Supreme Court Latest Update on Employee Transfer
Case Name: Caparo Engineering India Ltd. V. Ummed Singh Lodhi And Anr.| Civil Appeal Nos.5829-5830 Of 2021
Citation: LL 2021 SC 625
Coram: Justices MR Shah and AS Bopanna
The Supreme Court has observed that Fourth Schedule and Section 9A of the Industrial Disputes Act, 1947 would be attracted if transfer of workmen results in change of service conditions and nature of work.
Section 9A of the ID Act says that employer should give a notice to employee regarding any change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule,
The bench of Justices MR Shah and AS Bopanna in the present matter was considering civil appeals assailing Madhya Pradesh High Court’s judgement of upholding Labour Court’s award in which the Court declared the order of transfer of employees as illegal and void(Caparo Engineering India Ltd. V. Ummed Singh Lodhi And Anr).
While dismissing the appeal with costs quantified at Rs 25,000 the bench observed that,
“Order of transfer dated 13.01.2015 transferring the respective workman from Dewas to Chopanki, which is at about 900 Kms. away is in violation of Section 9A read with Fourth Schedule of the Industrial Disputes Act and is arbitrary, mala fide and victimization. As observed above, by such a transfer, their status as “workman” would be changed to that of “supervisor”. By such a change after their transfer to Chopanki and after they work as supervisor they will be deprived of the benefits.”
Factual Background:
Workmen were employed and working in Dewas factory of Caparo Engineering India Ltd. (“appellant”). Vide order dated January 13, 2015 all of them were transferred to Chopanki, District Alwar which is 900 kms away from Dewas. On failure of conciliation proceedings, the workmen through their Union raised the industrial dispute before competent authority.
In their claim before the Labour Court, they argued that their transfer was done malafidely with the intention to reduce the number of workmen in the Dewas factory. Terming the same as amounting to illegal change u/s 9A of the Act they argued that the employer pressurised the workmen to resign and on refusal, the employer transferred them without any justifiable reason to Chopanki at Rajasthan, which is 900 Kms. away. It was also their contention that such transfer would change the nature of work as they manufacture precision pipes at Dewas whereas at Chopanki the work was of manufacturing nut and bolt.
In their reply before the Labour Court, the employer while specifically denying the fact of transferring the employees for reducing the number of workmen at Dewas submitted that no unfair labour practice was adopted and compliance of Section 9A of the I.D. Act was not necessary. The employer further averred that no notice u/s 9A of the ID Act was required since there was continuous reduction in production at Dewas and the staff had become surplus which was not required and, therefore, to continue the employment of the concerned workmen, they had been transferred as per their service conditions.
The Labour Court found that the employer could not prove that there was continuous reduction of production at Dewas factory and that the staff had proportionately become surplus. It further found that the workmen – nine in numbers were transferred from Dewas with the intention to reduce the number of persons employed at Dewas and such an act was covered by Clause 11 of Schedule 4 of the I.D. Act and since no notice of change was given, the transfer orders were in violation of Section 9A of the I.D. Act.
The Labour Court also specifically found on appreciation of evidence that transfer would change the nature of work since the workmen were employed as labourers at Dewas and on transfer at Chopanki, they would be working as Supervisor. Consequently, the Labour Court found the order of transfer as null and void and set aside the same.
Aggrieved and dissatisfied with the award and judgement passed by the Labour Court, the management approached the Single Judge of the High Court under Article 227 of the Constitution of India. Since the Single Judge dismissed the writ, the employers approached the Division Bench of the High Court. Observing that the writ petitions under Article 227 of the Constitution of India were not maintainable, the Division Bench dismissed the writ appeals.
Aggrieved, the appellant approached the Top Court.
