1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 22 ND DAY OF OCTOBER 2013 BEFORE THE HON BLE MR. JUSTICE MOHAN.M. SHANTANAGOUDAR WRIT PETITION Nos.14307-14309 OF 2009 (GM-RES) C/W WRIT PETITION No.14578 OF 2009 (GM-RES) IN W.P. Nos.14307-309/2009 BETWEEN: 1. M/s. Lanco Hosakote Highway Pvt., Ltd., Plot No.4, Software Units Layout Infocity, Madhapur Hyderabad-560081 Rep by its Deputy Manager (Legal) Sri A. Lakshminarayana Having its Branch Office at No.EC.516, HRBR Layout 2 nd Block, 2 nd A Cross Kalyan Nagar Bangalore-560 043. 2. M/s. Lanco Devihalli Highways Pvt. Ltd., Having its Regd. Office at Plot No.4, Software Units Layout Infocity, Madhapur Hyderabad-560081
2 Having its Branch Office at No.EC.516, HRBR Layout 2 nd Block, 2 nd A Cross Kalyan Nagar Bangalore-560 043 Rep by its Deputy Manager (Legal) Sri A. Lakshminarayana. 3. M/s. Lanco Infratech Ltd., Plot No.4, Software Units Layout Infocity, Madhapur Hyderabad-560081 Rep by its Sr. Deputy General Manager Mr. Vishnu Rao E.V...Petitioners (By Sri M.A. Sebastian, Adv.,) AND : 1. Union of India Rep by its Secretary Ministry of Labour New Delhi. 2. Union of India Rep by its Principal Secretary Law and Legislative Affairs New Delhi. 3. State of Karnataka Rep by its Principal Secretary Public Works, Ports and Inland Water Transport Department Vidhana Soudha Bangalore-560 001.
3 4. Government of Karnataka Rep by its Principal Secretary (Labour) Vikas Soudha, Dr. Ambedkar Veedhi Bangalore-560001. 5. The Commissioner of Labour Govt. of Karnataka Karmika Bhavan, ITI Compound Bannerghatta Road Bangalore-560029. 6. Labour Inspector Kolar Circle, P.C. Layout Kolar. 7. Labour Officer & Tax Assessment Officer Door No.915/916 Gangotri Main Road SIT Back Gate Tumkur District Tumkur-572103...Respondents (By Sri K. Jayaram, CGSC., for R1 & R2; Sri Vijaykumar A.Patil, GA., for R3 to R6; R7 served) These Writ Petitions are filed under Articles 226 and 227 of the Constitution of India praying to declare the provisions of the Building and other construction workers [Regulation of Employment and Conditions of Service] Act 1996 [Act 27 of 1996] and the Building and other constructions workers Welfare CESS Act 1996 [Act No.28]
4 as ultra vires and unconstitutional and strike down the same in so far as petitioners are concerned. IN W.P. No.14578/2009 BETWEEN: M/s. IVR Prime Urban Developers Ltd., A Company registered under the Companies Act, having its registered Office at M-22, 3RT Vijayanagar Colony Hyderabad-500 057 (Andhra Pradesh) And Branch Office at : No.438, 18 th Main, VI Block Koramangala Bangalore-560095 Rep by Mrs. P.J. Philomena Manager (Administration & Marketing)...Petitioner (By Sri P.S. Manjunath, Adv.,) AND : 1. Union of India Ministry of Labour & Employment Shram Shakti Bhawan Rafi Marg New Delhi-110 001 Rep by its Secretary to Government. 2. State of Karnataka Vikas Soudha Dr. Ambedkar Veedhi
5 Bangalore-560 001 Rep by its Secretary to Government. 3. The Commissioner for Labour Government of Karnataka Karmika Bhavana Bannerghatta Road Dairy Circle Bangalore-560029. 4. The Labour Officer and Welfare Cess Assessment Officer Building and other Construction Workers Cess Act No.6, Sub-Division Karmika Bhavana Bannerghatta Road Dairy Circle Bangalore-560029...Respondents (By Sri Omkaresh, CGSC., for R1; Sri Vijaykumar A. Patil, GA., for R2 to R4) This Writ Petition is filed under Articles 226 and 227 of the Constitution of India praying to declare that the Building and Other Construction Workers Welfare Cess Act 1996 produced as Annexure-C as ultra vires of the powers of the Parliament. These Writ Petitions coming on for hearing this day, the Court made the following :
6 O R D E R These writ petitions are filed for a declaration that the provisions of the Building and other Construction Workers Welfare Cess Act, 1996 ( the Act for short) and Building and other Construction Workers Welfare Cess Rules, 1998 ( the Rules for short) are ultra vires and unconstitutional and consequently for striking down the said Act and the Rules. Consequential reliefs are also sought for by the petitioners. A direction is also sought against the respondents not to give effect to or enforce the provisions of the Act and the Rules against the petitioners. 2. Petitioners are the Companies. They are entrusted with certain construction works by the respondents. In order to regulate employment and conditions of service of building and other construction workers and to provide for their safety, health and welfare measures and the matters connected therewith and
7 incidental thereto, the Parliament has enacted the aforementioned Act. The Central Government has also framed the Building and Other Construction Workers Welfare Cess Rules 1998. The petitioners are aggrieved by certain provisions of the aforementioned Act and the Rules. 3. Section 3 of the Act deals with levy and collection of cess and the same reads thus: 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 percent but not less than one percent 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.
