Court No.22

               Civil Misc. Writ Petition No.4082 (M/S) of 2010

PNC Infratech Limited                                     ..........Petitioner
                                     Versus
State of Uttar Pradesh and others                         ......Opposite parties


Hon'ble S.S. Chauhan, J.

Heard Sri S.M.K. Chaudhary, Senior Advocate, assisted by Sri Vaibhav Pandey, learned counsel for the petitioner and Sri V.S. Tripathi, learned Addl. Chief Standing Counsel for the State as well as Sri K.D. Nag, learned counsel for the Airport Authority of India.

The petitioner, who happens to be a contractor has come forward to challenge the levy of cess under the Building and Other Construction Workers' Welfare Cess Act, 1996 (for short "Act No.28 of 1996") and the Rules framed thereunder known as the Building and Other Construction Workers' Welfare Cess Rules, 1998 (for short "the Cess Rules, 1998").

Submission of learned counsel for the petitioner is that the petitioner, who has engaged itself in the contract work with the Airport Authority of India for extension and strengthening of construction of new taxiway at Lucknow Airport cannot be subjected to the aforesaid charge of cess as contemplated under Act No.28 of 1996 as the petitioner is not covered within the definition clause and cess if any has to be imposed, then it cannot be imposed in respect of construction work which has not to take place with the approval of the local authority. To substantiate his argument reliance has been placed by the learned counsel for the petitioner on Section 3 of Act No.28 of 1996. It has also been submitted that the Cess Rules, 1998 contemplate that definition of establishment does not include the Airport Authority and therefore, the petitioner cannot be subjected to cess in respect of a contract which is being carried on by it with the Airport Authority of India.

Learned Addl. Chief Standing Counsel has submitted that the scheme of Act No.28 of 1996 and the Rules framed thereunder is altogether different from the scheme of the Building and Other Construction Workers' (Regulation of Employment and Conditions of Service) Act, 1996 (for short "Act No.27 of 1996") and the Rules framed thereunder known as the Uttar Pradesh Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Rules, 2009 (for short "Rules of 2009"). Learned Addl. Chief Standing Counsel submits that Act No.27 of 1996 and the Rules framed thereunder apply in respect of the regulation of employment and conditions of service of the workers and amenities to be 2 provided and neither cess is assessed or the liability is fixed under the aforesaid Act and the Rules. Penal provision is contained in the Act No.28 of 1996 and he has drawn the attention of the Court towards the language employed in sub-section 2 of Section 3 and has submitted that in respect of a building or other construction work of a Government or of a public sector undertaking deduction has to take place at source and in case of advance collection, deduction has to take place after the work is verified with the approval of the authority. Submission is that in the case in hand, the work which is being undertaken by the Airport Authority of India, which is a public sector undertaking and therefore, the deduction of cess has to take place at source. He has also submitted that deduction has already taken place at source and therefore, there is no illegality in deducting the cess from the petitioner at source. He also submitted that the statutory appeal is provided against any assessment and therefore, the petitioner may approach the appellate authority as contemplated under law if it wants to dispute the liability of assessment.

Having heard learned counsel for the parties, I find that the scheme of Act No.28 of 1996 and the Rules framed thereunder deal with in respect of determination of cess. Section 3 (2) of Act No.28 of 1996 specifically provides as under:-

"3 (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 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."

From the language of sub-section 2 of Section 3 of Act No.28 of 1996, it is evident that the cess has to be levied under sub-section (1) and has to be collected from every employer in such manner and at such time, including deduction at source in relation to a building or other construction work of a Government or of a public sector undertaking. The word 'or' clearly denotes that advance collection through a local authority where on approval of such building or other construction work by such local authority is required to be read disjunctively and they cannot be read in conjunction with the earlier part of the Section where the word 'or' has been used repeatedly. Therefore, argument of the learned counsel for the opposite parties is that the levy of tax has to take place in advance where a construction takes place with the approval of the local authority or where the construction is taking place in 3 respect to building of a Government or of a public sector undertaking the cess has to be deducted at source as is clear from sub-section 2 of Section 3 of Act No.28 of 1996. Cess Rules, 1998 also deal with the levy of cess and sub-rule 3 of Rule 4 of the Cess Rules, 1998 also provides that where the levy of cess pertains to building and other construction work of a Government or of a public sector undertaking, such Government or the public sector undertaking shall deduct or cause to be deducted the cess payable at the notified rates from the bills paid for such works.

The aforesaid language also goes to indicate that deliberately the Legislature has not used the word 'with the approval of the local authority' whereas in subsection 2 of Section 3 of Act No.28 of 1996 the word 'with the approval of the local authority' has been used, therefore, the interpretation which has to be adopted has to be in consonance with the language employed in the two provisions i.e. Section 3 (2) of Act No.28 of 1996 and Rule 4 (3) of the Cess Rules, 1998. Rule 4 (3) of the Cess Rules, 1998 is quoted as under:-

"4 (3). Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the levy of cess pertains to building and other construction work of a Government or of a public sector undertaking, such Government or the public sector undertaking shall deduct or cause to be deducted the cess payable at the notified rates from the bills paid for such works."

