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| Article 370 Challenge Fails; HC Upholds BOCW Cess in J&K | | Contractors liable on post-July 31, 2007 works; unpaid cess recoverable with 6% annual interest | |  Early Times Report
Jammu, Sept 8: In a significant ruling on the constitutional validity of the construction workers’ welfare cess in Jammu and Kashmir, the High Court of J&K and Ladakh has held that Parliament was competent to enact and apply the Building and Other Construction Workers Act and the Welfare Cess Act to the erstwhile State of J&K, rejecting a challenge founded on the special constitutional position that existed under Article 370.
A Division Bench comprising Acting Chief Justice Sanjeev Kumar and Justice Mohd Yousuf Wani delivered the judgment in two connected petitions filed by R.G. Buildwell Engineers Ltd. and Valeecha Engineering Ltd.
The petitioners had challenged the constitutional validity of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, the Building and Other Construction Workers Welfare Cess Act, 1996, and the corresponding Cess Rules, contending that Parliament lacked legislative competence to extend them to the then State of Jammu and Kashmir.
The dispute arose after the J&K Economic Reconstruction Agency began deducting one per cent cess from the contractors’ bills. The contractors argued that the levy was effectively a tax and that Parliament’s residuary legislative powers under Entry 97 of the Union List had only limited application to the erstwhile State because of the constitutional arrangement under Article 370.
The High Court, however, held that the levy under the Cess Act is a fee and not a tax, noting that the Supreme Court had already settled the issue in Dewan Chand Builders & Contractors v. Union of India. The money collected is meant specifically for augmenting the welfare fund for building and construction workers rather than becoming part of the Government’s general revenue.
The Bench further ruled that although Article 248 and Entry 97, as applicable to the erstwhile J&K, did not by themselves confer competence on Parliament to enact the Cess Act for the State, the legislation could validly be traced to Entries 23 and 24 of the Concurrent List, dealing with labour welfare and social security.
Examining the “pith and substance” of the legislation, the court said the Cess Act was not merely a revenue-collection measure but an integral extension of the BOCW Act, enacted to finance welfare measures for construction workers.
The Bench consequently held that Parliament had the legislative competence under Article 246 read with Entries 23 and 24 of List III, and declared the challenge to the constitutional validity of the Cess Act meritless.
On the question of when the cess became recoverable in J&K, the High Court noted that the J&K Building and Other Construction Workers Welfare Board was constituted on July 31, 2007. It held that the statutory mechanism could not have been effectively implemented prior to that date. However, from August 1, 2007, contractors became liable to pay cess at the prescribed rate, irrespective of whether they had factored the levy into their bid prices.
Disposing of both petitions, the High Court declared the BOCW Act, Cess Act and the 1998 Cess Rules constitutionally valid. It further ruled that cess payable on contracts arising from NITs issued after July 31, 2007 can be recovered from the petitioners along with interest at six per cent per annum from the date it became due until recovery. (JNF) |
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