Reduction in Unwarranted PF Inquiries

Reduction in  Unwarranted PF Inquiries 

PF Section 7A New Guidelines

EPFO vide circular no.C-II/20/76/Misc./2020/CBE/TN/027 has released guidelines for initiation of inquiries under Section 7A of the Employees Provident Fund And Miscellaneous Provisions Act, 1952. As per the circular, inquiry shall not be initiated for any purpose extraneous to the statutory mandate of Section 7A i.e. dispute of applicability or determination of dues. 

The new rules gave by the EPFO for reducing unwarranted inquiries under Section 7A are business amicable and liable to carry enormous relief to employers. Given the wide extent of forces gave upon Provident Fund Commissioners under Section 7A, the guidelines force truly necessary limitations to check any subjective exercise of such powers by the specialists.

Further, since the Limitation Act, 1963 isn't material to requests directed under Section 7A, the exertion of the EPFO as far as possible the extension and time of enquiries dependent on believable proof is an invite measure that may help reduce unjustified provocation of Employers brought under Inquires under the EPF Act. The rules will likewise acquire straightforwardness investigations and give a domain to the industrialist that encourages simplicity of working together.

• The minimum standard of evidence for commencement of any legal proceeding is existence of a prima-facie case and the same applies to proceedings u/s 7A as well. 
• A mere complaint in itself doesn't constitute a prima-facie case evidence. 
• Any complaint is required to be investigated by an Enforcement Officer Under Section 13(1) of the Act and substantiated on the basis of admissible evidence gathered during an investigation. 
• Once an inquiry is initiated for specific reasons and period, the scope thereof cannot be extended beyond the fact-in -issue. 
• The reasons for initiation of inquiry must be recorded in writing and copy of all the documents shall be supplied to the necessary parties along with the notice with the case number under Section 7A. 

Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 allow PF Commissioners to initiate inquiries in order to determine amounts due from employers under the EPF Act. To decide the deficit in commitments, Section 7A vests Commissioners with the forces of a civil court.

Prior, the Employees' Provident Fund Organisation (EPFO) had, on 28 August 2019, issued a notice directed at curbing unwarranted roving inquiries being initiated by authorities pursuant to a clarification issued by the Supreme Court of India (Supreme Court) in Regional Provident Fund Commissioner (II) West Bengal v Vivekananda Vidyamandir and Others [Civil Appeal Number 6221 of 2011] regarding the ambit of 'basic wages' under the EPF Act. 

In order to further regulate and uniformise conduct of inquiries under Section 7A, the EPFO has, vide its notice dated 14 February 2020, issued detailed guidelines for conducting inquiries.

The Guidelines

The following guidelines have been issued by the EPFO in supersession of all earlier instructions in this regard:

Limited basis of inquiry: 

In line with the stipulations under Section 7A, inquiries may be initiated only for two purposes i.e. 

• (a) to decide a dispute regarding the applicability of the EPF Act or / and 
• (b) determination of shortfall in contributions. 

Any other default, such as failure to produce records or submit returns, cannot be the basis for initiating an inquiry under Section 7A.

A prima-facie case: 

• Existence of a prima-facie case is a prerequisite for initiating an inquiry. As needs be, the Assessing Officer is required to record reasons recorded as a hard copy dependent on accessible proof to set up an at first sight case before starting a request. 
• Further, the EPFO has explained that a minor objection doesn't comprise by all appearances proof, except if it has been researched and additionally validated through proof assembled by Inspectors enabled to do as such under the EPF Act.

Procedure for initiation

• A copy of the documents constituting the basis of the inquiry must be supplied to the relevant parties along with the notice under Section 7A. 
• Further, the notice initiating an inquiry shall be assigned a computer generated diary number for the Compliance e-Proceedings Portal.

Time frame and scope inquiry

• The EPFO has criticised the practice of conducting inquiries for long durations ranging from 5 (five) to 20 (twenty) years, without evidence of prolonged default. 
• The Assessing Officers are now required to record the intended period of inquiry based on the evidence of default available, prior to initiating the inquiry.
• Further, upon the initiation of an inquiry, the issues under inquiry or the period thereof cannot be extended and the records sought from the employer must also be reasonably limited to such scope.
• Any new issue or period of default may be inquired into only after issuance of a separate notice in that regard.

A request led in resistance of any of the previously mentioned rules is impermissible and will be treated as non-est according to law.