M/S Genus Power Infrastructures LTD Through Its Senior Engineer Mr Praveen Kumar Gupta vs. State Of Jharkhand Through The Secretary Deptt Of Labour Employment And Training

Held

The Court held that the imposition of Labour Cess for the supply and installation of 'smart meters' is impermissible. The Court found that the nature of the work, which involves the supply and installation of smart meters, does not entail construction, alteration, repair, maintenance, or demolition work, nor is it allied to construction activity. The Court referred to the work order and the item-wise cost breakup, noting that the cost of equipment and its installation was consolidated. Based on the settled position of law, particularly the Supreme Court's judgment in U.P. Power Transmission Corpn. Ltd. v. CG Power & Industrial Solutions Ltd. and the Jharkhand High Court's decision in State of Jharkhand v. M/s Flowmore Limited, the Court concluded that cess cannot be levied on supply or consultancy components, and it can only be levied on construction, alteration, repair, maintenance, or demolition work. Therefore, levying and deducting Labour Cess on the supply and installation component was not in accordance with the settled principles. The Court set aside the levying of Labour Cess and directed Respondent No. 4 to refund the Labour Cess to the petitioner within eight weeks, along with simple interest at 6% per annum.

Facts

M/s Genus Power Infrastructures Ltd. (Petitioner) was awarded a contract by Jharkhand Bijli Vitran Nigam Limited (JBVNL, Respondent No. 4) for the supply, installation, operation, and FMS of Smart Meters. The Petitioner raised separate bills for the supply of materials and installation services. The Petitioner's grievance is that JBVNL levied and deducted Labour Cess at 1% of the gross bill amount on both the installation service bills and the supply of materials bills. The Petitioner sought a writ of mandamus directing JBVNL to refund the deducted Labour Cess and to refrain from further deductions. The contract value was INR 214,74,26,897/-, inclusive of GST, with a significant portion attributed to Plant and Equipment (INR 151,28,16,284/-) and another to Installation and other services (INR 22,28,31,055/-).

Key Issues

1. Whether the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act) is attracted only when the work involves 'building or other construction work' necessitating the engagement of laborers for civil work? 2. Whether the definition of 'building or other construction work' under the BOCW Act applies exclusively to 'construction, alteration, repairs, maintenance or demolition'? Petitioner's Argument: The Petitioner contended that the BOCW Act and the Cess Act are attracted only to 'building or other construction work' and that the supply and installation of smart meters do not fall under this category. They relied on the Supreme Court's decision in U.P. Power Transmission Corpn. Ltd. v. CG Power & Industrial Solutions Ltd. (2021) 6 SCC 15, arguing that mere installation or erection of equipment without involving construction work is not amenable to cess. They also cited the Jharkhand High Court's decision in State of Jharkhand through the Secretary, Department of Labour, Employment & Training v. M/s Flowmore Limited, LPA No. 511 of 2022, which held that cess cannot be levied on supply or consultancy components. Revenue/State's Argument: JBVNL (Respondent No. 4) argued that Section 3 of the Building & Other Construction Workers Cess Act, 1996, allows for a cess on the cost of construction, and this is confirmed by a letter from JBOCWW. They contended that levying Labour Cess on the supply of material is reasonable and not arbitrary. They also argued that the contract was a composite one where separate contemplation for services and supply was not made, and disputed questions regarding the nature of the contract cannot be adjudicated in a writ court.