In a batch of writ petitions filed before the Delhi High Court by Delhi Waste Management Limited against the North Delhi Municipal Corporation and South Delhi Municipal Corporation, seeking directions upon them to release specific sums withheld towards service tax and labour cess along with interest from the bills of Delhi Waste Management, a Single Judge Bench of Justice Amit Bansal dismissed the petitions as not maintainable.
Delhi Waste Management was engaged in the business of solid waste management. On 31-01-2005, Municipal Corporation of Delhi (MCD) entered into a Concession Agreement with them. Through this agreement, the petitioner was entitled to participate in the tenders of MCD for waste management services. In February 2012, quotations were invited for hiring vehicles with drivers and labour for lifting municipal waste. After negotiations, the petitioner quoted a price of Rs.1,934/- per day, and work orders were issued.
In March and June 2012, notifications exempted specified waste management services provided to local authorities from service tax. From June 2012 till December 2015, payments were released without deductions. However, objections were raised by the office of Chief Auditor by a letter dated 16-12-2015 regarding payments released to contractors in respect of service tax. Thereafter, the respondent started withholding amounts from the bills of the petitioner. The total amount deducted was Rs.52,20,381/-, comprising Rs.44,41,489/- towards service tax and Rs.7,78,892/- towards labour cess.
Delhi Waste Management contended that the deductions made towards service tax and labour cess were contrary to law and argued that the services were exempt from service tax, and that labour cess deductions violated Section 3 of the Building and Other Construction Workers’ Welfare Cess Act, 1996. The petitioner also argued that the amounts formed part of a running account, making the completion date of the contract the starting point for limitation period. Conversely, the respondent submitted that since the limitation for filing a civil suit had expired, the present petitions had been filed. It was also submitted that the negotiated rate included the service tax component, and allowing recovery would cause unjust enrichment. The respondent also maintained that it had a statutory obligation to deduct and deposit the labour cess.
The Court stated that each deduction gave rise to a distinct cause of action, and that if the petitioner contended that such deduction was illegal, it was required to institute a suit for recovery within three years from the date of deduction. Hence, the court found no merit in the submission that the limitation period ran from the contract completion date. It was also found that the petitioner was raising monthly invoices under two work orders and that there was nothing to substantiate a running account operating between the parties.
The court stated that the petitioner was a fence-sitter who had filed the present writ petitions in a highly belated manner, stating that the issue of limitation goes to the root of the present matter, which could not be brushed aside. It was reiterated that when a relief claimed was purely for recovery of money arising out of contractual dues, the parties must be relegated to a civil suit. Thus, the Court held that the petitions were barred by limitation, delay, and laches while dismissing the petitions as not maintainable.
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