velko infratech projects Pvt. Ltd. Vs the State of Ap

M/s. Velko Infratech Projects Pvt Ltd, Rep by its Managing Director, Sri Velagapudi Rama Rao S/o. Veera Raghavaiah 70 years R/o.H.No.59-10-2, Gayatri Nagar Vijayawada

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...Petitioner

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AND

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The State of Andhra Pradesh rep by Principal Secretary Panchayat raj and rural development dept secretariat velagapudi Amaravati Guntur Dist

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The Engineer in Chief RWS and Sanitation, A.OP Rural Water Supply and Sanitation (APRWSSP) Vasudha shelters 3'^^ floor C Block Near Lie colony Saipuram Colony Gollapudi Vijayawada - 225

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The Engineer in Chief II, RWS and Sanitation A OP Rural Water Supply and Sanitation APRWSSP Vasudha Shelters 3 rd floor c block near LIC colony Saipuram Colony Gollapudi Vijayawada-225

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The Superintendent Engineer, RWS and Sanitation Visakhapatnam AP Rural Water and Sanitation APRWSSP Visakhapatnam dist

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The Executive Engineer, RWS and S Division, Visakhapatnam, Visakhapatnam District

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...Respondents

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Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ order or direction more particularly^one in the nature of writ of mandamus declaring the action of the respondents⁴ and 5 in deducting the labour cess at 1 percent of the bills payable to the petitioner at the instance of respondents 1 to 3 as illegal, arbitrary^{andincontraventionof} Memo.No.636/Reforms-A1/2008, dated 08-06-2011 and in^{Contravention} of building and other construction workers welfare cess Act, 1996 and the rules made there under in circle agreement No. 153/2016-17 dt.24-03-2017, in respect of providing CPWS scheme to Sri Anakapalle Munagapaka and kasimkota Mandals (Phase-IV) in Visakhapatnam District, and consequently direct the respondents not to deduct the labour cess from the bills payable to the petitioner without including the same as required^{tobeincludedintermsof} the Memo No.636/Reforms-A1/2008, dated 08-06-2011

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lA NO: 1 OF 2019

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Petition under Section 151 CPC praying that in the^{circumstancesstated} in the affidavit filed in support of the petition, the High Court may be pleased to direct the respondents not to deduct the labour cess^fromthe bills of the petitioner in respect of circle Agreement NO. 153/2016-17^{dt.24.03.2017} in respect of providing CPWS Scheme to Anakapalli Munagapaka and Kasimkota Mandals (Phase-IV) in Visakhapatnam District pending disposal of the writ petition before this Hon'ble court

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Counsel for the Petitioner: SRI DEVI PRASAD MANGALAPURI Counsel for the Respondent No.1: GP FOR PANCHAYAT RAJ^AND RURAL DEV (AP)

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Counsel for the Respondents No.2 to 5: GP FOR IRRIGATION^&COMM AREA DEV

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The Court made the following order;

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APHC010051862019

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[3329]

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IN THE HIGH COURT OF ANDHRA PRADESH 0E0 AT AMARAVATI (Special Original Jurisdiction)

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WEDNESDAY,THE TWENTY THIRD DAY OF JULY TWO THOUSAND AND TWENTY FIVE

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PRESENT

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THE HONOURABLE SRI JUSTICE VENKATESWARLU NI MM AG ADD A

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WRIT PETITION NO: 2372/2019

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Between;

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1.VELKO INFRATECH PROJECTS PVT LTD, REP BY ITS MANAGING DIRECTOR SRIVELAGAPUDI RAMA RAO S/0. VEERA RAGHAVAIAH 70 YEARS R/O.H.NO.59-10-2, GAYATRI NAGAR VIJAYAWADA

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...PETITIONER

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AND

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1.THE STATE OF AP, REP BY PRL SECRETARY PANCHAYAT RAJ AND RURAL DEVELOPMENT DEPT SECRETARIAT VELAGAPUDI AMARAVATI GUNTUR DIST

