Messrs SHAHAB INDUSTRIES LTD. Versus SIND EMPLOYEES' SOCIAL SECURITY INSTITUTION

1. This appeal under section 64 of the West Pakistan Employees' Social Security Ordinance 1965 is filed by M/s Shahab Industries Limited, to challenge the order of Social Security Court No.l Karachi dated 27‑5‑1981, passed in Appeal No.4/80, which was preferred by the appellant against the order of Commissioner, Social Security Institution. The facts relevant for disposal of this appeal are as follows: ‑

2. The Social Security Institution in exercise of its powers under section 22 of the Ordinance inspected the records of appellant company for the years 1974‑75, 1975‑76 and 1976‑77 and detected certain differences in the amount of contribution payable under section 20 of the Ordinance which the appellant had allegedly evaded and failed to pay during the aforesaid period. Accordingly the Social Security Institution demanded a sum of Rs.11,661.59 from the appellant on account of difference of contribution which the appellant had evaded to pay. The appellant duly paid the above amount without any protest. It appears that, thereafter, the Social Security Institution also desired to inspect the records relating to the contributions paid by the appellant for the years 1972‑73 and 1973‑74 as it entertained doubt as to the correctness of contributions paid by the appellant for these years. Accordingly, by their letter dated 6th June 1977 the Institution asked the appellant to arrange inspection of the record for the years from 1972 to 1974 relating to contribution paid by them under the Ordinance. The above request was followed by another letter dated 28‑5‑1978 addressed to the appellant by the Social Security Institution demanding inspection of record for the years 1972 to 1974 relating to contribution paid by the appellant It appears that in response to above letters the appellant took the plea that they could not produce the records for the years 1972‑73 and 1973‑74 as in view of Regulation 8 of the Provincial Employers' Social Security (Employees' Return and Record) Regulation, 1967 they were not bound to maintain and keep the record of pay rolls or contribution schedule for a period beyond two years. It further appears that as the appellants did not produce the aforesaid record for the years under dispute the Social Security Institution assessed the demand for two years namely 1972‑73 and 1973‑74 allegedly in accordance with section 22(3) of the West Pakistan Social Security Ordinance and asked the appellant to deposit a sum of Rs.8,47 5 towards the arrears. The contribution demanded for the aforesaid period also included the increase. This demand of the Social Security Institution was challenged before the Commissioner and then before the Social Security Court but without success. From the evidence recorded in the case before the Social Security Court it is clear that respondent's witness admitted in cross‑examination that in the absence of pay roll it was not possible to make out the difference or work out the contribution only by referring to the contribution schedule, ledger, cash book and vouchers. The appellant's representative on the other hand, before the Social Security Court, in his evidence stated that insofar the documents mentioned in Regulation 8 of the Provincial Employees! Social Security (Employees' Return and Record) Regulation 1967 were concerned they were no more available with them at the time they were demanded for inspection by the Institution as a period of more than, two years had passed, However, the appellant were willing to produce other documents and accounts books available with them in this regard but the Institution declined to check the same. The case before the Commissioner as well as the Social Security Court, proceeded only on the legal question, whether the appellants were liable to account for the contribution in excess of a period of two years from the date of demand made by the institution in this regard. The Social Security Court took the view that although the appellant were not bound to keep and maintain the record of documents mentioned in Regulation No. 8 of the Provincial Employees Social Security (Employees Return and Record) Regulations 1967, for a period beyond two years from the date of these documents but there is nothing in the Ordinance to prevent the Institution from demanding inspection of documents under section 22 of the Ordinance and asking for payment of contribution in arrears‑ of a period of more than two years from the date of such demand. The above conclusion of the Social Security Court appears to be quite correct and no exception can be taken to it. It may be mentioned here that a provision similar to Regulation 8 referred to above also exists in' Rule 4(2) of Sind Employees' Social Security (contribution) Rule 1966 which is as follows:

3. "(2) The employer shall retain in his possession, for a period of not less than two years, a legible copy of each pay roll or contribution schedule so submitted and shall, on request by an official of the Institution authorised under subsection (1) of Section 22, produce any such copy for inspection."

4. The accumulative effect of Regulation 8 of the Provincial Employees Social Security (Employees' Returns and Records) Regulations 1967 and rule 4(21 of the Social Security Employees (Contribution) Rules, 1966 is that when a return is filed by an employer in accordance with Section 20(1) of the Social Security Ordinance, he is obliged to retain a copy of the pay roll or the contribution schedule for a period of at least two years after the payment of wages or filing of the return with the Social Security Institution as the case may be. It is also obligatory under the aforesaid rule and regulation on an employer to produce or cause to be produced these documents or any other relevant document relating to payment of wages before an official of the Institution when a demand is made for their inspection. It is nowhere provided either in regulation 8 or rule 4(2) reproduced above, that the Institution shall have no right to demand contribution or inspection of the record relating to the contribution for a period beyond two years frog the date of service of notice by the Institution on an employer in this regard. The right to inspect record of an employer in order to ascertain corrections of the return filed by such employer under section 20 of the Social Security Ordinance is contained in Section 22 of the said Ordinance which reads as follows:‑

