Understanding BOCW Cess: Are We Correctly Charging and Deducting from Contractors?

Our company is a state power transmission company. Apart from our own line construction work, we undertake line construction work (on a turnkey basis) for our clients as well.

We outsource the line construction work undertaken from our clients to our contractors. So the proposition is as follows: Customers -> our company -> contractor. For the construction work, we charge an estimated amount from our customer. Along with the construction cost, we also recover a 1% BOCW cess. The recovered BOCW cess is remitted to the BOCW Board.

We then outsource the "construction portion" of the total work to the contractor, and for the "material portion," we procure materials. As the work progresses, the contractor submits the bills. From the contractor's bill, we deduct 1% BOCW cess and remit the same to the BOCW Board.

Our queries are as follows:

(i) Is the above process of recovering cess from the customer and deducting cess from the contractor's bill correct?

(ii) Who is the employer in this case liable to collect the cess?

I would like you to go through the definitions of the terms "employer" and "establishment" defined respectively under section 2 (1) (i) and 2 (1) (j) of the BOCW Act, 1996, and the time and manner of collection of cess stipulated under rule 4 of the BOCW Welfare Rules 1998. A combined reading of all the above provisions would affirm the correctness of the practice of deducting cess proportionately from the contractors' bills.

Though your second question seems to be a moot one, the applicability of the terms "employer" and "establishment" to both the person for whom the construction work is carried out and the contractor who undertakes the work makes both responsible for the remittance of the cess. To be more specific on this moot point, my personal opinion on the ultimate responsibility to collect and remit revolves around fixing the person for whom the construction work is done in view of the extended application of the provision under rule 4(3) for deduction from the bills in respect of works pertaining to Public Sector and Govt Undertakings to others also and the provision under rule 4(5) of the 1998 Rules for advance payment of cess based on the estimated calculation of construction.

Thanks for the input. However, to be specific, my query is whether recovering cess from customers for the contract work we undertake from them is correct or not. Don't you think that there is a double recovery and payment of cess - first from our customer and second from the subcontractor's bill for the same work outsourced to the subcontractor?