Mandatory transfer of tax deducted at source under the Cess Rules

emphasizes that statutory deductions at source from contractors' running bills are legally conditional upon prompt deposit with the dedicated statutory fund. Rule 4(3) read with Rule 5 of the Building and Other Construction Workers' Welfare Cess Rules, 1998 requires government bodies and public sector undertakings to deduct cess at source and transfer all collected proceeds to the Welfare Board within thirty days. Where an employer effects or asserts deductions without remitting those funds to the designated Welfare Board—or where it retains recovered amounts to adjust against its own independent claims like liquidated damages—such conduct constitutes an unlawful appropriation. Diverting deductions collected under the guise of labour welfare into an employer's commercial accounts or general funds invalidates the statutory purpose and warrants an arbitral direction for complete reimbursement to the contractor. (Prakash Atlanta (JV) Vs National Highways Authority of India | 2026 INSC 76).