CA- Free Lanka Trading Co.. I Ml v. Commissioner of Labour (Atukorale. J.)97
COURT OF. APPEAL
Free Lanka Trading Co.. Ltd,
Commissioner .of Labour .
' *.£*. ./» »
C.A. No. 17918! — M C^tolomho 77J02I4
Employees' Provident Fund Act Section Jti — Finality of Certificate. Defaulterallowed to shdw cause.
: i The Commissioner of-Labour .filed a certificate’with the' Magistrate inproceedings instituted by the .Commissioner of. Labour .for/lht* recoveryof.certain sums of money due., to ..the .Provident. Fund from the Petitionero'n the grounds that such sums were in default. ’*’
The petitioner on being asked to show–cause1 in’1 terms of-Section .38sought to make .certain objections tin points, of law. fhe, .Magistratedisallowed these objections on1 the grounds that, the correctness ..of. thecertificate filed by the Commissioner of Labour'could* not–be called' inquestion or examined by any ctiurt. The Petitioner appealed against this order.
Held Section 38 (3) of the Employees Pravidept.Fu.nd Act as amendedby No.8 of ,1971 did not preclude the Magistrate from inquiring intothe grounds urged by the Pctitioiicrthat nothing was'duc from him*.
– .-..‘. , •;.•-.>. v.u.-,f.
Application for revision of.the orderofthe Magistratc-of Colombo.
Argued on:Decided on:
Atukorale J and H A:(LdeSilva,;J.tIsidore Fernando for fhe Retitjoner -.C.M.B. Bogollagama. Senior StateCounsel, for the Respondent.
■Cur, ■ ttdv. uvlt.
This is an application to set1 aside, by way- of .ifevisi6g, the-orderof the learned Magistrate :of. Colombo. dated 27.1,1981 refusing, toinquire into-certain objections raised by the petitioner on being askedto: show cause why further proceedings' for the recovery- of ;a sumof Rs. 48,251/98 ets. which, in a certificate issued1 by :thc Deputy
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Sd-Lanka Law Reports
Commissioner of Labour, was stated to be due from it as contributionsto the Employees’ Provident Fund. The certificate which was issuedto the learned Magistrate by tne Deputy Commissioner (a certifiedcopy of which was tendered to'us by learned Counsel for the petitionerafter the conclusion of the hearing) was in terms of S.38 (2) of theEmployees’ Provident Fund Act, No. 15 of 1958, (hereinafter referred‘ to as the principal Act) as amended by the Employees’ ProvidentFund (Amendment) Act, No!‘8 of.T971, stated, inter alia, that thepetitioner has defaulted in the ’ payment of the said sum beingcontributions due from it in respect of certain workmen employedby it for the period 1968 to 1^74. It was signed by one PragnaratneKariyawasam, Deputy Commissioner of Labour.On the certificatebeing issued to court the learned Magistrate summoned the petitionerto show cause why further proceedings for the recovery of the sumdue under the Act should not'be taken against him. The petitionerappeared in court in response‘ to -the summons and on its counselintimating to court that there was cause to show, the matter wasfixed for inquiry. After certain oral and written submissions had beenmade- by both parties on ^several dates of inquiry, the learnedMagistrate inquired whether it was open to him to inquire into theobjections raised by the petitioner. Counsel for the petitioner thenniUde'further, oral1 and written submissions to show that petitionercould establish the following matters by way of showing sufficent cause:
••(1.) that,the. petitioner is not a defaulter,
that employment of commission agents by the petitioner
has not by. regulation • been declared to be a coveredemployment, /’…
that no Order under S. 10 (3) of Employees’ ProvidentFund Act has been made by the Minister of Labour makingthe payment of cSntributions to the Fund obligatory bythe employer and the employee as from a specified date and
that the certificate issued by the Commissioner of Labourwas invalid, – vide -paragraph 4 of the petition.
The learned Magistrate then made the order of refusal which isnow sought to be revised in these proceedings. He held that as S.38(3) of the Act as amended,, provided that' the correctness of anystatement in the certificate issued to .epurt cannot be called ip .question;or examined by court. In • proceedings tinder'S.38. heJ-could-not'inquire into the matters urged before him and he'imposed a fine ofRs. 48,251/98 cts. on the petitioner to be paid in instalments.
CA 'Tree Lanka Trading Co. Ltd v. Commissioner of Labour (Atukoralc. J:) 99.
