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2011 Supreme(Mad) 3365
High Court of Judicature at Madras
K. CHANDRU
M/s. Damien Foundation India Trust, Rep. By its Authorised Officer, L. Camillus Rajkumar
Versus
Presiding Officer, Employee's Provident Fund Appellate Tribunal & Another
W.P.No.16150 of 2011 & M.P.Nos.1 and 2 of 2011
Decided on : 25-07-2011
For the Petitioner:Narmada Sampath, Advocate.
For the Respondents:R2 - K. Gunasekaran, Advocate.
The court emphasized the obligation of the employer to deposit contributions, the power to levy damages, and the need for consideration of the nature of activities of the employer in determining damages and interest under the PF Act.
Headnote:
Employees' Provident Fund - Challenge to order passed by Employees' Provident Fund Appellate Tribunal - Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (PF Act) - Section 17(2-A), Section 7-I, Section 14-B, Section 7-Q - The court discussed the applicability of the PF Act, definition of 'Employee', challenge to the coverage under the Act, and the levy of damages and interest under Section 14-B and Section 7-Q. The court emphasized the obligation of the employer to deposit contributions, the power to levy damages, and the need for consideration of the nature of activities of the employer in determining damages and interest.
Fact of the Case:
The petitioner Trust challenged an order passed by the Employees' Provident Fund Appellate Tribunal, contesting the levy of damages and interest under the PF Act. The Trust had voluntarily covered its employees under the PF Act, but disputed the demand for damages and interest by the PF Department.
Finding of the Court:
The court found that the Tribunal failed to consider the nature of activities of the petitioner Trust and did not address the issue of levy of damages and interest properly. It held that the Tribunal had the power to grant relief and should have considered the appeal against the levy of damages. The court also emphasized the need for the Tribunal to address the scope of levy of damages and interest, and the requirement of mens rea or actus reus for the imposition of damages.
Issues: The issues included the applicability of the PF Act, challenge to the coverage under the Act, and the justification for the levy of damages and interest under Section 14-B and Section 7-Q.
Ratio Decidendi: The court held that the Tribunal had the power to grant relief and should have considered the appeal against the levy of damages. It emphasized the need for the Tribunal to address the scope of levy of damages and interest, and the requirement of mens rea or actus reus for the imposition of damages.
Final Decision: The court allowed the writ petition, set aside the order of the Tribunal, and directed the PF Department to refund the amount levied as damages and interest to the petitioner Trust.
1. The petitioner Trust has filed the present writ petition, challenging an order passed by the Employees' Provident Fund Appellate Tribunal made in ATA No.680(13)2008 dated 28.01.2011. The Tribunal heard the appeal filed by the petitioner Trust at its camp sitting at Coimbatore and dismissed the appeal. Challenging the same, the writ petition came to be filed.
2. When the matter came up on 07.07.2011, this Court directed notice to be issued to the learned Standing Counsel for the second respondent. Accordingly, Mr.K.Gunasekaran, learned Standing Counsel for the PF Department appears. He had also filed a counter affidavit dated 20.07.2011.
3. Heard the arguments of Ms.Narmadha Sampath, learned counsel for the petitioner and Mr.K.Gunasekaran, learned Standing Counsel for the second respondent PF Department.
4. It is the stand of the petitioner that the Trust was earlier exempted under Section 17 (2-A) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short PF Act) for the period from 01.04.1990 to 31.03.1993. Subsequently, during the year 1994, the Trust had appointed staff on contract system and dispensed with the Provident Fund (for short PF) recovery with effect from 01.01.1994. The Trust had also sent a letter dated 02.06.1994 to the Department expressing their intention to close the account and settle the amount in respect of seven employees in whose case the PF amounts were deducted until then. It was also informed that the staff had opted to join the contract system to which the PF Act will not apply and they are voluntarily withdrawing the contribution towards PF. Subsequent to this, all the staffs employed directly by the Trust had got back their PF holdings.
4.a) Despite there being no employees having PF contribution, the Department was sending notices from time to time demanding PF contribution. The last such notice sent by the authorities was dated 09.09.1998. The petitioner Trust sent a reply dated 11.11.1998. It was stated that the petitioner Trust convened a meeting on 27.10.2001, wherein it had decided to cover the staff working in Chennai and Ranchi offices under the PF Scheme and to recover 12% on Basic plus DA towards PF. When this decision was informed to the PF authorities, it was informed by them that the action of the Trust that there was a change in the policy since April 1994 was not in order and fresh coverage ignoring the earlier one was not possible. Thereafter, the petitioner Trust under the understanding that their proposal was accepted remitted a sum of Rs.23,66,593/- to the PF Department towards arrears for the period from April 1994 to December 2003 and accordingly filed the returns. Even thereafter the Trust is continuing to file returns on time. They were also receiving the annual account slips up to the year 2007-2008 from the respondent and they are yet to receive the slips for the year 2008-2009 and 2009-2010. It was informed that due to computerisation, there was a delay.
4.b) In the mean while, the petitioner Trust received a Show Cause Notice dated 09.07.2008 from the second respondent asking the petitioner to remit a sum of Rs.17,55,569/- towards penal damages and Rs.6,71,635/- towards interest for the delayed payment of dues for the year 1994-1995 to 2004-2005. The Trust officials met the second respondent on 23.07.2008 and explained their position. During the meeting, the second respondent informed that he had no power to cancel the order and also informed that the petitioner will have to approach either the Appellate Tribunal at Delhi or the Central Board of Trustees, Delhi. The second respondent had also issued proceedings dated 28.07.2008 demanding damages in terms of Section 14-B and interest under Section 7-Q of the PF Act. The damages worked out to Rs.17,55,569/-and the interest worked out to Rs.6,71,635/-.
4.c) Aggrieved by the levy of damages and interest, the petitioner Trust preferred an appeal to the first respondent Tribunal under Secti
