The main legal point established in the judgment is that the labour cess is not leviable on the supply of materials and consultancy charges under the Building and Other Construction Workers' Welfare Cess Act, 1996, and the recovery of cess should be in accordance with the statutory provisions.

JUDGMENT :

RAJESH SHANKAR, J.

1. The present writ petition has been filed for quashing letter No. 1656 dated 25.08.2020 issued by the Senior Manager (F&A), Jharkhand Urja Sancharan Nigam Limited, Ranchi (the respondent No. 5) inasmuch as it relates to levying as well as deducting labour cess under the Building and Other Construction Workers' Welfare Cess Act, 1996 [hereinafter referred to as “the Cess Act 1996”] to the tune of Rs. 3,53,56,963/- from the payment of invoices made towards consultancy charges and supply of materials/equipment for the projects of various Grid Sub-Station (GSS).

2. According to the petitioner, the respondent-JUSNL during pendency of the present writ petition, continued to deduct labour cess to the tune of Rs. 2,37,81,437/- while making payments of various ongoing projects and thus the total deduction has now come to Rs. 5,91,38,400/-. Hence, additional prayer by way of amendment has been made for issuance of direction upon the respondents to forthwith refund a sum of Rs. 5,91,38,400/- which has been illegally and arbitrarily deducted by the respondent No. 4 as labour cess on supply of materials and consultancy charges. The petitioner has also prayed for issuance of direction upon the respondents to pay interest @ 18% per annum from the date of the said deduction till the date of actual payment being the compensation for the amount illegally retained by the respondents without jurisdiction.

3. The factual background of the case, as stated in the writ petition, is that the petitioner is primarily involved in the business of engaging in works contracts with government departments/local authorities relating to supply of materials/equipment, consultancy services and erection of electricity transmission lines. The respondent Nos. 4 and 5 in connection with construction of electric grid sub-stations at various locations in the State of Jharkhand such as; Chatra, Rajmahal, Bharagora, Chandankiyari, Tamar, Jamua etc. engaged the services of the petitioner and separate agreements were entered for different scope of civil and structural works namely (i) supply of materials and (ii) erection of Grid Sub-Stations and transmission lines at various locations. Even the terms of payment agreements relating to the aforesaid nature of works were different and distinct. As per the agreement between the parties, the payment was made to the petitioner separately on pro-rata basis for consultancy charges, supply part and erection part. Labour cess under the Cess Act, 1996 was initially deducted by the respondent Nos. 4 and 5 @ 1% for a substantial period only on the erection price. Labour cess was correctly not deducted on consultancy charges and supply of materials as it did not involve any civil work which would entail the services of building and other construction works. Suddenly, the petitioner received letter No. 1656 dated 25.08.2020 issued by the respondent No. 5 wherein it was stated that labour cess was deducted from the contractor's bills on the erection price, however, on the basis of an expert opinion, it was decided by the competent authority that labour cess was also to be deducted on entire components i.e. on the bills paid earlier towards supply of materials and consultancy services as well as on future bills also. The petitioner submitted its response vide letter dated 05.11.2020 stating inter-alia that some of the letters referred to in the letter of the respondent No. 5 dated 25.08.2020 had not been served to it. It was further claimed that the imposition of labour cess on supply of materials and consultancy charges was erroneous and based on misconceived interpretation of the applicable law. However, the respondents deducted an amount of Rs. 5,91,38,400/- as labour cess on the payments made for supply of materials and consultancy charges for both concluded as well as existing contracts of the ongoing projects.

4. Learned Sr. counsel for the petitioner submits that on bare perusal of the statement of Object