M/S EXCELLENT SERVICES v. The Assistant Provident Fund Commissioner, Employees Provident Fund Organization; Sub Regional Office, 36/685A, Bhavishanidhi Bhavan, Kaloor, Kochi; The Central Government Industrial Tribunal cum Labour Court, Housing Board Buildings, Panampally Nagar, Kochi; Sri Sajeev Kumar K Gopal – SC EPF

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ``` THE HONOURABLE MR. JUSTICE AMIT RAWAL ``` ``` WEDNESDAY, THE 27[TH] DAY OF JULY 2022 / 5TH SRAVANA, 1944 ``` ## **`WP(C) NO. 5778 OF 2022`** ## **`PETITIONER:`** ``` M/S EXCELLENT SERVICES 24/162B, JAISON BUILDING, NEAR PERUMANOOR JETTY WILLINGDON ISLAND, KOCHI - 682 003, REPRESENTED BY ITS PROPRIETOR, MR. FOUSIL H. ``` ``` BY ADVS. P.BENNY THOMAS D.PREM KAMATH TOM THOMAS (KAKKUZHIYIL) ABEL TOM BENNY JYOTHISH KRISHNA KURIAN OOMMEN THERAKATH SRUTHY J. MAMPILLY JAIKRISHNAN.M.PISHARODI ``` ## **`RESPONDENTS:`** ``` 1THE ASSISTANT PROVIDENT FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANIZATION, SUB REGIONAL OFFICE, 36/685A, BHAVISHANIDHI BHAVAN, KALOOR, KOCHI - 682 017. 2THE CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR COURT HOUSING BOARD BUILDINGS, PANAMPALLY NAGAR, KOCHI - 682036. ``` ``` SRI SAJEEV KUMAR K GOPAL – SC EPF ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 27.07.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` WP(C) NO. 5778 OF 2022 ``` ``` 2 ``` ## **JUDGMENT** Order Ext.P1 dated 04.12.2012 of the Assistant Provident Fund Commissioner and Ext.P4 dated 06.10.2021 of the Appellate Tribunal dismissing the appeal bearing No.664/2019 have been assailed on behalf of the petitioner establishment. 2. Petitioner a proprietorship, an establishment is an allottee of Code No.KR/27916 under the provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter called ‘1952 Act’). On the basis of inspection conducted by the Enforcement Officer, a notice for holding an enquiry under Section 7A of the 1952 Act was served upon the petitioner on account of non-payment of the contributions due under the provisions of the Act and Scheme framed thereunder, for the period 04/2012 to 06/2012. The wage register produced revealed that the wages paid to the male and female employees were Rs.138/- and Rs.96/- per day, shift allowance for male employees was Rs.65/- per day and no such remuneration for female employees. ``` WP(C) NO. 5778 OF 2022 ``` ``` 3 ``` Refreshment allowance for male employees was Rs.33.8/and Rs.34.25/- per day for female employees. Similarly, washing allowance, Rs.75/- for male employee and Rs.60/for female employees per day. The competent authority arrived at a monthly payment on the basis of wages as Rs.6,500/- and assessed the liability under Section 7A of the 1952 Act to the tune of Rs.2,86,227/-. 3. Aggrieved of the same, petitioner preferred an appeal bearing No.664/2019 before the Employees Provident Fund Appellate Tribunal by raising certain grounds as well as referring to the provisions of Section 2(b) of the basic wages and other provisions of the Act. Appellate Authority dismissed the aforementioned appeal. In this circumstances, present writ petition has been filed. 4. Learned counsel appearing on behalf of the petitioner in support of the averments in the writ petition raised the following submissions: i) The impugned orders are in disregard to the contentions of the petitioner that the basic wages as ``` WP(C) NO. 5778 OF 2022 ``` ``` 4 ``` defined under the provisions of 1952 Act does not include allowances such as washing, refreshment and shift. ii) Tribunal while passing the impugned order did not consider Section 6 which deals with the payment of contribution. Employer is liable to make the contribution of the basic wage, dearness allowance on the retaining allowance. iii) Since the petitioner establishment was not a seasonal industry no retaining allowance was being paid to the employees and the liability was only contribution towards the basic wage and dearness allowance which has been fully paid and that there was no contravention of the provisions of the Act. 5. Section 2(b) defines the 'basic wages' which has been misinterpreted by the Tribunal as basic wage means 'all emoluments earned by the employee while on duty or on leave or on holiday but does not include cash value for food consumption, dearness allowance, house rent allowance, ``` WP(C) NO. 5778 OF 2022 ``` ``` 5 ``` overtime allowance, bonus, commission and other similar allowance payable to the employees in respect of his employment or of work done' and thus urged this Court for setting aside the orders under challenge. 