Writ Petition No.2321 of 2012

15th February, 2017.

Petitioner Counsel: Shri ANAND JAISWAL, Mr. MAYANK SHARMA
Respondent Counsel: SHRI MATI BHARATI DANGRE, Shri M.M. AGNIHOTRI

Cases Cited:
Dewan Chand Builders and Contractors Vs. Union of India and others, 2012 ALL SCR 175=(2012) 1 SCC 101 [Para 5]
Adani Agri Logistics Ltd. And another Vs. State of Haryana and others, 2011(1) LLJ 307 [Para 5]
Sterlite Energy Ltd. Vs. State of Orissa and others, 2011 (3) LLJ 349 [Para 5]
Lanco Anpara Power Limited Vs. State of Uttar Pradesh and others, 2017(2) ALL MR 926 (S.C.)=(2016) 10 SCC 329 [Para 6]

JUDGMENT

B. P. DHARMADHIKARI, J. :- Petitioner, a factory duly functioning as per Factories Act 1948, has approached this Court questioning the demand of one percent cess from it by respondent no.4, on 29.3.2012. The cess is demanded as construction of building on Plot No. B-2 by petitioner is found to be covered under section 2(d) of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 ( hereinafter referred to as 'Act No. 27/1996'). The cess on this construction work is demanded as per the Building and Other Construction Workers Welfare Cess Act, 1966 ( hereinafter referred to as 'Cess Act').

2. Accordingly, we have heard Senior Advocate Anand Jaiswal with Adv. Mayank Sharma for petitioner, Mrs. Bharati Dangre, learned Government Pleader for respondent nos. 1 and 5 and Adv. Agnihotri for respondent nos. 2 to 4.

3. By placing reliance upon provisions of Section 2 (d) of the Act No.27/1996, senior Adv. Jaiswal submits that as the structure put up by petitioner was always subject to provisions of Factories Act 1948, the work in relation thereto cannot be viewed as building and construction work to attract Act No.27/1996. He submits that therefore demand of cess under Cess Act is unwarranted. He has taken us through the relevant provisions of Factories Act, to urge that right from selection of site, approval to plan of building in which manufacturing process is to be carried out, all facets of construction work are regulated by Factories Act and hence the impugned action is unsustainable.

4. Learned Government Pleader as also Adv. Agnihotri have opposed the contentions. They submit that provisions of Act No.27/1996, Cess Act and the provisions of Factories Act, 1948 operate in entirely different spheres and do not overlap. The cess has been demanded for the work which was completed before petitioner started any manufacturing process in the structure. Attention is invited to clarification issued by Chief Engineer, MIDC in this respect, to urge that as per said clarification issued vide Circular No.8/2013 on 11th March 2013, this distinguishing feature and identity of each sphere is maintained. The State Government has expressly observed that cess received by it till issuance of said clarification or circular, however, need not be refunded.

5. The learned Government Pleader has invited our attention to the judgment of Hon'ble Apex Court, reported at (2012)Vol.1 SCC 101 : [2012 ALL SCR 175] Dewan Chand Builders and Contractors vs. Union of India and others, to urge that cess under Cess Act is found to be a fee. Judgments delivered by Division Bench of Punjab & Haryana High Court reported at 2011(1) LLJ page 307: Adani Agri Logistics Ltd. And another vs. State of Haryana and others; by Orrisa High Court, reported at 2011 (3) LLJ page 349: Sterlite Energy Ltd. vs. State of Orissa and others, and by Andhra Pradesh High Court in Writ Appeal No.1012/2013 and other connected matters on 6.8.2015, are pressed into service. Learned counsel for respondents state that after comparing provisions of Factories Act and Act No. 27/1996 a categorical finding that Acts function in different spheres, that there is no overlapping and as such, the application of Act No.27/1996 or Cess Act till commencement of manufacturing process, has been accepted by all these Division Benches.

6. Arguments could not be concluded yesterday. Today, when we resumed the arguments, learned Govt. Pleader has invited our attention to judgment of Hon'ble Apex Court, reported at (2016) 10 SCC 329 : [2017(2) ALL MR 926 (S.C.)] Lanco Anpara Power Limited vs. State of Uttar Pradesh and others, to urge that the view taken by Orissa High Court and by Karnataka High Court on same lines, is already upheld by Hon'ble Apex Court. She, therefore, submits that controversy is no more res integra. Our attention is also drawn to judgment by Allahabad High Court from which, matter was taken to Hon'ble Apex Court.

