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D.S.M.Industries v. Regional Employees State - C.M.A.(MD).No.229 of 2000  RD-TN 1952 (15 June 2007)
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 15/06/2007
THE HONOURABLE MR.JUSTICE P.R.SHIVAKUMAR
C.M.A.(MD).No.229 of 2000
C.M.P.(MD).No.2152 of 2000
by its Partner ... Appellant vs.
1.Regional Employees State
State Insurance Corporation by its
2.The Deputy Director,
Employees State Insurance Corporation
Appeal filed under Section 173 of Motor Vehicles Act against the order and decretal order of the learned Principal District Judge, Thiruchirapalli passed in E.S.I.O.P.No.7 of 1990 dated 29.10.1998. For Appellant ... M/s.L.N.V.Subramanian L.N.S.Sethuraman
For Respondents ... Mr.P.Sermakani
This is an appeal filed under Section 82 of the Employees State Insurance Act, 1948 against the order of the learned Principal District Judge (ESI Court), Tiruchirappalli, dated 29.10.1998 passed in E.S.I.O.P.No.7 of 1990 by which the order of the assessing authority dated 30.7.1990 was confirmed.
2.The facts and circumstances leading to this Civil Miscellaneous Appeal can be briefly stated as under:
The appellant is a registered partnership firm running a factory in the name of M/s.D.S.M Industries at Coimbatore Road, LNS Post, Karur. The same is an Industrial Establishment governed by the provisions of ESI Act, 1948 and the appellant being the employer is bound to pay contribution (both employers and employees contribution) to the ESI Corporation in accordance with Section 40 of the ESI Act. Inspection of the records of the appellant at the factory premises for the period from 1982 to 1984 was conducted by the ESI Inspector on 4.9.1984. Similarly inspection of the records pertaining to the period from 1.8.1984 to 30.1.1986 was conducted by him on 12.2.1986. During the inspections, default of payment of contribution by the employer was noticed. Based on the inspection report, a show cause notice under form C 18 happened to be issued by the first respondent on 2.4.1986 calling upon the appellant to show cause why assessment should not be made under Section 45-A of the ESI Act. A calculation sheet furnishing details of arrears had also been sent along with the notice. The arrears of contribution claimed under the notice have been categorized into 4 items as follows:
Contribution on adhoc basis 1979-80, 1981-82 and 1983-84 21,950-00
Short payment of contribution for CPE 9/81
Contribution on adhoc basis on labour charges ex-gratia, cooly, casting batta etc., from 1-4-82 to 31-3-83
Short payment of contribution for the period from 27-1-85 to 31-12-85 ---
3.The appellant after initially making a total denial of liability to pay the contribution as demanded under the notice, subsequently admitted his liability to pay the contributions noted in items 1, 2 and 4 alone and remitted a sum of Rs.1,591.05 on 12.5.1986. So far as the contribution of Rs.56,045.40 demanded in item 3 was concerned, the appellant disputed its liability stating that the said amount was paid to Sub-contractors for fabrication works done outside the factory without the control and supervision of the appellant and that the entire amount paid to the Sub-contractors could not be termed wages or labour charges attracting ESI contribution and that the levy of contribution for the entire amount was not justified. The appellant took time for production of documents in proof of the contention that the amount noted as wages in item 3 was paid to the Sub-contractors which included the cost of the material and other incidental expenses to be born by the Sub-contractors.
4.But later on, without producing any documents, the appellant calculated 15 of the above said amount noted in item 3 as wages (Rs.8,00,650.05) as actual labour charges, calculated 7 contribution on the same and paid a sum of Rs.8,605.90. The same was not acceptable to the respondents. Thereafter, the appellant took several adjournments to produce break-up details and necessary records to substantiate his contention, but failed to do so. Consequently based on the report of the ESI Inspector, the first respondent passed an order under Section 45-A fixing the total contribution on all 4 items at Rs.57,636.55 deducted a sum of Rs.10,196.95 paid by the appellant during enquiry as indicated above and fixed the arrears of contribution at Rs.47,439.65 which amount was directed to be paid. A sum of Rs.1,525/- as interest for the arrears from the date of default till the date of order was also incorporated in the order. The contradiction for payment of Rs.47,439.65 and for future payment of interest at the rate
of 6 per annum had also been incorporated in the said order. The said order was challenged by the appellant before the Principal District Judge (ESI Court), Triuchirappalli in E.S.I.O.P.No.13 of 1986. The said Court, after enquiry, set aside the assessment order dated 7.11.1986 and remitted the matter back to the first respondent, directing to pass an order after giving an opportunity to the appellant to obtain the break-up particulars from the alleged Sub-contractors and produce the records for the proof of the same. The appellant had produced 2 day books and ledgers purporting to be maintained by two of its alleged contractors for the period from 1982-83 before the ESI Court during the enquiry in E.S.I.O.P.No.13 of 1986. In addition to the same, two volumes of day books for the period 27.3.1982 to 30.3.1983 and ledger for the period 1982 to 1983 alone were produced as fresh documents before the first respondent during enquiry after remand.
