TaxTMI 
TaxTMI 
1998 (6) TMI 592
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....ons/family pension fund contributions/insurance fund contributions and administrative/inspection charges into the respective funds on or before due dates for the months of October, 1976 to August, 1978, November, 1978, December, 1978, March, 1979, May and June, 1979, December, 1979, March and May, 1980, June to August, 1981 and September, 1980 to January, 1981, The appellants submitted reply to the show cause notice and pleaded that nothing was recoverable from it because the business had been purchased by the new management on 7.9.1978 and new management was not aware of the delayed deposit of the contributions by the previous management. It challenged to the notice on the ground of delay by placing reliance on the judgment of this Court in Amin Chand and Sons v. State of Punjab AIR 1965 P&H 441. The respondent took notice of the various points raised on behalf of the appellant and rejected the same vide his order dated 12.10.1984. The relevant-extract of the said order is reproduced below : "3. The employer has taken the following grounds for consideration : i) There are no arrears at the time of issue of notice as contribution had already been deposited. ....
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.... to which the dues relate as provided under para 38 of the E.P.F. Scheme, 1952 is an unqualified absolute statutory obligation of the employer. This obligation cannot be allowed to be diluted by plea of financial constraints and other extraneous factors. It is significant to note that even the employees' share of contributions which had been deducted from the wages of employees and was a money in trust with the employer had not been deposited in lime. Obviously this part of contribution had been misused in meeting other financial needs of the company. This aggravates the nature of default. The Hon'ble Supreme Court in the case of M/s Organo Chemicals and another v. Union of India 55 FLR 283 has ruled that damages U/s 14-B of the Act are punitive in nature to act as a deterrent for defaulter employer. If the factors, like electricity cut, losses, labour trouble etc. were to be accepted as mitigating factors the very concept of punitive damages would get defeated. The plea of financial hardship has been rejected by Hon'ble High Court of Gujarat in the case of M/s Urbind Mills Ltd. v. R.N. Gandhi 1982 Lab, I.C. 344 (Gujarat). The following extracts of the judgment deserve ....
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....6/79, 12/79, 3/80, 5/80, 6/81, 7/81, Supp. 9/80 to 1/81, totalling Rs. 1,97,169.94 be recovered as indicated in the statement enclosed, from employer in relation to the above establishment M/s Elson Cotton Mills (P) Ltd., Ballabgarh bearing code No. PN/2800. This includes a loss of Rs. 2009.60 caused to the statutory Fund on account of interest payment to the beneficiaries from the due date irrespective of delay in deposit of dues by the employer. The balance amount of Rs. 1,95,160.34 represents the penal part of the damages to serve as deterrent against defaults in payment. I further order that the amount of damages should be paid by the aforesaid employer within the 15 days of receipt of the order, failing which further action be taken as provided under the Act and the Scheme framed thereunder. The damages should be deposited in the different account Nos. mentioned below :- Nature of damages Amount A/c Nos. P.F. Contributions Rs. 1,59,283.70 1 E.P.F. Rs.4,307.94 10 Administrative charges Rs. 27,252,95 2 E.D.L.I. Contributions Rs. 5,450.55 21 E.D.L.1 Admn. Charges Rs. 87480 22 Total Rs. 1,97,169.94 The ....
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....pon it. The respondent considered the various points raised by the appellant and passed the order dated 31.3.1985 for levy of damages upon the appellant, C.W.P. No. 5199 of 1985 filed by the appellant has been dismissed by the learned Single Judge. L.P.A.No. 894 of 1986 6. The appellant which has a factory at Mathura Road, Faridabad was served with notice dated 27.11.1984 under Section 14B of the Act for levy of damages due to its failure to deposit employees' share as well as its own share under the employees provident fund and family provident fund apart from the employer's share of insurance fund contributions together with administrative/inspection charges payable under Section 17(F) of the Act. The appellant filed reply to the show cause notice. After considering the same, the respondent passed order dated 2.9.1985 for levy of damages amounting to Rs. 3,97,396.23. The relevant portion of the order passed by the Regional Provident Fund Commissioner in the appellant's case reads as under :- "3. The contentions of the employer are that :- i). the dates of deposits as mentioned in the notice and its source are doubtful. ii). the amount ....
