Dr.P.Sivakumar
Appreciate sharing, your valuable views. I do agree the same, as same is agreeable from the Principal Employer's point of view.
Look at the contractor,
Admitting without accepting knowledge / vocabulary in English, some of the Contractors, especially in south, learned only to sign in English, have signed contract agreement, may or may not have understood the full implications, for survival in tough competition / serious negotiations signed an agreement. I am not denying the validity of the contract agreement clauses signed.
He, the Contractor, as an Independent Contractor, his or her liabilities get increased vis-à-vis the employees. On allotment of code number, the Provident Fund Authorities recognize the contractor as ‘establishment’ since he has complied with all the prescribed conditions. A principal employer cannot be held responsible for the omissions and commissions of the contractor’s employees.
As agreed, the service charges what he could claim from the Principal Employer, is after long negotiation, survived / gained a contract for placement of workmen, with struggled tough competition. The service charges claimed is supposed to be for the service rendered, which includes his identifying /sourcing expenses, salary / wages for one or more supervisor, depending on the number of manpower, placed at the site, and administrative expenses, including stationary and Maintenance of computer and printer charges. No doubt the payment / crediting of ESI, PF, GST so on, are also can be defined as part of services.
The services of payment / crediting by the Contractor as an establishment, can also avail the benefit of payment of contributions in respect of his employees, after the due date, belated payments, with interest and penal charges as prescribed under the various welfare acts and rules framed thereunder, which is available both for Principle Employer and the Contractor equally
Further service charges also part of consideration payable for the services rendered, which includes wages, ESI, PF contributions management contribution and GST payable for the services rendered.
No contractor as establishment, would intentionally / understanding the interest and damages payable, which would be an amount close to double the contributions payable by him in time.
Especially after the judgement pounced, “the contractors, who are registered with the Provident Fund Department, having the independent code number, they are to be treated as independent employer. And therefore, cannot be treated to be ‘principal employer for the purposes of those contractors. “ Steel Authority of India Ltd. vs National Union Water Front Workers, 2001 LLR 961 (SC). 5th October 2019 “
After the above judgement, off late the enforcement authorities, in audit assessment assess the Contractor establishment, as follows.
Total calculated legal percentage under the act, from the bill received, against the heading wages, and actual contributions already paid as on date, and the difference (less some exemption eases as applicable for exempted employee) would be assessed as contributions payable, with interest payable, after the audit. OfCourse the penal charges notice will certainly follow once you cleared the payment, by voucher / E.chellan , as per the assessment.
Further as per the Amendment in Section 43B under Indian Income Tax Act,1961, the allowability of exemption, of ESI and EPF contributions, cannot be availed, if the assessee paid the same after due date ,as applicable under the respective acts
Imagine a contractor’s liability. In these circumstances, which contractor would like to pay the contributions, even if he received it from the Principal Employer in time. In some cases, the contractor had to pay, and claim reimbursement for having paid.
In the above predicament I feel, that the contractor is being punished, too much His act mostly may not be intentional, and is beyond his capability, and the business recession / exigencies he is facing.
Risk or disadvantage incurred from two sources simultaneously. Why not the remedy could be availed by invoking concept of Double Jeopardy /“audi altermn partum rule” with a crucial requirement for attracting the Article is that the offences should be the same, should be identical.
Kindly share your thoughts and views and if any legal citation similar / allied circumstances.