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2.THE ENGINEER IN CHIEF RWS AND SANITATION, A.OP RURAL WATER SUPPLY AND SANITATION (APRWSSP) VASUDHA SHELTERS 3RD FLOOR C CLOCKNEAR LIC COLONY SAIPURAM COLONY GOLLAPUDI VIJAYAWADA - 225

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3.THE ENGINEER IN CHIEF, RWS AND SANITATION A OP RURAL WATER SUPPLY AND SANITATION APRWSSP VASUDHA SHELTERS 3RD FLOOR C BLOCK NEAR LIC COLONY SAIPURAM COLONY GOLLAPUDI VIJAYAWADA-225

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4.THE SUPERINTENDENT ENGINEER, RWS AND SANITATION VISAKHAPATNAM AP RURAL WATER AND SANITATION APRWSSP VISAKHAPATNAM DIST

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5.THE EXECUTIVE ENGINEER RWS AND S DIVISION VISAKHAPATNAM, VISAKHAPATNAM DISTRICT

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...RESPONDENT(S):

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Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased toissue a Writ order or direction more particularly^{oneinthenature} of writ of mandamusdeclaring the action of the respondents 4 and 5 indeducting the labour 1 to 5 in deducting the labour cess at 1 percent of the bills payable to the petitioner at the instance of respondents 1 to 3 as illegal, arbitrary and in contravention of Memo.No.636/Reforms-A1/2008, dated 08-06-2011 and in Contravention of building and other construction workers welfare cess Act, 1996 and the rules made there under in circle agreement^{No.153/2016-17} dt.24-03-2017, in respect of providing CPWS scheme to Sri Anakapalle Munagapaka and kasimkota Mandals (Phase-IV) in Visakhapatnam District, and consequently direct the respondents not to deduct the labour cess rfrom the bills payable to the petitioner without including the same as required to be included in terms of the Memo N0.636/Reforms-A1/2008, dated 08-06-2011 and pass

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lA NO: 1 OF 2019

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased Pleased to direct the respondents not to deduct the labour cess from the bills of the petitioner in respect of circle Agreement NO.153/2016-17 dt.24.03.2017 in respect of providing CPWS Scheme to Anakapalli Munagapaka and Kasimkota Mandals (Phase-IV) in Visakhapatanam District pending disposal of the writ petition before this Hon'ble court and pass

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Counsel for the Petitioner:

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1.DEVI PRASAD MANGALAPURI

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Counsel for the Respondent(S):

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1.GP FOR IRRIGATION COMM AREA DEV

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2. GP FOR PANCHAYAT RAJ RURAL DEV (AP)

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The Court made the following:

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THE HON’BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA

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WRIT PETmON.NO.2372 OF 2019

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ORDER;-

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This writ petition is filed under Article 226 of the Constitution of the India

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seeking the following reliefs:-

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“issue a Writ, order or direction more particularly^one in the nature of writ of mandamus declaring the action of the respondents 4 and 5 in deducting the labour 1 to 5 in deducting the^labourcessat @ 1 percent of the bills payable to the petitioner^{attheinstanceof} respondents 1 to 3 as illegal, arbitrary and in contravention^ofMemo No.636/Reforms-A1/2008 dated 08.06.2011 and in Contravention of building and other construction workers welfare cess Act, 1996 and the rules made there under in circle agreement No. 153/2016-17, dt.24.03.2017, in respect of providing CPWS scheme to Sri Anakapalle Munagapaka and kasimkota Mandats (Phase-IV) in Visakhapatnam District and consequently direct the respondents not to deduct the labour cess from the bills payable to the petitioner without including the same as required to be included^intermsofthe Memo No.636/Reforms-A1/2008, dated 08.06.2011 and pass^such other order or orders... ”

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Heard learned counsel for petitioner and learned Government^Pleaderfor the respondents.

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When the matter is taken up for hearing, learned counsel for the petitioner would submit that the issue involved in this Writ Petition is squarely covered by the order dated 20.09.2023 passed by this^Court in Writ Petition No. 16156 of 2020 and batch and requested to pass a^similarorder in this writ petition also.

