A. PRABHAKARA REDDY & CO.versusSTATE OF MADHYA PRADESH & ORS.

                     [2015] 9 S.C.R. 675


             A. PRABHAKARA REDDY & CO.                             A
                               v.
          STATE OF MADHYA PRADESH & ORS.
             (Civil Appeal No. 375 of 2006 etc.)
                     AUGUST 24, 2015                               B

   [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.]

     Building and Construction Workers' Welfare Gess Act,
 1996 - s. 3 - Contracts for construction between the              c
appellants-contractors and the respondent-State - Before
constitution of Madhya Pradesh Building and Other
Construction Workers' Welfare Board- Demand of cess from
the contractors - Challenged inter-alia on the ground that no
cess could be levied on the contracts which came into              D
existence before the Board was constituted - Held: The
demand of cess cannot be faulted and would not amount to
retrospective application of the Gess Act - The scheme of
the Gess Act, Building and Other 'Construction Workers'
(Regulation of Employment and Conditions of Service) Act           E
(BOCW) and the Rules framed under the Gess Act, warrant
imposition and collection of cess and for putting the same in
the statutory welfare fund without delay - Such beneficial
measures for the welfare of workers are applicable even to
the construction activity which may have commenced befote          F
coming into force of the BOCWAct and the Gess Act, if they
are subsequently covered by the provisions of these Acts -
Levy of cess from the date of constitution of the Board is valid
in respect of cost of construction incurred thereafter- Building
and Other Construction Workers' (Regulation of Employment          G
and Conditions of Service) Act, 1996 - Building and Other
Construction Workers' Welfare Gess Rules, 1998.

                             675"                                  H
676         SUPREME COURT REPORTS                 (2015] 9 S.C.R.


A         Dismissing the appeals, the Court

           HELD: 1.1 After the Building and Other Construction
      Workers'Welfare CessAct, 1996 and the Building and Other
      Construction Workers' Welfare Cess Rules, 1998 came
B     into effect, and the Board was constituted, with the
      notification specifying the rate of cess to be levied upon
      thecostofconstruction, incurred by the employer already
      in place, the respondents were duty bound to collect the
      cess by ~aising the demands in respect of the on-going
C     construction works, if the workers in such construction
      activities were eligible for benefits under the Building
      and Other Construction Workers' (Regulation of
      Employment and Conditions of Service) Act, 1996 (BOCW
      Act). The fact that the task of registering the workers
D     and providing them the benefit, may take sometime,
      would not affect the liability to pay the levy as per the
      Cess Act. Any other interpretation would defeatthe rights
      of the workers whose P.rotection is the principal aim or
      primary concern and objective of the BOCW Act as well
 E    as the Cess Act. The Cess is a fee for service and hence,
      its calculation, is notto be strictly in accordance with quid
      pro quo rule and does not require any mathematical
      exactitude. The scheme of the BOCW Act, the Cess Act
 F    and the Rules warrant that the lawfully imposable cess
      should be imposed, collected and put in the statutory
      welfare fund without delay so that the benefits may flow
      to the eligible workers at the earliest. The scheme of the
      BOCW Act or the Cess Act does not warrant that unless all
G     the workers are already registered or the welfare fund is
      duly credited or the welfare measures are made available,
      no cess can be levied. In other words the service to the
      workers is not required to be a condition precedent for
      the levy of the cess. The rendering of welfare services can
H     reasonably be undertaken only after the cess is levied,
 A. PRABHAKARA REDDY & CO. v. STATE OF MADHYA 677
               PRADESH & ORS.

collected and credited to the welfare fund. [Para 12) A
[683-H; 684-A-F]

     1.2 Such beneficial measures for the welfare of
workers are applicable even to the construction activity
which may have commenced before coming into force of B
the BOCWAct and the Cess Act, if they are subsequently
covered by the provisions of these Acts. There can be no
legal obstacle in ignoring the construction cost incurred
before the cess became leviable by distinguishing it from
the cost of construction incurred later, from a date when C
the Board is available to render service to the Building
and other construction workers. Levy of cess in these facts
and circumstances cannot be faulted for any reason.
Demand of cess in the given facts cannot amount to
retrospective application of the Cess Act. [Para 13) [684- D
H; 685-A-C]

     Dewan Chand Builders and Contractors vs. Union of India
& Ors. (2012) 1SCC101: 2011 (13) SCR 214; Khazan Chand
& Ors. vs. State of Jammu and Kashmir & Ors. (1984) 2 SCC E
456: 1984 (2) SCR 858; Mis Ujagar Prints &Ors. (II) vs: Union
of India & Ors. (1989) 3 SCC 488: 1988 (3) Suppl. SCR 770;
Union of India &Ors. vs. Bombay Tyre International Ltd &Ors.
(1984) 1SCC467: 1984 (1) SCR 347; Shyam Sunder & Ors.
vs. Ram Kumar&Anr. (2001) 8 SCC 24: 2001 (1) Suppl. SCR F
115""" referred to.

