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10. The issue raised in M/s. System Stampings (supra) was predicated on a circular/office memorandum dated 29th May, 1990, quantifying the damages. As per the said circular an order u/s 14B would also take into account the interest chargeable u/s 7Q. Thus, the damages computed u/s 14B of the Act in terms of the Circular would include the interest element payable u/s 7Q. In view of the said Circular, it was held that once the establishment has paid the total amount quantified u/s 14B, it would be inclusive of the interest element payable under Section 7Q. Therefore, the Provident Fund Authorities could not have separately imposed interest under Section 7Q, for the said interest had already been charged and included in the damages under Section 14B of the Act.

The aforesaid paragraphs unmistakenly hold that orders passed u/s 14B prior to 26th September, 2008 would include the interest element payable under section 7Q, albeit the orders passed u/s 14B on or after 26th September, 2008 would not include the interest element under section 7Q of the Act. Post 26th September, 2008, the damages to impose u/s 14B, would not include the interest payable under Section 7Q. In these circumstances, the contention of the appellant that the respondents have tried to overrule the decision of the Supreme Court in Organo Chemical Industries (supra) is fallacious and merits rejection. The two provisions of Section 14B and 7Q operate in different fields and have different purposes and objects. The difference between a "penalty" and "interest" provision is well recognized. The terms represent different concepts. Penalty is ordinarily levied for contumacious or wrong conduct and violation of a provision of a particular statute. Interest is compensatory when imposed to set off the loss or prejudice caused on account of non- payment [see Pratibha Processors Vs. Union of India, (1996) 11 SCC 101 and Bhai Jaspal Singh & Anr. Vs. Assistant Commissioner of Commercial Taxes and Ors., (2011) 1 SCC 39]. Sometimes penalty or interest imposed can partake character of both "penalty" and "interest". Whether an impost is compensatory in essence and penal or a combination of the two has to be determined in the context and mere nomenclature in some cases may not be conclusive. Section 14-B provides for levy of damages for delayed payment as a percentage of the amount subject to a prescribed maximum. Organo Chemical Industries (supra) has to be understood in the context as at the prevailing time an order under Section 14-B also included the interest component. The circular dated 29th May, 1990 had significance. However, the position underwent a change with effect from 26th September, 2008, when there was a clear demarcation between levy of compensatory interest under Section 7-Q and penalty under Section 14-B. This aspect has also been elucidated below and would become clear when we refer to the recent decision of the Supreme Court in Arcot Textiles Mills Ltd. Vs. Regional Providence Fund Commissioner & Ors., (2013) 16 SCC 1.

Referring to the scope and ambit of Section 14B and elucidating upon the difference between the said Section and Section 7Q, it was highlighted that when an establishment does not have any cavil with regard to the dues payable towards the provident fund, then possibly the authorities had only to compute the interest payable as per the provisions of Section 7Q of the Act on the belated remittance or on non payment. On the question whether in an order passed in exercise of Section 7Q, which results in a demand, principles of natural justice have to be followed, reference was made to the decision of the Supreme Court in C.B. Gautam vs. Union of India, (1993) 1 SCC 78 and certain other decisions and it was held as under:-

A reading of the aforesaid paragraph would indicate that the authority while exercising power u/s 7Q has to compute the interest and inform the establishment. Computation sheet has to be furnished. Once the computation sheet is made available to the Establishment, they have the right to file objections before the authorities raising contentions and issues relating to computation of interest. The objections have to be dealt with summarily and decided. Learned counsel for the petitioner accepts that they have not separately filed objections after the order under section 7Q dated 16th February, 2006 was served. He however submits that the petitioner had received show cause notice dated 16th May, 2014 which included the interest payable under section 7Q and a detailed representation dated 31st July, 2014 was made. This included objections to the levy of interest. In particular, attention was drawn to paragraph 4 wherein it is stated that the date of tendering of cheque, including the five days gross period should be taken and counted towards the date of payment, whereas the respondents have treated the date of actual encashment of the cheque as the date of payment. This aspect, it is submitted, has not been examined by the respondents/authorities in the impugned order. It is also submitted that interest has been levied u/s 7Q for a period from March, 2008 till September, 2008. In view of the decision of the Full Bench in Roma Henny Security Services P. Ltd. (supra) and M/s. System Stampings & Anr., interest would not have been separately levied u/s 7Q till 26th Sept, 2008 for it could be included in the damages imposed for the said period u/s 14B of the Act.