PRAKASH MAHAVIR Vs. STATE OF M P

JUDGEMENT

(1.) THIS judgment shall govern the disposal of all the appeals. In all the appeals, common question of law is involved.

(2.) APPELLANT/petitioner had challenged various orders, circulars and letters issued by the respondents. Under this documents, it is directed that one per cent amount of cess shall be deducted from the payment of bills of the contractors under the provisions of Building and Other construction Workers Welfare Cess Rules, 1998 (hereinafter, referred to "cess Rules" ). These rules have been framed under the provisions of the Building and Other Construction Workers Welfare Cess Act, 1996 (hereinafter referred to "cess Act" ). Counsel for the appellant submits that in Section 3 of the Cess Act, it is specified that cess for the purposes of the Building and Other Construction workers shall be 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. He submitted that this amount is to be recovered from the employer. Counsel for the appellant submitted that contractor is not the employer. Owners of buildings are the employer. He referred to Rule 4 of the Cess Rules and submitted that the amount of cess shall be payable by an employer on completion of construction/project. It is contended by Counsel for the appellant that construction is in progress; unless construction is complete and its costs is determined, no cess can be recovered. Counsel for the appellant submitted that there is no provision for recovery of cess without completion of construction. Direction for deduction of the amount of cess from the bills of the contractor is contrary to law. He submitted that even if tax is assessed, then also after assessment of quantified liability, tax can be recovered. In support of this contention, he referred to the judgment in the case of Commissioner of wealth Tax Vs. Kantilal, (1985) 2 SCC 343. He submitted that Section 3 of the Cess Act, 1996 provides for imposition of tax on the cost of construction incurred by the employer. This taxable event is after completion of construction by the employer and referred to the judgment in the case of Good Year India Vs. State of Haryana, (1990) 2 SCC 71. Section 2 (i) of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (hereinafter, referred to "regulation Act") has defined the word "employer". He submitted that contractor will not fall in the definition of employer and referred to the judgment in the case of Black Diamond Beverages and another Vs. Commercial Tax Officer, Central Section, Assessment Wing, Calcutta and others, (1998) 1 SCC 458. Referring to Section 2 of the Cess Act, he submitted that in the context of Section 3 of the Cess Act, term "employer" will include only the owner who incurred the cost and not the contractor. In support of his contention, he referred to the following judgments. Printers (Mysore) Ltd. and another Vs. Assistant Commercial Tax Officer and others, (1994) 2 SCC 434, Ichchapur Industrial Co-operative Society Ltd. Vs. Competent Authority, Oil and Natural Gas Commission and another, (1997) 2 SCC 42 and K. V. Muthu Vs. Angamuthu Ammal, (1997) 2 SCC 53. Counsel for the appellant therefore, submitted that recovery of cess from the contractor is without jurisdiction. Unless work is complete, no cess can be deducted from the contractor without assessment. He further submitted that no cess is imposed on the cost of construction as the Act is enacted for the benefit of workers. Recovery of the tax on the basis of the rules which are contrary to the main Act is bad in law and he referred to the judgment in the case of State of Kerala Vs. Madras Rubber Factory Ltd. , (1998) 1 SCC 676, Commissioner of Wealth Tax, Gujrat-III Vs. Ellis Bridge Gymkhana [ (1998) 1 SCC 384] and Municipal Corporation, Gwalior Vs. M. E. S. Builders, 2002 (2) M. P. H. T. 508 (DB) = 2002 (II) MPJR 64. He submitted that Single Bench has committed an error in holding that the respondents are entitled to recover the cess and no cess can be recovered from the contractor.

(3.) IN reply, Counsel for the respondents submitted that under the scheme of the Cess Act cess can be recovered from contractor. He invited attention to Section 2 (d) of the Cess Act and submitted that this section provides that words and expressions used herein but not defined, then definition given in the Regulation Act shall have the meanings respectively assigned to them in that Act. Shri K. B. Chaturvedi, Government Advocate then invited attention to Section 2 of the Regulation Act wherein word "employer" is defined under clause (i ). He submitted that cess can be recovered from the contractor. For this purpose, he referred to Rules 4 (3) and 4 (4) of the Cess Rules and submitted that definition of the word "employer" includes contractor and amount of cess can be recovered from the contractor before completion of work. Then he referred to Rule 7 which provides that after assessment, the Authority shall specify the amount of cess due and cess already paid by the employer or deducted at source and balance amount payable and the date consistent with the provision of Rule 4, by which the cess shall be paid to the cess Collector. Counsel for the respondents submitted that the order of recovery is proper.