Skill Centres: Welfare board set to divert workers’ fund

The Tribune | June 23, 2022

The Punjab Building and Other Construction Workers’ (BOCW) Welfare Board is once again planning to divert labour funds for construction of four skill development centres in the state.

Earlier, the Legal Department and the Comptroller and Auditor General (CAG) of India had red-flagged the move. The work at these centres had to be stopped in December 2021. The legal opinion was sought by the Labour Welfare Board after The Tribune had raised the issue of misuse of Labour Cess (meant only for welfare of the construction workers).

Not true, claims official

We will not touch welfare funds. The Central Government has sought a report from us, following which we have asked for a status report from the Punjab Police Housing Corporation as they had built the skill development centres. —SS Gurjar, principal secretary, labour department

However, the Labour Department has now written to the Punjab Police Housing Corporation’s managing director and sought a detail report to complete the remaining work of skill centres. The corporation had been given the contract to construct the skill development centres.

The CAG report tabled in 2020 in the Vidhan Sabha had discovered that Rs 56.78 crore of welfares schemes, which violated Section 22 of the BOCC Act 1996, was spent on these development centres.

When questioned about restarting the work, SS Gurjar, Principal Secretary, Labour Department, said, “We will not touch welfare funds. The Central Government has sought a report from us, following which we have asked for a status report from the Punjab Police Housing Corporation as they had built the skill development centres.”

Vijay Walia, labour rights activist, said, “Instead of recovering Labour Welfare Fund, which was spent on the skill development centres, the Labour Board is shamelessly planning to spend more funds. CM Bhagwant Mann should order a Vigilance probe.”

BOCW Act: Applicability on factories?

Lexology | March 24, 2022
Introduction:

The article discusses the applicability of Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (‘BOCW Act’) to factories wherein construction activity for the purpose of expansion or constructing godowns is being undertaken.

Definition of ‘building or other construction work’:

The term, ‘Building or other construction work’ has three limbs:

First limb deals with the different activities which are to be undertaken, namely, construction, alteration, repairs, maintenance or demolition.
Second limb covers those buildings or works in relation to which the aforesaid activities are carried out.
The third limb contains the exclusion clause i.e., any building or other construction works to which the provisions of the Factories Act, 1948 (‘Factories Act’) or the Mines Act, 1952 apply instead.
It is worthy to note that construction in a factory will get covered within the first two limbs of the definition.

On the other hand, on a plain reading of the exclusion clause, one can also take the view that since expansion or construction of a godown or any other place will take place inside the factory, which is subject to the provisions of Factories Act, therefore, said exclusion will apply to such construction.

A legal scrutiny of the above exclusion clause is required from the perspective of the Factories Act which is as follows:

‘Factory’ means any premises where manufacturing process is carried on with or without the aid of power.
‘Worker’ covers a person who is employed in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of the manufacturing process.
The activity of undertaking construction of a godown, or any other place or for expansion of the factory, is not a manufacturing process.
In light of the above, the building constructed, as a godown or as a part of expansion of the factory, will not be treated as a factory since no manufacturing process is being carried out.

Consequently, workers engaged in the construction of said building by the contractor will also not be treated as workers for the purpose of Factories Act.

Accordingly, one can take a view that the provisions of Factories Act apply when the manufacturing process in the building which is being constructed has commenced and not to the activity of construction of the project itself. Therefore, the exclusion from the definition of ‘building or other construction work’ will not be available.

In case any contrary view is taken, there is a possibility that the workers engaged in the construction of building will get excluded from both the welfare legislations i.e. BOCW Act as well as the Factories Act.

Who is liable to pay cess?

The employer, in relation to an establishment, means the owner and the contractor. The contractor includes a sub-contractor.

Building and Other Construction Workers Welfare Cess Act, 1996 (‘Welfare Cess Act’) provides for the levy and collection of a cess on the cost of construction incurred by an employer. The cess levied shall be paid to the cess collector by the employer within thirty (30) days of completion of the construction project, or within thirty (30) days of the date on which assessment of cess payable is finalised, whichever is earlier.

Different mechanisms are prescribed for payment of cess for building and construction work (a) of a Government or of a Public Sector Undertaking, and (b) where approval from a local authority is required.

In case of building and construction work of private companies, the employer is to pay cess to the cess collector. The question arises as to who is liable to pay cess i.e., whether the employer of the establishment or the contractor, as the definition of employer covers both the owner and the contractor.

