Bombay High Court Allows BOCW Cess Refund On Supply Portion Of Contract

The Bombay High Court has allowed the Building and Other Construction Workers Welfare (BOCW) Cess refund on the supply portion of the contract.

The bench of Justice G.S. Patel and Justice Neela Gokhale has observed that a contractor who enters into a pure Supply Contract is statutorily exempt from levy under the BOCW Act.

The Respondent, the Maharashtra State Electricity Transmission Company Limited (MSETCL), issued work orders in favour of the petitioner for 26 projects. MSETCL and the petitioner executed separate agreements for each scope of work, namely separately for the supply of equipment, for the erection, testing, and commissioning, and for civil works.

On July 4, 2016, the Labour Department issued a notification that clarified that design, supply, and transportation costs would not fall within the purview of the Cess Act, which levied a 1% cess.

On June 30, 2016, however, MSETCL issued a circular, one that is impugned in the petition, directing a deduction of 1% cess from the running account bills, including bills for the cost of equipment supply.

On January 2, 2017, MSETCL followed the previous circular with a direction covering all projects stipulating a deduction of a 1% cess from the total project cost, i.e., including the supply agreements, only the cost of land stood excluded.

On July 27, 2017, the State of Maharashtra issued a corrigendum with effect from June 30, 2016, saying that the labour cess would apply to civil works only.

On August 4, 2017, the corrigendum was apparently withdrawn. The challenge in the Petition is the continued levy of 1% cess on the supply contracts.

The petitioner contended that the clear statutory scheme of the BOCW Act excludes a supply contract from its ambit.

The court quashed the 1% Cess on the design and supply of equipment.

The court directed the release of the payment relating to the 1% Cess already deducted illegally on the design and supply of equipment.

The court prohibited the respondents from making a deduction of 1% of the cess from the payments to be made to the Petitioner where the deduction is made on account of the cost of design and supply of equipment.

Case Title: GE T and D India Ltd Versus Union of India & Ors

Case No.: Writ Petition No. 668 Of 2019

Date: 05/06/2023

Counsel For Petitioner: Tushar Jarwal, Mrunal Parekh, Rahul Sateeja Mohit Tiwari

Counsel For Respondent: Abhay Patki

Click Here To Read The Order