In a recent case, the Rajasthan High Court, while staying the demand for cess against hoteliers, held that cess could be levied only on the original owner of the property, not the subsequent purchaser.
In 2019, the petitioner/assessee, Khum Singh Balla, and his two partners bought a property in Rajsamand from a person named Jagdish Agarwal. The previous owner of the property, Jagdish Agarwal, also built it. On February 17, 2022, the Department of Labour’s Cum Cess Assessment Officer and Labour Welfare Officer sent him a show-cause notice.
The petitioner received a cess assessment order from the cess assessment officer without being given a fair chance to be heard. In addition, the sub-divisional officer sent out a notice citing irrational demands for cess and interest under the Building and Other Construction Workers Welfare Cess Act, 1996.
The petitioner argued that only the original owner could be held accountable because the Building and Other Structure Workers Welfare Cess Act, 1996’s statutory system calls for the cess to be assessed on the structure itself. Nonetheless, it is quite evident from the recital of the sale deed that the petitioner did not build the entire property.
In the petitioner’s (the original owner’s) best interest, the petitioner claimed that the Cess Assessment Officer had sent a show-cause notice to the predecessor. However, the assessment order was made in breach of natural justice principles without providing a show-cause notice to the petitioner.
Further, the petitioner bought the property in 2019. A show-cause notice was sent to the predecessor in interest even after that. As a result, even the respondents were aware that the petitioner was not culpable; only the original owner was.
After analyzing the facts, the bench of Justice Arun Monga recognized that the petitioner/assessee, being the subsequent purchaser, cannot be bound by prior liability and that the cess can only be imposed on the original owner.
Thus, the notice was sent by the court and is due back on December 13, 2023. In the meanwhile, no coercive action should be taken against the petitioner regarding the recovery in question, the court added.
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