Regional Director, ESI Corporation, Banglore and Others Vs Management of Shagil Precision India

Regional Director, ESI Corporation, Banglore and Others

Vs

Management of Shagil Precision India

Facts of the Case:
The appellant management is a company manufacturing watch parts which is covered under ESI Act and the code number was allotted by the respondent. The appellant has been paying ESI contribution both for employer and employees regularly to the respondent/ESI Corporation.The appellant establishment initially constituted on a rented building. All the manufacturing activity  were carried on in that building till April 2000. The Appellant decided to have its own building and premises for manufacturing  the activities at Deralakatte Manglore. The construction of building was entrusted to the independent contractor in 1999 and the same was completed in the month of  April 2000. The management has shifted its manufacturing activities to its own news building.  The ESI inspector of the respondent/corporation visited the appellant’s establishment  in Feb 2001.After verification of the bills and vouchers relating to the construction of the building , the inspector observed that the appellant is liable to pay ESI contribution to the extent of Rs. 50,613 on payment of Rs.7,78,657. The respondent No.2 issued notice to appellant management on the basis of observation made by inspector. The Corporation started recovery proceedings and compelled the appellant management for deposit. Therefore the appellant deposit Rs 40,000 through challan. Later the appellant realised that they are not required to pay the alleged contribution claimed by corporation in respect of the payment made to the independent contractors to carry out the work. The appellant requested the corporation to refund the amount deposited by it under correction and to drop further recovery proceedings. But the respondent corporation without considering this request proceeded further for recovery of balance amount.

Therefore the appellant management filed the ESI application before the Presiding Officer of the Labour Court at Manglore. The learned presiding officer of Labour Court set aside the order of corporation for recovery of balance amount and refused to order for refund of the amount already deposited by the appellant but advised the appellant to initiate the other appropriate proceeding against the respondents for refund.

Both the parties(Mangement and ESI Corporation) filed appeal in High Court.

The Corporation filed appeal in high court for dismiss the ESI application and setting aside the order of ESI Court.

The Management filed this appeal for refund the amount of Rs. 40,000 obtained by them under coercion. Since both the appeals   was filed challenging the one and the same order passed by the same Presiding Officer in ESI Application.The high court clubbed both the appeals together for the sake of convenience in order of avoid and repetition of facts and law.

Decision:
The Hon’ble High Court allowed the appeal of management and  held that the appellant/Management is entitled to get the refund of the Rs. 40,000 . The payment made to an independent contractor does not amount to ‘wages’ as defined under the Section 2(22) of ESI Act, 1948. It also held that when the insurance court is empowered to entertain an appeal under section 75 of the ESI Act, it is competent to order refund of ESI contribution if it comes to a definite conclusion that such contribution was wrongfully taken by the ESI authorities hence no separate proceedings required for refund. The respondents are directed to repay the said amount within 30 days from the date of receipt of a copy of this order.  The appeal of ESI Corporation is dismissed.