Submission of Counsels
Submission On Appellant’s Behalf (Management/Employer)
Relying on Ashok K. Jha and Ors. Vs. Garden Silk Mills Limited and Anr., (2009) 10 SCC 584 Senior Advocate Jaideep Gupta has submitted that in order to determine whether a petition is under Article 226 or under Article 227 of the Constitution, what is to be looked at is the nature of jurisdiction invoked and the relief sought therein. It was also his contention that neither the provision cited in the cause title nor the provision mentioned by the learned Single Judge while exercising his power were determinative of the true nature of the application and order thereon.
Senior Counsel further argued that the High Court and Labour Court materially erred in holding that order of transfer amounted to change of terms and conditions of service requiring a notice under Section 9A and in the absence thereof, the said order was liable to be set aside. In this context he also contended that such an order of transfer did not bring about a change in the terms and conditions of service within the meaning of Section 9A read with Schedule 4 thereof.
Referring to the Top Court’s judgments in Hindustan Lever Ltd. Vs. Ram Mohan Ray and Ors., (1973) 4 SCC 141; Harmohinder Singh Vs. Kharga Canteen, Ambala Cantt., (2001) 5 SCC 540 and the decision of the Bombay High Court in the case of Associated Cement Companies Ltd. Vs. Associated Cement Staff Union, 2009 SCC Online Bom 2132, he also submitted that Clause 11 of Schedule 4 was not at all relevant when considering transfer orders. It was also his contention that the purpose of the transfer order was not to bring about a reduction in the establishment in question. It was also submitted that to bring a case within the change of terms and conditions of service within the meaning of Section 9A, it was necessary for the workmen to demonstrate that they have been adversely affected by the reduction.
Submission On Respondent’s Behalf (Workmen)
Representing the workment, Advocate Niraj Sharma submitted that the transfer order dated January 13, 2015 transferring transferring the respective workmen form Dewas to Chopanki and that too at the fag end of their service career amounted to an arbitrary and unfair labour practice by creating a situation in which the workmen were left with no other option except to leave their employment. It was also counsel’s contention that it was in fact a way to retrench the workmen without following the mandatory provisions of law.
He also contended that sudden transfer of the workmen to a different State and that too at a distance of about 900 Kms. from their place would cause great hardship as the place where they were transferred had no educational and medical facilities, their school going children and old aged parents were to be disturbed and uprooted and the place where they were transferred had no residential area within 40-50 Kms. form the plant with no means of transport.
Supreme Court’s Analysis
Considering the evidence on record the bench observed that, “It emerge from the evidence on record that the respective respondents – employees were employed at Dewas and working at Dewas for more than 25 to 30 years; all of them came to be transferred suddenly from Dewas to Chopanki, which is at a distance of 900 Kms. from Dewas; they came to be transferred at the fag end of their service career; that the place where they were transferred had no educational and medical facilities and that the place where they were transferred had no residential area within 40-50 Kms. from the plant with no means of transport. It also emerges that the number of workers at Dewas factory has been reduced by nine by transferring the workmen to Chopanki.”
The bench in the judgement authored by Justice MR Shah also considered that the respondents were workmen u/s 2(s) of the Act and therefore would have a protection under the provisions of the Act and that because of their transfer to Chopanki they will have to work in the capacity of supervisor and would therefore be deprived of the provisions of the Act.
Observing that the appellant’s submission that transfer was a part of the service condition and that section 9A would not be applicable has no substance, the bench noted that, ” The question is not about the transfer only, the question is about the consequences of transfer. In the present case, the nature of work/service conditions would be changed and the consequences of transfer would result in the change of service conditions and the reduction of employees at Dewas factory, for which the Fourth Schedule and Section 9A shall be attracted.”
The bench further said that it was established and proved that the employees were ‘workmen’ within the definition of Section 2(s) of the Act and, therefore, were entitled to the protection under the provisions of the Act.