A perusal of the present application. ap/J, object ions filed theretoand also the written . submissions, of |j}f pities to the learnedMagistrate (copi.es. of which jiave beep^.a^^pd to the presentapplication) show that the grounds on^^hich. .the petitioner desiredto show cause before the learned Magistrate,(wcre as follows:
tha1t he is not a defaulter for the reason that he was not
liable to contribute to the'^u/uf because, (i) employmentwith the petitioner has not, bv regulation, been declareda covered employment and (ii) there is no Order in'termsof S. 10(3) .of (he said Act made bv the Minister inrespect of the…petitioner fixing the date from which hehad to contribute to the Fund
that the certificate'issued to the Magistrate by the DeputyCommissioner is invalid!
The question that arises for our consideration is whether it wasin law open to the learned Magistrate to inquire' into the abovegrounds in view of the provisions of S.3K (3) of the said Act asamended. This subsection reads thus:
“(3) The correctness of any statement in a certificate issuedby the Commissioner for the purposes of this section shall notbe called in question or examined by the court in any proceedingsunder this section, and accordingly nothing in this section shallauthorise the court to consider or decide the correctness ofany statement in such certificate, and the Commissioners:ertificate shall be sufficient evidence that the amount dueunder this Act from the defaulting employer has been' dulycalculated and that such amount'is in default.” /
•. i–) ;,V|; iij-ji
..•"• 1 I 1 *
Learned counsel for the petitioner cited several decisions of theSupreme Court in support of his contention that the abpve provisionwill not preclude. the Magistrate from inquiring into the groundsurged before him and set out by me above. Learned Senior StateCounsel maintained the contrary and relied on some of the casescited by learned counsel for the petitioner and also a decision ofthis court in'case C.A. (S.C.j No. ^54/77 – Application for Revisionin M.C. Panadura case No. 73003/A – C.A. minutes of 27.2.1979.
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The Employees' Provident Fund (Amendment) Act, No. 8 of 1971.which came into operation on 1.1.1971, repealed, inter alia, the oldS. 38 of the principal Act. and inserted a new S.38 in place thereof,which by the Employees'' Provident Fund (Special Provisions) Act.No.24 of 1971,- was deemed to have come into operation on thedate of commencement of the prinicipal Act itself. 1 shall brieflyrefer to the types of procedure for the recovery of contributions thatwere prescribed in the principal Act prior to the amendment. S. 17(which is still in force) provided that any moneys due to the Fundshall be recoverable as a debt due to the Crown by an action inwhich proceedings may be taken by way of summary procedure. Theprovisions of the Civil Procedure Code relating to summary procedureapplied to such an action. S.12 required the Commissioner, wherehe was satisfied that the employer has reduced the earnings of anemployee for the purpose of reducing the amount of the contributions,to direct by written notice the employer to pay to the Fund in suchinstalments and before such dates as may be specified therein thedifference between the sum he should have paid and the sum actuallypaid by him as contributions. The section made it obligatory on theemployer to comply with such a direction. An employer who contravenedany provision of the Act was guilty of an offence. On convictionafter summary trial before a Magistrate he was liable to be sentencedto a fine not exceeding Rs. HMX)/- or to imprisonment to a term notexceeding 6 months or to both and was further liable to pay acontinuing fine of Rs.50/- per day – vide S. 37(1). Upon suchconviction the court was also empowered under S 37(2) to order theemployer to pay such sum for the failure to pay which he wasconvicted and the same was recoverable as a fine. S 38 made provisionfor the recovery of arrears of contributions due from an employerupon his conviction by a Magistrate for failing to pay any sum whichhe was liable to pay under the Act if a notice in the prescribedform had been sent to the employer before the date of commencementof his trial. If such notice had been so sent, on conviction of theemployer the court could order the employer to pay the arrears aswere found by court to be due from him. This sum was alsorecoverable as a fine. Hence prior to the enactment of the amendingAct, No. 8 of 1971, section 12. 17. 37(2) and 38 of the principalAct set out the procedure that had to be followed for the recoveryof contributions from a defaulting employer. In each case it had tobe by resort to a court of law, whether by way of a civil action ora criminal prosecution, in which it had to be established to the
i'A Free I.ankn Frailini; Co. I iJ r ( • ’tinni" !‘.n-> ./ / ,ibnnr lAmkimile. J.l 101
satisfaction of court that the sum claimed was one which the employerwas liable to pay under the Act. The liability of the employer tomake payment had first to be proved in court. It was the court thatdetermined whether the employer was liable to pay the amount thatwas claimed to be due from the employer. There was, and still is.no provision for the Commissioner of Labour or any of his officersto initiate or hold an inquiry into the liability of a defaulting employerto pay any sum. It is as against this background that the new S. 38was enacted repealing the old S. 38. The amending Act. No.8 of1971 which enacted the new S.38 also repealed S.7(2) of the principalAct. The new S. 38 prescribes two modes of recovery. Subsection(1) states that “where an employer makes default in the paymentof any sum which he is liable to pay under this Act and theCommissioner is of opinion that recovery under S.I7 of the Act isimpracticable or inexpedient, he may issue a certificate to the DistrictCourt” and the court is then required to issue a writ of executionto the Fiscal to seize and sell the property, both movable andimmovable, of the defaulting employer. Subsection (2) provides that“where an employer makes default in the payment of any sum whichhe is liable to pay under this Act and the Commissioner is of opinionthat it is impracticable or inexpedient to recover that sum under S.17 or under subsection (1) of this section or where the full amountdue has not been recovered by seizure and sale, then he may issue
a certificateto the MagistrateThe Magistrate shall.
