Construction cess, interest and the 90-day registration line
Skyline Infra Developers, Mohali, is building a five-storey commercial complex. Land cost was ₹3.5 crore; the cost of construction, including labour and materials, is ₹8.5 crore. The site has 410 workers, of whom 260 are registered beneficiaries of the Punjab Building and Other Construction Workers Welfare Board. Skyline paid no cess and filed no returns. Six months after completion of the first slab, an Assistant Labour Inspector inspects. The builder says the project is incomplete, that all workers are on sub-contractors' rolls, and that the cess is therefore the contractors' liability. Of the 150 unregistered workers, 38 have over 120 days of work in the year, 22 have exactly 90 days and 90 have 80–88 days. The contractor refuses to issue service certificates to the 22 who have completed exactly 90 days.
1. Compute the cess and the interest payable, and fix liability between the developer and the contractors.
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Base. Cess under section 3 of the Building and Other Construction Workers' Welfare Cess Act is 1% of the cost of construction incurred by the employer. Land cost is excluded, so the base is ₹8.5 crore, not ₹12 crore.
Cess. 1% of ₹8,50,00,000 = ₹8,50,000.
Interest. Section 5 levies simple interest at 2% per month or part of a month on delayed cess. 2% of ₹8,50,000 = ₹17,000 per month; for 6 months = ₹1,02,000. Total exposure: ₹9,52,000, besides any penalty and prosecution for non-filing of returns.
Liability. The cess is a levy on the employer - the developer - and is triggered by the cost of construction it incurs. The fact that workers sit on contractors' payrolls is irrelevant to the levy, and a clause in a works contract shifting the burden is only an internal indemnity between the parties; it cannot be set up against the Board. Recovery can be made as arrears of land revenue, and the Inspector should simultaneously check whether cess was deducted from contractor bills without being remitted.
2. How should the 150 unregistered workers be dealt with, especially those at or near the 90-day threshold?
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Under the Punjab Rules a construction worker qualifies for registration as a beneficiary after 90 days of building and construction work in the preceding twelve months. The word is '90 days', i.e. not less than 90 - the 22 workers at exactly 90 days are eligible and must not be pushed out by treating the threshold as 'more than 90'.
- 38 workers with 120+ days: register immediately on verification of muster rolls or wage registers.
- 22 workers at exactly 90 days: eligible; the contractor's refusal to issue service certificates cannot defeat a statutory entitlement. The Inspector should verify days from site attendance sheets, wage registers, ESI/EPF records or gate registers, and the Board may call for the employer's records under section 12.
- 90 workers with 80–88 days: not yet eligible, but they will cross the line if engaged further. They should be informed and their days tracked rather than rejected outright.
The employer's statutory duties - notice of commencement, maintaining registers of workers and wages - are the evidentiary backbone here. Non-maintenance is itself a prosecutable default and cannot be used to defeat registration.
3. What enforcement action should the Inspector recommend against the developer and the contractors?
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A graded response is appropriate. First, issue a written demand for ₹8,50,000 cess plus ₹1,02,000 interest, with a short compliance period, and require filing of the pending returns. Second, direct the developer to produce contractor licences, wage and attendance registers, and proof of cess deduction and remittance, to establish whether any amount was collected from contractors but not deposited. Third, initiate prosecution or penalty proceedings for failure to register the establishment and to file returns; the Cess Act and the BOCW Act both provide for fines and, on continuing default, further penalties.
On the welfare side, direct registration of the 60 clearly eligible workers, verification of the 22 border-line cases from site records, and payment of cess arrears into the Board's fund, since benefits cannot be disbursed from an empty fund. Recovery should proceed as arrears of land revenue if the demand is ignored. Finally, record in the inspection report that the 'incomplete project' plea does not postpone the levy, because cess accrues on cost of construction incurred, not on completion.