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S.P. Saraswathi Traders and others Versus Regional Director, ESI Corporation, Chennai – 34

2016 (1) TMI 905 - MADRAS HIGH COURT

Determination of contribution to the ESI - Employment by the sub-contractors - Principal employer are manufacturing papers and board at Pallipalayam. - Is not the respondent ESI corporation bound by their own circulars and are they not bound to follow the judgments rendered by this Hon'ble Court in LPA.Nos.159 and 160 of 2000 on 09.03.2004 and in CMA.No.1606 of 1995 on 10.12.2003? - Has not the respondent ESI corporation acted arbitrarily and capriciously treating 90% of the contribution bill am .....

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for want of particulars about the exact payments made and the impugned order hence calls for no interference.

However, it is made clear that the total amount payable by the 20th petitioner towards ESI contribution for the relevant period is ₹ 9,46,758/- as evident from the order made in IA.No.162 of 1999 dated 28.03.2000 and the sum of ₹ 4,96,268.15 has already been paid and the balance sum is only payable by the petitioners. The substantial questions of law are accordingl .....

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s and board at Pallipalayam. There were during relevant point of time 1700 permanent workers covered under the Employees State Insurance Act subject to the salary unit. The principal employer used to engage independent contractors (immediate employer) for various activities and the contractors/immediate employers used to engage their own men to carry out the said jobs and the contractors are to be paid the amount according to the nature of the work done by them. The amount paid to the contractor .....

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sed on the information given by the contractors and the section officers of the principal employer. While so, the principal employer served with the notice dated 27.01.1998 by the respondent/Employees State Insurance Corporation as to why ESI contribution should not be recovered on ₹ 1,45,09,700/- representing feeding charges relating to the period from October 1986 to March 1992 paid by the principal employer at the rate of 7.25% which comes to ₹ 10,51,953/-. The principal employer .....

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CT) stating that the contribution payable by the principal employer is on 90% of the amount paid to the Contractors, treating the balance 10% as margin for the contractors and incidental expenses and accordingly demanded contribution of ₹ 9,46,758/- less ₹ 4,96,268.15 together with interest along with the proof for payment of ₹ 4,96,268.15. The amount so demanded was on the ground that the calculation of the principal employer was based on theory of probable percentage of labou .....

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of 50% of the total amount demanded, the learned Presiding Officer Labour Court has accepted the contention of the 20th petitioner herein, that the total amount demanded is ₹ 9,46,758/- and 50% of the same to the tune of ₹ 4,96,268.15 was already deposited and the deposit of remaining 50% is waived. Thereafter ESIOP was disposed of after due contest. The relief sought for in the ESIOP was subsequently amended for setting aside the impugned order dated 30.04.1999 demanding ₹ 9, .....

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s, not produced the same before the respondent and the ESIOP was accordingly dismissed. Aggrieved against the same, the present civil Miscellaneous appeal is filed before this Court. 6. The substantial questions of law that arises for consideration in the civil miscellaneous appeal are as follows :- a)Is not the respondent ESI corporation bound by their own circulars and are they not bound to follow the judgments rendered by this Hon'ble Court in LPA.Nos.159 and 160 of 2000 on 09.03.2004 and .....

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books and accounts relating to Feeding charges. 7. Heard the rival submissions made on both sides and perused the records. 8. The learned counsel for the petitioners would seriously question the correctness of the impugned order on the following grounds. The contribution payable by the 20th petitioner/principal employer is only upon 25% of total amount paid by way of wages to the contractors as per the guidelines issued by ESI corporation on 26.06.1982 and as per the order passed in CMA.77 and 7 .....

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82 and the order passed by this Court in CMAs as confirmed in LPAs would say that the contribution payable is on 25% of the amount of the bills, as such the question to be decided herein is as to whether the memorandum as well as the decision arrived at on the basis of the memorandum in the judgments above referred to are applicable to the facts to the present case. 10. In order to appreciate this aspect, it is but necessary to refer to the memorandum. The reading of the same would reveal that t .....

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ffice memo dated 16.11.1981 was made applicable only in cases of payment relating to repair/maintenance etc., of the factory/establishment building, the memorandum dated 26.06.1982 would clarify that the bill includes apart from labour charges, cost of material, profit etc of the contractor or the person doing the job and this adoption of 25% of the total amount is applicable where the principal employer is not in a position to produce any relevant records in regard to wage elements in the bills .....

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ructions, the employer may be specifically told that the assessment has been made as a special case and he should in future cover all such employees and pay contributions in accordance with the provisions of the ESI Act and regulations, otherwise the contributions will be charged on the full amount booked in the Accounts Books. It is further stated herein that it is necessary, so that the employer may not have the impression that he could discharge his liability by paying contribution on 25% of .....

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ements in the bill. 14. Whereas, in the present case, it is throughout the case of the petitioners that the contribution is effected by the principal employer based on the information given by the section officer of the principal employer and the contractors and the respondent officials have after making full scale inspection audited the records and satisfied with the compliance of the provisions of ESI Act. It is categorically stated in para 26 of the petition that the finding of the Deputy Dir .....

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harges and profit and the principal employer has submitted the records, documents and statements showing the charges paid to the contractors. 15. One of the grounds raised in the petition is questioning the conduct of the respondent in not accepting the competency of the Section Officer of the principal employer to confirm the quantum of labour involved in the work and certify the quantum of labour charges involved in the bill of contractors. The petitioners also in their petition have made a re .....

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t on the exact wages paid to the contractors for the labour work. It is also stated in para 28 that there are vouchers and receipts and details of the materials, labour and transport charges, return on investment and profit in the contract and audit details have been certified by the employer and every receipt was certified by the employer and the employer based his contribution on the calculation and the quantum of the wages and not on probable percentage theory and those vouchers and receipts .....

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