The obligation to pay Cess as mandated by the Acts and the utilization of the funds towards the welfare of construction workers.

This writ petition is filed by M.E.S. Builders Association of India represented by its Secretary. It is claimed that the said Association is a registered association. Its parent body is having its registered office at New Delhi. The petitioner being the branch consisting of 46 members comprising of various builders undertaking contract work to Military Engineering Service. They have come forward to challenge the order of the fourth respondent Controller of Defence Accounts, dated 12.3.2010 as illegal and ultra vires to the Constitution of India.

2. By virtue of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (Central Act 27 of 1996) and more particularly under Section 18 of the said Act, the State Governments should constitute a Board known as Building and Other Construction Workers Welfare Board, which board shall be a body corporation having perpetual succession and a common seal. The said Board as per proviso to Section 18(3), shall include an equal number of members representing the State Government, the employers and the building workers and that at least one member of the Board shall be a woman.

3. By virtue of the Building and Other Constructions Workers Welfare Cess Act, 1996 (Central Act 28 of 1996), more particularly under Section 3, there must be levy of cess not exceeding 2%, but not less than 1% of the cost of construction incurred by an employer, as the Central Government, by notification in the Official Gazette, from time to time may specify. Under Section 3(2), cess levied shall be collected from every employer in such a 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 as may be prescribed. Under Section 3(3), the amount collected by way of Cess shall be paid by the local authority or the State Government collecting the Cess to the Board after deducting the cost of collection of such cess not exceeding 1% of the amount collected.

4. The term "Board" has been defined under Section 2(a) as the Board constituted by the State Government under Section 18(1) of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. By the impugned circular by the Controller of Defence Accounts, he informed that the headquarters had issued instructions to levy cess of 1% to 2% on the total cost of construction to provide welfare measures to the workers and transfer the amount to the Building and Other Construction Welfare Board constituted by the State Government. It was also directed that in all contract agreement, a clause must be introduced regarding the collection of Cess in terms of 1996 Act. Therefore, the CDA requested that issue should be taken up with the State Governments of Tamil Nadu and Kerala as to whether they have constituted the Board in terms of Section 18(1) of the Central Act 27/1996. Pending receipt of reply from the State Government, 2% of Cess are to be recovered from the bills processed by the office of the Chief Engineer under the jurisdiction of the Controller of Defence Accounts.

5. It is the case of the petitioner that the members of the petitioner association are engaged in contract work with MES undertaking civil contract works. For the purpose of executing the contract, various clauses of contract have been prescribed with pecuniary limit and for participation in the tenders, security deposits have also been provided. It is their case that usually respondents 1 to 14 estimate the construction cost including the tax, levies, of which the rate will be quoted by the contractors. Till date the estimation cost given by respondents for construction workers was never added. By the present demand for collection of cess at the rate of 2% will be an unnecessary force on them. The collection of Cess at the rate of 2% on contract value will be huge.

6. It was also contended that under t