Jharkhand High Court

M/S. Larsen & Toubro Limited vs State Of Jharkhand on 21 August, 2023

 IN THE HIGH COURT OF JHARKHAND AT RANCHI
        W.P. (C) No. 3928 of 2023
M/s. LARSEN & TOUBRO LIMITED, a company incorporated under the
Companies Act, 1956, having its principal place of business at Mount
Poonamallee Road, Manapakkam, P.B. No.979, Chennai Tamilnadu,
through its Authorized Signatory namely Mr. Anand R, Son of Sri
Ragavan, aged about 52 years, resident of Plot No. 5, 4th Main Road,
Rajalakshmi Nagar, Madipakkam, Saidapet, P.O. & P.S. Madipakkam,
District - Kancheepuram, Tamil Nadu.
                                                ... Petitioner
                    VERSUS
1. STATE OF JHARKHAND, through the Secretary, Department of
   Labour, Employment & Training, Doranda, having its office at Shram
   Bhawan, Doranda, P.O. and P.S. - Doranda, District - Ranchi,
   Jharkhand - 834 002.
2. PRINCIPAL ACCOUNTANT GENERAL, Jharkhand, Ranchi, P.O.
   and P.S. - Doranda, Town and District - Ranchi.
3. JHARKHAND URJA SANCHARAN NIGAM LIMITED, through its
   Managing Director, having its office at Nigam HQ Building, Kusai
   Colony, Doranda, P.O. and P.S. - Doranda, District - Ranchi,
   Jharkhand -834 002.
4. Senior Manager (Finance and Accounts), Jharkhand Urja Sancharan
   Nigam Limited, through its Managing Director, having its office at
   Nigam HQ Building, Kusai Colony, Doranda, P.O. and P.S. -
   Doranda, District - Ranchi, Jharkhand -834 002.
                                                ... Respondents
                    ---------
CORAM: SRI SANJAYA KUMAR MISHRA, C.J.
             SRI ANANDA SEN, J.
                    ---------
For the Petitioner:         Mr. M.S. Mittal, Sr. Advocate
                            Mr. N.K. Pasari, Advocate
                            Mr. Shubham Choudhary, Advocate
                            Mr. Shubham Gurung, Advocate
For Resp. No.1:             Mr. Aditya Kumar, A.C. to Sr. S.C.-I
For Resp. No.2:             Mrs. Richa Sanchita, Advocate
For Resp. Nos.3&4:          Mr. Sachin Kumar, Sr. S.C.
                    ---------
03/Dated: 21.08.2023

      Upon hearing the learned counsel for the parties, this Court

passed the following, (Per, Sanjaya Kumar Mishra, C.J.)

                         ORDER

1) This writ petition has been filed by the petitioner seeking for the

following reliefs:-

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(i)     For issuance of an appropriate writ, order or direction

directing upon the Respondents to show cause as to how under what authority of law, payments have been withheld from the running bills of the Petitioner and Labour Cess is being deducted from various invoices pertaining to Supply and Consultancy charges.

(ii) For issuance of an appropriate writ, order or direction, directing upon the Respondents to show cause as to how and under what circumstances, the Respondents are sitting tight over the representations made by the Petitioner, and the refund of amount deducted from the bills of the Petitioner towards BOCW, is not being granted to the Petitioner.

(iii) For issuance of an appropriate writ / order / direction or a writ in the nature of certiorari quashing the impugned Letter No. 386 dated 24.02.2021, issued by Respondent No. 4 (Annexure- 1) as being illegal, arbitrary and unreasonable in as much as it seeks to levy Labour Cess to the tune of Rs.4,52,95,309.00/- (Rupees Four Crores, Fifty Two lakhs, Ninety Five Thousand, Three Hundred and Nine only) on supply of materials and consultancy charges under the BOCW Act, the Cess Act and the Cess Rules, for the ongoing as well as concluded contracts;

(iv) For issuance of an appropriate writ/ order/ direction to the Respondents, or a writ in the nature of mandamus, directing the Respondents to refund, forthwith and at the earliest, the sum of Rs. 2,97,22,892/- (Rupees Two Crores, Ninety Seven Lakhs, Twenty Two Thousand, Eight Hundred and Ninety Two only) illegally and arbitrarily deducted by Respondent No. 4 as Labour Cess on supply of materials and consultancy charges under the BOCW Act, the Cess Act and the Cess Rules, towards ongoing contracts;

(v) For issuance of an appropriate writ/ order/direction to the Respondents, or a writ in the nature of mandamus, directing the Respondents to henceforth refrain from levying Labour Cess on supply of materials and consultancy charges from future bills.

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2) It is brought to our notice by the learned Senior Counsel appearing

for the petitioner as well as the learned counsel appearing for the

State that the matter is already covered by a judgment passed by us

in L.P.A. No. 511 of 2022 dated 27.07.2023 wherein deciding the

same question as to whether the labour cess is leviable on supply of

materials and consultancy charges with respect to the contract, we

have, after taking in consideration several judgments and provisions

of law, held as follows:-

"5. Section 3 of the Building & Other Construction Workers' Welfare Cess Act, 1996 is the charging provision, which provides for levy and collection of cess. Sub section (1) of Section 3 reads as follows: -

"3. Levy and collection of cess.- (1) There shall be levied and collected a cess for the purposes of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, at such rate not exceeding two per cent, but not less than one per cent of the cost of construction incurred by an employer, as the Central Government may, by notification in the Official Gazette, from time to time specify."

