Kerala High Court
Sree Sakthi Paper Mills Limited ( Cella ... vs The Regional Provident Fund ... on 10 January, 2025
Author: N.Nagaresh
Bench: N.Nagaresh
2025:KER:1478
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
FRIDAY, THE 10TH DAY OF JANUARY 2025 / 20TH POUSHA, 1946
WP(C) NO. 5972 OF 2022
PETITIONER:
SREE SAKTHI PAPER MILLS LIMITED
(CELLA SPACE LIMITED)
SREE KAILAS, 39/2723 A, KOCHI-682016,
REPRESENTEDBY ITS GENERAL MANAGER,
VINOD KUMAR.V.
BY ADVS.
P.RAMAKRISHNAN
PREETHI RAMAKRISHNAN (P-212)
ASHA K.SHENOY
T.C.KRISHNA
PRATAP ABRAHAM VARGHESE
C.ANIL KUMAR
RESPONDENTS:
THE REGIONAL PROVIDENT FUND COMMISSIONER,
REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN,
KALOOR, KOCHI-682017
BY SRI.SAJEEV KUMAR K. GOPAL, SC, EPFO
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 21.11.2024, THE COURT ON 10.01.2025 DELIVERED THE
FOLLOWING:
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W.P.(C) No.5972/2022
:2:
N. NAGARESH, J.
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W.P.(C) No.5972 of 2022
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Dated this the 10th day of January, 2025
JUDGMENT
~~~~~~~~~
The petitioner, an incorporated Company, which
was engaged in manufacture of craft paper and duplex board,
has filed this writ petition seeking to quash Ext.P10 order dated
02.09.2021 of the Central Government Industrial Tribunal-cum-
Labour Court, Ernakulam in Appeal No.623/2019.
2. The petitioner states that the business of the
Company was wound up in July, 2016. The workmen were
given statutory terminal benefits after negotiations with the
Trade Unions and as per a tripartite conciliation settlement.
3. The Employees Provident Fund Organisation
initiated proceedings under Section 7A for the period from
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03/2009 to 04/2012, on the basis of Ext.P3 enquiry report
dated 27.02.2012 submitted by the Enforcement Officer. In
Ext.P3 report, the Enforcement Officer alleged that PF
contributions were being deducted on wages less than the
wages fixed under the Minimum Wages Act. Ext.P4 notice
under Section 7A was also issued to the petitioner.
4. The petitioner states that the respondent had
conducted enquiry on six different dates and the questions
raised by the respondent were clarified by the officers of the
petitioner. The respondent was informed that contributions
were remitted on the basis of wages fixed as per Exts.P1 and
P2 settlements.
5. Without considering the explanation given by the
petitioner, the respondent passed Ext.P7 order dated
12.07.2013 directing the petitioner to pay ₹54,99,268/- as dues
for the period from 03/2009 to 04/2012. The petitioner filed
Ext.P8 Appeal against Ext.P7 interim assessment. The Appeal
was transferred to the Central Government Industrial Tribunal,
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Ernakulam and re-numbered as Appeal No.623/2019.
6. The Tribunal held that the petitioner was paying
contributions only on basic plus DA. The conveyance
allowance, special allowance, washing allowance, incentive,
High BF incentive, etc. paid uniformly to all employees, will
attract Provident Fund deduction. The Tribunal further held
that salary arrears would also attract Provident Fund
deduction. On these premises, the Tribunal dismissed the
Appeal as per Ext.P10 order dated 02.09.2021.
7. The petitioner states that as per Paragraph 29 of the
EPF Scheme, contribution is to be paid with reference to Basic
Wages, Dearness Allowance and Retaining Allowance, if any
payable to employees. Basic Wages would exclude cash
value of food concession, DA, HRA, Overtime Allowance,
Bonus Concession, etc. Ext.P7 was issued reckoning all
allowances, which is illegal.
8. Wages were paid to the employees based on
Exts.P1 and P2 settlements. Allowances payable by the
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petitioner as per Exts.P1 and P2 settlements are excluded
from the definition of Basic Wages. The respondent committed
an error in reckoning the said allowances for payment of
contribution and the Tribunal omitted to see the illegality.
Ext.P10 is therefore liable to be quashed, contended the
petitioner.
9. The respondent filed counter affidavit. The
respondent stated that after an inspection, the Enforcement
Officer reported that, out of ₹5,80,72,000/- expended by the
establishment as wages for the year 2010-2011, only
₹1,25,18,602/- was reckoned for computing EPF dues.
Therefore, in order to examine the matter in detail, Section 7A
proceedings were initiated. On scrutiny of wage statement
filed by the petitioner, it was noted that emoluments are being
paid under different heads. However, EPF contribution is
remitted only for Basic and FDA.
10. The inquiry concluded that various allowances
earned by the employees in terms of the contract of
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employment are to be treated as Basic Wages. Consequently,
Ext.P7 assessment order was issued. Ext.P7 and Ext.P10 are
not liable to be interfered on any of the grounds urged by the
petitioner, contended the respondents.