thereupon, summon such employer before him to show cause whyfurther proceedings for the recovery of the sum due under this Act
should not be taken against him" Next follows subsection (3)
which I have quoted above. The certificate issued by the Commissionermust contain particulars of the sum due and name and place ofresidence of the defaulting employer. The correctness of such particular,*,in terms of subsection (3), “shall not be called in question or examinedby court in any proceedings under this section, and accordinglynothing in this section shall authorise the court to consider or decidethe correctness of any statement in such certificate, and theCommissioner’s certificate shall be sufficient evidence that the amountdue under this Act from the defaulting employer has been dulycalculated and that such amount is in default." In my view the word‘accordingly’ in this subsection seems to indicate that the legislatureintended that the opening words ‘shall not be called in question orexamined by court’ to be qualified by and to have the limited meaningand effect set out in the rest of the subsection.
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: .Under the old .Income Tax Ordinance (Chap.88, L.E., 1938 Edition)there, was. similar provision for the institution of recovery proceedings•in court by the issue of a certificate by the Commissioner of IncomeTax to a Magistrate – vide S.80 of the Ordinance. Where any taxwas in default the Commissioner could seek to recover the same.under that section. The tax was deemed to be in default when theassessee failed to .pay it as prescribed in the earlier sections of theOrdinance. The Ordinance itself provided for the machinery by whichthe, liability, of an assessee to.pay. tax could be . inquired into anddecided upon. The proviso to S.80 of the Ordinance is as follows:
, “Priojyided that nothing in this section shall authorise or requirethe Magistrate in any proceeding-thereunder to consider, examineor decide the correctness of any statement in the certificateof the Commissioner.”
* • « t* ' ? ’ *•
S.80(2) enacted that the Commissioner’s certificate shall be sufficient
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evidence that the tax has been duly assessed, and is in default, andany plea that the tax is excessive, incorrect, or under appeal shallnot be entertained,, except in the case where an assessee had notappealed within the proper time against the assessment when thecourt could grant an adjournment. It will thus be seen that there isstrong resemblance in the language used in the two sections (S.80of the old Income Tax. Ordinance and the new S.38 of the Employees’Provident Fund Act) in describing ;and defining the effect of acertificate that is issued tq, a Magistrate.. ,
The effect of a certificate issued by the Commissioner to a Magistratein'terms of S.80. of the Income Tax Ordinance has been the subjectof several decisions pf the Supreme Court, In Vaz v, The Commissioner,of Income Tax (46 NLR. 200) Wijeyewardene J. held that such acertificatie is conclusive against the plea that the tax is ‘excessive,incorrect'or under appeal’ subject to the right of the assessee to thelimited relief by way of an adjournment. “On the other hand,” heobserved, “the Commissioner’s certificate is only’ sufficient evidence’.tHk't’fhe tax is in default.”
In M.E. de Silva V. The Commissioner of Income Tax (53 NLR.280) a certificate was issued to the Magistrate by the Commissionerstating that the appellant, as the^principal officer of the Company,was the defaulter chargeable with tax for the relevant years of
Free l.anku trading ( … 1 _nt r ( '< >tnrniai ./;.■/ < ./ l a hum (Atuknrutc. / I 10.V
. assessment. The notices of assessment, however, had been made outon the basis that the Company was the assessee. Before the Magistratethe appellant took up the objection that he was not the ‘defaulter'in so far as his personal liability wits alleged to be affected. Thisobjection was overruled on two grounds, one being that the provisoto S.80(l) precluded the court from ‘considering, examining or decidingthe correctness of any statement in the certificate of the Commissioner'.In appeal Gratiaen J.; in the course of his judgment, said:
“The real purpose of the proviso to S.80(l) is to prevent adefaulter who has been duly assessed to income tax for whichhe is properly chargeable from re-agitating in the course ofproceedings taken under S.KQ(I) for the recovery of such tax.the correctness of the assessments served on him. The reasonis obvious. A magistrate's jurisdiction in matters of this, kindis the jurisdiction of a Court of execution simpliciter, and notthat of an appellate tribunal. An assessee who-.disputed thecorrectness of an assessment made on him has already had
aecess to other machinery prescribed by the OrdinanceSo
much is clear enough, but I am not prepared to accede to thefurther proposition that the combined effect of the proviso toS.XO(l) and of S.X0(2) is to prevent an alleged defaulter againstwhom proceedings have been initiated from satisfying theMagistrate that he was not duly assessed, or that he was nota defaulter in respect of any tax for which he was properly
chargeable under the provisions of the OrdinanceIndeed.
