M/S BIO VED ACTION RESEARCH COMPANY V. THE REGIONAL PROVIDENT FUND COMMISSIONER-2

CWP/7776/2022

AI Insights

The case involves M/S Bio Veda Action Research Company, which faced allegations of not paying statutory EPF dues for over 1000 Beauty Advisors engaged in selling products. The RPFC-II assessed dues amounting to approximately Rs. 23.18 crores for the period from 02-2016 to 12-2018. The petitioner challenged the CGIT's order requiring a 50% deposit of the assessed amount for appeal registration, arguing that the Beauty Advisors were not employees but independent contractors. The High Court found the CGIT's order to be non-speaking and unreasoned, leading to its setting aside and remanding the case for a new decision.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 690642 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 10-11-2022
• Assessment Year: misc
• Laws Referred To: Employees Provident Funds and Miscellaneous Provisions Act, 1952
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAVLESH VERMA
• Assessee Lawyers: BIPIN NEGI; SANJOY GHOSE
• Keywords: Commission payments; EPF dues; Waiver; Beauty Advisors; Employment relationship
• Section: 7(a); 7-O; 7(I)

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA ON THE 10th DAY OF NOVEMBER, 2022 BEFORE HON’BLE MR. JUSTICE A.A. SAYED, CHIEF JUSTICE & HON’BLE MS. JUSTICE JYOTSNA REWAL DUA CIVIL WRIT PETITION No.7776 of 2022 Between:- M/S BIO VEDA ACTION RESEARCH COMPANY AT 444/43, 526/442/43, MAUJA RAMPUR GHAT, TEHSIL PAONTA SAHIB-173025, THROUGH ITS AUTHORIZED REPRESENTATIVE SH. AMIT BANKA S/O LATE SH. R.P. BANKA, R/O 1215, ASHIANA UPVAN, ASHINSA KHAND-2, INDIRAPURAM, GAZIABAD, UTTAR PRADESH-201014 …...PETITIONER (BY MR. BIPIN C. NEGI AND MR. SANJOY GHOSE, SENIOR ADVOCATES WITH MR. NITIN THAKUR, MR. GANESH BAROWALIA, MR. JEEVAN BALLAV PANDA AND MR. MEHER TANDON, ADVOCATES) AND THE REGIONAL PROVIDENT FUND COMMISSIONER-II, SHIMLA, BHAVISHAYA NIDHI BHAWAN, BLOCK NO.34, 1ST – 2ND FLOOR, SDA COMPLEX, KASUMPTI, SHIMLA, HIMACHAL PRADESH-171009 …...RESPONDENT (BY MR. NAVLESH VERMA, ADVOCATE) This petition coming on for admission this day, Hon’ble Ms. Justice Jyotsna Rewal Dua, passed the following: - 2 - O R D E R Writ petitioner’s application under Section 7-O of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter to be referred as the ‘Act’) for waiver of the amount due assessed by the Regional Provident Fund Commissioner-II, Himachal Pradesh (in short ‘RPFC-II’) in its order dated 30.07.2022, was decided by the Central Government Industrial Tribunal, Chandigarh (in short ‘CGIT Chandigarh’) on 13.10.2022. In terms of this order, the appeal preferred by the petitioner under Section 7-I of the Act was ordered to be registered subject to its depositing 50% of the assessed amount. The order dated 13.10.2022 has been challenged in this petition. 2. Bare minimum facts which need to be noticed for deciding this writ petition are:- 2(i). A complaint was made on 18.06.2018 by one Ms. Ratna before the Employees Provident Fund Organization (EPFO), Shimla alleging that she was an erstwhile employee of the petitioner- Company. More than 1000 Beauty Advisors were engaged as permanent employees by the petitioner. The petitioner was not paying the statutory EPF dues on account of these Beauty Advisors. Such action was in violation of the EPF Act, 1952 and the schemes framed thereunder. - 3 - 2(ii). The Assistant Provident Fund Commissioner, Nahan deputed an Enforcement Officer to investigate the complaint and inspect petitioner’s premises. The Enforcement Squad on 24.05.2019 reported approximate assessment of dues owed by the petitioner to the tune of Rs.23,18,06,900/- for the period from 02- 2016 to 12-2018 in respect of the commission pay-outs to the Beauty Advisors and third party charges incurred in the usual course of business. The report was sent to the Regional Office, Shimla. 2(iii). Pursuant to the proceedings initiated against the petitioner under Section 7(A) of the EPF Act, the RPFC-II, Himachal Pradesh passed an order on 30.07.2022. The petitioner was held liable for Rs.13,60,44,861/- towards Beauty Advisors and Rs.9,57,62,039/- towards expenses incurred by the petitioner in its Balance Sheets for the year 2015-16 to 2017-18 and trial balance for the year 2018-2019. 