Read MoreSome important case laws of October, 2021
- Abandonment to be presumed when workman did not resume duty despite intimation………Del HC
- Recommendation of Internal Committee without any reasoning is unsustainable………. HP HC
- Reporting on duty and entering room of Principal in inebriated condition is a grave misconduct……………MP HC
- Non Registration of Principal employer or License by Contractor, the workers will be treated as employees of Principal Employer ……..SC
- A work of pumping of water will be treated as manufacturing process in factory…………SC
- During enquiry under section 7A, any person other than employer or employee can be asked to cooperate………..MP HC
- EPF & MP Act, 1952 does not mandate the authorities to impose penalty in every case…….P&H HC
In a significant order, the National Consumer Disputes Redressal Commission (NCDRC) held that a home-buyer is a consumer within the meaning of Section 2 (1) (d) of the Consumer Protection Act since the developer had failed to prove that home-buyer (complainant) is indulging in the business of sale and purchase of the flats.
In an order issued earlier this month, the NCDRC bench of justice Deepa Sharma (presiding member) and Subhash Chandra (member) says, “… the burden is squarely upon the opposite party (IREO Pvt Ltd, High Responsible Realtors Pvt Ltd, Fiverivers Buildcon Pvt Ltd) to prove the fact that complainant is indulging in the business of sale and purchase of the flats. There is no contention in the written version that the complainant is indulging in the business of sale or purchase of the properties. Since the opposite party has failed to discharge this burden, we hold that complainant is a consumer within the meaning of section 2 (1) (d) of the Act.”
The bench also directed IREO Pvt Ltd, High Responsible Realtors Pvt Ltd, Fiverivers Buildcon Pvt Ltd to refund the entire principal amount of Rs2.24 crore to complainant Aloke Anand along with compensation in the form of simple interest at the rate of 10.25% per annum (CONSUMER CASE NO. 1277 OF 2017).
The case related to delay in possession for a flat booked by Aloke Anand in the project ‘SKYON’ of the opposite party situated at Golf Course Extension Road at Gurugram. He made an initial payment of Rs15 lakh and was given an allotment letter on 14 January 2011 by the developer. Later on several dates, he paid Rs2,23,91,480 as the total consideration amount as per the builder-buyer agreement executed on 14 February 2012. He was also made to pay certain additional charges by the developer.
The due date of possession of the flat as per the agreement was 42 months, with a grace period of six months from the date of approval of the building plan. However, after not getting possession of his flat from the developer, Aloke Anand approached the NDDRC seeking possession and compensation for the delay from the developer.
In its contention, the developer stated that Aloke Anand, the complainant, is not a consumer since he already has two residential addresses from Delhi and Jaipur. Further, he is only an investor in the subject property and he has also invested in another developer’s project in Victory Valley and has been allotted apartment no. B-2801.
“It is contended that he has invested for commercial gains, i.e. either by way of income of rent and/or re-sell at an appreciated value. The reason for the delay in completing the construction is mentioned in detail in the complaint,” the developer stated.
Responding to this, Aloke Anand, submitted that he is not the owner of the properties mentioned by the developer in its written statement. “Rather those properties are owned by the other members of his extended family and it is submitted that he is a consumer within the meaning of Section 2 (1) (d) of the Act,” he stated.
He also referred to a judgement delivered by the NCDRC on 6 December 2019 against the developer. This judgement was challenged by the developer in the Supreme Court (SC). However, on 11 December 2020, the apex court dismissed the appeal. Aloke Anand submitted with the dismissal of the developer’s plea by the SC, the order issued by NCDRC has attained finality and it should pass similar order in his case too.
Arguing that Aloke Anand, the complainant, is not a consumer, the developer stated that he bought the flat not for residential purpose but for commercial purpose and since he is not a consumer, the complaint should be dismissed.
Based on admitted facts, the NCDRC bench observed that Aloke Anand had booked the flat with the developer and the developer had failed to deliver possession of the flat within the stipulated time. The bench then delved into the definition of consumer. It quoted Section 2(1) of the Act and a judgement by the SC in Laxmi Engineering Works vs PSG Industrial Institute (1995 AIR 1428) while discussing the scope of Section 2 (1) (d) of the Act.