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....e plea of the strikes, closures and financial constraints cannot be accepted as mitigating factors, and is of no avail to the employer. The plea of strikes etc. has already been rejected by the Kerala High Court in the case of Calicut Spinning and Weaving Mills v. R.P.F.C. 1981 LLJ 440 in the following words: "Even in case of lock out and strike, the failure to make the contributions resulting in default will have to be visited but (with ?) damages under section 14B". The plea of financial difficulties has also been rejected by the Hon'ble High Court of Gujarat in the case of Urbind Mills v. R.N. Gandhi and others 1982 Lab IC 344, in the following words : "We will be setting at naught the will of the Parliament if we were to say that a mere averment to the effect that the payment could not be made on account of financial hardships is sufficient to mitigate the damages. Even if it was established that the financial position of the company was embarrassing it would not justify taking such a view. In a way every company needs finance and has even to borrow from financial institutions. Even the fact that the company is running at a loss for some years would not ju....
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....s. 2,731.25 22 Total Rs. 397396.23 This order was challenged by the appellant in C.W.P. No. 5386 of 1985 which stands dismissed by the learned Single Judge vide order dated 24.9.1996. L.P.A.No. 15 of 1987 7. Aggrieved by the order dated 11.9.1986 passed by the learned Single Judge dismissing C.W.P. No. 920 of 1986 filed by it, M/s Hada Steel Products Ltd., Faridabad has preferred this appeal under Clause X of the Letters Patent. The facts of this case shows that notice dated 14.9.1984 was issued by the respondent proposing levy of damages on the appellant under Section 14B of the Act due to its failure to comply with the provisions of the Act and the Schemes framed thereunder for the period from June, 1980 to November, 1983. The appellant filed a detailed representation dated 18.2.1985. Thereafter the respondent heard the representatives of the department and the appellant and passed the order dated 14.4.1985 for levy of damages amounting to Rs. 1,16,503.95 due to the appellant's failure to pay P.F. contributions, P.P.F contributions, Administrative charges, E.D.L.I. contributions and Admn. charges. This is the background in which the appellant has p....
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....contributions towards P.P., Family Pension Fund and Administrative charges for the period from June, 1977 to October 1980, December, 1980, January, 1981, March, 1981, April, 1981, June, 1981 to July, 1981, September, 1981, January, 1982, April, 1982 to July, 1983, November, 1983 to May, 1984, October, 1984, November, 1984 and March, 1985. C.W.P. No.-3839 of 1987 11. M/s Shree Saraswati Spinning Mills, Bhiwani has challenged the order dated 2.12.1986 passed by the respondent for levy of damages to the tune of Rs. 1,72,334.75 due to its alleged failure to pay the contributions towards employees provident fund, family pension fund, insurance fund and administrative/inspection charges for the months of August, 1975 (DLI only), September, 1976 to March, 1978, September, 1978 to December, 1978, March, 1979 to June, 1979, October, 1979, December, 1979, January, 1980, and March, 1979 to September, 1979. C.W.P. No. 3840 of 1987 12. M/s Makharia Traders, Bhiwani has filed this petition for challenging the order dated 2.12.1986 passed by the respondent for levy of damages to the tune of Rs. 44,313.60 due to its alleged failure to pay the contributions towards the provident fund, F....
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.... the order passed by the respondent is the violation of the guideline issued by the Central Provident Fund Commissioner. It has also raised the plea of the violation of the principle of natural justice and non-application of mind. The respondent has contested the writ petition by stating that the impugned order has been passed after giving reasonable opportunity of hearing to the representative of the petitioner and that levy of damages is justified in view of the various pronouncements of the Supreme Court and the High Courts. C.W.P. No. 2770 of 1988 16. The petitioner-Union has prayed for quashing of the show cause notice dated 10.3.1987 issued under Section 14B of the Act and the order dated 6.10.1987 passed under that section by the Regional Provident Fund Commissioner for levy of damages amounting to Rs. 1,17,345/- due to its failure to comply with the provisions of the Act and the schemes framed thereunder in respect of the provident fund contributions, family pension contributions, administrative charges and the employees deposit linked insurance contributions for the months of May, 1977, June, 1977, August, 1977, September, 1977, January 1978, February 1978, Septem....
