Madras High Court
M/S A & F Over Seas Trade Private Limited vs The Assistant Provident Fund ... on 6 August, 2014
W.P.No.23101 of 2014
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 04.07.2023
DELIVERED ON : 14.07.2023
CORAM
THE HONOURABLE MR.JUSTICE G.K.ILANTHIRAIYAN
W.P.No.23101 of 2014
M/s A & F Over Seas Trade Private Limited,
represented by its Authorised Signatory,
Factory at Uravaiyur Village,
Mangalam Road & Post,
Villianur,
Puducherry-605110. ... Petitioner
-Vs-
The Assistant Provident Fund Commissioner,
Employees Provident Fund Organisation,
Sub-Regional Office,
No.101, 100 ft Road,
Sree Venni Commercial Complex,
Chollan Nagar, Olandaikeerapalayam,
Puducherry-605004. ... Respondent
Prayer:- Writ Petition filed under Article 226 of Constitution of India
for the issuance of Writ of Certiorari, calling for the records of the
respondent in proceedings No.PDC/PC/364/REGL/2014(Interest) and
quash its order dated 06.08.2014.
For Petitioner : Mr.S.Ravindran, Senior Counsel
for Mr.S.Bazeer Ahamed
For Respondent : Mr.P.K.Panneer Selvam
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W.P.No.23101 of 2014
ORDER
This Writ Petition has been filed challenging the order passed by the respondent in proceedings No.PDC/PC/364/REGl/2014(Interest) dated 06.08.2014, thereby directed the petitioner to pay interest under Section 7Q of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (herein after called as EPF and MP Act) to the tune of Rs.7,06,146/-.
2. The petitioner is engaged in the manufacture of shoe uppers. Due to adverse business reasons, the net worth of the petitioner got eroded and it became a sick company. There was a delay in payment of wages to the employees, which resulted in delay in payment of contribution under the EPF and MP Act. While being so, the petitioner was directed to pay contribution after the month of March 2010, by its notice dated 19.03.2014. After litigation, the respondent claimed damages at Rs.8,13,253/- and interest at Rs.7,06,146/- totalling to Rs.15,19,399/-. The respondent claimed damages including interest from the employers ranging from 17% to 37% per annum. With effect from 26.09.2008, Section 7Q of the EPF and MP Act was introduced by which Page 2 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 the interest was levied at 12% per annum towards belated payment of contribution. Therefore, from 26.09.2008, the damage was proportionately reduced by 12% namely ranging from 5% to 25% per annum. A notice dated 06.08.2014, was served with the petitioner claiming interest for belated payment from August 2000 to January 2014 at Rs.7,06,146/- under Section 7Q of EPF and MP Act.
3. Mr.S.Ravindran, the learned Senior Counsel appearing for the petitioner submitted that prior to the introduction of separate provision of levy of interest on the delayed payment of PF contribution, Section 14B of the EPF and MP Act provided for levy of damages including interest. This was implemented in terms of Para 32A of EPF Scheme by providing a table levying damages at the rate of 17%, 22%, 27% and 37% per annum depending upon the period of default in payment of contribution. The provisions under Section 7Q of EPF and MP Act was introduced in the year 1988 providing for interest at the rate of 12% per annum. However, this provision was made effective only from 01.07.1997. Therefore, the percentage of damages should be proportionately reduced at 5%, 10%, 15% and 25%. However, the respondent claimed damages at Page 3 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 the rate of 17%, 22%, 27% and 37%, thereby claiming interest twice, under Section 14B and another under Section 7Q of EPF and MP Act.
4. He further submitted that Para 32A of EPF Scheme was corrected and levy of damages was fixed at 5%, 10%, 15% and 25% effectively from 01.10.2008. However, the respondent imposed damages as per the old table as 17%, 22%, 27% and 37% per annum and also now claiming interest at 12% per annum for the period from August 2000 to January 2014. Therefore, the period from August 2000 to September 2008, the petitioner is not liable to pay any interest. If at all any interest payable by the petitioner, it is only for the period from October 2008 to January 2014.