11. I have heard the learned counsel for the petitioner
and the learned Standing Counsel appearing for the
respondent.
12. The short question arising for consideration in this
writ petition is whether various allowances paid by the
petitioner to their employees are exigible to PF deduction.
Apart from Basic Wages and variable DA, the petitioner has
been paying conveyance allowance, special allowance,
washing allowance, incentive, High BF incentive, etc. uniformly
and generally to all the employees. The petitioner has been
paying educational allowance to a few employees.
13. As per Section 2(b) of the Employees Provident
Funds and Miscellaneous Provisions Act, "basic wages" means
all emoluments which are earned by an employee while on
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duty or on leave or on holidays with wages in either case in
accordance with the terms with 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 Allowances 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 present made by the employer.
14. Section 6 of the EPF Act states that contribution
shall be paid by the employer. The contribution shall be 10%
of the Basic Wages, Dearness Allowance and Retaining
Allowance, if any, payable to employees. Section 6 takes in
Dearness Allowance and Retaining Allowance also.
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15. The Hon'ble Apex Court considered the conflicting
provisions in detail and finally evolved the tests to decide which
are the components of wages which will form part of basic
wages, in the judgment in Bridge and Roof Company
Limited v. Union of India [1963 (3) SCR 978]. The Apex
Court held that where the wages is universally, necessarily and
ordinarily paid to all across the board, such emoluments are
Basic Wages. Where the payment is available to be specially
paid to those who avail of the opportunity is not Basic Wages.
In the judgment in T.I. Cycles of India v. Gurumani [2001 7
SCC 204], the Hon'ble Apex Court followed the judgment in
Bridge and Roof Company (India) Limited (Supra).
16. In the case of the petitioner, the establishment was
paying contribution on Basic Wages and DA. The Provident
Fund authorities have excluded HRA and Overtime
allowances. The Provident Fund authority noted that
Conveyance Allowance, Special Allowance, Washing
Allowance, Incentive, High BF, Adhoc Allowance, etc. were
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being paid uniformly and generally to all the employees. If that
be so, those allowances would indeed be exigible to deduction
of Provident Fund. As regards salary arrears, such arrears
would indeed attract Provident Fund deduction.
In the afore circumstances, I do not find any illegality
in Ext.P10 order of the Industrial Tribunal. The writ petition is
dismissed.
Sd/-
N. NAGARESH, JUDGE
aks/07.01.2025
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APPENDIX OF WP(C) 5972/2022
PETITIONER'S EXHIBITS:
Exhibit P1 TRUE COPY OF LONG SETTLEMENT DATED
27/11/2003 ENTERED INTO BETWEEN THE
PETITIONER AND TRADE UNIONS IN RELATION
TO THE SERVICE CONDITIONS OF EMPLOYEES
OF FACTORY AT EDAYAR.
Exhibit P2 TRUE COPY OF THE SETTLEMENT DATED
21/11/2003 ENTERED INTO BETWEEN THE
MANAGEMENT AND TRADE UNIONS IN RELATION
TO THE SERVICE CONDITIONS OF EMPLOYEES
OF FACTORY AT CHALAKUDY.
Exhibit P3 TRUE COPY OF REPORT DATED 27/2/2012 OF
THE ENFORCEMENT OFFICER OF THE
RESPONDENT.
Exhibit P4 TRUE COPY OF NOTICE DATED 18/6/2012
ISSUED BY THE RESPONDENT
Exhibit P5 TRUE COPY OF WAGE STATEMENTS FOR THE
MONTH OF MARCH 2012 IN RESPECT OF
EMPLOYEES OF EDAYAR FACTORY.
Exhibit P6 TRUE COPY OF WAGE STATEMENT FOR THE
MONTH OF MARCH 2012 IN RESPECT OF
EMPLOYEES OF CHALAKUDY FACTORY.
Exhibit P7 TRUE COPY OF ORDER DATED 12/7/2013
ISSUED BY THE RESPONDENT.
Exhibit P8 TRUE COPY OF MEMORANDUM OF APPEAL
NO.ATA 544(7) 2013 DATED 31/7/2013.
Exhibit P9 TRUE COPY OF COUNTER-AFFIDAVIT DATED
3/2/2014 IN ATA 544(7) 2013 FILED BY
THE RESPONDENT.
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Exhibit P10 TRUE COPY OF ORDER DATED 2/9/2021
ISSUED BY THE CENTRAL GOVERNMENT
INDUSTRIAL TRIBUNAL CUM LABOUR COURT,
ERNAKULAM IN APPEAL NO.623/2019 (ATA
544(7) 2013).
Exhibit P11 TRUE COPY OF NOTICE DATED 13.4.2022
ISSUED BY THE RECOVERY OFFICER OF THE
RESPONDENT ORGANIZATION.
RESPONDENT'S EXHIBITS:
Exhibit R1(a) TRUE COPY OF THE COMMUNICATION RECEIVED
FROM THE VILLAGE OFFICER TO THE
ENFORCEMENT OFFICER OF EPFO DATED 30-
08-2024.