The apex court, in its judgement, had stated, “The National Commission appears to have been taking a consistent view that where a person purchases goods ‘with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit’ he will not be a ‘consumer’ within the meaning of Section 2(d)(i) of the Act. Broadly affirming the said view and more particularly with a view to obviate any confusion the expression ‘large-scale’ is not a very precise expression the Parliament stepped in and added the explanation to section 2(d)(i) by ordinance or amendment act, 1993.”
“…if the buyer of goods uses them himself, i.e., by self-employment, for earning his livelihood, it would not be treated as a ‘commercial purpose’ and he does not cease to be a consumer for the purposes of the Act…a person who purchases an auto-rickshaw, a car or a lathe machine or other machine to be plied or operated exclusively by another person would not be a consumer. This is the necessary limitation flowing from the expressions ‘used by him’, and ‘by means of self-employment’ in the explanation. The ambiguity in the meaning of the words ‘for the purpose of earning his livelihood’ is explained and clarified by the other two sets of words,” the apex court had said.
Citing the judgement, the NCDRC bench says, “….(if a) person indulges itself in commercial activities qua the goods and in case of purchase of residential houses, it can be said that buyer is indulging into the activity of buying or selling the properties and purchased it for that purpose.”
However, it noted, “It is settled proposition that burden is upon the opposite party to prove that the complainant is indulging in commercial activities of sale and purchase of the flats and that he had booked the subject flat with the intention to sell it to earn profit as part of his commercial activities.”
“There is no contention in the written version that the complainant is indulging in the business of sale or purchase of the properties. Since the opposite party has failed to discharge this burden, we hold that complainant is a consumer within the meaning of Section 2 (1) (d) of the Act,” it ruled.
The NCDRC then directed the developer to refund Rs. 2.24 crore with an interest of 10.25% to Aloke Anand. It also asked the developer to pay Rs25,000 as the cost of litigation to the home-buyer.
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Labour court terms closure of Hyatt Regency hotel as illegal
Following the shutdown of Hotel Hyatt Regency on June 7, 200-odd employees of the hotel approached the industrial court and labour commissioner seeking protection from termination.
Hyatt is an American hospitality company that manages and franchises luxury and business hotels. It is managing the Mumbai property on a contract basis on behalf of Asian Hotels (West).
A labour court has ruled that the decision of Hotel Hyatt Regency to halt its operations in Mumbai is “illegal” under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices (MRTU and PULP) Act, 1971.
“It is held and declared that respondents (Hotel Hyatt Regency) have engaged into unfair labour practice under Item 6 of Schedule II and Item 9and 10 of Schedule IV of MRTU and PULP Act 1971. Respondents are directed to cease and desist from the same,” said an order passed by SV Suryawanshi, member of the Industrial Court in Mumbai, on September 30.
On June 7, the management of the five-star hotel said the hotel will remain closed till further notice, since its parent Asian Hotels (West) Ltd is not making payments for its salaries and operations. Following the shutdown, 200-odd employees of the hotel approached the industrial court and labour commissioner seeking protection from termination.
These employees of the hotel are part of Bhartiya Kamgar Sena, a workers’ union affiliated with the Shiv Sena. Union secretary Manoj Dhumal said, “The labour court has ruled in favour of the employees and asked the hotel to pay its employees.”
The labour court has directed Asian Hotels (West) to “provide work and/or wages to the concerned workers so far as they are in the employment including arrears of earned wages from time to time”. It has also “restrained” Hyatt Regency and Asian Hotels from disposing of or creating third interest on the properties owned by them.
Hyatt is an American hospitality company that manages and franchises luxury and business hotels. It is managing the Mumbai property on a contract basis on behalf of Asian Hotels (West).
