Summary
The Court declined to interfere with quashing of UPPTCL’s demand for construction-worker cess on a separate equipment-supply contract. A pure supply contract did not attract the levy. Recovery based solely on an audit objection, without statutory assessment and through withholding other dues or invoking a performance guarantee, lacked statutory and contractual authority. The arbitration clause did not bar the writ petition in these circumstances.
Issues
- Whether the separate supply component of a turnkey substation project attracted construction-worker cess.
- Whether an audit objection authorized recovery without assessment by deductions or invocation of a performance guarantee.
- Whether the contractual arbitration clause excluded Article 226 relief.
Provisions considered
- Section 2(1)(d), (g) and (i), Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996Applied the definitions of construction work, contractor and employer to distinguish a pure supply contract from construction activity. (¶¶ 6, 8, 23, 51, 52, 53, 54, 55)
- Sections 3(1)–(4), 5 and 10, Building and Other Construction Workers’ Welfare Cess Act, 1996Examined the construction-cost levy, assessment and prescribed recovery scheme; rejected recovery of disputed cess without assessment on the basis of an audit report alone. (¶¶ 12, 13, 14, 15, 17, 44, 60, 70, 71)
- Rules 3, 4, 7 and 13, Building and Other Construction Workers’ Welfare Cess Rules, 1998Read the cost, collection, assessment and recovery rules as requiring use of the prescribed statutory process. (¶¶ 18, 44, 70, 71)
- Article 226, Constitution of IndiaRecognized discretionary writ relief in contractual matters and against action exceeding jurisdiction notwithstanding alternative remedies or arbitration. (¶¶ 66, 67, 68, 69, 70)
Held
- The contracts were separately structured despite single-point responsibility for timely project completion. The first contract was for pure supply, distinct from civil construction, and did not attract cess; construction work under the third contract stood on a different footing. (¶¶ 20, 21, 22, 23, 51, 52, 53, 54, 55)
- The contractual provisions concerning legally payable taxes and deductions for costs or defaults did not authorize this recovery. The supplier had duly performed the first contract and the guarantee was retained only for disputed cess. (¶¶ 45, 46, 47, 48)
- UPPTCL could not recover the disputed cess solely on a CAG audit objection, without statutory levy and assessment, by withholding other contract dues or invoking the performance guarantee. The statute and rules prescribed the recovery method, which had to be followed. (¶¶ 44, 59, 60, 63, 64, 70, 71)
- An arbitration clause does not by itself debar a writ petition. No such objection was taken below, and the challenged action exceeded UPPTCL’s legal and contractual powers. Writ relief may extend to contractual and monetary matters, although disputed evidentiary questions ordinarily counsel restraint. (¶¶ 42, 63, 65, 66, 67, 68, 69, 70)
Result
Special leave petition dismissed; High Court’s quashing of the disputed cess-demand communications maintained.