6. From the aforesaid provision, it is clear that cess would be levied and collected at a particular per cent of the cost of construction incurred by the employer. Section 2(d) of Building & Other Construction Works (Regulation of Employment and Conditions of Service) Act, 1996 defines 'building' or 'other construction work'. It is necessary to quote the aforesaid Section 2(d) of Building & Other Construction Works (Regulation of Employment and Conditions of Service) Act, 1996, which reads as under:-

2. Definitions. - (1) In this Act, unless the context otherwise requires,-

(a) ...

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              (b) ...
              (c) ...

(d) "building or other construction work" means the construction, alteration, repairs, maintenance or demolition, of or, in relation to, buildings, streets, roads, railways, tramways, airfields, irrigation, drainage, embankment and navigation works, flood control works (including storm water drainage works), generation, transmission and distribution of power, water works (including channels for distribution of water), oil and gas installations, electric lines, wireless, radio, television, telephone, telegraph and overseas communications, dams, canals, reservoirs, watercourses, tunnels, bridges, viaducts, aqueducts, pipelines, towers, cooling towers, transmission towers and such other work as may be specified in this behalf by the appropriate Government, by notification but does not include any building or other construction work to which the provisions of the Factories Act, 1948 (63 of 1948), or the Mines Act, 1952 (35 of 1952), apply;

7. From the aforesaid definition of "building or other construction work" it is quite clear that in relation to any building, streets or even transmission or distribution of power, the "building or other construction" will mean and convene to any construction, alteration, repairs, maintenance or demolition of or in relation to the said structures. It is quite clear from the conjoint reading of Section 2(d) and Section 3 of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, that no cess can be levied on supply or consultancy component. It can only be levied on construction, alteration, repair, maintenance or demolition work.

Extending the said levy on consultancy or supply will be a clear deviation from the provisions of the Act. Further, the Hon'ble Supreme Court has decided an exactly similar issue in the case of Uttar Pradesh Power Transmission Corporation Ltd. (supra) and has held that the Act excludes a supply contract from within

-5- W.P. (C) No. 3927 of 2023

its ambit. Learned Single Judge has also considered the said judgment on the facts of this case, which is also similar with the facts dealt with by the Hon'ble Supreme Court.

8. So far as plea of alternative remedy is concerned, we find that similar issue was also before the Hon'ble Supreme Court in the case, which was being dealt with in Uttar Pradesh Power Transmission Corporation Ltd. (supra) wherein it has been held that relief under Article 226 of the Constitution of India may be granted in a case arising from civil contract. Availability of alternative remedy does not prohibit the High Court from maintaining a writ petition in an appropriate case. In the aforesaid case, the Hon'ble Supreme Court has upheld invocation of Article 226 of the Constitution of India, which involves similar nature of facts. The Hon'ble Supreme Court, in paragraph 71 of the aforesaid judgment has held that UPPTCL (the Company involved in the case before the Hon'ble Supreme Court) has no power or authority or jurisdiction to realize labour cess under the Cess Act by withholding the dues and the State Government has acted in excess of powers by its acts impugned. We find that the learned Single Judge has considered all these aspects and especially the judgment of the Hon'ble Supreme Court and has disposed of the writ petition in the following terms:-

(i) Letter No.1656 dated 25.08.2020 issued by the Senior Manager (F&A), Jharkhand Urja Sancharan Nigam Limited, Ranchi (the respondent No.5) [Annexure-1 to the writ petition] is hereby quashed.

(ii) The labour cess is not leviable on supply of materials and consultancy charge with respect to the contracts in question as the same are distinct from the contract for civil works.

(iii) The respondent-JUSNL is directed to communicate the Department of Labour, Employment and Training, Government of Jharkhand regarding refund of labour cess deducted against the petitioner's bills for supply of materials and consultancy charges which is

-6- W.P. (C) No. 3927 of 2023

said to have been deposited by it with the said department, within two weeks from the date of receipt/production of a copy of this order.

(iv) The competent authority of the Department of Labour, Employment and Training, Government of Jharkhand, Ranchi is directed to refund the amount of labour cess which has been deducted from the petitioner's bill for supply of materials and consultancy charges through the respondent- JUSNL within one month from the date of receipt of the communication from the respondent- JUSNL.

(v) The petitioner will be at liberty to move before the appropriate authority claiming interest on the deducted amount in terms with the order of a co- ordinate Bench of this Court as referred in paragraph 28 of the judgment."

3) In that view of the matter, we follow the order passed by us in the

aforesaid Letters Patent Appeal and, hence, this writ petition is

allowed. We hereby quash the Annexure 1 and the matter is again

remanded back to the authorities to consider the leviable part of the

labour cess keeping in mind our observations that labour cess is not

leviable on supply of materials and consultancy charges.

Accordingly, the labour cess will be re-calculated and appropriate

demand notice shall be issued in favour of the petitioner-Company

within a period of 60 days, hence.