M/S Whirlpool of India Ltd. v. Regional Provident Fund Commissioner

12. The Petitioner preferred a Latent Patent Appeal (LPA 622/2013 titled as „Whirlpool India Ltd v. RPFC & Ors‟) against the order dated 22.07.2013 passed by the learned Single Judge of this Court. The Hon‟ble Division Bench vide its order dated 02.09.2013 set aside the order dated 22.07.2013 passed by the learned Single Judge and thereby restored the aforesaid writ petition filed by the Petitioner. The relevant extract of the order dated 02.09.2013 passed by the Hon‟ble Division Bench in LPA 622/2013 reads, inter alia, as follows:

13. In view of the order dated 02.09.2013 passed by the Hon‟ble Division Bench, the Petitioner preferred CM No. 48821/2018 for revival of the present Writ Petition. This Court vide order dated 11.09.2019 allowed the said application and the present Writ Petition was restored to its original position.

14. With the consent of the parties, this Court has taken up the present matter for final arguments and heard the arguments advanced by both the parties.

SUBMISSIONS MADE ON BEHALF OF THE PETITIONER

15. Mr. Parag P. Tripathi, learned Senior Counsel appearing for the Petitioner vehemently opposed the findings of the Enforcement Officer and the Respondent Nos. 1 and 3 that the canteen allowance paid by the Petitioner is nothing but „cash value of food concession‟ which is due to be paid on account of Provident Fund.

16. Learned Senior Counsel submitted that the canteen allowance paid by the Petitioner at the rate of Rs.300/- per month is not covered by the definition of the „basic wage‟ under Section 2(b) of the E.P.F. Act. Learned Senior Counsel further highlighted that the Respondent No.1 cogently admitted vide its letter dated 16.03.1998 that the canteen allowance does not constitute a part of the basic wages under Section 2(b) of the E.P.F. Act. “The contents of your letter have been examined, no doubt canteen allowance being paid by you cannot be treated as part of basic wages in terms of Section 2(b)(ii) of the Employees provident Fund & Misc. Provisions Act, 1953 but the PF contributions are required to be made on cash value of food concession also which is covered under Section 6 of the E.P.F& M.P. Act, 1952 read with para 29 of the E.P.F. Scheme, 1952.”

17. Learned Senior Counsel has relied upon the circulars issued by the Central Provident Fund Commissioner (CPFC) from time to time by virtue of which following allowances were excluded from forming part of the „basic wages‟ under the statute:

(i) Tiffin allowance

(ii) Canteen subsidy – subsidy paid to workers in lieu of canteen facilities which cannot be provided for want of space etc.

18. Learned Senior Counsel further argued that Explanation-I to Section 6 of the E.P.F. Act intends to include only „cash value‟ of food concession under its ambit for the purpose of computing the provident fund contribution, and not the „cash payment‟ as is made to the workmen in the present case. Furthermore, he placed reliance on the judgment dated 22.07.2013, passed by Hon‟ble Single Judge of this Court in W.P.(C) 7729/1999, wherein though the Hon‟ble Single Judge dismissed the petition filed by the Petitioner, but made the following observation at Para 25 of the judgement: “25. I am, therefore, of the view that canteen allowance, in fact, forms part of the basic wages and there is no question of it being considered as “cash value of any food concession”. The decisions of the Bombay and Gujarat High Courts in Tata Hydro Electric Supply (supra) and Reliance Industries Ltd. (supra) do not advance the case of the petitioner, because they proceeded on the basis that the expression "cash value of any food concession" pre-supposes the grant of food concession of which the cash value is determined. There may be no quarrel with the said proposition However, neither of these decisions have explored the definition of the expression "basic wages" contained in section 2(b) and, in particular, the issue whether canteen allowance forms part of the basic wages, or not.”

19. It is averred that the stand taken by the Respondents that the canteen allowance is being paid in lieu of subsidized canteen facilities is based on conjecture and surmises. Moreover, this canteen allowance is not being paid to all the employees but is limited to only those employees who qualify as „workman‟ under Section 2(e) of the I.D. Act as per the terms of settlement dated 13.10.1995. Only 2319 employees are entitled to canteen allowance, out of approximately 2670 employees working with the Petitioner, hence, it is not the case that „all‟ employees were getting the benefits of canteen allowance.

20. It is submitted that the Respondent No.3, while passing the Impugned Order dated 17.12.1999, has erroneously interpreted the term „cash value of food concession‟ and consequently made it subject to the Provident Fund deduction. The Respondent No.3 interpreted the term in blatant ignorance of the judgments and orders passed by the various High Courts, wherein the Courts/Authority have excluded allowances of similar nature (such as tea and milk allowance) from the purview of basic wages for computation of Provident Fund. Learned Senior Counsel has further averred that calling an allowance as „cash value of food concession‟ necessarily means that the employer has been providing food item at some concessional rate to the employees. The difference between the market rate of food item and concessional rate would mean „cash value‟ of food concession‟. However, in the present matter, no food item is being provided by the Petitioner at a concessional rate to its employees. The canteen allowance being paid by the Petitioner is in cash and cannot by any stretch of imagination be called „cash value of food concession‟.

