In a big respite to the employers, provident fund authority has published a circular1 on its web-portal wherein it has directed the field offices to abstain from initiating any roving (fishing) inquiries into the wage structure of complying establishments on the pretext that certain allowances that ought to have been considered as 'basic wages' might not have been so considered for determining employer and employee provident fund contribution.
The circular, permits the field offices to conduct inquires only in those cases where credible basis is available for forming a view that the employer has indulged in illegal practices of avoiding payment of contribution by splitting basic wages. However, for this purpose, the field offices have to take prior permission of Central Analysis Intelligence Unit (CAIU) as well as follow administrative guidelines and policy.
Coincidentally, on the day when the circular was published, the Hon'ble Apex Court heard the review petition2 preferred by one of the petitioners namely Surya Roshni Limited. As you must be aware, Hon'ble Apex Court by its judgement passed in The Regional Provident Fund Commissioner (II) West Bengal Vs. Vivekananda Vidyamandir and Ors3 dated February 28, 2019, has adjudicated the issue as to what constitutes 'basic wages' under the Employees' Provident Fund and Misc. Provisions Act, 1952 ("Principal Act").
The review petition was preferred against the Hon'ble Apex Court's prior judgement. The Hon'ble Apex Court has dismissed the review petition on the grounds that it did not find any justifiable reason to entertain the same. The only respite that the employers can now hope for is the above circular.
In yet another major development, the Ministry of Labour and Employment, Government of India ("GOI") as a part of pre-legislative consulting process has now invited suggestions/comments/inputs of all concerned by putting draft amendment bill namely The Employees' Provident Fund and Misc. Provisions Amendment Bill, 2019 ("Amendment Bill")4 in public domain.
The Amendment Bill seeks to amend Section 7A (Determination of moneys due from employers) of the Principal Act. Section 7A of the Principal Act empowers provident fund authorities to conduct inquiry:
- In disputes pertaining to applicability of the Principal Act to an establishment; and
- Determination of any amount due from an employer under Principal Act or schemes/regulations thereunder.
By the Amendment Act, GOI seeks to achieve the following:
- Prohibit any inquiry after expiry of 5 years from the date on which dispute referred in para (a) above is alleged to have arisen or the amount referred in para (b) above is alleged to have been due from an employer; and
- Provident fund authorities must, as far as practicable, endeavour to complete such inquiry within a period of 2 years by holding inquiry on day-to-day basis. However, if the officer conducting such inquiry fails to complete it in 2 years, he has to submit reasons for the same to the higher authority.
From the tone of the circular as well as the contents of Amendment Bill, it appears that the GOI is keen on ensuring minimum harassment of employers who have not indulged in any illegal act of splitting wages to avoid provident fund contribution in the past.
1. Circular No. C-I/1(33)2019/Vivekanand Vidyamandir/717 dated August 28, 2019 https://www.epfindia.gov.in/site_docs/PDFs/Circulars/Y2019-2020/Vivekanand_Vidyamandir_717.pdf
2. R. P. (C) Nos. 1972-1973/2013 in C. A. No. 3965-3966/2013 read with IA No. 52547/2019.
3. Civil Appeal No. 6221 of 2011
4. No.S-35012/5/2017-SS-II dated August 23, 2019 https://labour.gov.in/sites/default/files/Annexure-A_B_C.pdf
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