Kerala High Court
Ocean Well Exports vs Assistant Provident Fund Commissioner on 15 September, 2022
Author: Amit Rawal
Bench: Amit Rawal
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE AMIT RAWAL
THURSDAY, THE 15TH DAY OF SEPTEMBER 2022 / 24TH BHADRA, 1944
WP(C) NO. 20516 OF 2022
PETITIONER/S:
M/S OCEAN WELL EXPORTS,
KAKKATHURUTH ROAD, ERAMALLOOR PO, CHERTHALA,
ALAPPUZHA - 688 537, REPRESENTED BY ITS MANAGING PARTNER
A. ANWAR SAIT.
BY ADVS.
P.RAMAKRISHNAN
PREETHI RAMAKRISHNAN (P-212)
T.C.KRISHNA
C.ANIL KUMAR
ASHA K.SHENOY
PRATAP ABRAHAM VARGHESE
RESPONDENT/S:
1 ASSISTANT PROVIDENT FUND COMMISSIONER
EMPLOYEES PROVIDENT FUND ORGANISATION, BHAVISHYANIDHI
BHAVAN, KALOOR, KOCHI - 682 017.
2 THE CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR
COURT,
ERNAKULAM, KERALA HOUSING BOARD BUILDING, PANAMPILLY
NAGAR, KOCHI - 682 031.
BY ADVS.
SRI.SAJEEV KUMAR K. GOPAL, SC, EPFO
Jagadeesh Lakshman
SAJEEV KUMAR K.GOPAL
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
15.09.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) NO. 20516 OF 2022
2
JUDGMENT
Petitioner is a partnership firm engaged in the business of processing and export of marine products. The establishment is covered under the provisions of the EPF & MP Act, 1952 under the Code No.KR/24931.
2. For carrying on the aforementioned business activities, entered into a contract with M/s Marine Daiou Company Ltd., Tokushima, Japan for export of finished marine products for the period 1.4.2011 to 31.3.2013, Ext.P1. As per the aforementioned contract, the company of Japan would depute the technicians for quality assurance with a further condition that the petitioner shall only provide accommodation and food. In other words, the salary and other expenses of the technicians would be met by the Japanese Company.
3. In lieu of the aforementioned agreement, the said Japanese Company deputed 22 technicians to the petitioner's factory. The petitioner provided them accommodation and food allowances of Rs.2,500/- per person. On 8.12.2012, 19.2.2013 and 23.10.2013 the office of the respondent conducted inspection and submitted reports alleging non-enrollment of the 22 foreign technicians, Ext.P2, P3 and WP(C) NO. 20516 OF 2022 3 P4. Petitioner duly filed the reply explained that the technicians were not their employees and did not have any control much less supervision and as far as the allegation with regard to two(2) security guards, it was pointed out that they were paid more than Rs.6,500/- per month and therefore would fall within the definition of excluded employees as defined in paragraph 2 F of the Employees Provident Fund Scheme 1952 (herein after called 'the Scheme').
4. Learned counsel for the petitioner submitted that all the salary registers, cash books, ledger and balance sheet for the period in question was submitted to the respondents. Even the affidavits of the employees were also submitted but the respondents for the best reasons passed the impugned order dated 6.8.2015, Ext.P9. The aforementioned order was assailed by preferring an appeal bearing No.339 of 2019 and stay was granted on condition that the petitioner pays 40% of the amount determined which was also deposited. The appeal vide impugned order dated 18.1.2022, Ext.P12 was dismissed.
5. It was submitted that an international worker is defined in paragraph 2(ff) of the scheme to be an employee other than an Indian employee, holding other than an Indian Passport working for an establishment in India to which the act applies. An employee is defined under Section 2(f) of the Act as a person 'who is employed for WP(C) NO. 20516 OF 2022 4 wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who gets his wages directly or indirectly from the employer and includes any person employed by or through a contractor or in connection with the work of an establishment'. In the instant case twenty two (22) foreign technicians were not brought under the coverage of the aforementioned provisions as they did not come within the definition of 'international worker'. They were employed by the Japanese Company which had been paying wages for ensuring the quality of the products imported by them.