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....he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employed by him. Under para 30, the employer is authorised before paying the member employee his wage in respect of any period or part of period for which contribution are payable, to deduct the employee's contribution from his wages. It further provides that the deposit of such contribution shall be made by that employer within fifteen days of the close of every month, i.e., a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence. Section 14 of the Act provides for penalties. Failure to comply with the requirement of Section 6 is punishable with various terms of imprisonment which may extend to a period of six months, or with fine which may extend to one thousand to two thousand rupees, under the provisions of Section 14, depending upon the nature of the breach, viz. failure to pay the contributions, or failure to submit the necessary returns, or failure to pay administrative charges. Section 14A provides for offences by companies and other corporate bodies. Par....
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....t No. 40 of 1973, the words "twenty-five per cent of were omitted from Section 14B and the words "not exceeding of the amount on arrears" were substituted. 20. Challenge to constitutional validity of Section 14B of the Act was examined by the Supreme Court in Organo Chemical Industries v. Union of India, AIR 1979 SC 1803. Their Lordships of the Supreme Court made reference to the provisions of the Act and the Scheme as well as the statements of objects and reasons for the insertion of Section 14B and upheld the validity of Section 14B. Some of the observations made in the decision, which are relevant to the subject matter of these appeals and writ petitions are extracted below :- "The traditional view of damages as meaning actual loss, does not take into account the social content of a provision like Section 14B contained in a socio-economic measure like the Act in question. The word 'damages' has different shades of meaning. It must take its colour and content from its context, and it cannot be read in isolation, nor can Section 14B be read out of context. The very object of the legislation would be frustrated if the word 'damages' appearing in Section ....
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....mplete absence of explanation by the respondent(s) must be treated as sufficient to vitiate the proceedings initiated against the appellants/petitioners because they have suffered grave prejudice due to the long passage of time. Learned counsel relied on the following decisions :- 1. Amin Chand and Sons v. State of Punjab AIR 1965 P&h 441. 2. State of Gujarat v. P. Raghav AIR 1969 SC 1269. 3. S.B. Gurbax Singh v. Union of India AIR 1970 SC 1115. 4. BisheshwarLal v. Income Tax Officer [1970]75ITR698(All) . 5. M/s Sushma Fabrics Pvt. Ltd. v. Union of India, 1991 Lab.I.C. 1046. 6. K.T. Rolling Mills Ltd. v. R.M. Gandhi, 1993 Lab.I.C. 1466. 7. Orissa Forest Development Corporation v. Regional Provident Fund Commissioner 1994 Lab IC 2510 : 1995(2) SCT 425 . 8. National Marketing Corporation v. Regional Provident Fund Commissioner. 9. R.P.F.C. v. K.T. Rolling Mills Pvt. Ltd. 1995(3) RSJ 64. 22. Shri Rajesh Bindal countered the submissions of Shri Bhandari by arguing that in the absence of statutory prescription of the period of limitation, provisions of the Indian Limitation Act, 1963 cannot be invoked by....
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....d 1979 Lab.I.C. 187. 3. M/s U.S.U.T. Bhandar Ltd. v. Union of India 1981 Lab.I.C. 285. 4. S.H. Salve Kadam and Co. v. R.P.F. Commissioner, Bangalore, 1981 Lab.I.C. 568. 5. Mary George v. R.P.F. Commissioner 1983 Lab.I.C.133. 6. Gandhidham Spinning and Mfg. Co. Ltd. v. Regional Provident Fund Commissioner and another 1987 Lab.I.C. 659. 7. M/s A.S. Pvt. Ltd. v. Union of India 1993(67) F.L.R. 1029. 8. M/s Mathur Alloy and Steel Ltd. and another v. Union of India. 25. The decisions of the Supreme Court in State of Gujarat v. P. Raghav (supra) and S.B. Gurbax Singh v. Union of India, (supra) relied upon by the Shri Bhandari do not have any bearing on the interpretation of Section 14B of the Act. In Gujarat's case, their Lordships of the Supreme Court held that the power of revision vested in the Commissioner under Section 65 should be exercised within a reasonable time. In the second case, similar view has been expressed with reference to the provisions of the Bengal Sales Tax Act, 1941. Basheshwar Lal's case (supra) involved interpretation of the penalty notice issued under Section 28(1)(c) of the Income Tax Act, 1922. In....