After the shutdown of its hotel in June, Asian Hotel in a statement said that the hotel management had to make the unprecedented move of temporarily shutting down Hyatt Regency in Mumbai because Yes Bank Ltd, with which it maintains an account, has blocked that account and held back all funds after a default in loan repayment. Asian Hotel had said it defaulted on repayment due to a severe liquidity crunch since the beginning of the Covid-19 pandemic.
Earlier this week, The Indian Express reported that Yes Bank has taken possession of Hotel Hyatt Regency building after Asian Hotels defaulted on loan repayment of Rs 267 crore.
Asian Hotels has come under fire since the closure of operations at Hyatt Regency on June 7. Since then, all independent directors on the board of the company have quit. In September, the auditor of the company resigned, according to a notification by the company to the stock exchanges
By Dayanand Mangaonkar
Read MoreVarious reasons for delay in crediting interest to your EPF account every year
The central board of trustees meets in March to announce the interest rate for the financial year, and the proposal is then forwarded to the finance ministry for ratification.
The Finance Ministry has ratified the interest rate of 8.5 percent, which Central Board of PF Trustees (CBT of EPFO) had approved in March, for the financial year 2020-21.
Though the announcement was made before Diwali, it could be a while – two weeks as per reports – for the interest amount to be credited to your EPF account. A Diwali ‘gift’ ought to make people happy, but the fact is that the delay tends to cause heartburn amongst employees year after year. A cursory glance at the timeline of EPFO’s twitter handle (@socialepfo) shows multiple complaints on the delay every year. In times of advanced fintech tools and automated pay-outs, it is surprising that the interest for the previous financial year is credited later than half way into the current financial year.
The main reason for delay is due to inter-ministerial co-ordination and administrative process……
A long-winding bureaucratic process and time-consuming paperwork. The central board of trustees meets in March to announce the interest rate for the financial year, and the proposal is then forwarded to the finance ministry for ratification. Once the approval comes through, the labour ministry notifies the interest rate and the process of crediting interest into accounts begins. “The lag in ratification is because of the delay on the part of the labour ministry in forwarding the required documents. The interest credit to PF accounts is a big cash flow for the central government, and the finance ministry holds the arrangement for validating the submitted data, allocating the required funds and other procedural arrangements before crediting the interest to the members’ account.”
Now, interest credit for India Post small savings accounts – savings, senior citizens’ saving schemes, Sukanya Samriddhi account, public provident fund and so on – is not such a cumbersome process.
The Finance Ministry approves interest rates every year for each quarter, which is credited to accounts as scheduled, without any delay.
But the delay in the case of EPF interest is a recurring feature.
“There is not much information available on the reason for the delay. One possible reason is the due diligence that the Finance Ministry may require from Labour Ministry given that the PF rate is much higher than other savings schemes’ rates.”
Many employees have been expressing their displeasure at the delay and when questioned, a standard reply is sent to the members stating “Whenever the interest will be credited, it will be accumulated and paid in full. There would be no loss of interest. Please maintain patience.”
“In today’s day and age, ideally, there should not be any delay. Even in the banking system, there are crores of accounts, but all of them receive interest credit on time. So, even EPFO should be able to calculate interest on a regular basis and facilitate auto-credit.”
“If all other entities are able to manage seamless processing, there is no reason why EPFO cannot. There might be historical reasons for the delays, but with the current pace of technological advancements, the entire chain of approvals should be completed without any lag.” He believes that at the best, there can be a lag of one month from the interest rate announcement for account finalisation. “The co-ordination between the two ministries and EPFO’s manual interest credit are responsible for the delays. The ratification by the finance ministry and the administrative process of crediting interest to employees’ accounts take time.”
Process overhaul needed to eliminate delays…….