6. The 22 technicians were not the employees of the petitioner as defined under Section 2f nor they worked under the instructions of the petitioner. Inspection reports allegedly showed that the enforcement officer inspected the attendance register, wage registers, balance sheets, cash books, ledgers and vouchers for the period upto 09/2013, whereas petitioner produced the relevant records during the proceedings under Section 7A but there is no reference in the impugned order Ext.P9 i.e. regarding the payment of salary of foreign technicians; thus there is an abdication. There was no relationship of employer and employee mandatorily requiring the petitioner to enroll such employees in the scheme and making them eligible for statutory contributions. As regards the allegation of 2 security guards, they WP(C) NO. 20516 OF 2022 5 were exempted employees, the explanation was given by submitting a proof i.e. a bill dated 30.9.2011.
7. On the other hand, learned counsel appearing on behalf of the first respondent, EPF Organization countered the argument of the learned counsel for the petitioner and submitted that the petitioner's establishment is covered under the employees provident fund and engaged in fish processing and non-vegetarian food preservation; thus would be covered under Section 1(3)(b) of the Act with effect from 15.9.2009. All the technicians were from Philippines and could not fall within the definition of excluded employees as provided para 83 of the 1952 Scheme as there is no such proof that international workers had been contributing to a social security programme of his country of origin, either as a citizen or a resident with whom India has entered into a social security agreement on reciprocity basis and enjoying the status of detached worker. There has been an amendment in para 26, 26A and 26B with effect from 7.5.2014 where every international worker (other than the excluded employee), employed as on 1 st day of October, 2008, in an establishment to which this scheme applies, shall be entitled and required to become a member of the fund with effect from the 1st day of November, 2008. Section 2f dealing with the definition of employee of Act would mean any person who is employed WP(C) NO. 20516 OF 2022 6 for wages in any kind of work, manual or otherwise or in connection with the work of (an establishment), and who gets his wages directly or indirectly from the employer.
8. As per the definition of basic wages, Section 2(b) of the EPF Act all emoluments earned by an employee other than those specifically excluded components would with the basic wages for the purpose of contribution. EPF contribution, as per Section 6 is payable on the basis of wages, dearness allowance, cash value of food concessions and retaining allowances, if any. Once the petitioner had been paying allowances of Rs.2500/- would definitely fall within the provisions of Section 6 of the Act and the scheme framed thereunder. It was the duty of the petitioner employer to ensure that all eligible employees were enrolled from the date of eligibility and the benefits, envisaged under the Act and scheme, were extended to the beneficiary members in terms of Para 26 of the EPF Scheme 1952. Petitioner is liable to remit the contribution in respect of complete wages paid to the employees including the lumpsum paid to the international workers as per Section 2(b) and 6 of the Act.
9. I have heard the learned counsel for the parties and appraised the paper book. Before adverting to the argument of the respective counsel, it would be appropriate to reproduce the definition WP(C) NO. 20516 OF 2022 7 of employee, wages defined under Section 2 of the EPF Act, provisions of Section 6 of the Act, Paragraph 83 and newly added paragraph 26, 26A and 26B of the Scheme, 1952.