2(iv). Dissatisfied with the order dated 30.07.2022, the petitioner preferred an appeal under Section 7-I of the Act before the learned CGIT, Chandigarh. Alongwith the appeal, an application under Section 7-O of the Act was moved seeking complete waiver of the condition of deposit of assessed amount. On 13.10.2022, learned CGIT, Chandigarh passed an order, directing the petitioner to deposit 50% of the assessed amount as a condition precedent for - 4 - hearing the appeal. Feeling aggrieved, the petitioner has filed this writ petition for the grant of following reliefs:- “i. The impugned order dated 13 October, 2022 passed under Section 7O of the EPF Act, 1952, to the extent that it directs the Petitioner herein to deposit 50% of the amount assessed by the Regional Provident Fund Commissioner-II, Shimla under Section 7A of the EPF Act may kindly be set aside and quashed; ii. Alternatively, the impugned order dated 13 October, 2022 passed under Section 7O of the EPF Act, 1952, to the extent that it directs the Petitioner herein to deposit 50% of the amount assessed by the Regional Provident Fund Commissioner-II, Shimla under Section 7A of the EPF Act may kindly be modified to require the Petitioner to deposit a token amount, as may be deemed appropriate in facts and circumstances of the case; iii. Alternatively, the impugned order dated 13 October, 2022 passed under Section 7-O of the EPF Act, 1952, to the extent that it directs the Petitioner herein to deposit 50% of the amount assessed by the Regional Provident Fund Commissioner-II, Shimla under Section 7A of the EPF Act may kindly be modified to require the Petitioner to deposit the said amount in an FDR by marking a lien on the said FDR in favour of the Ld. CGIT instead of requiring the said amount to be deposited with the Ld. CGIT.” 3. Learned Senior Counsel for the petitioner submitted that while ordering deposit of 50% of the assessed amount, learned - 5 - CGIT, Chandigarh did not consider petitioner’s submissions. Had the petitioner’s submissions been considered in proper perspective, it would have been crystal clear that it was such a case where the petitioner should not have been ordered to deposit even a single rupee of the amount assessed under order dated 30.07.2022. It was a case where:- 3(i). The petitioner had made repeated submissions before all the concerned authorities that it had no relationship of employment qua Beauty Advisors. The Beauty Advisors were not petitioner’s employees. 3(ii). The petitioner was a partnership firm engaged in manufacturing, packaging and distribution of Ayurvedic Skin, Haircare and Wellness products across the country. The petitioner retails its products to the final consumers through third party stores/shops across the country. These third party stores/shops purchase petitioner’s products and sell them in their stores. The third party stores/shops engaged services of freelance workers called Beauty Advisors to assist the customers with information about all products sold by them and in this manner help increase their sales. The Beauty Advisors are independent service providers for the benefit of third party stores/shops. They assist in the sale of products not only of the petitioner, but also of its competitors. - 6 - 3(iii). The products manufactured by the petitioner get distributed and purchased by the third party stores/shops. The income of the petitioner for distribution of its products is not dependent on the sale of these products by the stores/shops to the final customers. However, the continued purchase and volume of goods purchased of the petitioner’s products by the stores/shops is dependent on the popularity of its products. 3(iv). As an incentive to help the third party stores/shops to sell its products, the petitioner makes commission pay-outs to the Beauty Advisors engaged by the third party stores/shops proportionate to the volume of sales made by them on the products manufactured by the petitioner. 3(v). There is no contract of employment between the petitioner and Beauty Advisors. They are engaged by the third party stores/shops. They work from their premises and are not exclusive to the petitioner in any manner. The petitioner exercises no control or supervision over these Beauty Advisors. The role of Beauty Advisors is to assist the third party stores/shops to earn income through the sale of all products and items sold by them and not just the products manufactured by the petitioner. 3(vi). The petitioner opted to have the commission payments directly remitted to the Beauty Advisors instead of routing them - 7 - through the store owners to ensure that the actual and full payments made their way into the hands of the intended beneficiaries. 3(vii). The display expenses on account of charges paid to the third party stores/shops for displaying petitioner’s products in their windows and other areas help increase sale of petitioner’s products. 3(viii). The tax deductions in respect of payments to the Beauty Advisors were made not under Section 192, but Section 194 C of the Income Tax Act, 1961, which can only be made with respect to independent contractors etc. and not employees. In view of the above factual submissions, learned Senior Counsel for the petitioner contended that the order dated 30.07.2022, passed by the RPFC-II, Himachal Pradesh, imposing liability of Rs.23,18,06,900/- towards EPF dues was absolutely illegal. The petitioner should have been allowed complete waiver from the condition of depositing the amount assessed under this order. Impugned order dated 13.10.2022, directing the petitioner to deposit 50% of the assessed amount, is illegal. Learned counsel for the respondent opposed the factual submissions of the petitioner and defended the orders dated 30.07.2022 