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For better understanding the operative portion of the^{saidorderreadsas}

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follows:

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“...Therefore, the writ petitions are disposed of, with the following directions:

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4^

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a. The respondents shall verify the bills of the petitioners^and if the corresponding amount is included in the estimates, the respondents can deduct amount as prescribed at the^rate of 1% towards Labour Cess,

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b. Upon verification, if the respondents found that the corresponding amount is not included In the estimates, the respondent shall not take steps to deduct the amount/^recoverthe amount from the petitioners towards Labour Cess....”

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The same is not disputed by the learned Government Pleader appearing for the respondents.

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In view of the same, let there be a similar order in this case, following the identical lines as in Writ Petition No. 16156 of 2020 and batch, dated 20.09.2023.

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In the result, the Writ Petition is disposed of with the following directions: a. The respondents shall verify the bills of the petitioner^and if the corresponding amount is included in the estimates, the respondents can deduct amount as prescribed at the rate of 1 % towards^LabourCess.

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b. Upon verification, if the respondents found that^{thecorresponding} amount is not included in the estimates, the respondent shall not take steps to deduct the amount/recover the amount from the petitioner^towards Labour Cess.

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Registry is directed to attach a copy of the order passed by this Court in Writ Petition No.16156 of 2020 and batch dated 20.09.2023,^{tothisorder.No} costs.

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Consequently, miscellaneous petitions, pending, if any, shall stand closed.

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To,

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//TRUE COPY//

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Sd/- K TATA RAO DEPUTY REGISTRAR SE C^fel-dFFICER

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The Principal Secretary, State of Andhra Pradesh, Panchayat raj and rural development dept secretariat velagapudi Amaravati Guntur Dist

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The Engineer in Chief RWS and Sanitation, A.OP Rural Water Supply and Sanitation (APRWSSP) Vasudha shelters 3'"^ floor C Block Near Lie colony Saipuram Colony Gollapudi Vijayawada - 225

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The Engineer in Chief II, RWS and Sanitation A OP Rural Water Supply and Sanitation APRWSSP Vasudha Shelters 3'^^ floor c block near LIC colony Saipuram Colony Gollapudi Vijayawada-225

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The Superintendent Engineer. RWS and Sanitation Visakhapatnam AP Rural Water and Sanitation APRWSSP Visakhapatnam dist

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The Executive Engineer, RWS and S Division, Visakhapatnam, Visakhapatnam District

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One CC to SRI DEVI PRASAD MANGALAPURI Advocate [OPUC]

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Two CCs to GP FOR IRRIGATION AND COMM AREA DEV High^Court of Andhra Pradesh [OUT]

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Two CCs to GP FOR PANCHAYAT RAJ AND RURAL DEV (AP) High Court of Andhra Pradesh [OUT]

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Two CD Copies

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(Along with Copy of Order dated 20.09.2023 in WP. No. 16156 of 2020)

HIGH COURT

DATED: 23/07/2025

ORDER

WP NO. 2372 OF 2019

o 18 AUG 2025 ]%
'^^sCliajntSectioiix^I^

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DISPOSING THE WP WITHOUT COSTS

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THE HON’BLE SRI JUSTICE VENKATESWARLU NIMMAGADDA

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W.P.Nos. 16156. 318, 522, 3055. 4086, 12758, 14257. 14853, 15917, 15979, 21720, 25604 OF 2020;

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W.P.Nos. 3154, 3672 OF 2021

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W.P.Nos.5951. 15800, 17273, 17650, 18490, 18550, 18574, 18576, 18797, 19336, 19377 OF 2019;

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W.P.Nos.20177. 30641, 30672 OF 2018;

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W.P.No.34074 OF 2017

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COMMON ORDER:-

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The petitioners in these batch of writ petitions are civil contractors registered with various departments of the Government. The departments and agencies that entrusted works to the petitioners are taking steps to deduct Labour Cess @ 1% from the bills payable to the petitioners.

