• Labour Cess included in Agreement of Sale and to be paid by buyer

We recently booked a flat in Andhra Pradesh where my father signed a Rs10/- Non Judicial paper which stated that LabourCess (along with ST, VAT etc) has to be paid by the buyer. While i agree on ST/VAT, i believe LabourCess has to be paid by builder and should be on the construction value. We have not taken the possession of flat yet. Since we signed a bond paper, are we bound to pay this amount and cannot claim this back through consumer forum ?

Thanks,
Santosh
Asked 6 months ago in Property Law from Vizianagaram, Andhra Pradesh
Religion: Hindu
1) the labour welfare cess is being collected by govt for providing welfare to unskilled workers 

2) it is supposed to be 1per cent of construction cost levied on the builder 

3) it is liability of builder to pay this tax for welfare to his labourer 

4) since you have agreed to pay the labour cess under the agreement builder is seeking to recover the amount of cess from you 

5) pay the amount under protest take possession of flat then move consumer forum against builder and seek refund as it is liability on the builder 
Ajay Sethi
Advocate, Mumbai
23296 Answers
1220 Consultations
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1) it would take 2 years for your complaint to be disposed of 

2) litigation costs would far outweigh the amount sought to be recovered by you 

3) ask the builder to give details as to how the amount of Rs 18000 has been arrived at 
Ajay Sethi
Advocate, Mumbai
23296 Answers
1220 Consultations
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Why did your father sign the agreement if he was unhappy with any of the liabilities that were proposed to be imposed on him thereunder? Once you execute an agreement it becomes the charter of all rights and liabilities of parties thereto. If you now do not pay the amount that you agreed to pay the builder will cancel the allotment and shall refund the money in accordance with cancellation clause. 
Ashish Davessar
Advocate, Jaipur
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As per the Act, the employer in relation to an establishment means, the owner thereof and includes the contractor in case where the building or other construction work is carried on by or through a contractor. Section 3 (charging section) of the Cess Act along with such a definition certainly does not specify whether the cess has to be paid by the owner or the contractor with respect to an establishment. Such a query has been partially addressed by the Courts in Builders Association of India v. UOI [(139) 2007 DLT 578] and New India Construction Company v. State of Haryana (see end note 2) by observing that under the scheme of the BOCW Act, the intention was not to confine the applicability of the Acts to the owner or the contractor but to cover both. The cess should be collected from either the owner or the contractor. The Court has also suggested that if the cess is not collected from the contractor then the same may be collected from the owner. 
However, as Section 46 of the BOCW Act requires the employer to give a notice of commencement of construction work to the inspector having jurisdiction in the area where the site is located, the employer may register the establishment from where it carries out the business and issue a notice of commencement whenever it initiates a building or construction work. 
T Kalaiselvan
Advocate, Vellore
14069 Answers
127 Consultations
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Per builder, we have to now pay 18k (1%) as LabourCess (as the flat registration is for 18lacs). Wondering if the consumer forum route takes more money, time to get the amount refunded ? 
I believe, i should also get a split up of construction, land costs and then pay the charges on top of construction value instead of the whole registered value. Is that correct ?

Yes you may pay under objection and can claim refund through consumer forum if the builder is not returning it. 
The split up as stated by you also can be taken up for this purpose.
T Kalaiselvan
Advocate, Vellore
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127 Consultations
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Hi
In the normal course the builder has to pay labour cess and other taxes during the course of construction.

If you have agreed to pay labour cess, then the buiilder should provide the costs incurred on labour only 

The following costs are to be EXCLUDED in computation of Labour cess  (i.e cement, brick, sand, steel and other material costs, Land value, Architect costs etc. are Excluded when computing labour cess)

Consumer courts decide such cases within 90 days. Court fees will be 2000-/-. Lawyer fees and documentation fees will be extra.
Hope this helps.
Rajgopalan Sripathi
Advocate, Hyderabad
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43 Consultations
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