R.G. Buildwell Engineers Ltd. Vs Union of India (Jammu & Kashmir High Court)
Summary: The Jammu & Kashmir High Court upheld the constitutional validity of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (“BOCW Act”), the Building and Other Construction Workers Welfare Cess Act, 1996 (“Cess Act”) and the Building and Other Construction Workers Welfare Cess Rules, 1998, rejecting the contractors’ challenge to their application to the erstwhile State of Jammu and Kashmir. The petitioners contended that the one per cent construction cess was a tax and that Parliament lacked legislative competence because Article 248 and Entry 97 of List I applied to Jammu and Kashmir only with modifications. The Court held, following Dewan Chand Builders & Contractors v. Union of India, (2012) 1 SCC 101, that the cess is a fee rather than a tax because the amount is earmarked for the welfare of building and construction workers instead of forming part of general governmental revenue.
While acknowledging that Article 248 read with Entry 97, as then applicable to Jammu and Kashmir, did not confer competence on Parliament to legislate the Cess Act through the ordinary residuary route, the High Court held that the legislation could nevertheless be sustained under Entries 23 and 24 of List III. In its pith and substance, the Cess Act supplements the BOCW Act by financing Welfare Boards and is therefore labour-welfare legislation rather than merely revenue-collection legislation. The Court distinguished the earlier treatment of legislative competence in Dewan Chand Builders and Builders Association of India on the ground that the alternative foundation under Entries 23 and 24 had not been adjudicated from the special constitutional perspective of Jammu and Kashmir. The Court further relied upon Prakash Atlanta (JV) v. National Highways Authority of India, 2026 SCC OnLine SC 1998, for the proposition that constitution of a Welfare Board is a sine qua non for effective collection of cess. Since the J&K Building and Other Construction Workers Welfare Board was constituted on 31.07.2007, the petitioners became liable for cess in respect of works allotted pursuant to NITs issued after that date. The Court consequently upheld the BOCW Act, Cess Act and Cess Rules and directed recovery of the applicable cess with interest at six per cent per annum from the date it became due until recovery.