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According to the petitioners, when the works were entrusted, the recovery of 1% labour cess was not contemplated and^{nosuchamountat} the rate of 1% was included in the work estimates prepared by the respondents. The grievance of the petitioners is that,^{withoutincludingthe} amount towards Labour Cess @ 1% in the work estimates,^{thesamecannot} be recovered and the respondents did not empower for effecting deduction of the said Labour Cess amount at 1% out of bills payable to the petitioners.

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Respondents filed counter affidavit seeking to justify^{theiractionin} proposing to recover the amount towards Labour Cess^anddenied their obligation in inclusion of proposed labour cess amount^{inworkestimates}

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2 NV,J WP No. 16156 of 2020 & batch

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'I

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as claimed by the petitioners. It is submitted that, as per norms of the contract, in Condition No.7.3.2, Labour Cess @ 1% is provided in the Schedule-A Part-II (B). While making payment to the contractor, the amount will be paid to the Labour Department proportionately as per rules and Labour Cess will be recovered from the bills of the contractors amount. but not from the amount kept in Schedule A- Part-II(B). It is submitted that payment of Labour Cess is the responsibility of the contractor and deduction from the bills and remittance to the board iIS the responsibility of the Government.

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Heard learned counsel for the petitioners and learned Government Pleader for the respondents. 5. The workers in the construction field are unorganized as well as unregulated and are not governed by the various legislations that are intended for the benefit of workmen of various industries and other sectors. With a view to take effective welfare measures for them, as like the other regulated work force, the Parliament enacted the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (‘1996 Act’ for short). Various aspects such as creation of fund, registration of workers/beneficiaries and issuance of identity cards were provided for. Committees are constituted at state and central levels to regulate the system and to see the welfare measures to reach the unorganized work force/labour in the civil construction sector.

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3 NV,J WP No.16156 of 2020 & batch

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For the purpose of pooling neeessary resources and to augment finances to carry out the objectives under the 1996 Act, the Parliament enacted the Building and other Construction Workers Welfare Cess Act, 1996 (Cess Act’ for short). This makes it obligatory on the part of the employers to pay to the competent authority, cess at prescribed rate, which shall not be more than 2 % and less than 1% out of the value of the construction as determined under the provisions of^theAct.

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The 1996 Act and Cess Act were enacted with the avowed policy and the object of protecting the interests of workers engaged in the buildings and other civil construction activity. These enactments apply to all the persons or institutions, which engage not less than 10 workers i n construction or building work in the preceding twelve^months.The manner in which the cess is to be administered is provided for under the Act. The Cess Act enables the competent authority to recover or collect cess at the prescribed rate which shall be between 1% and 2%. It is stated that the notification that was issued in this regard stipulates^{thecessattherateof} 1% only.

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The burden of payment in the form of cess must be borne by the agency which undertakes the construction. It is not an obligation that can be placed upon the contractors. The element of this levy cannot be compared with the service charges or profession tax which are squarely

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4

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NV,J WP No.16156 of 2020 & batch

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referable to the activity undertaken by the person or agency not the one for or on behalf of whom the activity is undertaken.

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It is not disputed that this Court, by order dated 22.10.2009 earlier held in a batch of writ petitions in W.P.Nos. 11269 of 2009 & batch that the Government cannot be permitted to deduct the amount while making payments to the contractors and the occasion for an agency to deduct cess under the Cess Act would arise only when the corresponding^amount ISi included in the work estimates and conversely if the amount representing the cess is not included in the work estimates, deductions cannot be made while making payments to the contractors. The above batch of writ petitions were disposed of with the following directions;

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(a) That the respondents shall include 1% cess in the estimates for the works which they propose to undertake, if the^work continues for or beyond twelve months and involves engagement of 10 workers or more; and

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(b) That the respondents shall not deduct any amount towards cess, unless the corresponding amount is included in the estimates.