6. On the other hand, learned counsel representing the respondent supported the impugned orders on the ground that order of the assessing authority was speaking and was issued after hearing the petitioner. Order has been passed in consonance with the ratio decidendi culled out by Supreme Court in _**Regional Provident Fund Commissioner (II) West Bengal**_ v. _**Vivekananda Vidyamandir and Others**_ [2019 KHC 6257 Supreme Court] holding that the basic wages would not ipso facto take within its ambit the salary breakup structure to hold it liable for provident fund deductions when special incentives or production bonus was being given to more meritorious workmen who had put in extra output and had direct nexus and linkage with the output. In the absence of any material by the establishment the allowances in question being paid to the employees were either variable or linked to any incentive for production. The ``` WP(C) NO. 5778 OF 2022 ``` ``` 6 ``` allowances in question were not paid across all employees, the special allowances also would fall within the expression 'basic wages' for computation of deduction towards provident fund. Thus nothing survives in the petition in view of the findings arrived at by the Supreme Court. Section 6 of the 1952 Act provided that the contribution is payable on the basic wages, DA, cash value of food consumption, retaining allowance, if any. Thus the definition of 'basic wage' subsumes in its definition all emoluments earned by the employee while on duty or on leave or on holidays. 7. I have heard the learned counsel for the parties and appraised the paper book. It would be expedient to extract the definition 'basic wage' in Section 2(b) and Section 6 of the 1952 Act: **“Section 2(b):** “ **basic wages** ” means all emoluments which are earned by an employee while on duty or (on leave or on holidays with wages in either case) in accordance with the terms of 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 allowance (that is to say, all cash ``` WP(C) NO. 5778 OF 2022 ``` ``` 7 ``` 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 allowances payable to the employee in respect of his employment or of work done in such employment; (iii) any presents made by the employer; **Section 6:-Contributions and matters which may be provided for in Schemes.** The contribution which shall be paid by the employer to the Fund shall be 10% of the basic wages, dearness allowance and retaining allowance if any, for the time being payable to each of the employees whether employed by him directly or by or through a contractor and the employees’ contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding 10% of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section. Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specified, this section shall be subject to the modification that for the words 10% at both the places where they occur, the words 12% shall be substituted. Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee or quarter of a rupee. ``` WP(C) NO. 5778 OF 2022 ``` ``` 8 ``` Explanation 1.—For the purposes of this section, dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee. Explanation 2.—For the purposes of this section, “retaining allowance” means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.” 8. The Industrial Tribunal after noticing the contents of the definition of Section 2(b) as well as Section 6, held that special allowances will form an integral part of the basic wages and as such, the amount paid by way of these allowances to the employees by the establishment are liable to be included in the basic wages for the purpose of deduction of the provident fund. Petitioner management has not placed any material to demonstrate that the allowance in question paid to its employees were either variable or linked to any incentive for production resulting into greater output by an employee. In other words, the allowances were not paid across the board to all the employees. Regarding the exclusion of dearness allowance it has been held that all allowances earned by the employees would fall within the ``` WP(C) NO. 5778 OF 2022 ``` ``` 9 ``` definition of basic wage and liable for contributions. In view of the judgment of Supreme Court referred above, orders impugned are perfectly legal and justified. No ground for interference is made out. Writ petition is accordingly dismissed. Sd/- **AMIT RAWAL JUDGE** nak ``` WP(C) NO. 5778 OF 2022 ``` ``` 10 ``` ## **`APPENDIX OF WP(C) 5778/2022`** |`PETITIONER`|`EXHIBITS`| |---|---| |`Exhibit P1`|`TRUE COPY OF THE ORDER DATED 04.12.2012`| ||`IN PROCEEDINGS`| ||`NO.KR/KC/27916/ENF.III(3)/2012 ISSUED`| ||`BY 1ST RESPONDENT.`| |`Exhibit P2`|`TRUE COPY OF THE APPEAL MEMORANDUM`| ||`NO.664/2019 (OLD NO.13(7)2013) DATED`| ||`28.12.2012 FILED BY THE PETITIONER.`| |`Exhibit P3`|`TRUE COPY OF THE REPLY IN APPEAL`| ||`NO.664/2019 (OLD NO.13(7)2013) DATED`| ||`28.12.2012 FILED BY THE 1ST RESPONDENT.`| |`Exhibit P4`|`TRUE COPY OF THE ORDER DATED 06.10.2021`| ||`IN APPEAL NO.664/2019 (OLD`| ||`NO.13(7)2013).`|