   2. The appellants are granted liberty to raise the
contention that if cess is found leviable, its liability
should be borne by the principal, i.e, Government of G
Madhya Pradesh. [Para 14) [685-D]

                 Case Law Reference
   2011 (13) SCR 214           referred to.   Para 8
                                                           H
   1984 (2) SCR 858            referred to.   Para 9
678         SUPREME COURT REPORTS                  [2015] 9 S.C.R.-


A         1988 (3) Suppl.SCR 770       referred to.     Para 9

          1984 (1) SCR 347             referred to.     Para 9

         2001 (1) Suppl. SCR 115       referred to.     Para 9

B         CIVILAPPELLATE JURISDICTION: Civil Appeal No. 375
      of2006.

          From the Judgment and Order dated 21.06.2004 of the
      High Court of Judicature at Jabalpur in Writ Petition No. 1099
C     of2004.

                                    WITH
          C.A. No. 376-379 of 2006

D        Sunil Gupta, K. N. Madhusoodhanan, T.G Narayanan Nair,
      Gunnam Venkateswara Rao for the Appellant.

         Mishra Saurabh, Vanshuja Shukla, Ankit Kr. Lal for the
      Respondents.
E
          The Judgment of the Court was delivered by

          SHIVA KIRT! SINGH, J. 1. The questions of law in these
      appeals are same and arise out of similar factual matrix.
F     Hence, they have been heard together and shall be governed
      by this common judgment.

       2. The appellants are engaged in the business of
  construction of buildings etc. In the present matters their
  grievance is against demand of cess under The Building and
G Other Construction Workers' Welfare CessAct, 1996 (Act 28/
  96) (hereinafter referred to as 'the CessAct') in the following
  factual premise. Their agreements· or contracts for construction
  of projects belonging to departments and instrumentalities of
H Government of Madhya Pradesh were finalized and work
  orders were issued to contractors (the appellants) between
       A. PRABHAKARA REDDY & CO. v. STATE OF MADHYA 679
            PRADESH & ORS. [SHIVA KIRTI SINGH, J.]

      December 2002 to March 2003. Since the Madhya Pradesh A
      Building and Other .Construction Workers' Welfare Board
      (hereinafter referred to as 'the Board') came to be constituted
      only on 9.4.2003 followed by gazette publication on 10.4.2003,
      there could be no provision in the contracts as to who shall
      bear the burden of paying cess under the CessAct. On that as B
      well as several other grounds the appellants, being aggrieved
      with the demand of cess made upon them, challenged such
      demand by preferring writ petitions which have been dismissed
      by the impugned common judgment dated 21.6.2004 of the
      Division Bench following an earlier judgment dated 17 .3.2004    c
      in LPA no. 169 of 2003.

            3. The impugned judgment exhibits more than one ground
       to assail the demand of cess but before us the appellants have
       given up the other grounds and have confined their challenge D
       on the ground that the Assistant Labour Commissioner (ALC)
       in his letter to the Chief Engineer of the concerned project at
       Jabalpur had communicated that cess is to be recovered w.e.f.
       1.4,2003. He also reminded the Chief Engineer that it was
       expected of him that he will "definitely stipulate the condition E
       of payment of 1% cess in each tender with effect from above
       date." On the basis of above, the submission on behalf of
     · appellants is that no cess could be levied for the tenders,
       contracts and work orders for construction that came into
                                                                        F
       existence before the Board was constituted on 9/10.4.2003.
       As per submissions of Mr. Sunil Gupta, learned Senior
       Advocate for the appellants, the cost of construction triggers
       the charging of cess under Section 3 of the Cess Act. Such
       cost stands ascertained and determined when contract is G
       executed and work order issued. This cost cannot be split up
       into two components, one for the pre-Board and the other for
;i
       the later period for levying cess on the cost incurred in the
       latter period only.
                                                                        H
             4. It is also the case of the appellants that if demand of
680         SUPREME COURT REPORTS                     [2015] 9 S.C.R.


A     cess is made on construction works undertaken or even
      contemplated on account of issue of work order before the ·
      constitution of the Board, then such demand would amount to
      making the Cess Act operate retrospectively and that would
      be unwarranted, illegal and unjust.
B
           5. In view of such limited issues, it is not necessary for us
      to consider at length the factual details. Only some relevant
      dates and facts have to be noted to support our reasons for
      not agreeing with the aforesaid contentions advanced on
c     behalf of the appellants.

