Minimum wages can be split into allowances for provident fund contributions

Employees' Provident Fund Appellate Tribunal, New Delhi

ATA No. 743 (8) 2010

Delight Services …… Appellant
vs.
RPFC, Indore ….. Respondent

ORDER
26.11.2015

Present: Sh. S.K. Gupta, Advocate for the Appellant
Sh. Shivnath Mehanta, Advocate for the Respondent

1. By the present appeal filed by the appellant under section 7- 1 of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 (here-in-after referred to as “the Act”), appellant seeks quashing of order dated 24.09.2010 pass on 29.09.2010 by respondent under section 7A of the Act.

2. The brief facts as emerging from the appeal are that the appellant is a contractor engaged in the work of supplying labours to various industries. The provisions of EPF & MP Act, are applicable on the appellant establishment and is registered at Code No. MP/17836 and it has been assiduously depositing the contribution of its employees. Respondent served the appellant with a notice observing that the salary/ wages shown is negligible even lesser in comparison to the minimum basic wages as notified under the Minimum Wages and further observed that PF contribution on the wages less than minimum wages is not justifiable and defeats the very purpose of the social welfare legislation aimed for providing old ages social security in the name of PF and Pension to the poor workers. Contribution has been assessed in tune of Rs. 1,37,599/- on basis of minimum wages of semi-skilled employee. Appellant provides labours to hospital and nursing homes, call centres which were not subjected to Minimum Wages Act at all. The provisions of the Minimum wages Act have not been made applicable to these class of establishments, hence this appeal.

Editor’s Note : 

Strenge of the ways of Employees’ Provident Fund Organisation (EPFO). It shows swiftness in issuing those circulars, which have possibility to be misunderstood but it becomes slack and lethargic in conveying those decisions succinct and contain no ambiguity.  It will, thus, be seen that as and when there is a favourable judgment for the EPFO, the circular or clarification is issued without any loss of time but if the position is otherwise, no such clarifications are circulated.  

Keeping in view the space constrained and also obstinacy of the provident fund authorities determining of money due from employers etc. don’t abide by the orders of the EPF Appellate Tribunal but keeping in view the significance of the landmark order in ATA No.743(8) 2010 decided on 30.11.2015, We have decided to publish the whole.   

3. Shri S.K. Gupta, Counsel for appellant contended that the impugned order was passed without application of mind in a highly laconic manner as a matter of routine.

4. Counsel for appellant further contended that appellant establishment is depositing PF contribution according to law and respondent with mala-fide intention inflicted a notice to the appellant establishment, directing the appellant establishment to change policy regarding payment of salary to employees according to minimum basic wages. Whereas respondent was not supposed to direct the appellant establishment to change the policy of employees of appellant establishment.

5. Counsel for appellant further contended that as per law appellant establishment is liable to deduct PF contribution on the basic wages defined under Section 2(b) of the Act, read with Section 6 of the Act but respondent without considering written objections and written representations, passed impugned order against the principals of naturals justice. Respondent was having no power under the Act to direct any employer that how and in what manner employee is to be paid. In support of his argument counsel for appellant cited a case law titled Assistant PF Commissioner Vs G4s Security Services (India) Limited 2011 LLR 316 P & H HC.

6. Per contra learned counsel for the respondent contended that the, EPF Act is meant to provide social and financial security to the downtrodden section of the society at the time of their retirement, death during service, medical treatment, etc. The EPF Act is a special welfare legislation which cannot be done away with and strict adherence to its provisions is mandatory. Under this Act, the employer is duty bound to pay the minimum wages to every employee and thereafter employer is also duty bound to pay the Provident Fund contributions on time.

7. Counsel for appellant further contended that a notice was served upon to appellant establishment for making contribution under section 7A of the Act and as appellant establishment was found paying the PF contribution on the wages lesser than the minimum wages prescribed for employees under the category of semi-skilled and appellant evaded amount of Rs. 5,37,072/- so respondent was having no option but to assess amount of Rs. 1,37,599/- under Section 7A of the Act. There is no illegality in the order of respondent hence appeal filed by appellant may be dismissed.

8. I have given my thoughtful consideration to the submissions made by learned counsels for the parties and have also perused the material on record.

9. The primary contention on behalf of the appellant is that respondent is not empowered to direct the appellant establishment to pay minimum wages to its employees and further to pay PF contribution on the basis of minimum wages.

10. Admittedly, there is no dispute regarding applicability of the provisions of the Act to appellant establishment and that PF Code No. MP/17836 allotted to the appellant establishment.

11. As per Section 6 of the Act, employer is supposed to contribute/ pay in the Fund on the basis of the basic wages, dearness allowance and retaining allowance for the time being payable to each of the employees.

12. As per case of appellant, appellant is depositing PF contribution as per law i.e. on the basis of basic wages, dearness allowances and retaining allowances.

13. In case in hand, controversy is with regard to basic wages. ‘Basic Wages' has also been defined in Section 2(b) of the Act which is reproduced here:-

Section 2(b) “ basic wages” means all emoluments which are earned by an employer while on duty [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 allowances (that is to say, all cash payment by whatever name called paid to an employee on account of a risen 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 2(b) of the Act does not prescribe how much amount shall be considered as basic wages. So now this is to be seen by this Tribunal whether respondent is empowered to direct the appellant establishment to pay minimum wages to employees. During course of argument, no provision of the Act cited by counsel for respondent which could reveal that ‘Commissioner' is empowered to direct the employer to pay minimum wages to the employee.

15. Bifurcation of wages below minimum wages or basic wages and DA etc. are the issue, completely out of the purview of PF Authorities. PF authorities have no jurisdiction to ensure the compliance of Minimum Wages Act or to issue any direction in this regard. Wages are to be determined is a decision between employee and employer and further authority appointed under the Minimum Wages Act is only empowered to raise issue regarding Minimum Wages, to be given to the employee.

16. Being quasi judicial authority respondent has statutory power to direct the appellant establishment to deduct PF contribution on the basis of Section 6 of the Act only.

17. Keeping in view all the circumstances, this Tribunal reached at a considered opinion that order dated 24.09.2010 passed by respondent under Section 7A of the Act is illegal, hence set aside. Copy of the order be sent to parties. File be consigned to record room after due compliance.

(HARISH GUPTA)
Presiding Officer, EPFAT