Research › Search › Judgment

Karnataka High Court · body

2022 DIGILAW 1132 (KAR)

Nataraj Computers v. Assistant Provident Fund

2022-09-01

SURAJ GOVINDARAJ

body2022
JUDGMENT 1. The petitioner is before this Court seeking for the following reliefs: "Wherefore, the Petitioner prays that, this Hon'ble Court be pleased to pass an order of writ or order in the nature of mandamus or certiorari thereby quashing the order dtd. 25/8/2011 in A.T.A. No.66(6)/2011 passed by the Employees Provident Fund Appellate Tribunal, New Delhi at Annexure-A and thus set aside the order No.KN/PF/SRO/Mys/Adm/RTI/137/2011-12 undated November 2010 passed by the respondent, in the interest of justice and equity". 2. The petitioner had entered into an agreement with Karnataka State Electronics Development Corporation Limited (KEONICS) for imparting computer education to the students studying in the schools coming under the Scheme formulated by the Government viz., 'Mahiti Sindhu Project' under which the Commissioner of Public Instructions, Karnataka had entrusted the said work to M/s.KEONICS who in turn had engaged the services of the petitioner. 3. In furtherance of the said entrustment of the work, a deed of agreement came to be executed on 21/9/2007. Under the said agreement, it was agreed that the petitioner being service provider would hire a computer faculty by making payment of sum of Rs.4,500.00 per month as minimum salary. The petitioner who was treated as a franchise of KEONICS insofar as providing of education services in the Government School is concerned, the petitioner therefore has hired 50 instructors to impart the above education. 4. An amount of Rs.4,500.00 mentioned in the agreement being a consolidated amount, the petitioner bifurcated the said amount into basic pay, dearness allowance, travelling allowance, house rent allowance etc., and fixed a sum of Rs.1,250.00 as the basic pay and having fixed necessary amount as dearness allowance has made payment of provident fund dues on the said amounts to the concerned authorities under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short, P.F.Act). 5. The Assistant Provident Fund Commissioner contending that the necessary amounts have not been paid in terms of the entire amount being paid as a salary issued notices under Sec. 7A of P.F.Act and determined that an amount of Rs.12,22,168.00 was required to be paid taking into consideration Rs.4,500.00 as minimum salary per month. 6. 5. The Assistant Provident Fund Commissioner contending that the necessary amounts have not been paid in terms of the entire amount being paid as a salary issued notices under Sec. 7A of P.F.Act and determined that an amount of Rs.12,22,168.00 was required to be paid taking into consideration Rs.4,500.00 as minimum salary per month. 6. Challenging the same, the petitioner filed an appeal in ATA No.647(6)/2010 and had also filed an application to hold the hearing in Bangalore instead of Delhi, no orders having been passed on the said application, the proceedings continued in Delhi and without affording an opportunity to the petitioner, a final order came to be passed. 7. Challenging the same, the petitioner filed a Writ Petition No.4431/2011 but in the meanwhile since an order under Sec. 7C of P.F.Act had been passed stating that certain amounts had escaped assessment, the petitioner withdrew WP No.4431/2011 and had filed the present Writ Petition challenging the order under Sec. 7C of P.F.Act. 8. Sri.Sharath Gowda, learned counsel appearing for the petitioner would submit that even on a perusal of the order passed by the Assistant Provident Fund Commissioner under Sec. 7A of P.F.Act, the said authority has recorded categorically the statement made by the KEONICS that the amount paid being Rs.4,500.00 per faculty is before deduction of service tax @ 12.36% for the Calendar Year 2007-08, 2008- 09 and @ 10.3% for the Calendar Year 2009-10. He further submits that apart from the deduction of service tax, a further amount equivalent to 5% was deducted on account of administrative expenses for both the said periods and as such, the petitioner not having received the said amounts, the question of the petitioner making payment of any amount of Rs.4,500.00 to each of the faculty would not arise and as such, the consideration by the Assistant Provident Fund Commissioner that the PF contribution has to be made on a sum of Rs.4,500.00 is completely wrong. 