Reliance placed by the learned counsel for the petitioner on Act No.27 of 1996 i.e. the Building and Other Construction Workers' (Regulation of Employment and Conditions of Service) Act, 1996 and the Rules of 2009 are in regard to the Regulation of Employment and Conditions of Service and operate in different field and the definition, if any, appended therein has to be read in respect of establishment of the Board and welfare measures to be adopted in respect of the workers, who are working with the contractor at site. Elaborate provisions have been made in that regard, therefore, in the aforesaid circumstances, the argument of the learned counsel for the petitioner fails.

Learned counsel for the petitioner has placed reliance upon a judgment rendered by the Apex Court in the case of M/s Saraswati Sugar Mills and others vs. Haryana State Board and others, (1992) 1 SCC 418, to emphasise that the two Acts operate in different fields and they cannot come to the aid and support of each other and the cess is to be determined under the Cess Act, which has been framed to raise revenue for augmenting the resources of the Pollution Control Boards. Paragraphs 5, 11 and 19 of 4 the aforesaid judgment are reproduced hereunder:-

"5. The object of the Act is to control the water pollution and to ensure that industrial affluents are not allowed to be discharged into the water coarses without adequate treatment. The Cess Act is not an enactment to regulate and control pollution but a fiscal measure to raise revenue for augmenting the resources of the Pollution Control Boards. The levy and collection of cess provided under the Cess Act is on water consumed by persons carrying on the industries specified in the Schedule. The Cess is levied on the person carrying on the specified industry. The question is whether industries manufacturing sugar are covered by Entry 15 that is "processing of vegetable product industry".

11. The interpretation of one of the entries in Schedule I to the Cess Act came up for consideration in Member- Secretary, A.P. State Board for Prevention and Control of Water Pollution v. A. P. Rayons Ltd. and others, (1989) 1 SCC

44. The question for consideration was whether manufacturing of rayon grade pulp a base material for manufacturing of synthetics or man-made fabrics is an industry as mentioned in Schedule I to the Cess Act. It was held:

"[W]hether a particular industry is an industry as covered in Schedule I of the Act, it has to be judged normally by what that industry produces mainly. Every industry carries out multifarious activities to reach its goal through various multifarious methods. Whether a particular industry falls within the realm of taxation, must be judged by the predominant purpose and process and not by any ancillary or incidental process carried on by a particular industry in running its business."

This Court also observed:

"It has to be borne in mind that this Act with which we are concerned is an Act imposing liability for cess. The Act is fiscal in nature. The Act must, therefore, be strictly construed in order to find out whether a liability is fastened on a particular industry. The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to its natural construction of words. See the observations In Re. Nicklethwait, (1885) 11 Ex. 452, 456. Also see the observations in Tennant v. Smith (1892) AC 150 (and Lord Halsbury's observations at page 154). See also the observations of Lord Simonds in St. Aubyn v. A.G. (1951) 2 All. ER, 473, 485. Justice Rowlatt of England said a long time ago, that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One has to look fairly at the language used. See the observations in Cape Brandy Syndicate v. IRC, (1921) 1 KB 64, 71. This Court has also reiterated the same view in Gursahai Saigal v. CIT, 5 (1963) 3 SCR 893, CIT v. V.MR. P. Firm, Muar, (1965) 1 SCR 815, Controller of Estate Duty v. Kantilal Trikamlal, (1976) 4 SCC 643.

The question as to what is covered must be found out from the language according to its natural meaning fairly and squarely read. See the observations in IRC v. Duke of Westminster, (1963) AC 1, 24 and of this Court in A.V. Fernandez v. State of Kerala, 1957 SCR 837. Justice Krishna Iyer of this Court in Martand Dairy & Farm v. Union of India (1975) 4 SCC 313 has observed that taxing consideration may stem from administrative experience and other factors of life and not artistic visualisation or neat logic and so the literal, though pedestrain, interpretation must prevail."

19. We are unable to appreciate the reasonings of the learned judges. Pollution Act may be a regulating Act but Cess Act is a fiscal enactment, as is held by this Court in Member Secretary, A. P. State Board for Prevention and Control of Water Pollution v. A. P. Rayons Ltd. and Others and Rajasthan State Electricity Board v. Cess Appellate Committee, JT (1990) 4 SC

123. Therefore we have to look merely at what is clearly said. There is no room for any intendment and there is no room for bringing within the provision of the Act anything by implication. Unless we give the botanical meaning to the word 'vegetable' it is not possible to conclude sugarcane as vegetable."

The law propounded by the Apex Court also goes to indicate that the Cess Act has been given an independent recognition and the liability of cess is to be assessed under the Cess Act only. The argument of learned counsel for the petitioner, therefore, taking aid and help from the other Act and the Rules of 2009 is misconceived and is rejected.

The writ petition is devoid of merit. It is accordingly dismissed. The petitioner, if so chooses, may prefer an appeal before the appropriate authority as contemplated under law.

04.08.2010 RBS/-