RAMU-HR
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Korgaonkar K A
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This is Ramu working in manufacturing industry( Cement). My query is that we have received a notices from Joint commissioner of Labour to pay building cess on construction value. BOCW Act is not applicable to Factories Act as well as Mines Act, there was provision in BOCW Act.
But labour department authorities are telling that before commencement of Manufacturing process it is not factory, hence you are liable to pay building cess. Machinery value also included in construction value as per their notice.
Whether Building cess is applicable to factory? If applicable, whether machinery value shall include or not in construction value?
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Hi Ramu,
Labour department is correct. Before commencement of manufacturing process, the BOCW act is applicable. you need to pay Cess on total cost of construction activity. I think it includes machinery costs as well.
The Chattisgarh High Court recently held that the moment manufacturing process begins in an industry, the provisions of the factories act, would be applicable, and therefore, the provisions of the BOCW act would cease.
You can refer Lanco Anpara Power Ltd Vs State of Uttar Pradesh and ors on 18th October 2016 judgement
Thank you very much sir for your advise
Dear Praveen Bhosale ji,
Greetings & thanks for quoting the case of Chattisgarh High Court which I came to know from your post. I need to study this case law.
However, what I recollect now and I have made comments also somewhere on Lanco Anpara Power Ltd Vs State of Uttar Pradesh that, the SC said that unfortunately you can not take the benefit of exclusion carved out under Section 2(1)(d) of the BOCW Act. And thereby, you have no option but to obtain Registration Certificate under BOCW Act and also to pay Cess even though the construction work is carried out in a factory under the FA. The SC while coming to its conclusion, adopted a purposive interpretation to Section 2(1)(d) of BOCW Act giving primacy to the 'superior purpose' contained in the BOCW Act and the Welfare Cess Act, such purpose being the welfare of the unorganised labour class involved in construction activity. The Hon'ble SC further held that a literal interpretation as desired by the construction companies would result in a situation where the construction workers would be deprived of the benefits of both the BOCW Act and the Factories Act, which could not have been the legislative intent.
But now I am reading something different on net on the SC above said judgement.
There is a need to study both the Judgements once again. Experts are requested to comments on both the judgements after due study.
PS. Praveen ji, are you ex-siemens guy?
Dear Friend,
On the basis of your posting it is difficult to provide any opinion.
Please follow the following points to judge your case;
1. Whether your establishment is a running factory?
2. Whether you take up any expansion in subsequent date?
Your establishment required not to pay cess, If the answer is yes.
In the matter Mr. Praveen Bhosle has discussed certain things to which you need to focus.
If your factory is newly constructed and entered into production then you are liable to pay cess.
You are advised to follow the order of
A) Civil Appeal NO;6223 of 2016 of the Supreme Court in the matter of Lanco Anpara Power Ltd Vs UP.
B) Order of the Chatishgarh High Court, Bilaspur Bench in WPC:2636 of 2010 order dt.16/02/2018.
Besides your management can take legal course if the facts have substantial ground to challenge the demand Notice.
NB: I have quoted above two cases in an querry made under eligibility of gratuity
Dear sir
Yes now it is a running factory. But they are demanding cess for at the time of construction value ( 2009)
if we take up a expansion project, whether building cess is applicable or not
Ramu
On which date the construction of plant was started and date on which end. Any green field construction is fall under the B&OCW Act and the cess levied for that period is justified.
The date on which factory obtained licence for commercial production and on commensement of production shall be treated under Factories Act.
As per the decission of the Chatishgarh High Court, if you take up an expansion project in the premises of the running factory would not attract payment of cess under B&OCW.
Government Of Andhra Pradesh & ... vs Lakamsani Samba Siva Rao & Others on 6 August, 2015.
The Hon. Acting Chief Justice Shri.Dilip Bhosale and Hon.Justice S.V.Bhat
W.A.Nos.1012 OF 2013 and batch
Please go through the judgement. Even expansion of work within working factory has been covered under BOCW and cess needs to be paid.
While giving judgment Hon.ACJ has termed it as beneficial legislation. The construction workers are not covered under factories Act. If they won’t be covered under BOCW Act then there won’t be any benefit to them or coverage. This is most vulnerable section of society.
This was not intention of legislation. So workers need to be covered and cess needs to be paid.(Even on Machinery)
Worth reading.
Mr. Mohanty has given correct opinion.
Apart fron Greenfield it is applicable to running factories as written above.
Some additional information.
The Act has been made effectiveness retrospectively. Although the act was made long back rules were not framed. Since it has to be implemented by each State,rules were required.
When the rules were published in gazette the state governments started levying cess retrospectively. Although it was their delay.
So in short even when all work is done 5-6 years back cess needs to be paid.
It needs to be paid for Green field project and even for running factory.
As BOCW implementation is fresh there are very less cases to refer to.
Unless Supreme Court creates sufficient database of cases it would go on with some cases in favour of owners and some against.
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