8 (2) The cess levied under sub-section (1) shall be collected from every employer in such manner and at such time, including deduction at source in relation to a building or other construction work of a Government or of a public sector undertaking or advance collection through a local authority where an approval of such building or other construction work by such local authority is required, as may be prescribed. (3) The proceeds of the cess collected under sub-section (2) shall be paid by the local authority or the State Government collecting the cess to the Board after deducting the cost of collection of such cess not exceeding one percent of the amount collected. (4) Notwithstanding anything contained in sub-section (1) or sub-section (2), the cess leviable under this Act including payment of such cess in advance may, subject to final assessment to be made,
9 be collected at a uniform rate or rates as may be prescribed on the basis of the quantum of the building or other construction work involved. 4. Levy of Cess is described under Rule-3 of the Rules. The time and manner of collection of cess levied is dealt with under Rule-4 of the Rules. Rule-6 of the Rules mandates every employer to furnish information to the Assessing Officer in Form No.I within 30 days of commencement of his work or payment of cess, as the case may be. Rule-7 deals with assessment of cess. 5. The petitioners are principally aggrieved by Section 3 of the Act and Rules 3 and 7 of the Rules. It is argued by the petitioners counsel that the Parliament did not have competence to enact the Act; Rule-3 of the Rules is arbitrary inasmuch as the cost of construction under the said Rules includes all expenditure incurred by an employer
10 in connection with the building or other construction work, except the cost of the land and any compensation paid under the Workmen s Compensation Act. According to the petitioners, the cost of construction should not have included every expenditure incurred by the employer in connection with the construction work; in other words, the cost of construction should have included only the actual cost incurred by the Contractors for construction and not other overheads. 6. All the aforementioned arguments cannot be considered at this stage in these writ petitions by this Court inasmuch as the validity of the Act and the Rules made thereunder are already upheld by the Apex Court in the case of DEWAN CHAND BUILDERS & CONTRACTORS.vs. UNION OF INDIA reported in (2012)1 SCC 101. As the Apex Court has already upheld the validity of the Act and the Rules made thereunder, it is not open for this Court to
11 reconsider the very aspect once again in these writ petitions. 7. On merits, it is argued that notices issued by the respondents directing the petitioners to pay 1% cess on the cost of construction is illegal; such demand should not have been made even prior to commencement of construction work; demands ought to have been made after one year from the date of construction of building etc. Section 3 of the Act specifies that the cess shall be levied and collected for the purposes of Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, at such rate not exceeding 2% but not less than 1% of the cost of construction incurred by an employer. This clearly goes to show that the Central Government may by notification direct the Contractor to pay minimum 1% of cost of construction as cess. What has been imposed on the petitioners is only 1%. Since
12 minimum prescribed under Section 3 is imposed on the petitioners, they cannot have any grievance, more particularly when the Act contains Section 3 and the same is held to be valid. Rule 3 of the Rules also clarifies that cost of construction shall include all expenditure incurred by an employer in connection with the building or other construction work, but shall not include cost of land and the compensation paid under the Workmen s Compensation Act. Therefore there is no option left to the Assessing Authority to go against Rule-3 of the Rules. Assessment has to be done in the light of Rule-3 of the Rules. It is for the employer/petitioners to furnish the information in Form No.I to the Assessing Officer within 30 days of commencement of work or payment of cess, as the case may be. The petitioners in Writ Petition Nos.14307-14309/2009 have not even filed Form No.I as required under Rule-6 of the Rules. Therefore it is incumbent upon the petitioners to furnish information in Form No.I.
13 Thereafter the Assessing Officer will assess the cess to be paid by the petitioners and such cess needs to be paid by the petitioners. Rule-4 of the Rules, as aforementioned deals with the manner and collection of cess and therefore collection of cess needs to be made as per the prescribed Rules. In view of the same, no relief can be granted in favour of the petitioners in these petitions. Petitions fail and the same accordingly stand dismissed. The petitioners are liable to pay 1% cess on the cost of construction as prescribed under the Act and the Rules made thereunder or the amount as assessed as per law. Sd/- JUDGE Gss/-