       6. The Union of India was evidently concerned with the.
  sad plight of construction workers belonging to unorganized
  sector. With a view to regulate employment and conditions of
D service of Building and other construction workers and to
  reduce their exploitation by providing for welfare measures
  related to their safety, health etc, the Central Government
  promulgated The Building and Other Construction Workers'
  (Regulation of Employment and Conditions of Service)
E Ordinance 1995 on 3.11.1995. It was succeeded by other
  Ordinances bearing nos. 3/96, 15/96 and 25/96. The last
  Ordinance dated 20.6.1996 was followed by the Building and
  Other Construction Workers' (Regulation of Employment and
  Conditions of Service) Act, 1996 (Act 27/96) (hereinafter
F referred to as 'the BOCW Act'). It was published in the gazette
  on 19.8.1996 but as provided by Section 1(3), it was effective
  from 1.3.1996. For its effective working, a cess or fee was
  necessary. For that the Parliament enacted the CessAct (Act
  28/96).
G
       7. The Cess Act was published in the gazette on
  19.8.1996. Under Section 1(3) it was enforced from still an
                                                                           ...
  earlier date, i.e, 3.11.1995. Under this Act, the Central
  Government framed The Building and Other Construction
H Workers' Welfare Cess Rules, 1998 \hereinafter referred to
     A. PRABHAKARA REDDY & CO. v. STATE OF MADHYA 681
           PRADESH &ORS. [SHIVAKIRTI SINGH, J.]

    as 'the Rules') which came into force on publication in the            A
    officiai gazette dated 26.3.1998. As noted earlier the Madhya
    Pradesh Government constituted the Board after considerable
    delay by a notification dated 9.4.2003 published in the official
    gazette dated 10.4.2003.
                                                                           B
        8. It is relevant to note that the constitutionality of the Cess
    Act and Rules framed thereunder was challenged before the
    High Court of Delhi which upheld it. The matter came to this
    Court and by judgment in the case of Dewan Chand Builders
    and Contractors vs. Union of India & Ors. reported in                  C
    (2012) 1 SCC 101, this Court also dismissed the challenge
    and held that the levy is in fact a "fee" and not a "tax" .

         . 9. The appellants have based their contention noted earlier
    on the premise that the cess chargeable under the Cess Act D
    is a fee and therefore it cannot be levied from a retrospective
    date when there was no Board to render any service. Mr. Su nil
    Gupta, learned senior advocate for the appellants placed
    reliance upon judgments of this Court in the case of Khazan
    Chand & Ors. vs. State of Jammu and Kashmir & Ors, E
    (1984) 2 SCC 456, Mis Ujagar Prints & Ors. (II) vs. Union
    of India & Ors., (1989) 3 SCC 488 and Union of India &
    Ors. vs. Bombay Tyre International Ltd. & Ors., (1984) 1
    sec 467 to highlight that a statute for compulsory levy or tax
    is required to have provisions for charging of the levy/tax, for F
    the machinery to make the assessment and lastly, provisions
    for collection or recovery. He also relied upon judgment in the
    case of Shyam Sunder & Ors. vs. Ram Kumar & Anr.,
    (2001) 8 sec 24 to buttress the well established proposition
    of law that retrospective operation is not to be given to a statute G

.   when the effect is to adversely affect existing right or obligation,
    (matters of procedure being an exception) unless retrospective
    operation cannot be avoided on account of express language
    or necessary intendment flowing from the enactment.
                                                                           H
682         SUPREME COURT REPORTS                   (2015] 9 S.C.R.


A          10. Counsel for the State of Madhya Pradesh and other
      respondents pointed out that after the Union of India through a
      notification bearing SO no. 2899 dated 26.9.1996 specified
      the rate of cess as 1% of cost of construction, the liability of
      concerned employers under the Gess Act became fully
B     ascertainable on the basis of Section 3 of the Gess Act which
      provides as follows:

           "3 . Levy and collection of cess.-(1) There shall be levied
           and collected a cess for the purposes of the Building
c          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
D          in the Official Gazette, from time to time specify.

           (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
 E         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.
 F
            (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
G           exceeding one per cent, 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
 H         to final assessment to be made, be collected at a uniform
        A. PRABHAKARA REDDY & CO. v. STATE OF MADHYA 683
             PRADESH & ORS. [SHIVA KIRTI SINGH, J.]

            rate or rates as may be prescribed on the basis of the        A
            quantum of the building or other construction work
            involved."