5. He further submitted that similar issue was dealt by the Hon'ble Full bench of Delhi High Court reported in 2012 (132) DRJ 753 (FB) in the case of Roma Henny Security Services Pvt.Ltd Vs Central Board of Trustees, EPF Organization, wherein it was held that the damages under Section 14B of the EPF and MP Act were inclusive of interest chargeable under Section 7Q of EPF and MP Act. Therefore, the Page 4 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 respondent had no right to charge the interest under Section 7Q of EPF and MP Act additionally, when it already stood payable in the order passed under Section 14B of EPF and MP Act. It was challenged by the Central Board of Trustees before the Hon'ble Supreme Court of India in Civil Appeal No.6592 of 2014 in the case of Central Board of Trustees Vs Roma Henny Security Services Pvt.Ltd dated 27.02.2019, wherein the Hon'ble Supreme Court of India set aside the Judgment of the Hon'ble Full Bench of the Delhi High Court and remitted the case to the Delhi High Court to consider the effect of Clause 32-A and also consider various questions afresh and decide the case in accordance with law. It was further observed that the circular dated 29.05.1990 has also been brought to its notice which provides that interest component has to be separated than the damages. Mainly the Judgment of the Hon'ble Full Bench of Delhi High Court has not considered the effect of Clause 32A of the EPF Scheme. It does not provide that the interest is included in the penalty specified in the provisions under Clause 32A of the EPF Scheme. It has also not gone into question whether the circular of 1990 issued by the Central Provident Fund Commissioner would hold the field in view of the statutory provisions of Clause 32A of the EPF Scheme introduced Page 5 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 in the year 1991. Further, it has not taken into consideration whether Clause 32A of the EPF Scheme can be taken to include interest when provision for interest 7Q of the EPF and MP Act was not in force.
6. The learned Senior Counsel for the petitioner also submitted that while imposing interest, the petitioner was not given any opportunity and therefore, prayed to remand the matter to the respondent to consider afresh in respect of interest.
7. Heard the learned counsel for the petitioner and the learned counsel for the respondent and perused the materials available on record.
8. A perusal of the counter filed by the respondent revealed that the petitioner defaulted in the payment of PF contributions and other statutory charges for the period from August 2000 to January 2014. Therefore, the petitioner was issued show cause notice informing the proposed levy of damages for the default committed by them annexing a statement showing the wage, month, due date, amount payable in the respective accounts, the actual date of remittance and the frequency as Page 6 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 well as the delay in number of days by notice dated 21.03.2014. After adducing ample opportunities to the Employer/Establishment, final proceedings made in number PDC/PC/364/REGl/2014(Damages) dated 06.08.2014 was passed by the respondent levying a sum of Rs.8,13,253/- as damages under Section 14B of the Act and levied interest under Section 7Q of the EPF and MP Act amounting to Rs.7,06,146/- vide proceedings No.PDC/PC/364/REGl/2014(Interest) dated 06.08.2014. Aggrieved by the said orders, the petitioner filed this writ petition against the levy of Rs.7,06,146/- as interest under Section 7Q of EPF and MP Act and another writ petition in W.P.No.23400 of 2014 against levy of Rs.8,13,253/- as damages under Section 14B of EPF and MP Act. W.P.No.23400 of 2014 was disposed by this Court on 11.06.2018, permitting the petitioner to file an appeal before the tribunal. Accordingly, the petitioner filed an appeal before the Central Government Industrial Tribunal (CGIT) and the case is numbered as EPFA No.643 of 2018 and it is pending.
9. Admittedly, the petitioner had remitted the contribution with Page 7 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 delay. Section 14B of EPF and MP Act does not contemplate about the reasons for the delay in remittance of PF contributions of the establishments. The Act cast upon a statutory duty on the part of the petitioner to remit the contributions, with other charges, within the due dates prescribed under the Act and scheme. If the petitioner fails, it contemplates levy of damages in the form of penalty. Therefore, the petitioner had no valid explanations for the default and levy of damages for the show cause notice issued by the respondent. In fact, the reason for enacting the provisions under Section 14B of EPF and MP Act is that the employers may be deterred and thwarted from making defaults in carrying out statutory obligations to make payments to the provident fund. Insofar as the interest payable under Section 7Q of the EPF and MP Act is completely different from levying damages. The damages have been levied at 5% to 25% on sliding scales for different spells depending on the periodicity of delay as provided under Para 32A of the scheme of the EPF scheme. Therefore, the damage levied under Section 14B in consonance with Para 32A of the EPF scheme is completely different from interest levied under Section 7Q of the EPF and MP Act. Section 7Q of EPF and MP Act was introduced in the year 1988 and it Page 8 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 was made effect from 01.07.1997. Whereas, the petitioner committed default from the period August 2000 to January 2014. Therefore, the petitioner was levied damages as 17%, 22%, 27% and 37% per annum. However, Para 32A of the EPF Scheme came into force with effect from 01.10.2008. Therefore, the respondent ought to have levied tax as per old table till September 2008 and as per new table Para 32A of EPF Scheme, from 01.10.2008. Therefore, it was challenged before the EPFA No.643 of 2018 and it is pending.