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Assuming that there existed any justification for their omission to include the amount payable towards cess in the work estimates, they cannot be permitted to deduct that amount while making payments to the contractors. In a way, it would amount to either penalizing the contractor

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or affecting the levy contrary to the provisions of 1996 Act. The consequences that flow from any violation of 1996 Act must in fact be directed towards agency that has undertaken construction. Therefore, the

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5

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NV.J WP No-16156 of 2020 & batch

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inescapable conclusion is that the occasion for an agency to deduct the cess under the Cess Act would arise only when the corresponding amount is included in the work estimates. Conversely, if the amount representing the cess, is not included in the estimates, deductions cannot be made while making payments to the contractors.

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In W.P.Nos. 11269 of 2009 & batch dated 22.10.2009 and W.P.No.6090 of 2011 dated 11.04.2012, the High Court^{ofAndhraPradesh} at Hyderabad observed that, the inaction on the part of the respondents in not refunding the amount already collected towards^LabourCess is held unsustainable and held that the petitioners were entitled for the amount recovered from them.

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One of the contention made by the learned Government^Pleader is that the ratio laid down by the Division Bench of the High Court of Andhra Pradesh in W.A.No.l012 of 2013 & batch dated 06.08.2015 is applicable to the present facts of the case, as such the petitioners are not entitled to refund of already deducted amount and the respondents are at liberty to deduct the amount at the rate of 1% of cess from the bills payable to the petitioner. The question involved in W.A.No.l012 of^{2013&batchwas} “whether the works executed by the petitioners in the factory are the works incidental to and/or connected with the works of the factory and thus exempted from the provisions of The Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act, 1996. In the said case, the case of contractors, in short, is that the company is a

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6

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WP No. 16156 of 2020 ii batch

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factory established under Act of 1948 and is, therefore, expressly excluded from the application of the provisions of Act No.27. According to contractors, under any circumstances, factories of the companies are covered by the provisions of Aet of 1948, and are, therefore, not liable to pay 1% cess under the provisions of Act No.28. The provisions contained in Act No.27, in particular, the definition of “building or other construction work” would not cover the structures such as blast furnace and, therefore, they are not liable to either deduct 1% cess or remit any such amount to the Government under the provisions of the said Act.

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On perusal of the above judgment, it is evident that the question involved in the said case was as to applicability of Labour Cess. But, in the present case, the question involved was whether the petitioners are entitled for such reduction in Labour Cess or not, as such, the ratio laid down in W.A.No.1012 of 2013 & batch cannot be applied to the present facts of the case, and the contention of the learned Government Pleader is rejected.

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Whether it is a case of proposed deduction from the bills or the case of refund of the amounts already deducted, the respondents have no right to recover any amount from the contractors towards cess without first including the same in the estimates and such deduction towards cess from the bill amounts without there being any corresponding^{inclusionofthe} said amount in the estimates is bad in law and the petitioners are certainly not liable for deduction from their bills. The action of the respondents in

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7 NV.J WP No. 16156 of 2020 & batch

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proposing to deduct the Labour Cess @ 1% from the bills payable to the petitioners is therefore held unsustainable.

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Whether it is a case of proposed deduction from the bills or the case of refund of the amounts already deducted, the respondents have no right to recover any amount from the contractors towards cess without first including the same in the estimates and such deduction towards cess from the bill amounts without there being any corresponding^{inclusionofthe} said amount in the estimates is bad in law and the petitioners are certainly not entitled for deduction from the bills.

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Therefore, the writ petitions are disposed of with the following directions:

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a. The respondents shall verify the bills of the petitioners^and if the corresponding amount is included in the estimates, the respondents can deduct amount as prescribed at the rate of 1% towards Labour Cess,

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b. Upon verification, if the respondents found that the corresponding amount is not included in the estimates, the respondent shall not take steps to deduct the amount/recover the amount from the petitioners towards Labour Cess.

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stand closed.

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Consequently, miscellaneous applications pending if any, shall also

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JUSTICE VENKATESWARLU NIMMAGADDA

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Date:20.09.2023 SP

velko infratech projects Pvt. Ltd. v. the State of Ap

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velko infratech projects Pvt. Ltd. v. the State of Ap

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