21. In support of the submissions made by them, the learned Senior Counsel has relied upon the judgments delivered in Tata Power Company Limited, Mumbai v. Regional Provident Fund Commissioner, Mumbai, reported as 2008 SCC OnLine Bom 681; Reliance Industries Ltd. v. Regional Provident Fund Commissioner, reported as 2011 SCC OnLine Guj 7625; Wipro, Ltd. v. Presiding Officer, Employees Provident Fund Appellate Tribunal, New Delhi, reported as 2006 SCC OnLine Mad 847; CCE v. S. Kumar Ltd., reported as (2015) 16 SCC 317; Godrej Industries Ltd. v. CCE, reported as (2008) 17 SCC 471; Commr. of Customs v. Toyo Engg. India Ltd., reported as (2006) 7 SCC 592; Bridge and Roofs Co. Ltd. v. Union of India, reported as (1963) 3 SCR 978; Manipal Academy of Higher Education v. Provident Fund Commr., reported as (2008) 5 SCC 428; Provident Fund Commr. v. Vivekananda Vidyamandir, reported as (2020) 17 SCC 643.

22. Based on the aforementioned submissions, the learned Senior Counsel prays for the setting aside of the Impugned Order.

SUBMISSIONS MADE ON BEHALF OF THE RESPONDENTS

23. Ms. Inderjeet Sidhu, learned counsel representing the Respondent countered the arguments raised by the Petitioner by submitting that it is a well-established principle of law that canteen allowance forms part of the „basic wages‟ for computation of the Provident Fund. Such canteen allowance was introduced by the Petitioner by discontinuing the subsidized canteen facility vide the agreement dated 13.10.1995. The Petitioner is paying Rs.300/- per month as canteen allowance to all its employees covered under the I.D. Act. In light of these arguments, the learned counsel has fervently asserted that the earlier provided food concession has taken color of fixed cash value in the form of „canteen allowance‟ which is payable to all eligible employees, and hence satisfies the test laid by the Apex Court in Bridge & Roofs Co. Ltd. Case (Supra). The Petitioner has deliberately revamped its subsidized canteen facility and introduced canteen allowance in order to escape the liability of provident fund deduction under the E.P.F. Act. Therefore, it is nothing but allowance in lieu of the subsidized canteen facility.

24. Placing special emphasis on the definition of basic wage as provided in Section 2(b) of the E.P.F. Act, the learned counsel has submitted that the expression „basic wages‟ means „all emoluments‟ which are earned by an employee while on duty or on leave or on holiday in accordance with the terms of the contract or employment and which are paid or payable in cash to him. The intention of the Legislature is apparent from the language of the provision that contribution to the fund should be made on basic wages, dearness allowance and retaining allowance. It includes all emoluments except those specifically excluded from the definition of basic wages.

25. Learned counsel has advanced the argument by explaining the need of liberal construction and purposive interpretation of the terms in favour of the weaker section of the society as the E.P.F. The Act is a beneficial social legislation. It is submitted that exclusion of canteen allowance from the definition of „basic wages‟ and „cash value of food concession‟ will frustrate the statutory purpose of the E.P.F. Act. Terms must be construed liberally so as to fulfill statutory objective of the E.P.F. Act and to avoid the Petitioner from escaping the obligation towards the provident fund contribution.

26. Reliance has been placed by the learned counsel for the Respondent on the judgements in the matters of Gujarat Cypromet, Ltd. v. Assistant Provident Fund Commissioner, reported as 2004 SCC OnLine Guj 109; Bhavnagar University v. Palitana Sugar Mill (P) Ltd., reported as (2003) 2 SCC 111; SAIL v. National Union Waterfront Workers, reported as (2001) 7 SCC 1; Regional Provident Funds Commr. v. Shibn Metal Works, reported as (1965) 2 SCR 72; Provident Fund Commr. v. Vivekananda Vidyamandir, reported as (2020) 17 SCC 643.

27. With the aforementioned submissions, learned Counsel for the Respondent prays for the dismissal of the present Writ Petition.

LEGAL ANALYSIS

28. This Court has heard the rival contentions of the parties and have perused the relevant documents and judgements with the assistance of the learned counsels for the parties.