It is worthwhile to note that the Supreme Court has held that, as per the BOCW Act and the Welfare Cess Act, the liability to pay cess falls not only on the owner of a building or establishment but also on the contractor. It is to ensure that the cess is collected at source from the bills of the contractors to whom payments are made by the owner. The burden of cess is passed on from the owner to the contractor.

Accordingly, one can take a view that the contractor is to collect cess and make payments to the collector.

There are certain provisions in BOCW Act which cast the welfare related responsibility of the workers on the employer of the establishment such as for canteens, accommodation, creches, and first-aid.

On a concluding note, while paying and collecting cess, the impact of the BOCW Cess read with Welfare Cess Rules should be appropriately dealt with by businesses.

5 yrs on, schools fail to deposit labour cess

The Tribune | Karam Prakash | July 05, 2021

Mandatory to pay 1% building cost to govt

Though the Education Department has developed many smart schools in the state, but none of these has deposited labour cess, which is mandatory under the Building and Other Construction Workers’ (BOCW) Cess Act. Consequently, cess worth crores has not been deposited at the labour department, which is used for the welfare of construction workers.

As per the BOCW Cess Act, 1996, 1 per cent of the total cost of any construction facility has to be deposited with the labour department as labour cess. The Education Department, in 2016, had already issued orders to the District Education Officers, stating every school had to deposit 1 per cent cess for any construction work at the school. However, none of the schools, despite the instructions, paid the labour cess.

VK Janjua, Principal Secretary, said, “We will again write to the Education Secretary to issue fresh directions to schools to deposit the labour cess.”

Meanwhile, school heads and principals, who get the construction work done, told The Tribune that they were neither informed by any government agency nor had they received any additional amount for labour cess. Amarjeet Singh, District Education Officer, Patiala said, “It is not my responsibility to deposit the money. School heads have to deposit the amount as they look after the construction in schools.”

Construction cess not payable on contracts not having any construction component

Lexology | May 24, 2021

The Supreme Court, in its recent judgment, has finally settled a long pending issue by holding that contracts which cover works other than civil works and do not involve any construction, do not attract cess under the Building and Other Construction Workers’ Welfare Cess Act, 1996. The Apex Court in the decision in the case of UP Power Transmission Corporation Limited v. CG Power and Industrial Solutions Limited [Judgement dated 12 May 2021] clarified that mere installation and/or erection of pipelines, equipment for generation, transmission, or distribution of power, electric wires, transmission towers, etc., which do not involve construction work, are not amenable to levy of such cess.

Facts and issues:

  • The Appellant/ Employer – UP Power Transmission Corporation Limited entered into a framework agreement with the Respondent (Contractor), for the construction of a 765/400kV power substation, which was split into four separate contracts, for (i) Supply and delivery of equipment, (ii) Handling, erection, testing and commissioning works, (iii) Civil works and (iv) Operation & maintenance.
  • The Comptroller and Auditor General (CAG), in its audit, pointed out the lapse on the part of Employer in not deducting cess, as leviable under the Cess Act, from the bills of the Contractor.
  • Based on the CAG’s observations, the Employer sought to recover the cess on the total value of work provided under all four contracts, including supply, erection, testing, and commissioning. Admittedly, there were no proceedings that were passed with reference to the assessment or levy of cess under the Cess Act. The Employer, as a consequence, refused to discharge the Performance Bank Guarantee submitted by the Contractor, to secure recovery of an amount of INR 2.6 crore towards cess payable on works under all contracts including the supply part.
  • The Employer sought to recover the cess for the supply part from the pending bills and by encashment of the Performance Bank Guarantee. The contracts in the present case did not provide for the Employer to withhold any amount from the bills raised by the Contractor on the Employer towards any taxes, cess, or any other statutory dues of the Contractor.
  • Aggrieved by the actions of the Employer, the Contractor approached the Allahabad High Court. The High Court held that, in the absence of any order for levy and assessment under the Cess Act, recovery could not be made solely pursuant to an audit objection raised by the CAG.
  • The order of the High Court was assailed before the Supreme Court by way of an appeal.

