Rajasthan High Court Holds ₹45,000 Paid To Municipality Cannot Offset Labour Cess Liability Of Hospital
The Rajasthan High Court on 5 August declined to interfere with labour cess recovery proceedings against Saini Multispecialty Hospital, holding that payment of Rs. 45,000 to a municipal body could not by itself discharge the hospital's statutory liability under the Building and Other Construction Workers' Welfare Cess Act, 1996.
A Division Bench comprising Justices Arun Monga and Ashutosh Kumar at the Jaipur Bench held that the cess had to be assessed and deposited with the authority prescribed under the statutory scheme and dismissed the hospital's challenge to the recovery proceedings. It observed:
"...The Nagar Palika Mandal is a stranger to that scheme. A deposit made with it, howsoever bona fide, does not amount to discharge of the statutory liability. The amount never reached the coffers of the Labour Welfare Board within the time prescribed. The mistake of depositing the amount before a wrong authority, therefore, confers no immunity upon the petitioner..."
The dispute arose after the hospital constructed its premises and deposited Rs. 45,000 towards labour cess with Nagar Palika Mandal, Udaipurwati, in September 2019.
The Labour Cess Assessing Authority subsequently determined the hospital's cess liability and initiated recovery proceedings. The authority issued a recovery notice seeking Rs. 3,42,680 towards cess, interest and penalty.
The hospital argued that it had already deposited Rs. 45,000 in 2019 and subsequently paid Rs. 67,724 towards the balance cess. It contended that the earlier payment should have been adjusted while calculating the interest and penalty.
The State opposed the plea, submitting that the hospital had deposited the initial Rs. 45,000 with the Nagar Palika Mandal instead of the authority prescribed under the 1996 Act and the Building and Other Construction Workers' Welfare Cess Rules, 1998. It therefore argued that the statutory liability remained unpaid until the amount reached the competent authority.
The Bench observed that the 1996 Act creates a self-contained statutory scheme under which the cess must be assessed and deposited with the prescribed authority.
Since the Rs. 45,000 payment went to the municipal body and did not reach the Labour Welfare authorities within the prescribed period, the Court held that the payment could not by itself be treated as discharge of the statutory liability.
It, however, noted that the hospital had made the payment in 2019 and later taken steps to have the amount transferred to the Labour Welfare Officer. It observed that the hospital could seek a refund of any amount that continued to remain with the municipal authority.
Further, the Bench noted that Section 11 of the Building and Other Construction Workers' Welfare Cess Act, 1996 provides a statutory appeal against an assessment order. It held that the question whether the Rs. 45,000 already paid could ultimately be adjusted, as well as the date from which interest and penalty should be calculated, required consideration of evidence by the appellate authority. It found no jurisdictional error or violation of natural justice warranting interference under Article 226 of the Constitution.
Accordingly, the High Court disposed of the writ petition, granting the hospital liberty to challenge the assessment order through the statutory appeal and seek a refund of any amount wrongly deposited with the Nagar Palika Mandal. It clarified that all contentions concerning adjustment of the amounts already paid would remain open before the appellate authority.
For Petitioner: Ripu Daman Singh Naruka, Advocate
For Respondent: Mahi Yadav, AAG with Chelsi Agarwal, AAAG