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....very is not by suit, the provisions of the Indian Limitation Act, 1963 are not attracted. 3. The position under Section 14B of the Act of an employer is totally different. The employer who has defaulted in making over the contributions to the Trust Fund had, on the other hand, the use of monies which did not belong to him at all. 4. In cases under Section 14B if the Regional Provident Commissioner has made computations earlier and sent demand immediately after the amount fell due, the defaulter would not have been able to use these monies for his own purposes or for his business. In our opinion, it does not lie in the mouth of such a person to say that by reason of delay in the exercise of powers under Section 14B, he has suffered loss. 5. There is no period of limitation prescribed by the legislature for initiating action for recovery of damages under Section 14B. The fact that proceedings are initiated or demand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings under Section 14B would be taken; mere delay in initiating action under Sec....
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....hat the Parliament had designedly refrained from prescribing the period of limitation for initiation of proceedings under Section 14B. Re. (b) and (c) 28. Shri Bhandari and Shri Arun Jain valiantly argued that in view of the instructions issued by the Central Provident Fund Commissioner, the respondent(s) could not have levied 100% damages while exercising power under Section 14B. In order words, argument of the learned counsel is that the instructions issued by the Central Provident Fund Commissioner are binding on the respondent(s) and the orders passed by them ignoring the instructions issued by the superior authority should be invalidated. An additional argument urged by Shri Bhandari is that the instructions issued by the Central Provident Fund Commissioner are discriminatory and violative of Article 14 of the Constitution inasmuch as different rates of damages have been prescribed vide circular No. E.11/17/(5)81-Damages dated 13.5.1983. Shri Rajesh Bindal argued that the instructions issued by the Central Provident Fund Commissioner can at best be treated as administrative guidelines which can be relied upon by the Regional Provident Fund Commissioners while awarding da....
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....gional Provident Fund Commissioners. In the second case, the learned Single Judge held that the administrative instructions cannot be overlooked by the Regional Provident Fund Commissioners. In neither of these decisions, the learned Single Judges of Bombay High Court examined the issue in the context of the absence of any statutory provisions empowering the Central Provident Fund Commissioner to issue administrative instructions for regulating exercise of discretion by the Regional Provident Fund Commissioners. Thus, we do not agree with the learned counsel for the appellants/petitioners that the orders passed by the respondent(s) are vitiated due to the violation of the instructions issued vide circulars dated 24.1.1975, 3.11.1982 and 13.5.1983. The argument of Shri Bhandari that the instructions issued vide circular dated 13.5.1983 are discriminatory also merits rejection in view of our conclusion that these instructions do not have the force of law and are not binding on the Regional Provident Fund Commissioners. Re. (d) 30. Learned counsel for the appellants/petitioners urged that the respondents have arbitrarily levied the penalty. They submitted that the respondents....
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.... for delayed payments under Section 14B of the Act, it cannot be contended either that the arrears have been deposited before the issue of the notice under the section and as such no damages can be levied or that the arrears having been paid damages-beyond the prescribed time are irrecoverable. The learned counsel for the respondent has also placed reliance on The Bombay Gas Co. Ltd. v. Gopal Bhiya and others, (1963)IILLJ608SC , which has been followed by a Division Bench of the Allahabad High Court in The Regional Provident Fund Commissioner, U.P. v. M/s Allahabad Canning Co. Bamraull, 1973 Lab.I.C. 998, and again in Mrs. Mary George v. Regional Provident Fund Commissioner, Trivandrum 1983 Lab.I.C. 133. In the tatter two judgments, it has been held that Section 14B of the Act does not provide any limitation during which action against an erring employer can be taken for delayed deposits under the Act. In the absence of any bar or limitation, there is no principle of law which debars the Regional Provident Fund Commissioner from exercising the statutory powers available to him under Section 14B of the Act. I find no reason to differ with the view taken in the aforementioned authori....