7. We find that in the light of judgment of Hon'ble Apex Court mentioned supra and various judgments of High Courts (supra), our work has become much easier.

8. Perusal of section 2 (d) of Act No. 27/1996 reveals that it does not speak of either building or construction but it considers "building or other construction work." Emphasis in definition therefore is on process or stages through which building or construction comes up. The exclusion from operation of provisions of Act No.27/1996 envisaged in that definition is, therefore also applicable only when such "work" is governed by provisions of Factories Act, 1948 or Mines Act, 1952. If the work of erection of a building or a particular structure cannot be subjected to Factories Act or Mines Act, the excluding part in said Sec.2(d) will not be applicable.

9. The Circular No. 8/2013 issued on 11th March, 2013 clarifies that in case registration under Factories Act,1948 is obtained by units/ allottee, labour cess is not applicable to such units/allottee with effect from the date of its registration under the Factories Act, 1948. It further stipulates that "however, cess received so far cannot be refunded".

10. Learned Government Pleader has attempted to urge that activity of raising a building or construction by itself, can never be construed as a manufacturing process in terms of Section 2 (k) of the Factories Act and, as such, till the actual manufacturing process begins, the provisions of Factories Act, cannot apply. We find that the Division Bench of Andhra Pradesh High Court has, in the course of discussion, taken a hypothetical situation in which construction is complete but for reasons beyond control, manufacturing process never starts, it has been held that in that situation, the cess under Cess Act is recoverable. However, question sought to be urged that work of raising of a building or any structure even to house a factory, may not constitute manufacturing process was not required to be gone into in any of the judgments.

11. The process or exercise of raising a building is undertaken by a civil contractor and, in most of the cases, on sites belonging to some other persons. He has undertaken to produce a definite result i.e. to complete the building as required for his employer and when he delivers that building ( final product) his work is over. He then shifts to other site and may be, with the help of same staff, same labour or other staff and other labour, depending upon the distance between sites, again takes up the same exercise. Thus, when in a standard manufacturing process, the infrastructure, apparatus and appliances used to manufacture the end product always remains same, here, after final product is ready the activity itself comes to an end.

12. The Circular mentioned supra issued by Chief Engineer/ respondent Nos.2 to 4, on 11th March, 2013 does not show that respondent nos.2 to 4 have accepted building and construction "work" as such, as manufacturing activity.

13. The building to be erected is always subject to various legislations, like Regional Town & Planning Act, Development Control Rules or Building ByeLaws. Similarly, provisions in Factories Act stipulate peculiar requirements or standards of construction contingent upon manufacturing activity to be undertaken therein and also in the interest of safety, health, hygiene of work force. These provisions are prescribing standards applicable to completed structure/building. The manufacturing of that completed building i.e. work of construction of that building is therefore not regulated by these provisions. The said "work" is controlled by contractor and performed by a "building worker". The provisions of Act No.27/1996 are for welfare of labour force employed by that contractor. Cess is charged on that labour or work and after work is over, the purpose or user to which that building or structure is put, is not relevant for levy thereof. If in future, some other work like expansion or repairs is again taken up, the competent authority can again demand cess for workers who are employed on that work. This power to demand cess is subject to qualification, that provisions of Factories Act are not applicable to such "work", if it is taken up after manufacturing process has been commenced.

14. In present facts work of construction of building has begun on 27.03.2008 and in February 2008, the petitioner was directed to get itself registered under the Act No.27/1996. The petitioner got itself registered as a factory on 18.01.2010. The manufacturing process has started with effect from 01.07.2010. It is not in dispute that demand for cess is for a period upto 18.1.2010.

15. In the light of various judgments noted supra and particularly the judgment of Hon'ble Apex Court, it is clear that after manufacturing process starts, the work on a factory building or any other civil work therein which can be subjected to provisions of Factories Act 1948, shall not attract provisions of Act No.27/1996 or then Cess Act. However till that stage is reached, certain amount of "work" is always done and the building or structure ready to house the plant, machinery etc. is already available. On that "work", legitimately cess can be demanded and has been demanded. We therefore, find that after such building and structure is put to use as a factory, no question of refund of any cess can arise. However as person interested in seeking such refund is not before this Court, we are not recording a conclusive and binding finding in this respect.

16. In the light of this discussion, we find no merit in the petition. The Writ Petition is accordingly dismissed. Rule discharged. No costs.

Petition dismissed.