Section 2(b) "basic wages" means all emoluments which are earned by an employee while on duty or 3[ on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include--
(i)the cash value of any food concession;
(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any presents made by the employer;
2(f) "employee" means any person who is employed for wages in any kind of work, manual\or otherwise, in or in connection with the work of 6[an establishment], and who gets his wages directly or indirectly from the employer, 7[and includes any person--
(i) employed by or through a contractor in or in connection with the work of the establishment;
(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act,1961 (52 of 1961), or under the standing orders of the establishment;] Section 6: Contributions and matters which may be provided for in Schemes. The contribution which shall be paid by the employer to the Fund shall be [ten per cent.]of the basic wages,[dearness allowance and retaining allowance (if any)] for the time being payable to each of the employees [(whether employed by him directly or by or through a contractor)], and the employees' contribution shall be equal to the contribution payable by the employer in respect of him and may, [if any employee so desires, be an amount exceeding [ten per cent.] of his basic wages,dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section]:
[Provided that in its application to any establishment or class of WP(C) NO. 20516 OF 2022 8 establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words [ten per cent.], at both the places where they occur, the words [twelve per cent.] shall be substituted:] Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee or quarter of a rupee.
[Explanation 1].--For the purposes of this [section], dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee. [Explanation 2.--For the purposes of this 12[section], "retaining allowance"means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.] Para 83, Special provision in respect of International Workers. - The Scheme., shall, in its application to international Workers as defined in this paragraph, be subject to the following modifications,namely:-
(1) For clause (f) of paragraph 2, the following clause shall be substituted, namely:-
f)"excluded employee"means,-
(i) an International Worker, who is contributing to a social security programme of his country of origin, either as a citizen or resident, with whom Indian has entered into a social security agreement on reciprocity basis and enjoying the status of detached worker for the period and terms, as specified in such an agreement; or
(ii) an International Worker, who is contributing to a social security programme of his country of origin, either as a citizen or resident, with whom India has entered into a bilateral comprehensive economic agreement containing a clause on social security prior to 1st October, 2008, which specifically exempts natural persons of either country to contribute to the social security fund of the host country;] (2) After clause (i) of paragraph 2, the following clause shall be substituted,namely:-
(a)"International Worker"means,-
(a) an Indian employee having worked or going to work in a foreign country with which India has entered into a social security agreement and being eligible to avail the benefits under a social WP(C) NO. 20516 OF 2022 9 security programme of that country, by virtue of the eligibility gained or going to gain, under the said agreement;
(b) an employee other than an Indian employee, holding other than an Indian Passport, working for an establishment in Indian to which the Act applies;
26. Class of international Workers entitled and required to join the Fund. -(1) (a) Every international Worker (other than an excluded employee), employed as on first day of October, 2008, in an establishment to which this Scheme applies, shall be entitled and required to become a member of the Fund with effect from the first day of November,2008.
(2) Every International Worker (other than an excluded employee), employed after the 1st day of October, 2008 in an establishment to which this Scheme applies,who has not become a member already shall be entitled and required to become a member of the Fund from the date of his joining the establishment. (3) Where the Scheme applies to an establishment on the expiry or cancellationof an order of exemption under section 17 of the Act, every international Worker who, but for the exemption would have become and continued as a member of the Fund shall become a member of the Fund forthwith. (4) An excluded employee of an establishment to which this Scheme applies shall, on ceasing to be such an employee, be entitled and required to become amember of the Fund from the date he ceases to be such employee.
(5) On re-election of a class of International Workers exempted under paragraph 27-A to join the Fund or on the expiry of cancellation of an order under that paragraph, every International Worker, who but for such exemption would have become and continued as a member for the Fund, shall forthwith become a member thereof.
(6) Every International Worker who is a member of a private provident fund maintained in respect of an exempted establishment and who,but for the exemption, would have a become and continued as a member of the Fund shall, on joining an establishment to which this Scheme applies, become a member of the Fund forth with.
26-A. Retention of membership. - A member of the Fund shall continue to be a member until he withdraws under paragraph 69 the amount standing to his credit in the Fund or is covered by a notification of exemption under section 17 of the Actor an order of exemption under paragraph 27 or 27-A or the benefits are settled WP(C) NO. 20516 OF 2022 10 in terms of the relevant provisions under the social security agreement entered into between India and his country of origin.
