FOR THE ATTENTION OF EMPLOYERS
PF Department has recently come out with the following Circular:
EMPLOYEES’ PROVIDENT FUND ORGANISATION
(Ministry of Labour & Employment, Govt. of India), Head Office
Bhavishya Nidhl Bhawan, 14, Bhlkaiji Camaji Place, New Delhi – 110 066.
No. Coord./4(6)2003/Clarification/Vol.II/2482 Dated: 21.06.2011
Sub: Forwarding of Landmark Judgment delivered by the Hon’ble Division Bench of Madhya Pradesh High Court on the issue of considerable components of Basic Wages – regarding
Please find enclosed herewith a copy of Judgment dated 24.03.2011 in the matter of Montage Enterprises Pvt. Ltd versus Employees Provident Fund, Indore & one another delivered by the Hon’ble Divisional Bench of Madhya Pradesh High Court Bench at Gwalior whereby, the Hon’ble Court has laid down a principle for treatment of certain allowances like Conveyance/Transportation allowance, Special Allowance etc. as component of “Basic Wages” for the purpose of Provident Fund liabilities if the same are being paid uniformly, necessarily and ordinarily to all employees. The same may be utilized as per merits of the case.
End: As above.
(Anita S. Dixit)
Regional PF Commissioner-I (Coord.)
Employers need to adhere to this dictum of Hon’ble Divisional Bench of Madhya Pradesh High Court Bench at Gwalior whereby, the Hon’ble Court has laid down a principle for treatment of certain allowances like Conveyance/Transportation allowance, Special Allowance etc. as component of “Basic Wages” for the purpose of Provident Fund liabilities if the same are being paid uniformly, necessarily and ordinarily to all employees apart from laying down the law .
The Department can re-open the Returns for earlier period of non compliance and the penal provisions will be incurred.
The rate of penal damages for belated payment of EPF dues is as follows:
If the period of default less than 2 months -5 %
If the period of default is 2 months above but less than 4 months – 10 %
If the period of default is 4 months above but less than 6 months – 15 %
If the period of default is 6 months above–25 %
The above is in addition to 12 % simple interest .
Apart from the above the further consequences for default are:
Attachment of Bank Accounts
Realization of dues from Debtors[ Garnishee Order]
Attachment of moveable and immovable properties.
Arrest and detention in Prison.
Action under section 406/409 of the Indian Penal Code[ Criminal Law] and Section 110 of Cr .P.C
Prosecution.Prosecution for Non payment of contributions normally end in favour of the Department.Mandatory punishment of detention in Prison is provided .
Managing Director or CEO of Corporates/Business /Industry on their part need to direct their Head of Compliance to file adherence reports on the Circular issued by the Department and arrange for a Board of Directors directed Compliance Audit on the following EPF Circulars :
1. No.: Coord/4(6)2003/Clarification/Vol-II/ Dated: 23-05-2011
2. No. Coord./4(6)2003/Clarification/Vol.II/2482 Dated: 21.06.2011
If a negative report on compliance of the above EPF Department Circulars is indicated by the Board directed compliance Audit Team then immediate remedial action is to be taken to avoid penal action by the Department.
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