Can a Contractor Be Charged Cess Retroactively if It Wasn't in the Original Tender?

Can the cess, not collected earlier by the owner (say a PSU) from the contractor's running bills, still be collected from the subsequent/final bills? If yes, is the contractor justified in going to court/arbitration especially when at the time of tendering for the work, there was no mention of such deduction in the Notice Inviting Tender (NIT)?

Ensure there is a single line break between paragraphs.

Please go through the allotment of the work contract carefully. I am sure there must be a clause stating that the contractor will abide by all existing labor laws. The Cess Act has been on the statute book since 1996 and, therefore, must have been in existence on the day when the work was allotted.

Best wishes,
Jpratap

Dear,

We are also to examine who is responsible for depositing the amount of cess. If the contractor does not fall within the category of the employer, then why should he pay? If yours is a PSU unit, then you must be having a Law Officer. First, ask him to go through the BOCW Cess Act, 1966, and let him give his advice on who is responsible for the deposit of cess. Then go through the agreement. See what it says and take action accordingly.

Regards,

R.N.Khola
(Labour Law & Legal Consultants)
09810405361

Dear,

Please go through sub-rule (3) of Rule 4 of the Cess Rules, 1998. It is the responsibility of a PSU to deduct cess from the bills of the contractor and pass it on to the State Welfare Board. In case it fails, it may have to pay from its own pocket. Upon the completion of the project, the assessment will be made, and the Assessing Officer will require you to deposit the remaining 1% of cess on the total cost of construction of the project. If you have not deducted, you can imagine - the interest is 2% p.m., and the penalty is 100% of the unpaid cess amount.

I think you should proceed to deduct.

Best of luck, Jpratap

Dear SHAHI,

Yes, it is also applicable to Private Ltd. companies.

With Regards,
R.N.Khola

Dear Friend,

No, establishments covered under the Factories Act are expressly excluded from this Act.

Regards

Cess Payment on Construction of Factory Buildings

You have to pay cess on the construction of a factory building—whether new or an extension. The BOCW Act is applicable until the Factories Act, 1948 becomes applicable, which happens only when the occupier gives notice to the Factory Inspector of their intention to resume the building to be used as a factory. The premises are then inspected, and a license under the Factories Act is issued. Until then, the BOCW Act, 1996 remains applicable. Hence, in this situation, one cannot escape the payment of cess.

In this context, you may also view the judgment of the Hon'ble High Court reported in Labour Law Reporter "2010 LLR MP HC 165."

Regards,
Jpratap

I have seen the MP HC judgment of Gannon Dunkerly; however, the same is vague and does not explain why Cess is payable for buildings under the Factories Act. If the definition excludes buildings under the Factories Act, then what would be exempted? If we are only expanding at the existing site where the factory is running and the expanded building will also be covered under the Factories Act, then under BOCW Cess Act, how are we liable to pay? How would you interpret the exclusion from the definition? You said, "occupier gives notice to the Factory Inspector of his intention to resume the building to be used as a Factory." Kindly clarify.

Thanks!

In addition to the opinion given by Jpratap, I would like to add and clarify that where the Factory License has been obtained, the factory is exempted from the BOCW Act. The intention of the BOCW Act is to cover the unorganized sector, such as building workers, and provide them with the umbrella of Safety, Health, and Welfare, as rightly stated by Jpratap. Once the Factory Act is applicable on the premises, it will override all other acts related to safety, welfare, and health.

Regards

Thank you for all the comments and detailed views. However, I do not agree with the view taken by MP HC. I will challenge the notice and let you know the outcome. Thanks again!

Cess Act Under BCWW Act 1996

What is the Cess Act under the BCWW Act 1996? Who is supposed to pay the tax, the principal employer or the contractor, if the old tender has been finalized and the tax has not been deducted from the bills? Who is responsible, the contractor or the principal employer, especially when there is no clause for cess in the tender (NIT)?

Mechanical Earthwork and the Cess Act

Does the work of mechanical earthwork in cutting come under Building & Other Constructions, and does it fall under the purview of the Cess Act?

Supply of Ballast and the Cess Act

Does the work for the supply of ballast fall under the purview of the Cess Act?

Track Work and the Cess Act

Does the track work come under the purview of the Cess Act?

Regards

In the case of Adani Agro vs. State of Haryana (2010 LLR 753), the Punjab and Haryana High Court in Chandigarh has removed all doubts as to who is the 'employer' under the BOCW Act, 1996, and who is required to pay cess under the BOCW Cess Act, 1996. It has also endorsed the views of the MP High Court regarding the applicability of the Act to establishments where the provisions of the Factories Act 1948 apply. For the complete judgment, kindly refer to the Labour Law Reporter or ask me for a photocopy of the same at my email address: [Email Removed For Privacy Reasons].

Regards,
jpratap

Please refer to rule 3 of the BOCW Cess Rules, 1998, which reads as follows:

"Levy of Cess: For the purpose of levy of cess under Sub-sec (1) of Sec. 3 of the Act, the cost of construction shall include all expenditure incurred by an employer in connection with the building or other construction work but shall not include:
- Cost of land;
- Any compensation paid or payable to a worker or his kin under the Worker's Compensation Act, 1923."