EPF investment-pattern surcharge cannot be imposed on exempted establishments unless exemption conditions are amended, Calcutta High Court rules

The petitioner, an establishment exempted under Section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, challenged an order dated 31 July 2025 under Section 7A imposing surcharge for alleged deviations from the prescribed investment pattern during April 2019–March 2021.

The authority relied on condition 17 of Appendix A to paragraph 27AA of the EPF Scheme, 1952.

The petitioner contended, among other things, that paragraph 27AA did not apply to exempted establishments unless the exemption conditions were amended, and that the surcharge lacked statutory basis.

The respondent defended the levy as a regulatory and compensatory measure.

1. Whether paragraph 27AA and Appendix A of the EPF Scheme applied to the petitioner, an establishment exempted under Section 17, in the absence of an amendment to its exemption conditions.

2. Whether the surcharge order passed under Section 7A, based on alleged breach of paragraph 27AA, could stand in law.

Section 17 of the EPF Act governs exemption of establishments and the conditions subject to which an exemption operates. Paragraph 27AA and Appendix A of the EPF Scheme prescribe investment requirements and related conditions.

In M/s. Electric Lamp Manufactures (India) Ltd. v. Regional Provident Fund Commissioner, the Court held that statutory authorities may act only within powers conferred by the statute and that an establishment or its employer cannot be subjected to an additional liability not provided for by law.

In Caledonian Jute & Industries Ltd. v. Union of India, the Court held that paragraph 27AA and Appendix A do not apply to establishments exempted under Section 17 unless the exemption conditions are modified by an amendment published in the Official Gazette.

The impugned order imposed surcharge on the basis of an alleged breach of condition 17 of Appendix A to paragraph 27AA.

Applying Electric Lamp and Caledonian Jute, the Court held that paragraph 27AA was not applicable to the petitioner as an exempted establishment in the absence of a modification of its exemption conditions.

Consequently, the authority could not sustain the surcharge order by relying on that provision; the Court set aside the order on that basis.

The order was set aside, and the writ petition was allowed.