Transparency and auto-transfers can ease the pain for employees. In my considered opinion a standard rate of interest should be declared at the beginning of the financial year. Interest should be credited to individual EPFO accounts at the end of every quarter, just like Listed Companies and final interest can be declared by the EPFO in consultation with the MoF at the end of the year. Also, there is a need for greater transparency by way of digitising the calculation of interest and auto-credit of interest to the members’ accounts.” I strongly feel that with Aadhaar-seeding and PAN linkage, a key leg of digitisation, is already completed and it is time to move to auto-credit of interest like it is done in case of Bank Accounts.
Even the Code on Social Security is silent on this issue exhibiting unwillingness of the concern Ministries in this regard.
Read MoreSome important judgments of Oct, 2021.
- Sundays and holidays to be counted for 240 days working of any employee.
- Gratuity paid is exempted upto the prescribed ceiling under Income Tax act.
- Termination even for habitual absence must be as per the Industrial Disputes Act, 1947
- Maternity Benefit only when the employee has put in 80 days of service.
- Principal Employer supervising employee of service provider has to extend maternity benefit.
- Without establishing employer-employee relationship raising demand for EPF dues is not sustainable.
- An employee exonerated by the police investigation would ne reinstated pending inquiry.
- Imposing damages, witjpout establishing mens rea or financial crises faced by employer, is not proper.
- Amount recovered by the EPF authority to be credited to the respective account of beneficiaries.
Jab for Job: 82% of Indian Employers Want Employees To Be Vaccinated
As India hits a historic milestone of administering 100 crore Covid vaccines, a study by the world’s #1 job site Indeed shows almost all employer and employee respondents (94% and 87% respectively) want people coming in to work to be vaccinated with at least a single dose. Some businesses are either making it mandatory or heavily encouraging vaccination among their new hires. But, the common trend across employees and employers is that a majority of both employers (52%) and employees (61%) are in favour of Hybrid work models as compared with either going to work every day or working from home every day. The future of work is definitely hybrid.”
Govt to soon set up panel for National Employment Policy
The government will soon set up a committee to frame India’s first National Employment Policy with an aim to significantly push up employment generation in the country. Work has begun to identify the members of the committee that is expected to have representatives from stakeholder ministries, academia, experts and representatives of employers and trade unions, a senior government official told ET. “The new committee will be notified soon. We hope to put in place the first draft by next fiscal,” the official said, adding that the policy will be based on the data that emerges from employment surveys currently under way.
Support group for the differently-abled offers employment opportunities
A Chennai-based support group of parents of children with intellectual disabilities has embarked on a new journey – ensuring employment opportunities for the children. Towards creating an inclusive workplace, VOICE (Voice of Parents for Inclusion, Care and Empowerment of Children With Special Needs) is facilitating employment for the differently-abled, parents of such young adults and able-bodied individuals. KNSOFT Technologies, a Hyderabad-based startup, is the first company that has associated with VOICE to offer work from home opportunities for more than 80 people, which includes 10 neuro-diverse individuals, 20 special moms, and the remaining being individuals in need.
Read MoreGig workers have constitutional right in India to form unions, says TN Hari of BigBasket
Emerging tech businesses that employ gig workers should have a mechanism to address their grievances on time and those trying to muzzle the voices of protest must face legal actions, said Bigbasket head of human resources TN Hari on October 21.
Hari’s remarks came after Salauddin expressed concern over the mistreatment many gig workers face when they try to raise their voices against the establishments they work with. “It is a constitutional right in India to form unions. No company can stop and persecute anybody for forming it. That’s the law of the land. If a person is vocal and speaking up whether on social media or at other places and a company is blocking this individual or taking punitive actions, it is completely illegal and that is not desirable at all,” said Hari.
Read MoreUnder the employment transactions, an employee offers services, and the employer provides a salary plus other non-monetary benefits (perquisites).
Under the employment transactions, an employee offers services, and the employer provides a salary plus other non-monetary benefits (perquisites). So, at both ends, there is supply, and thus the same should be taxable under GST. In this article, let us understand in detail the treatment of GST on employee remuneration and notice pay recovery.
What is Notice Pay Recovery?