10. To appreciate the aforementioned provisions, it would also be expedient to reproduce relevant portion of the contract entered into between the petitioner and the Japanese Company, Ext.P1. M/s Marine Daiou Co. Ltd., Japan (hereinafter called as "Buyer") is a company engaged in importing Fresh Frozen Fish and Fishery Products and trading/distributing the fishery products to their various clients all over the world.
M/s. Ocean Wealth Exports, Kerala, India (hereinafter called the "Supplier") are engaged in processing and exporting of all kinds of fish and fishery products to their overseas buyers/buyer's agents. Both the above parties after discussions have mutually agreed and signed this business contract inaccordance with the following terms and conditions.
(1) The Buyer has agreed to purchase finished products, such as Tuna Loins, Meat, Fillets and other value added fishes from the Supplier subject to the products strictly processed and packed under the direct supervision and guidance of their Quality Control Technicians. (2) The Supplier has agreed to sell their finished value added products such as Turia Loins, Meat Fillet etc. to the Buyer, If their prices are competitive. (3) The Buyer is desirous to depute their Philippine Technicians/Workers to the factory in India of the Supplier for supervision and necessary guidance to the workers for maintaining quality of the value added products processed and packed for them. 4) it is also agreed by the Buyer that all the expenses such as salary, travelling expenses etc. for the Philippine Technicians/Workers so deputed for the quality assurance will be bome by them. Only the facility for accommodation and food for the Technicians/Workers should have to arrange by the Supplier. (5) It is agreed by the Supplier that necessary guidance and help shall be provided to the Technicians/Workers In India for getting Visa extension, registration, release order etc. a and when required. (6) The period of this contract is for two years from 1" April 2011 to 31" March 2013 and can be extended for further period on mutual WP(C) NO. 20516 OF 2022 11 understanding. Both the parties mentioned above have mutually agreed the terms and conditions referred above and signed this Business Contract on this 5" March 2011
11. From the perusal of the contract, Ext.P1, it is evident that as per clause 4 of the contract, the expenses such as salary, travelling expenses etc. for the Philippine Technicians/Workers so deputed for the quality assurance were to be borne by the buyer ie., Japanese Company. Only the facility of accommodation, food for technicians would have to be provided by the supplier ie, the petitioner. The contract was for a period of two years from 1st April 2011 to 31st March 2013 with the clause of extension on the basis of mutual understanding. The contract do not reveal that the 22 technicians Philippines deployed by the Japanese Company were at any point of time, directly or indirectly employees of the petitioner and would fall within the definition of 'employee' as neither the petitioner had employed them or paid any 'wages'. International worker as per Para 83 (ja) extracted herein above, means that an Indian employee having worked or going to work in a foreign country or an employee other than an Indian employee holding other than an Indian passport, working for an establishment in India. The cash books, ledgers and pass books do not reflect any payment of wages to 22 technicians. WP(C) NO. 20516 OF 2022 12 Even as per newly inserted paragraph 26 the expression used for 'international worker' is employed as on 1 st October 2008 in an establishment to which the scheme applies, mandatorily requires to become a member of the Fund with effect from 1 st November 2008. The expression employed referred to in sub paragraph 1 of para 26 also cannot remotely connect to the terms and conditions of contract by inferring 22 Philippines technicians to be employees of the petitioner as there is no offer of appointment or contract conferring the status of an employer upon the petitioner. Petitioner concededly, had not being paying any retaining allowance of wages except accommodation and food. Neither the assessing authority nor an appellate authority, in my considered view did not discuss the documents submitted by the petitioner. For the sake of brevity, it would be appropriate to extract the relevant portion of the order of the assessing authority.
(II) Whether wages paid or not, if so it was in other than Indian Rupee or in Indian Rupee (para 26-B provisions to para 4)They are getting wages in foreign currency (III) Whether the International Worker came here on visiting visa or job visa?