and 13.10.2022 passed by the RPFC-II, Himachal Pradesh and learned CGIT, Chandigarh, respectively. It was submitted that the order appealed against by the petitioner before - 8 - the Tribunal was neither patently illegal nor without jurisdiction so as to attract complete waiver of condition of depositing the amount assessed in it. 4. Order dated 30.07.2022 impugned before the learned CGIT, Chandigarh had assessed petitioner’s liability in two parts, i.e. Rs.13,60,44,861/- towards ‘Identified Workers’ and that of Rs.9,57,62,039/- towards ‘Unidentified Workers’. The argument of the petitioner is that the order dated 30.07.2022 in itself was a non- speaking and unreasoned order that had mechanically relied upon the report dated 24.05.2019. The report dated 24.05.2019 was also based on assumptions. The argument of learned Senior Counsel for the petitioner is that neither the RPFC-II, Himachal Pradesh nor the Enforcement Officer considered the record submitted by the petitioner. That while passing the order dated 30.07.2022, the RPFC-II, Himachal Pradesh failed to appreciate that the payments made by the petitioner to the Beauty Advisors were in the nature of commission, solely dependent upon the number of products stocked by the third party stores/shops that they have helped to sell. The RPFC-II, Himachal Pradesh also failed to take note of the nature of tax deductions made by the petitioner in respect of the payments made by it to the Beauty Advisors. No effort was made by the RFPC-II, Himachal Pradesh to determine the relationship of - 9 - employment between the petitioner and Beauty Advisors. Even the calculation of dues of Rs.9,57,62,039/- was made only on the hypothesis that some workmen might have been employed/engaged for executing these items of work. That existence of a prima facie strong case, balance of convenience and undue hardship have also not been considered in the impugned order directing the petitioner to deposit 50% of the assessed amount. The reasons given by the learned CGIT, Chandigarh in its order dated 13.10.2022 (impugned herein) for directing the petitioner to deposit 50% of the amount assessed by the RPFC-II, Himachal Pradesh are as under:- “7. Upon hearing and perusal of appeal file, it is found that the appellant has failed to make a prima facie case for total waiver of the condition of pre-deposit as laid down under Section 7(O) of the Act. Appellant is directed to deposit 50% of the assessed amount by respondent within 4 weeks from the date of passing of order. The respondent is directed not to take any coercive action/step till disposal of appeal.” Petitioner’s contentions that the impugned order does not set out as to who these Identified Workers are, what relationship they had with the petitioner, whether there is any relationship of employment that can be established between such Identified Workers and whether such liability could, therefore, accrue in - 10 - respect of these Identified Workers, presumptions in respect of unidentified workers etc. have not been taken note of in the impugned order dated 13.10.2022. The impugned order has not set out any cogent reason for directing the petitioner to deposit 50% of the amount assessed in the order dated 30.07.2022 impugned before the learned CGIT, Chandigarh. Petitioner in its application had claimed complete waiver from depositing the assessed amount. Section 7-O of the Act provides that no appeal by the employer shall be entertained unless he has deposited with it 75% of the amount due from him as determined by an officer referred to in Section 7-A. Provided that the Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section. Learned Tribunal in the impugned order had directed the petitioner to deposit not 75% but 50% of the assessed amount. However, no reasons behind such direction can be gathered from reading of the order. It cannot be deciphered from the impugned order as to why petitioner’s prayer for complete waiver from depositing the assessed amount has not been allowed and also as to why as against the condition of deposit of 75% of assessed amount, petitioner has been directed to deposit 50% of the amount assessed. - 11 - In view of the above, we find that in the facts and circumstances of the case, the impugned order dated 13.10.2022, directing the petitioner to deposit 50% of the amount assessed by the RPFC-II, Himachal Pradesh, is non-speaking and unreasoned. The impugned order dated 13.10.2022 is accordingly set aside. The matter is remanded to the learned CGIT, Chandigarh to pass fresh, reasoned and speaking order in petitioner’s application moved under Section 7-O of the Act, after hearing learned counsel for the parties on both sides in accordance with law. Parties, through their learned counsel, are directed to appear before the learned CGIT, Chandigarh on 24.11.2022. The writ petition stands disposed of in the above terms, so also the pending miscellaneous application(s), if any. (A.A. Sayed) Chief Justice (Jyotsna Rewal Dua) November 10, 2022 Judge Mukesh "