S.S(I(2) makes the Commissioner's certificate in such proceedingsonly ‘sufficient evidence that the tax has been duly assessedand is in default'. I am content in this connection to adopt,with respect, the observations of Bennett .1. In re Puce andNeets Cash Chemists (Southern) Limited's Contract (1^37) Gh.642 at page 647:-
‘lt is a truism that the word sufficient' is not the sameword as and has not the same meaning as ‘conclusive …!think one must find some context of a compelling kindbefore one can decide that the word sufficient has the samemeaning as conclusive."
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In Nilaweera v. The Commissioner of Inland Revenue (63 NLR.486) a certificate was issued to the Magistrate and the petitioner onbeing asked to show cause maintained before him that the assessmentof tax was time-barred. The Magistrate held that it was not opento him to investigate this defence. Gunasekera J. held in appeal thatthe petitioner is entitled to show that he was not duly assessed. Inthe course of his judgment he stated:
u Hie learned Magistrate’s view that it was not open to him toconsider whether the assessment was time-barred is based onthe proviso to S.80(l), where it is enacted that nothing in thatsection shall authorise or require the Magistrate in any proceedingsthereunder to consider, examine or decide the correctness ofany statement in the certificate. The matters that are requiredto be stated in the certificate are the particulars of the tax indefault that is sought to be recovered and the name and lastknown place of business or residence of the defaulter. Thesestatements would assume that the alleged defaulter has beenduly assessed to income tax, but there is nothing in the provisoto prevent him from proving that the assumption is incorrect…Subsection (2) of the section provides that in any proceedingsunder subsection (1) the Commissioner’s certificate shall besufficient evidence that the tax has been duly assessed and isin default. It must be noted that the certificate is to be merelysufficient, and not conclusive, evidence of these facts. Moreover,the provision that it shall be evidence connotes that an issueas to whether the tax has been duly assessed can arise fordecision in such a proceeding.’’
A consideration of the above decisions seems to indicate that evenunder the old Income Tax Ordinance, which contained elaboratestatutory provisions for an assessee aggrieved by an assessment issuedon him to appeal in succession to the Commissioner, then to theBoard of Review and Anally to the Supreme Court on a questionof law, our courts have placed a very broad and liberal constructionon the relevant provisions contained in the proviso to S.80(l) andS.80(2) of the Income Tax Ordinance. As pointed out by me earlierthere is no statutory provision in the Employees’ Provident FundAct for the Commissioner of Labour to hold an inquiry into theliability of an employer to pay contributions claimed to be due fromhim. There is no provision to enable the employer to dispute the
CA Free Lanka Trading Co. Ltd r. Commissioner of Labour (Atukorale. J.) 105
legality or the accuracy of any sum alleged to be due from himunder the Act. Learned Senior State Counsel drew our attention toS. 28 of the Act. which enables the Commissioner to make adetermination which is subject to an appeal under S.29.. But it isclear that these sections deal only with claims to benefits referredto in S.23 and do not empower the Commissioner to inquire intothe employer's liability to pay the sum claimed to be due from him.In the instant case the grounds urged by the petitioner were mainlylegal issues and not matters relating to the factual correctness of theamount claimed.
Learned Senior State Counsel also cited the decision of this courtin C.A. (S.C.) 954 (77-Revision in M.C. Panadura No. 73003/A-decided on 27.2.1979. The ground sought to be urged before theMagistrate in that case was that the employer was not liable to paythe contribution because the workman was only a casual employee.There was evidence in that case that the employer had participatedin an inquiry into this question. In the circumstances this court heldthat the learned Magistrate was correct in refusing to hear theemployer on the same ground. The decision in that case has noapplication to the facts of this case.
On a consideration of all the above matters I am of the opinionthat S.38(3) of the Employees' Provident Fund Act as amended byAct No.8 of 1971 did not preclude the learned Magistrate frominquiring into the grounds urged by the petitioner. The order of thelearned Magistrate is therefore set aside and the case is remitted tothe Magistrate’s Court to enable the petitioner to show cause on thegrounds enumerated by me above. The petitioner will not be entitledto urge any other grounds before the Magistrate.
A.G. DE SILVA J. — I agree.
Order set aside. Case remitted for re-hearing as directed.
Free Lanka Trading Co. Ltd V Commissioner of Labour