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2011 Supreme(Cal) 1544
IN THE HIGH COURT AT CALCUTTA
Sambuddha Chakrabarti, J.
M/s. Kanchrapara, Harnett English Medium School represented by its Chairman
Vs.
The Regional Provident Fund Commissioner & Ors.
W. P. No. 21454(W) of 2010
Decided on : 22.12.2011
For the petitioner: Mr. Anant Kumar Shaw, Mr. Sabyasachi Mukhopadhyay, Mr. Ravi Kumar Dubey, Mr. Mainak Ganguly.
For the respondents: Mr. Bijay Kumar.
A belatedly covered establishment that paid its provident fund dues within the time prescribed in the coverage notice was entitled to exemption from damages for the pre-discovery period under the circular dated June 16, 2004, and the subsequent circular withdrawing the earlier circular prospectively could not take away this benefit.
Headnote:
EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 - SECTION 7Q, SECTION 14B - Employees' Provident Fund Organisation (EPFO) - Circulars - Exemption from Damages - Levy of Damages for Pre-discovery Period - Applicability and Interpretation - Benefit to Belatedly Covered Establishments.
Fact of the Case:
The petitioner, a registered society running an English medium school, applied for registration under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) in 2007. After allotment of a code number, the petitioner paid the provident fund dues for the period from June 1993 to September 2007. Subsequently, the petitioner received notices from the EPFO demanding interest under Section 7Q and damages under Section 14B of the EPF Act for the pre-discovery period. The petitioner challenged these notices, claiming exemption from damages based on a circular issued by the EPFO in 2004.
Finding of the Court:
The court held that the petitioner was entitled to the benefit of exemption from paying damages as conferred by the circular dated June 16, 2004, which was in force at the time of the petitioner's coverage. The subsequent circular withdrawing the earlier circular prospectively with effect from February 16, 2009, could not take away the benefit granted earlier.
Issues: 1. Whether the petitioner, a belatedly covered establishment, was liable to pay damages for the pre-discovery period under Section 14B of the EPF Act. 2. Applicability and interpretation of the EPFO circulars dated June 16, 2004, and February 13, 2009, regarding exemption from damages for belatedly covered establishments.
Ratio Decidendi: 1. The court interpreted the circular dated June 16, 2004, to provide exemption from damages for belatedly covered establishments that paid their dues within the time prescribed in the coverage notice. 2. The court held that the subsequent circular dated February 13, 2009, withdrawing the earlier circular prospectively, could not deprive the petitioner of the benefit of exemption granted by the earlier circular. 3. The court emphasized that the EPFO authorities abused their power by issuing notices for damages to the petitioner, ignoring the true import of the earlier circular.
Final Decision: The court allowed the writ petition and set aside the impugned notices demanding damages from the petitioner. The court held that the petitioner was not liable to pay damages for the pre-discovery period and was entitled to the benefit of exemption as per the circular dated June 16, 2004.
Sambuddha Chakrabarti, J.:
This writ petition has been filed against orders and notices dated January 13, 2010 and February 3, 2010 being annexures P-4 and P-5 respectively to the petition praying for an order of setting aside the same.
2. The case made out by the petitioner, inter alia, is this that the petitioner, a registered society, is a English medium school and is a voluntary non-profit, non-government organisation which has been established for the development of poor children in rural areas. In April, 2007 the petitioner applied to the appropriate authority for registering the establishment under the coverage of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the ‘said Act’). Thereafter the respondent no. 1 herein by a Memo, dated April 23, 2007 allotted a code number to the said establishment and the petitioner was directed to pay the provident fund dues for the period beginning from June 16, 1993 up to the date of the issuing of that letter within a period of 15 days. The petitioner states that by a demand draft dated September 1, 2007 the petitioner paid the entire provident fund dues, both arrear and the current which was within the stipulated period as extended by the Provident Fund authorities.
3. The case of the petitioner is this that by a communication, dated January 13, 2010, issued by the respondent no. 3 the petitioner was asked to pay simple interest under Section 7Q and damages under Section 14B of the Act to the tune of Rs. 7,06,278/- and Rs. 12,65,692/- respectively. The petitioner approached the respondents authorities for granting some time to pay the amount of interest and also to waive the payment of damages since the petitioner had paid the requisite dues within the specified date of demand. In response the respondents issued a notice dated February 3, 2010 asking the petitioner to show cause why damages should not be levied and recovered and further directed to deposit the interest dues under Section 7Q within seven days from the date of receipt of the notice. The petitioner thereafter paid Rs. 7,06,278/- towards interest to the respondents authorities.
4. The petitioner was thereafter served with a notice of hearing regarding the levy of damages. The petitioner approached the respondent authorities showing cause why the damages should not be levied on the ground that the entire amount was paid within the time. The further case of the petitioner is that it is entitled to get the benefit of the earlier Circular dated June 16, 2004 of the Employees’ Provident Fund Organisation with regard to the levy of damages for the pre-discovery period. The petitioner invoked the second clause of the Circular by which it was provided that establishments which had paid the provident fund dues within the period prescribed in the coverage notice no damages would be levied but they should be required to deposit simple interest at the rate of 12 per cent per annum. According to the petitioner since the establishment had already paid the interest it was not required to make any further payment.
5. This Circular of 2004 was followed by a subsequent Circular dated February 13, 2009 on the levy of damages for the pre-discovery period wherein it was provided that it had been decided by the concerned authorities to withdraw the earlier Circular of 2004 prospectively and that in future all cases for levy of damages should be processed as per the provisions contained in Section 14B read with para 32A of the Act. The petitioner seeks to make out a case that since by this date it has already paid the entire provident fund dues the latter Circular is not applicable to it.
6. This was followed by a comprehensive representation by the petitioner requesting the respondent authorities to recall and set aside the proceeding initiated for the recovery of the damages. Since the authorities did not redress the grievances of the petitioner it served the respondents with a notice