29. The main bone of contention in the present matter stems from the assessment made by the Area Enforcement Officer on 18.09.1997 wherein, it was determined that the canteen allowance of Rs.300/- paid by the Petitioner is a „cash value of food concession‟ upon which Provident Fund contributions are payable as per Section 6 read with Section 2(b) and Section 2(c) of the E.P.F. Act. The Petitioner, being aggrieved with the aforesaid assessment, is contesting the finding that canteen allowance is a „cash value of food concession‟. It is the submission of the Petitioner that the canteen allowance of Rs.300/- per month is merely a „cash allowance‟ paid to their employees and cannot be in any case termed as „cash value of food concession‟ as no food item at concessional rate has been supplied by the Petitioner to its employees. Since the canteen allowance is not a „cash value‟ of food concession, it cannot be made subject to the provident fund deduction. On the other hand, the Respondent has asserted that the Petitioner strategically transformed the previously given subsidized canteen facility into the canteen allowance, so as to escape its liability under the E.P.F. Act.

30. It is pertinent to note that the case of the Respondent before the Authority constituted under Section 7-A of the E.P.F Act as well as before the Appellate Tribunal was that the canteen allowance paid by the Petitioner was an allowance in lieu of the subsidized canteen facility and therefore qualifies as „cash value of food concession‟ and hence the said allowance is part of dearness allowance. Since, the employer needs to pay provident fund on the dearness allowance, the Petitioner requires to deposit the Provident Fund on the canteen allowance. However, it is the case of the Respondent before this Court that the canteen allowance is actually a part of the basic wages as defined under Section 2 (b) of the E.P.F. Act and hence the Petitioner needs to pay provident fund on the same. From the stand of the Respondent, it is very much evident that according to them the Petitioner is required to deposit Provident Fund on canteen allowance irrespective of whether it falls under basic wages or „cash value of food concession‟. Since the question raised by the Respondent in the present proceedings, i.e., whether canteen allowance paid by the Petitioner to its employees is part of basic wages u/s 2 (b) of the E.P.F. Act is a pure legal question and hence this Court deems it appropriate to decide the said issue in the present writ Petition.

31. In view of the same, the issues to be decided by this Court are as follows:

(i) Whether the canteen allowance paid by the Petitioner to all the employees is a „cash value of any food concession‟ under Section 6 of the E.P.F. Act; and

(ii) Whether the canteen allowance which is paid in cash by the

Petitioner to all the employees in terms of the settlement dated 13.10.1995 is „basic wages‟ for the purposes of Section 2 (b) of the E.P.F. Act.

32. Regarding the first issue, i.e., whether the canteen allowance paid by the Petitioner to all the employees is a „cash value of any food concession‟ under Section 6 of the E.P.F. Act, the law is settled. Various High Courts in Tata Power Company Limited, Mumbai v. Regional Provident Fund Commissioner, Mumbai (Supra); Reliance Industries Ltd. v. Regional Provident Fund Commissioner (Supra); Wipro, Ltd. v. Presiding Officer, Employees Provident Fund Appellate Tribunal, New Delhi, (Supra), categorically held that the cash paid by the Petitioner to its employees in lieu of canteen facilities does not amount to „cash value of any food concession‟. This Court is in respectful agreement with the ratio of these Judgments and hence in view of the law laid down by various High Courts, it is held that the canteen allowance paid by the Petitioner to its employees in lieu of canteen facilities cannot be treated as „cash value of any food concession‟. However, in none of these cases, the issue whether cash allowance paid by the employer to its employees in lieu of canteen facilities can be considered as „basic wages‟ for the purpose of Section 2 (b) of the E.P.F. Act has been considered.

33. In view thereof, this Court now proceeds to examine the second issue, i.e., whether canteen allowance which is paid in cash by the Petitioner to all the employees in terms of the settlement dated 13.10.1995 is „basic wages‟ for the purpose of Section 2 (b) of the E.P.F. Act. The learned Single Judge of this Court, in its earlier decision dated 22.07.2013, examined this issue and held that „canteen allowance‟ can be treated as part of basic wages of an employee as defined under Section 2 (b) of the E.P.F. Act.

34. However, the Hon‟ble Division Bench of this Court vide order dated 02.09.2013 in LPA 622/2013, set aside the said decision of the learned Single Judge observing that „Ex-facie there is a conflict in the impugned decision with respect to the issue settled by the learned Single Judge in paragraph 9 of the decision and the conclusion arrived at in paragraph 25‟.

