The first respondent-Special Project Engineer, Indian Institute of Science, Bangalore, issued a tender notification on 29.12.2008 for construction of new hostel complex with kitchen and dining Block at IISc Campus, Bangalore. The tender amount was Rs.68.30 lakhs. The petitioner had participated in the tender and finally it was awarded to the petitioner.

2. An agreement was entered into between the petitioner and the first respondent on 30.04.2009. This agreement between the parties omitted to mention payment of 1% cess recoverable at source. Again it was clarified by the first respondent by issuing a corrigendum for recovery of 1% cess on contract value. In view of non-inclusion in the contractual agreement, on the basis of corrigendum issued, it was not obligatory on the part of the petitioner to pay 1% cess to either first or second respondent.

3. The learned Counsel for the petitioner while referring to Section 2(1)(i) of the Building and Other Construction Workers (Regulation of Employment And Conditions of Service) Act, 1996, (hereinafter referred to as ‘the Act’ for short) submits that ‘employer’ for the purpose of deduction is the first respondent. Accordingly, the recovery of 1% cess should have been provided in the agreement. Under the circumstances, insisting the petitioner to pay 1% cess is arbitrary and it is ultra vires to the provisions of the Act. It is the submission of the petitioner that unless there is an express agreement between the contractor and the first respondent, it cannot be recovered and if at all recovery is made, it is in contravention of the agreement.

4. In support of his submission, the learned Counsel for the petitioner referred to the judgment of Andhra Pradesh High Court in W.P.No.6090/2011 between M/s. Maytas-NCC-JV and The Secretary to Government, wherein at paragraph-4 it is held that recovery arises only when the corresponding amount is included in the estimates and conversely if the amount representing the cess is not included in the estimates, deductions cannot be made while making payment to the contractors.

5. The learned Counsel for the petitioner has referred to another judgment dated 22.10.2009 in W.P.No.11269/2009 and connected matters, wherein at internal page No.4 it has been held that “therefore, the inescapable conclusion is that the occasion for an agency to deduct the cess under the Cess Act would arise only when the corresponding amount is included in the estimates. Conversely, if the amount representing the cess, is not included in the estimates, deductions cannot be made while making payments to the contractors”.

6. Learned Counsel for respondent No.2 requests this Court to dismiss this petition on the ground that even with or without mentioning the deduction of cess under the agreement or if the deduction is mandatory it is inescapable by assigning any reasons and when the law demands that there shall be deductions at source itself, then without there being any reference to the agreement there shall be deduction by the person who is empowered to do so.

7. The learned Counsel referred to Section 2(1)(i) of the Act, where it defines ‘employer’ in relation to an establishment, which means the owner thereof, and includes,-

(iii) in relation to a building or other construction work carried on by or through a contractor, or by the employment of building workers supplied by a contractor, the contractor.

8. Learned Counsel for respondent No.2 further submitted that for the purpose of deduction, it is only the petitioner who can be the employer and if the deduction is to be made, it ought to be done strictly in accordance with the provisions of Labour Cess Act.

9. The learned Counsel further refers to subsection (2) of Section (3) of The Building And Other Construction Workers’ Welfare Cess Act, 1996, which states that cess levied under sub-section (1) of Section (3) shall be collected from every employer for the purpose of employment.

10. The learned Counsel referred to the defin