Andhra Pradesh High Court - Amravati

Bommineni Ramanjaneyulu, vs The State Of Andhra Pradesh on 15 November, 2022

 HON'BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA

                  WRIT PETITION No. 23220 of 2021

ORDER:

This writ petition under Article 226 of the Constitution of India is

filed for the following relief:-

"to issue a Writ of Mandamus or other appropriate writ order or direction declaring the action of the respondents 4 and 5 in deducting the labour cess at 1 percent of the bills paid at the instance of respondents 1 to 3 as illegal arbitrary and in contravention of Memo No. 636/ReformsA1/2008 dated 08.06.2011 and in contravention of Building and other Construction Workers Welfare Cess Act. 1996 and the Rules made thereunder in agreement No. /201819 dt. 07.02.2019 in respect of work providing Water supply to the R and R package colony of Chinnavutapalli Village in Gannavaram Mandal of Krishna District and consequently to direct the respondents not to deduct the labour cess from the bills payable to the petitioner in Agreement No. /201819 dated 07.02.2019 without including the same as required to be included in terms of the Memo No.36/ReformsA1/2008 dated 08.06.2011 and pass such other order or orders as this Honble Court may deem fit and proper in the circumstances of the case"

2. Heard learned counsel for the petitioner and learned Government

Pleader for Panchayat Raj and Rural Development appearing for the

respondents.

3. Learned counsel for the petitioner would submit that the issue

involved in this writ petition is squarely covered by the order of the

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erstwhile High Court of Andhra Pradesh at Hyderabad dated 22.10.2009

passed in W.P.No.11269 of 2009 and batch and hence, the present writ

petition may also be disposed of in terms thereof. The same is not

disputed by the learned Government Pleader for Panchayat Raj & Rural

Development appearing for the respondents. But, the learned

Government Pleader would contend that the petitioner is not entitled to

refund of the amount already deducted. The relevant portion of the

above mentioned order reads as follows:

"1996 Act and Cess Act were enacted with the avowed policy and the object of protecting the interests of workers engaged in the building activity. These enactments apply to the persons or institutions, which engage not less than 10 workers in construction or building work in the preceding twelve months. The manner in which the cess is to be administered is provided for under the Act. The Cess Act enables the competent authority to recover or collect cess at the prescribed rate which shall be between 1% and 2%. It is stated that the notification that was issued in this regard stipulates the cess at 1%.

The burden in the form of cess must be borne by the agency that undertakes the construction. It is not an obligation that can be placed upon the contractors. The incidence of this levy cannot be compared with the service charges or profession tax which are squarely referable to the activity undertaken by the person or agency not the one for or on behalf of whom the activity is undertaken. Obviously to ensure proper enforcement of the provisions of the enactments, the state Government issued directions from time to time to the departments concerned to add an amount of 1% to the estimates. In U.O.Note dated 28.02.2008, the finance department tendered the following advice:

(i) In respect of ongoing works, wherever agreements do not contain the clause relating to the condition of the Building and other construction Workers Cess Act, an amount of @ 1% of the amount will be added to the estimates and the estimates revised accordingly for all payments made after 26.6.2007.

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(ii) In respect of agreements which provide that the Contractor shall pay Cess at the rate not exceeding 2% of the cost of Construction under the Building and other Construction Workers Cess Act, 1996, the Contractor has no option but to Pay Cess by way of deduction at source effective from 26.6.2007.

Independent of the said note, the departments of the Government are expected to recognize their obligation under 1996 Act. Assuming that there existed any justification for their omission to include the amount payable towards cess in the estimates, they cannot be permitted to deduct that amount while making payments to the contractors. In a way, it would amount to either penalizing the contractor or affecting the levy contrary to the provisions of 1996 Act. The consequences that flow from any violation of 1996 Act must in fact be directed towards agency that has undertaken construction. Therefore, the inescapable conclusion is that the occasion for an agency to deduct the cess under the Cess Act would arise only when the corresponding amount is included in the estimates. Conversely, if the amount representing the cess, is not included in the estimates, deductions cannot be made while making payments to the contractors.

Therefore, the writ petitions are disposed of directing that: -

(a) the respondents shall include 1% cess in the estimates for the works which they propose to undertake, if the work continues for or beyond twelve months and involves engagement of 10 workers or more; and

(b) the respondents shall not deduct any amount towards cess, unless the corresponding amount is included in the estimates."

4. Adopting the reasoning mentioned in the aforesaid order dated

22.10.2009 in W.P.No.11269 of 2009 and batch, a learned Single Judge

of the erstwhile High Court of Andhra Pradesh at Hyderabad dealt with

the refund of amount already deducted from the bills at para 4 of the

order dated 11.04.2012 in W.P.No.11269 of 2009, as follows:

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"4. ......... ........ ...... The learned Government Pleader would, however, seek to draw a distinction by contending that the above cases related to recovery of the amount by way of cess but not refund of the amount already collected. Whether it is a case of proposed deduction from the bills or the case of refund of the amounts already deducted, the ratio laid down in the above judgment applies equally. When once it is held that the respondents have no right to recover any amount from the contractors towards cess without first including the same in the estimates and such deduction towards cess from the bill amounts without there being any corresponding inclusion of the said amount in the estimates is bad in law, the petitioner would certainly be entitled for refund of the said amount which is already deducted from the bills. The inaction on the part of the respondents in not refunding the amount already collected towards labour cess is, therefore, held unsustainable and the petitioner is certainly entitled for the relief prayed for, in view of the earlier judgments of this Court in the above batch of writ petitions."

5. In view of the above, this Court is of the opinion that the present

case is squarely covered by the above orders of this Court and the

petitioner is entitled for refund of the amount which was already

deducted from the bills.

6. Accordingly, the Writ Petition is disposed of in terms of the

aforesaid order dated 22.10.2009 passed in W.P.No.11269 of 2009 and

batch. There shall be no order as to costs.

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Consequently, Miscellaneous Petitions, if any, pending in the

writ petition shall stand closed.

____________________________________ VENKATESWARLU NIMMAGADDA, J 15th November, 2022 cbs

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