5. "22. Official of Institution to check employer's books.‑‑(1) Any official o the institution, duly authorised by a certificate in a form specified in the Regulations, may, for the purpose of inquiring into the correctness of any of the particular stated in the records or returns referred to in section 21 or for the purpose of ascertaining whether any of the provisions of this Ordinance have been complied with‑

(a) require an employer to furnish to him such information as he may consider necessary; or

(b) at any reasonable time enter any establishment or other premises occupied by such employer and require any person found in charge thereof to produce and allow him to examine such accounts books and other documents relating to the employment of persons and payment of wages, or to furnish to him such information, as he may consider necessary; or

(c) examine, with respect to any matter relevant to the purposes aforesaid, the employer, his agent or any person found in such establishment or other premises or any other person whom the said official has reasonable cause to believe to be or to have been a secured person.

(2) The official referred to in subsection (1) shall be bound to secrecy as regards all matters with which he becomes acquainted in the performance of his duties and which do not relate to matters provided for in this Ordinance.

(3) If an employer fails to maintain records or to submit returns as required by regulations, or otherwise fails to comply with the provisions of subsection (1) and thereby makes it difficult to ascertain the identity of persons required to be secured or the amount of contribution payable. the contribution shall be assessed on the basis of such evidence as the Institution may find satisfactory for this purposes."

6. A reading of the above section of the Ordinance will show that the right of an official of the Institution who is duly authorised in this behalf to require an employer to produce the documents mentioned in the aforesaid document for the purpose of ascertaining the correctness of any particular stated in his record or the return referred to in Section 21 of the Ordinance and to see the compliance of other provisions of the Ordinance is not in any manner controlled or circumscribed by any limitation of time mentioned in Regulation 8 or Rule 4(2) referred to above. 1, therefore, hold that the learned Social Security Court rightly reached the conclusion that in so far the right of the Institution to demand an inspection of the documents by an employer to ascertain the correctness of a return submitted by him under the provisions of the Ordinance and to demand contribution found payable from the employer as a result of any scrutiny alone in accordance with the provisions of section 22 of the Ordinance is not controlled by the time limit prescribed under Regulation 8 for keeping copies of the documents filed by the employer.

7. The learned counsel for the appellant has, however, raised another contention in the case that the assessment carried out by the Social Security Institution in respect of the years 1972‑73 and 1973‑74 is not based on any document or evidence and as such the said assessment should not have been upheld by the Tribunals below. This contention of learned counsel is not without force. I have already reproduced above the provisions of section 22 of the Ordinance. Subsection (3) of section 22 of the Ordinance authorises the Social Security Institution in a case where the employer fails or refuses to produce the relevant documents for the purposes of ascertaining the contribution payable by him, to assess the same on the basis of such evidence as the institution may found satisfactory for that purpose. It is, therefore, quite clear that the assessment under section 22(3)1 of the Ordinance by the Institution has to be based on some evidence which may either be produced by the employer or failing which may be available with the institution for assessment of contribution payable by the employer for a particular period. This however, does not mean that such assessment can be made by the Institution arbitrarily without reference to any basis or evidence in the event of failure on the part of employer's to produce the relevant record on demand by the Institution. From the copies of the two notices served on appellant by the Institution in the case before me it is quite clear that the demand for production of the documents made by the Institution to the appellant was vague. It cannot be ignored that in view of Regulation 8 and rule 4(2) referred to above there was no obligation, on the appellant to keep and maintain the copies of the pay rolls or the contribution schedule for a period beyond two years. It was, therefore, necessary for the Institution, while demanding production of the record by the appellant to have specified the documents which they wanted to inspect in connection with the assessment of the contribution for the relevant years as the appellant had already expressed their inability to produce copies of pay roll of contribution schedule which they were legally not bound to produce. This aspect of the case escaped the attention of tribunals below while rejecting the appellant's case. I accordingly partially allow this appeal and hold that the demand raised by the Social Security Institution in their letter, dated 11th October, 1978 is not in accordance with law and is accordingly not payable by the appellants. However, it is clarified that it will be open to the Social Security Institution to demand inspection of such documents as they are entitled to see under the law in connection with the contribution paid by the appellants for the disputed years and upon inspection of such documents if they still find that they are entitled to recover any further amount under the law from them for these years by way of difference or arrears of contribution they are at liberty to do so. After I dictated the above order both Mr. Ali Amjid and Mr. S. A. Sarwana, stated before me that a sum of Rs.8,487 has been deposited by the appellant in this Court towards the demand of respondent for years 1972‑73 and 1973‑74. This amount may be returned to the appellants in view of the decision in the appeal. This appeal succeed to the extent indicated above but there will be no order as to costs.

8. S. Q. /S‑1501 K Appeal partly accepted.