35. This Court shall now proceed to examine the aforesaid issue in the light of the various provisions of E.P.F. Act. Sections 2(b) and 6 of the E.P.F. Act are reproduced herein below for a better understanding of the context in which the term is being used in the statute: “Section 2(b) All emoluments which are earned by an employee, while on duty or on leave or 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 allowance that is to say, all cash payments by whatever name called paid to an employee on account of a rise in 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 presents made by the employer;

6. Contributions and matters which may be provided for in Schemes.— The contribution which shall be paid by the employer to the Fund shall be ten per cent of the basic wages, dearness allowance and retaining allowance (if any), for the time being payable to each of the employees (whether employed by him directly or by or through a contractor), and the employee's contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten per cent of his basic wages, dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section: Provided that in its application to any establishment or class of establishments which the Central Government, after making such enquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words [ten per cent,at both the places where they occur, the words [twelve per cent] shall be substituted: Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee or quarter of a rupee. Explanation [1].—For the purposes of this section dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee. Explanation 2.—For the purposes of this section “retaining allowance” means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.”

36. From the plain reading of Section 6 of the E.P.F. Act, it can be seen that the employer is to make payment towards Provident Fund on: (i) basic wages; (ii) dearness allowance; and (iii) retaining allowance paid to its employees. As per Section 2(b) of the E.P.F. Act, basic wages means all emoluments which are earned by an employee, while on duty or on leave or holidays except: (i) cash value of any food concession; (ii) Dearness Allowances; and (iii) any gift paid by the employer to its employees. This Court has already held that the canteen allowance cannot be treated as „cash value of any food concession‟. The said allowance cannot be treated as dearness allowance as the same was not given to the employees to meet the cost of living. The said allowance by no means is a gift to the employees. Hence, canteen allowance is not falling within the exceptions of Section 2(b) of the E.P.F. Act. Now, the question to be determined is whether the said allowance can be treated as „basic wages‟ for the purpose of Section 2 (b) of the E.P.F. Act.

37. The Hon‟ble Supreme Court in Bridge & Roofs Co Ltd v. UOI (supra), analysed the concept of basic wages as defined under Section 2 (b) of E.P.F. Act. Relevant portion of the said Judgment, reads, inter alia, as follows:

38. From a reading of the aforesaid Judgement, it is clear that the emoluments like canteen allowance which are available to all the employees can be treated as part of „basic wages‟.

39. The Hon‟ble Gujarat High Court in Gujarat Gypromet (supra) has examined the question whether lunch allowance, medical allowance, conveyance allowance and house rent allowance provided by the employer to his employees can be treated as „basic wages‟ under Section 2 (b) of the E.P.F. Act. While relying upon the earlier decision of Hon‟ble Bombay High Court in Hindustan Lever Employees Union v. RPFC & Anr. reported as 1995(II) LLJ 279, the Hon‟ble Gujarat High Court held that unless the payment falls in any one of the specifically mentioned excepted categories, every emolument which is earned by the employee while on duty or on leave or on holidays in accordance with the terms of the contract of employment and which are paid or payable in cash to him must be included within basic wages. The relevant portion of the said Judgment reads, inter alia, as follows:

40. In order to resolve the issue, it is important to examine the nature of „canteen allowance‟ which is central to the present dispute. It is an undisputed fact that the Petitioner, prior to 13.10.1995, was providing the facility of a subsidized canteen to its employees wherein food items were available at a concessional rate than the market rate. However, post 13.10.1995, the Petitioner revamped the canteen service and instead decided to pay a lumpsum amount of Rs.300/- per month to all its permanent employees who are covered under Section 2 (e) of the I.D. Act as „canteen allowance‟.

41. It is the submission of the learned Senior Counsel for the Petitioner that there were approximately 2670 employees in the Petitioner Company, however, only 2319 employees were entitled to receive the canteen allowance. Accordingly, it is the contention of the Petitioner that since the canteen allowance is not available to all the employees of the Petitioner, the same cannot be treated as „basic wages‟ as per the law laid down by the Hon‟ble Supreme Court in Bridge & Roof Co. Ltd. (supra). However, a perusal of the record shows that the Petitioner extended the benefit of canteen allowance to all the employees who are covered under Section 2(e) of the I.D. Act. This benefit is not personal to individual employees. Thus, canteen allowance is not a benefit extended to individual employee; it is available to all the employees covered under Section 2 (e) of the I.D. Act.

42. In view of the detailed discussion herein above, this Court deems it appropriate to decide Issue No.2 in favour of the Respondent. This Court is of the considered view that canteen allowance can be treated as an emolument which is part of basic wages of an employee under Section 2(b) of the E.P.F. Act and therefore, the Petitioner needs to deposit Provident Fund on the said amount.

43. In view of the reasons explained herein above, the present Writ Petition is dismissed. The Petitioner is liable to deposit Provident Fund on „Canteen Allowance‟ as the same falls within the definition of „basic wages‟ under Section 2 (b) of the E.P.F. Act.

44. No order as to costs.

GAURANG KANTH, J. JULY 06, 2023