Navigating EPF Act Compliance and Enforcement Proceedings: Insights on Employee Records and Legal Ad

Dear Members,

We are a Mumbai-based organization. We started our business in April 1999.

Upon reaching an employee count of 20, in 2008, we made an application to the EPFO for coverage effective from 01/04/2008. Subsequently, registration was granted, and since then, we have been regularly remitting contributions.

In May 2012, 4 years after we commenced remitting the contributions, an enforcement officer visited us for an inspection to ascertain the applicability of the coverage date. For this purpose, he requested all employee records from the inception of the business. Due to our lack of awareness in maintaining all records and given that under IT and VAT regulations, a period of 6 years is allowed, we had disposed of earlier records. Nonetheless, we submitted records starting from 01/04/2004, along with all balance sheets since the company's establishment. Regrettably, without considering the submitted documents and our explanations, we have now been issued a notice under 7A.

Another significant concern we face is the definition of an employee. We have been assigning minor tasks at employees' homes to their family members, solely to offer them additional income. These tasks are irregular and sporadic. However, the enforcement officer asserted that all these family members also qualify as employees, thereby affecting the determination of applicability.

We would greatly appreciate appropriate guidance and assistance.

Thank you.

If you have filed returns on time, there is no meaning in conducting a 7A enquiry after the expiry of four years. Therefore, it is desirable to attend the enquiry with a legal representative and explain the relevant clauses in the Law of Limitation.

Regarding the coverage of outworkers, there are differences of opinion. The family members of the employees can be treated as your contract workers, and the payment made to them would fall within coverage. This is because the work or at least the final output is subject to your supervision, and you will become the Principal employer when you have control over the production made outside the factory. Once it is established that control and supervision are with you, it is easy to establish the relationship when it is clear that you only supply the materials required to be rolled out.

In view of the above, I suggest you represent the matter with proper legal advice only.

Regards,

Madhu.T.K

Dear Madhu,

Thank you for your feedback.

I was not sure about the law of limitation, and I read somewhere that the EPF officers have powers to reopen a matter up to 5 years. I hope that I am wrong. Each and every return, as well as monthly payments, have been very prompt right from the 1st date of coverage.

Regarding the coverage of family members of the staff, we are going over our books very carefully to check everything once again. But in this case, during the inspection visit, nothing substantial was observed except the payment made to the sweeper.

What I am not sure about is how to tackle the issue of the requirement of producing employee records from day 1. Is this also covered by the law of limitation?

Normally, reopening is done as per section 7B when there exists any chance of omission. However, in your case, it is a 7A enquiry, an enquiry that takes place afresh. Anyway, please attend the enquiry, clarify your stand, and post it for another day.

Madhu.T.K

Hello,

We have now received a summons under section 7-A to appear before the RPFO. The summons states that we have failed to remit dues for the period until June 2012, from the date of coverage (01-04-2008). The summons itself is dated 29 June 2012.

We have paid dues for all the years by the due date and have also filed monthly as well as annual returns on time. This record was presented to the enforcement officer during his visit to our office and is documented in his visit report.

We are unable to understand why such a summons has been issued. Moreover, since February 2012, if not the entire record, at least from February to June 2012, are available online, and acknowledgments of payments are also generated from the EPFO site.

We would appreciate any advice on how to handle this situation.

You can attend the hearing on the scheduled date. You can make your submissions before the APFC. Let us wait for the order. Any way, the order can be challenged in the PF Tribunal. But do not hesitate to appear for the 7A enquiry.

Madhu.T.K

I just personally attended the 7-A enquiry. Our reply to the show cause notice was not on record. The AC said that had that reply been on record, he would not have issued summons. The enforcement officer's report filed states that from the contents of the 2010-11 audited balance sheet, he suspects that PF dues have not been paid on some amounts, which are presumably labor charges. Since our books are clear, we hope that the issue will be resolved in the next hearing. For determination of the date of applicability, he stated that they can go back all the way till the date of inception of the company. He also informed to take up this with the concerned EO. In this regard, the question which arises is as follows: How to tackle the issue of the deviations in the office report filed by the EO with respect to the report prepared during the visit. In this case, the office report prepared by the EO did not apparently indicate that the monthly and annual returns were checked and also that records up to 4 years prior to the registration were also inspected to determine the applicability.