Deepali Kalia –
The Apex Court held that there cannot be a recovery of cess solely on the basis of the Comptroller and Auditor General (CAG)’s report without any statutory adjudication process.
The judgment by Allahabad High Court which had quashed the orders issued by the Uttar Pradesh Power Transmission Corporation Ltd (UPPTCL) directing a contractor to remit Labour Cess amounting to Rs.2,60,68,814/- was upheld by a division bench comprising Justice UU Lalit and Justice Indira Banerjee.
The orders by the UPPTCL were issued underSections 3 sub-section (1) and (2) of the Building and Other Construction Workers’ Welfare Cess (BOCWWC) Act.
UPPTCL’s demand for cess was challenged by the contractor, CG Power and Industrial Solutions Ltd in Allahabad High Court.
The contractor contended that the contracts in question do not attract cess under the BOCWWC Act as they do not involve any construction work.
An audit inspection was conducted by the Audit Officer under the Senior Accountant General during the period from 4th June 2016 to 9th June 2016. In the audit report that followed, the lapse on the part of UPPTCL in not deducting labour cess from the bills of the contractor was pointed out by the Accountant General.
Consequently, UPPTCL informing about the CAG audit wrote to the contractor asking it to remit the cess amount.
Supreme Court approved of the High Court judgment in the matter and rejected the appeal filed by the UPPTCL against the High Court judgment.
‘In this case, the action of UPPTCL in forcibly extracting building cess from the Respondent No.1 in respect of the first contract, solely on the basis of the CAG report, is in excess of power conferred on UPPTCL by law or in terms of the contract. In other words, UPPTCL has no power and authority and or jurisdiction to realize labour cess under the Cess Act in respect of the first contract by withholding dues in respect of other contracts and/or invoking a performance guarantee. There is no legal infirmity in the finding of the High Court that UPPTCL acted in excess of power by its acts impugned when there was admittedly no assessment or levy of cess under the Cess Act.’ The Court observed.