             11. He highlighted the provisions in the CessAct and Rules
        framed thereunder such as Rules 3, 4, 5 & 7 providing for levy B
        ofcess; time and manner of collection; transfer of the proceeds
        of the cess to the Board; and assessment of the cess, to
        support his contention that there is no basis under the law to
        support the plea of the appellants that the contracts or work
        orders finalized before constitution of Board must be made C
        immune from levy of cess on the ground that cost of construction
        must always be treated as a single entity and therefore
        incapable of two divisions, one pertaining to pre-Board period
      . and the other relating to after the constitution of the Board. He
        supported the views of the High Court that there can be no D
        estoppel against statute and hence, even if a contract or work
        order does not provide for payment of recovery of cess by the
        contractor or the principal, the statute providing for Ge$S cannot
        become ineffective. It is also the stand of the respondents that
        had the cess been a tax, the liability to pay the same would be E
        coterminous with the entire cost, if construction was after
        coming into force of the Gess Act but since it has been held to
        be a fee, the respondents have acted reasonably and effected
        its levy by raising demands only to cover such cosf of F
        construction which coincides with and begins from the
        constitution of the Board.

            12. Although learned senior counsel for the appellants had
       taken us through the entire scheme of the Main Act as well as
       the CessAct and also the Rules framed thereunder, but nothing      G
       helps the appellants' case and in view of limited issues arising
...    from determination, we do not feel persuaded to go into details
       of the Gess Act and the Rules unnecessarily. We are of the
       considered view that after the Gess Act and the Rules came         H
       into effect and the Board was constituted, with the notification
684         SUPREME COURT REPORTS                    (2015] 9 S.C.R.


A     specifying the rate of cess to be levied upon the cost of ;
      construction incurred by the employer already in place, the
      respondents were duty bound to collect the cess by raising
      the demands in respect of the on going construction works if
      the workers in such construction activities were eligible for
 B    benefits· under the BOCW Act. The fact that the task of
      registering the workers and providing them the benefit may
      take sometime, would not affact the liability to pay the levy as
      per the Cess Act. Any other interpretation would defeat the
      rights of the workers whose protection is the principal aim or
c     primary concern and objective of the BOCW Act as well as the
      Cess Act. The Cess is a fee for service and hence, its
      calculation, as per settled law is not to be strictly in accordance
      with quid pro quo rule and does not require any mathematical
      exactitude. The scheme of the BOCWAct, the CessAct and
 D
      the Rules warrant that the lawfully imposable cess should be
       imposed, collected and put in the statutory welfare fund without
      delay so that the benefits may flow to the eligible workers at
      the earliest. The scheme of the BOCW Act or the Cess Act
 E     does not warrant that unless all the workers are already
       registered· or the welfare fund is duly credited or the welfare
       measures are made available, no cess can be levied. In other
      words the service to the workers is not required to be a
      .condition precedent for the levy of the cess. The rendering of
 F    welfare services can reasonably be undertaken only after the
       cess is levied, collected and credited to the welfare fund.

       13. We also find no merit in other submission advanced
   on behalf of the appellants that there is legal impediment in
 G charging levy on the cost of construction incurred by the
   employer from a particular period on account of constitution of
   Board from a particular date or for any other reason. This               ...
   argument is fallacious. Such beneficial measures for the welfare
   of workers are applicable even to the construction activity which
 H
     A. PRABHAKARA REDDY & CO. v. STATE OF MADHYA 685
          PRAD.ESH & ORS. [SHIVA KIRTI SINGH, J.]

    may have commenced before coming into force of the BOCW                A
    Act and the CessAct, if they are subsequently covered by the
    provisions of these Acts. There can be no legal obstacle in
    ignoring the construction cost incurred before the cess became
    leviable by distinguishing it from the cost of construction incurred
    later, from a date when the Board is available to render service       B
    to the Building and other construction workers. Levy of cess in
    these facts and circumstances cannot be faulted for any
    reason. Demand of cess in the given facts cannot amount to
    retrospective application of the CessAct. Hence the appeals
    mu~fuil.                                                               C

         14. Before parting with the judgment, it is made clear that
    the appellants did not press their contention that if cess is found
    leviable, its liability should be borne by the principal, i.e,
    Government of Madhya Pradesh. They have sought liberty that            D
    they be permitted to raise such contention in an appropriate
    proceeding, in accordance with law. This liberty is granted.

         15. The appeals are dismissed but without costs. If any
    dues of cess payable by the appellants to the respondents              E
    has remained unpaid on account of interim orders, all such
    lawful dues should be paid by the appellants as per law at the
    earliest and in any case within eight weeks.

    Kalpana K. Tripathy                              Appeals dismmised.    F




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