10. The respondent has quantified the interest under Section 7Q of EPF and MP Act only based on the statutory provision and duly adhering to its calculation at the simple interest rate at 12% per annum. Further the provisions under Section 7Q was challenged before the Hon'ble High Court of Karnataka in the case of M/s Khodays Systems limitetd, Bangalore and others Vs Regional P.F.Commissioner (Enforcement) Bangalore and another reported in 2008(1) LLJ.329 (karn.H.C), wherein it has held as follows:-
“ The object of the Act is to protect the interest of Page 9 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 the employees and when such contribution is being made and recovered from the salary/wages of the employees, it is the bounden duly on the part of the employer to contribute as well as to pay toward the fund as a member of security for life of the employee as is envisaged under Article 21 of the Constitutional India. The very scheme provided for contribution and any lapse in remitting such contribution from time to time in the usual course should earn interest as when such an amount is deposited by way of fund at a future date to be withdrawn by the employee on retirement, necessarily it should earn interest and keeping it idle will be detrimental to interest of the employee.
In such circumstances, the provision under Section 7Q is introduced as a regulatory measure thereby directing the employer to systematically deposit the funds and it cannot be either termed as discriminatory or as against the freedom of trade and profession of the employer much less it does not amount to any such imposition by way of violation of Art.20(1) of the Constitution as it was canvassed by the petitioner. There is also no question of punishing the same person twice by way of imposing penalty. What is contemplated under Section 7Q is only payment of interest on failure to make contribution well in time as in the usual course, such deposit would have necessarily earned interest and that interest would be paid by the concerned department/Government.”
11. Insofar as the interest is concerned for the period August 2000 to January 2014, the respondent rightly arrived at Rs.7,06,146/-. It is no way connected with the damages as contemplated under Section 14B of EPF and MP Act and Para 32A of EPF Scheme, since the interest levied Page 10 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 under Section 7Q of the EPF and MP Act was came into effect from 01.07.1997. Therefore, the petitioner is liable to pay interest as per Section 7Q of the EPF and MP Act. Whatever the interest levied by the respondent cannot be adjusted towards the damages which was levied by the respondent at the rate of 17%, 22%, 27% and 37% per annum. However, the petitioner had challenged the levy of damages to the tune of Rs.8,13,253/- in W.P.No.23400 of 2014 before this Court and this Court by an order dated 11.06.2018 disposed of the petition, permitting the petitioner to file an appeal before the Tribunal.
12. As aforesaid, already the petitioner challenged the levy of damages before the Appellate Tribunal in EPFA No.643 of 2018 and it is pending. Though the Hon'ble Full Bench of Delhi High Court held that the damages under Section 14B of the Act were inclusive of interest chargeable under Section 7Q of EPF and MP Act, it was set aside by the Hon'ble Supreme Court of India and remanded the matter to the Hon'ble Delhi High Court for fresh disposal to consider the effect of Para 32A of the EPF Scheme. Further observed that the circular dated 29.05.1990 was brought into their notice which provides that interest obtained has to be Page 11 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 separated than damages.
13. Therefore, this Court finds no infirmity or illegality in the order passed by the respondent and this writ petition is devoid of merits and liable to be dismissed. Accordingly, this writ petition stands dismissed. No costs.
14.07.2023 (2/2) Internet : Yes Index : Yes Speaking order mn Page 12 of 13 https://www.mhc.tn.gov.in/judis W.P.No.23101 of 2014 G.K.ILANTHIRAIYAN, J.
mn To The Assistant Provident Fund Commissioner, Employees Provident Fund Organisation, Sub-Regional Office, No.101, 100 ft Road, Sree Venni Commercial Complex, Chollan Nagar, Olandaikeerapalayam, Puducherry-605004.
W.P.No.23101 of 2014
14.07.2023 Page 13 of 13 https://www.mhc.tn.gov.in/judis