It is in job visa, it means they are working in or in connection with a covered EPF establishment in India. But an agreement made between this establishment and a contractor situated abroad, the contractor is paying wages to those International WP(C) NO. 20516 OF 2022 13 Workers.
So the Employer is liable to extend these employees as they are International Workers working in India for wages. Even the employer is paying only Food allowances to the International Workers. it means they are the employees of the present establishment. Another important thing, the accommodation and the other related expenses for the stay related to the International Workers are borne by the establishment. I am under the firm belief that the Employer is meeting the expenses and the same shall include the cost of commodities sold to the establishment, which was situated in a foreign country. There is every possibility of evasion of professional tax.
In view of the above the enquiry is concluded and I am constrained to determine the dues based on the report of the Enforcement Officer dated 08.11.2013, 19.02.2013 & 23.10.2013, which are based on the records/ registers of the establishment subject to the provisions contained under Section 7C of the Act.
12. No reasoning has been assigned by the assessing authority as to how the petitioner can be construed to be an employer, conferring status of employees being international workers, work in India for wages. The same illegality has been committed by the appellate Tribunal in not referring to the terms and conditions of the contract entered into between the petitioner/supplier and the buyer ie., Japanese Company. Thus in my view there is a gross abdication and fallacy.
For the reason aforementioned, the impugned orders, Exts. P9 and P12 are set aside. The writ petition stands allowed. Any amount WP(C) NO. 20516 OF 2022 14 already paid by the petitioner for settling the bill is ordered to be returned within a period of 30 days from the date of receipt of a certified copy of this judgment.
Sd/-
sab AMIT RAWAL
JUDGE
WP(C) NO. 20516 OF 2022
15
APPENDIX OF WP(C) 20516/2022
PETITIONER EXHIBITS
Exhibit P1 TRUE COPY OF BUSINESS CONTRACT DATED
5/3/2011 ENTERED INTO BETWEEN THE PETITIONER AND M/S MARINE DAIOU COMPANY LIMITED.
Exhibit P2 TRUE COPY OF INSPECTION REPORT DATED 19/11/2012 IN RESPECT OF INSPECTION CARRIED OUT ON 8/11/2012.
Exhibit P3 TRUE COPY OF INSPECTION REPORT DATED SUBMITTED IN RESPECT OF THE INSPECTION CARRIED OUT ON 19/2/2013.
Exhibit P4 TRUE COPY OF INSPECTION REPORT SUBMITTED IN RELATION TO THE INSPECTION CARRIED OUT ON 23/10/2013.
Exhibit P5 TRUE COPY OF REPLY DATED 22/2/2013 SUBMITTED BY THE PETITIONER TO THE 1ST RESPONDENT.
Exhibit P6 TRUE COPY OF LETTER DATED 27/3/2013 ISSUED BY M/S MARINE DAIOU COMPANY LTD TO THE PETITIONER.
Exhibit P7 TRUE COPY OF AFFIDAVIT DATED 6/8/2015 SUBMITTED BY ESTOY JOEBERT CABRILLOS BEFORE THE 1ST RESPONDENT.
Exhibit P8 TRUE COPY OF AFFIDAVIT DATED 6/8/2015 SUBMITTED BY AUMAN LINA ARROGANTE BEFORE THE 1ST RESPONDENT Exhibit P9 TRUE COPY OF ORDER DATED 06/08/2015 PASSED BY THE 1ST RESPONDENT.
Exhibit P10 TRUE COPY OF MEMORANDUM OF APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT DEHORS ANNEXURES.
WP(C) NO. 20516 OF 2022 16 Exhibit P11 TRUE COPY OF REPLY DATED 9/5/2016 SUBMITTED BY THE 1ST RESPONDENT BEFORE THE 2ND RESPONDENT.
Exhibit P12 TRUE COPY OF ORDER DATED 18/1/2022 IN APPEAL NO. 339/2019 ISSUED BY THE 2ND RESPONDENT.