9. He submits that it is on that basis that further order under Sec. 7C of P.F.Act has been passed on blank dated November 2010 at Annexure-G which is under challenge under these proceedings. He submits that the Sec. 7A order itself being without any basis and/or without any details, the question of passing orders under Sec. 7C of P.F.Act would not have arisen. He submits that the Sec. 7A order itself being without any basis and/or without any details, the question of passing orders under Sec. 7C of P.F.Act would not have arisen. There is no basis provided under Sec. 7C order as regards what are the amount which have escaped assessment and in what manner, more so, when there is no reference itself made to the Sec. 7A order as regards the amounts allegedly not paid by the petitioner. On this basis, he submits that the order passed under Sec. 7C of P.F.Act is required to be quashed. 10. Per contra, Sri.Pradeep, learned counsel for the respondent would submit that in terms of the agreement an amount which was required to be paid by the petitioner is sum of Rs.4,500.00 for each instructor for each month. That being the basic requirement, it was required that the provident fund also be calculated on the same amount and as such, in the order under Sec. 7A of P.F.Act, the same has been taken into consideration and the differential amount being directed to make payment of amounting to Rs.12,22,168.00. Thereafter on coming to know that several other payment have also not being paid by the petitioner, those details have been taken into consideration and the order under Sec. 7C of P.F.Act at Annexure-G had been passed. There is no infirmity in the said order. 7C order relating to the escaped assessment and the demand raised by the respondent is proper and correct and does not require to be interfered with. 11. Heard Sri.Sharath S.Gowda, learned counsel for the petitioner and Sri.M.Pradeep, learned counsel for respondent No.1 and perused papers. 12. Insofar as the assessment order under Sec. 7A of P.F.Act is concerned, the same had been earlier challenged by the petitioner before the Tribunal which subsequently came to be challenged before this Court in W.P.No.4431/2011, which came to be withdrawn. Hence, the validity or veracity of 7A order cannot be challenged in these proceedings and is not subject matter of the present proceedings. 13. What is under challenge is the assessment order under Sec. 7C of P.F.Act as regards escaped assessment as regards which an appeal had been filed which came to be dismissed and thereafter, the present writ petition has been filed. 14. 13. What is under challenge is the assessment order under Sec. 7C of P.F.Act as regards escaped assessment as regards which an appeal had been filed which came to be dismissed and thereafter, the present writ petition has been filed. 14. A perusal of the impugned order at Annexure-G viz., Sec. 7C order would indicate that there is no details forthcoming in the impugned order as to how the amounts have been assessed, calculated and tabulated. There are no details as regards what is the payment which has been made by the KEONICS to the petitioner, what is the payment made by petitioner to each of the individual employees, what is the basic pay paid, what is the dearness allowance paid so as to enable calculation of the amounts due under PF Act. Without those details being furnished and taken into consideration, I am of the considered opinion that there could not have been an order of escaped assessment made under Sec. 7C to contend that there is a provident fund, which is escaped to bring into force Sec. 7C, it was but required for the authority concerned to categorically state as to what was the amount received and what was the amount paid and the PF to be paid thereon. These details being completely lacking, I am of the considered opinion that the same would not stand a test of Sec. 7C of P.F.Act. In view thereof, I pass the following ORDER i. Writ petition is partly allowed. ii. The order dtd. 25/8/2011 in ATA No.66(6)/2011 passed by the Employees Provident Fund Appellate Tribunal, New Delhi at Annexure-A and the order No.KN/PF/SRO/MYS/ADM/RTI/137/2011-12 undated November 2010 passed by the respondent is hereby quashed. iii. The matter is remitted to the respondent for fresh consideration by providing an opportunity to the petitioner to place such documents as the petitioner may deem fit. iv. Since the order being passed in the presence of both the counsels, the petitioner shall file, its statement along with documents that he intends to rely upon on or before 26/9/2022. The respondent shall consider the matter on 10/10/2022 at 3.00 p.m. when the petitioner shall appear before the respondent without requirement of any further notice.