Whenever an employee joins or leaves an organization, he/she is bound by the terms of employment. An employee is usually required to serve the agreed notice period before he/she resigns. But, most of the employee agreements have a clause stating that if an employee wants to leave the company without serving the agreed notice period, then he is required to pay an amount equal to the unserved notice period.
This is called notice pay recovery, which is either recovered from the employee or deducted from the salary payable to him.
Treatment of GST on Employee Remuneration…….
Under the CGST Act, all supply of goods and services attracts GST. It applies to an amount made by a registered taxable person for consideration and in the course of furtherance of business. However, Schedule I of the CGST Act includes transactions treated as supplies even if it is made without consideration between related parties but is made in the course of furtherance of business. Also, Section 15 of the CGST Act states that the employer and employee are deemed to be related persons.
Thus, supply made by an employer to an employee is liable to GST even if it is made without consideration (except gifts up to Rs. 50,000). However, Schedule III of the CGST Act states that ‘services by an employee to the employer in the course of or concerning his employment’ are not considered as supply of goods or services. So, GST does not apply to employee remuneration.
Applicability of GST on Notice Pay Recovery…….
As discussed above, employment services are exempted from GST. Thus, some professionals are of the view that as notice pay recovery is in the course of employment, the same is also exempt from GST. But, it should be noted that Schedule II of the CGST Act states certain activities that shall be treated as a supply of goods or services.
Such activities include ‘Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation’. To this, there can be a different point of views:
1. It could be contended that an employee receives the notice period pay for not serving the notice period prescribed by the employer.
The action of not serving the notice period leads to tolerating the act of an employer. Thus, GST is applicable to notice pay recovery.
2. In case the notice pay policy does not contain such agreement for tolerating the act of an employee. Then, such notice pay recoveries are not subject to GST.
This is a long-pending issue and needs clarification from the GST authorities. Taxpayers can make representations to seek clarification, as this is a prevalent issue.
There are also a few crucial decisions made in favour of the assessees stating that such notice pay recoveries are not subject to GST:
1. Order of Commissioner (Appeals) in case of M/s.Gujarat State Fertilisers & Chemical Ltd – It held that cessation of employment is treated as employment service not liable for the GST.
2. Allahabad CESTAT in case of M/s. HCL Learning Systems Vs CCE, Noida – It held that the amount recovered out of salary already paid is not subject to GST
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Conveyance allowance is NOT ‘Wages’ u/s 2(22) of the ESI Act.
The hon’ble SC in “ESI Corporation Vs. M/s Texmo Industries[SLP (C) No. 811/2021]”, held that Conveyance allowance is NOT ‘Wages’ u/s 2(22) of the ESI Act. At para 14, the SC observed “From the definition of wages in Section 2(22) of the ESI Act, it is amply clear that wages includes remunerative payments, but does not include compensatory payments”.
The conveyance allowance paid to an employee is in the nature of compensatory payments, thus outside the scope of term ‘Wages’. However, the SC has given a point of caution, where the amount booked as conveyance allowance may be considered as WAGES. At para 25, the hon’ble SC observed as under:
“25. Conveyance Allowance, on the other hand, compensates expenses that might be incurred by an employee for reporting to his usual place of work or to any other place of work, where he may have to report. If an employer were to provide the employee with accommodation within walking distance from his place of work and that employee were not required to go to any other place in connection with his duties under his contract of employment, the employee may not have to incur any expenditure in connection with his employment. In such a case, Conveyance Allowance would be redundant and might be construed as part of allowance consisting wages”.
Therefore, the employer must take due care while preparing the Salary structures. Owing to the above Supreme Court Judgment, in some borderline cases, the employees having gross salary of Rs. 21100 with wage structure comprising of Basic: 17000, HRA: 2500, Conv: 1600 who was NOT earlier a member of ESI would now come within the ambit of ESI.
By Puneet Gupta (Advocate)
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