1. The petitioners have filed this petition under Article 226 of the Constitution of India praying for quashing and setting aside the impugned order dated 31.1.1996 passed by the respondent Commissioner, Ahmedabad. The petition was admitted and impugned order was stayed by this Court.
2. It is the case of the petitioner that the Central Government issued a Notification dated 31.8.1994 in exercise of powers conferred under Section 6 of the Employees Provident Fund & Miscellaneous Provisions Act and thereby amended the earlier Notification issued by the Government of India dated 17.5.1989 and in the Schedule attached to the said Notification dated 17.5.1989, added an entry at Serial No.99 was added as under:-
"99. Textiles (made wholly or in part of cotton". In view of the said Notification, the Provident Fund Department instructed the concerned officers to comply with the provisions of the said Act by making payment of contribution at the enhanced rate of 10%.
3. It is also the case of the petitioners that the Notification dated 31.8.1994 came to be further amended by another Notification dated 1.3.1995 by substituting another item at Serial No.99 replacing earlier item as prescribed under the earlier Notification dated 31.8.1994. The entry which is amended as per the said Notification dated 1.3.1995 reads as under:-
"99. Textiles (made wholly or in part of cotton or wool or silk, whether natural or artificial)"
In view of this subsequent amendment the Provident Fund Department issued intimation dated 6.7.1995 to the petitioner to comply with the provisions of the said Act as well as the scheme by making payment of provident fund contribution at the enhanced rate of 10% rather than at the rate of 8.33%. The Provident Fund Department had also issued another letter dated 31.8.1995 reiterating the demand of the provident fund at the rate of 10% instead of 8.33%. The respondent Commissioner thereafter initiated inquiry under the provisions of Section 7A of the said Act and issued summons on 19.9.1995 for determination of the amount due by the petitioner Company under the provisions of the said Act as well as the scheme. The petitioners gave detailed reply on 29.11.1995 and ultimately the impugned order was passed on 31.1.1996 raising the demand of provident fund dues at the rate of 10% instead of 8.33%.
4. Mr.Kunan Naik, learned advocate appearing for M/s. Trivedi & Gupta, for the petitioners has submitted that the respondent had wrongly applied provisions of Notifications dated 31.8.1994 and 1.3.1995 issued by the Government of India though the same are not applicable to the petitioner Company which was manufacturing synthetic yarn made out of polyester fibre and viscose fibre and not any textile product made wholly or in part of cotton, wool or silk. He has, therefore, submitted that the petitioner is not liable to pay provident fund dues at 10% as demanded from the petitioner.
5. Mr.Naik further submitted that the respondent had ignored and overlooked the required material produced before him with a view to demonstrate the clear distinction between the textile products made wholly or in part of cotton, wool or silk and synthetic yarn made out of polyester fibre and viscose fibre. He has further submitted that the distinction between synthetic yarn made out of polyester fibre and viscose yarn and the textile products made wholly or in part of cotton has also been recognized by the provisions of the Essential Commodities Act, 1955 and keeping in mind the provisions of the said Act, it was obligatory on the part of the respondent to draw a line of demarcation between the textile products made wholly or in part of cotton and synthetic yarn made out of polyester fibre and viscose fibre.
6. Mr.Naik further submitted that the petitioner Company was engaged in the business of manufacturing man-made synthetic yarn out of polyester fibre and viscose fiber which are not the natural fibres such as cotton, wool and silk. He has, therefore, submitted that the business of the Jamnagar unit of the petitioner Company did not fall under the industries manufacturing 'Textiles' made wholly or in part of cotton, wool or silk, whether naturally or artificially. He has further submitted that the petitioner was making payment of excise duty on Entry No.55, namely, man made staple fiber. Necessary challans are produced on record along with additional affidavit which were not denied by the respondent. He has, therefore, submitted that the petitioner is not liable to pay enhanced rate of provident fund and the impugned order passed by the respondent deserves to be quashed and set aside.
7. Mr.P. K. Shukla, learned advocate appearing for the respondent, on the other hand, has submitted that the petitioner establishment was covered under the Act and under schedule head 'Textile' with effect from 1.5.1971. He has further submitted that the petitioner has been complying with the various provisions of the Act without any dispute regarding application of schedule head 'Textile' as applied to the petitioner at the relevant point of time. He has further submitted that the petitioner never raised dispute about the application of the schedule head 'Textile' when it was covered and thereafter till the date of enhanced rate of 10% sought to be applied by the respondent no such objections were raised by the petitioner establishment. He has further submitted that initially from 17.5.1989 Textile Industry was totally exempted from higher rate of 10% and, thereafter, from 31.8.1994 'Textiles made wholly or part of cotton' was directed for 10% compliance under the Act and ultimately from 1.3.1995 all the establishments covered under the original Schedule i.e. 'Textile made wholly or in part of cotton or wool or silk whether natural or artificial' were directed to comply at the enhanced rate of 10%. He has, therefore, submitted that the petitioner establishment is covered under the schedule head 'Textiles' as it stood on the initial application of the Act and it is also liable to comply at the enhanced rate of 10% from 1.3.1995. He has further submitted that the Central Excise Tariff Act, 1955 is not applicable to the present case and hence no support can be derived there from. He has, therefore, submitted that there is no merit or substance in the petition and it deserves to be dismissed.
8. Having heard the learned counsels appearing for the parties and having considered their rival submissions in light of the pleadings made by them in the petition, reply affidavit as well as further affidavit and further reply and also evidence on record, the Court is of the view that the petitioner has successfully established that items manufactured by them did not fall within the purview of the Notification. What was manufactured by the petitioner was man-made polyester fibre and enhanced rate of 10% is applicable only on 'Textile made wholly or in part of cotton or wool or silk whether natural or artificial. The respondent has failed to establish that the items manufactured by the petitioner are textile made wholly or in part or cotton, wool or silk whether natural or artificial. There is no dispute about the fact that after applicability of the Act in 1971 the petitioner has been paying provident fund dues at the rate of 8.33%. However, when the enhancement was made by virtue of aforesaid Notification, certain items were carved out and since the petitioner was not manufacturing those items the petitioner was not liable to pay enhanced rate of 10% and hence grievance raised by the petitioner is quite justified.
9. Even otherwise from 1996 the petitioner has been enjoying the interim relief granted by this Court. It is stated at the bar that the petitioner establishment has closed down its unit at Jamnagar and no manufacturing activities are carried out since 2000 onwards. In this view of the matter and also considering the merit of the matter the Court is of the view that the impugned order deserves to be quashed and set aside and it is accordingly set aside.
10. This petition is accordingly allowed. Rule is made absolute without any order as to costs.