Findings of the Supreme Court:

  • The Supreme Court held that the first and second contracts, which do not cover civil works, do not involve any construction and accordingly are outside the purview of levy under the Cess Act.
  • The Contractor was held as not a ‘contractor’, within the meaning as defined under the BOCW Act, nor an ‘employer’ within the meaning provided under the said Act, for the first, second, and fourth contracts. It was observed that the statutory scheme of the BOCW Act excludes a supply contract from within its ambit.
  • The Court clarified that mere installation and/or erection of pipelines, equipments for generation, transmission, or distribution of power, electric wires, transmission towers, etc., which do not involve construction work, are not amenable to levy of cess under the Cess Act.
  • It was held that when there is no assessment or levy of cess under the Cess Act, the Contractor cannot withhold amounts towards such cess payments. Even otherwise, the recovery can be done only in the mode and manner of recovery of outstanding cess under the Cess Act.
  • Further, it was considered that in the absence of contractual provisions, the Employer cannot withhold payments or realize cess by revocation of a Performance Guarantee.
  • Lastly, the availability of an alternative remedy (in this case ‘arbitration’) was held not to prohibit the High Court from entertaining a writ petition in an appropriate case.

COVID-19 first wave pushed 23 crore Indians into poverty: Azim Premji University

Business Today | May 06, 2021

The report, titled ‘State of Working India Report 2021’ stated that rural India witnessed a 15% increase in poverty and a 20% rise was registered in urban areas after one year of the coronavirus pandemic

The first wave of the COVID-19 pandemic shoved a staggering 230 million (23 crore) Indians below the poverty line, estimated a study by the Azim Premji University.

The report, titled ‘State of Working India Report 2021’ stated that rural India witnessed a 15% increase in poverty and a 20% rise was registered in urban areas after one year of the coronavirus pandemic.

“Coming on a low-income base, this shock meant that the number of individuals who lie below the national minimum wage threshold (Rs 375 per day as recommended by the Anoop Satpathy committee) increased by 230 million during the pandemic,” according to the report.

“This amounts to an increase in the poverty rate by 15 percentage points in rural and nearly 20 percentage points in urban areas. Had the pandemic not occurred, poverty would have declined by 5 percentage points in rural areas and 1.5 percentage points in urban areas between 2019 and 2020, and 50 million would have been lifted above this line,” it added.

The report further highlighted how women lost more employment than men during the COVID-19 pandemic last year, how around half of formal salaried workforce moved into informal work, and how poorer households underwent considerably higher income losses during the lockdown period.

Mobility curbs resulted in income losses because of decreased economic activity, the report noted. “A 10% decline in mobility was associated with a 7.5% decline in income,” it stated, suggesting the situation could get worse if more lockdowns are imposed in the future.

The report proposed that the Centre will need to roll out a relief package worth Rs 8 lakh crore to contain hardships being faced by lower-income groups due to the economic impact of COVID-19.

The report is based on inputs from Consumer Pyramids Household Survey, Azim Premji Foundation, and many other civil society organisations.

The study found that nearly half of formal salaried workers moved into informal work, either as self-employed (30 per cent), casual wage (10 per cent) or informal salaried (9 per cent) workers, between late 2019 and late 2020 and there was a decline in their income level as well.

In April and May, the poorest 20 per cent of households lost their entire income and the richer households suffered losses of less than a quarter of their pre-pandemic incomes, the report said.

To bring relief for the people suffering hardships of COVID-19 impact, the Azim Premji University report, released on Wednesday, recommended measures that would cost the government an additional expenditure of around Rs 8 lakh crore.

“The measures that we have proposed will bring the spending by the government of India to 4.5 per cent of overall GDP between this year and last or about Rs 8 lakh crore. We think that is not even internationally comparable to what other countries have done, but really what India needs to do,” Azim Premji University associate professor of economics Amit Basole said while releasing the report.

According to the report, the public distribution system has a wider reach than Jan Dhan Yojana, and free rations under the PDS should be extended beyond June, at least till the end of 2021.

In Karnataka and Rajasthan, out of those with women-owned Jan Dhan accounts, 60 per cent received one or more transfers, around 30 per cent did not receive any transfers and 10 per cent did not know about the fund status in their account, it added.

The university report recommended a cash transfer of Rs 5,000 for three months to as many vulnerable households as can be reached with the existing digital infrastructure, including but not limited to Jan Dhan accounts.

It has suggested expanding the MGNREGA entitlement to 150 days and revising programme wages upwards to state minimum wages.

This needs to expand the programme budget to at least Rs 1.75 lakh crore, according to the report.

It has also recommended launching a pilot urban employment programme in the worst-hit districts with a focus on women workers, increasing the central contribution in old-age pensions to at least Rs 500, a COVID hardship allowance to 25 lakh Anganwadi and ASHA workers of Rs 30,000 and automatically enrolling all MGNREGA workers who do construction work as registered workers under the building and other construction workers (BoCW) Act.

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