5.At the conclusion of enquiry, the first respondent disbelieved the genuineness of the above said documents and assessed the contribution of the third item of demand with break up particulars as follows: Description Charges
Contribution at 7 Rs. P.
Contributio remitted Rs.P.
i) Labour charges
ii) Casting batta
iii) Ex-gratia payment
iv) Miscellaneous wages LF 62
A sum of Rs.8,605.90 already paid during enquiry in respect of item 3 was deducted from the said amount and the arrears of contribution to be paid was fixed at RS.47,439.65. It was also observed in the said order that the said amount shall carry interest at the rate of 6 per annum from the date of default. The above said assessment order made under Section 45-A of the ESI Act was passed on 30.7.1990 by the first respondent in his proceedings No.TN/INS.II.51-12518-67.1239-41 dated 30.7.1990. The said order was challenged before the ESI Court in E.S.I.O.P.No.7 of 1990.
6.In the enquiry before the ESI Court, one witness was examined and 28 documents were marked on the side of the petitioners. No witness was examined and no document was marked on the side of the respondents.
7.The learned Principal District Judge, Tiruchirappalli in his capacity as Judge of the ESI Court, after enquiry, by his impugned order dated 29.10.1998, confirmed the assessment made by the first respondent and dismissed the E.S.I.O.P.No.7 of 1990. Aggrieved by and impugning the said order dated 29.10.1998 passed by the ESI Court, the appellant has preferred this present Civil Miscellaneous Appeal under Section 82 of the ESI Act.
8.The Court heard the arguments advanced by Mr.L.N.V.Subramanian, the learned counsel for the appellant and also by Mr.P.Sermakani, the learned counsel for the respondents and paid its considerations to the same.
9.It is not in dispute that the appellant is running a factory and is an employer coming under the purview of the ESI Act to pay contribution to the ESI Corporation based on the wages paid to its workers. Pursuant to the inspection reports submitted by the ESI Inspector after conducting inspection of records of the appellant's factory, default in payment of contributions to the ESI Corporation to a large extent was noticed by the ESI authorities. After issuing a show cause notice in form C 18 and after giving an opportunity to the appellant to represent his case, the arrears of contribution was assessed by the first respondent under Section 45-A of the Act. The said assessment was challenged before the ESI Court and it proved unsuccessful. Hence, the appellant is before this Court.
10.The appeal against the order of the ESI Court can be filed in the High Court only on a substantial question of law. Section 82 Sub-clause 1 of the ESI Act provides an abstent clause that no appeal shall lie from an order of an ESI Court save as otherwise provided in the sub-Section 2. Sub-section 2 is the enabling provision which says that an appeal shall lie to the High Court from an order of an Employees Insurance Court if it involves a substantial question of law. A reading of the said Section will make it clear that an appeal against the order of the ESI Court can be entertained only if it involves a substantial question of law. On the other hand, no appeal can be maintained the questions of fact alone. In the instant case, the appellant has framed two questions and incorporated the same in its memorandum of appeal as the substantial question of law involved in this case. They are
"1) Was not the non-appreciation of the relevant materials with proper perspective apparent from the finding that the entire payments made by the appellant to its contractor amount to Labour Charges attracting payment of E.S.I. Contributions on the whole amounts despite the statutory recognition of 15 of the total price alone amounts to labour expenses with respect to fabrication works, contracts, under the Tamil Nadu General Sales Tax Act? 2) Can adverse inference can be drawn with respect to account books maintained in the regular course of business merely on the ground that entries they are identical and stereo-typed when particularly the works were entrusted to the contractors on the same dates and to be completed on a particular date?"
11.The Court considered the above said questions and upon such consideration, comes to the conclusion that out of the two questions cited above, the second one relates to the appreciation of evidence and the same cannot be accepted as a substantial question of law. Appreciation of evidence is the process by which question of facts are decided. A question of fact may at times attain the position of a question of law, if such a finding is perverse or based on no evidence. The question "whether the account books produced by the appellant purporting to be maintained by the so-called contractors of the appellant are genuine and reliable?" - is nothing but a question of fact. The same cannot be termed a question of law, much less a substantial question of law. Even if it is assumed that the reliability of a particular document will be a question of law, unless the same is proved to have been decided wrongly by the lower Court, the appellant cannot succeeded in his appeal. In the instant case, it is not correct to state that the account books allegedly maintained by the supposed contractors of the appellant were held unreliable only on the ground that the entries found therein were identical and stereo-type. The same happened to be one of several reasons for arriving at the conclusion. Even in the absence of the said reason, the other reasons assigned by the ESI Court are enough to sustain the finding regarding the reliability of the said documents.
12.None of the supposed contractors were examined. P.W.1 admitted in his evidence that the contractors did not submit their accounts to the Income Tax Department and that they had not produced any proof for the receipt of raw materials for fabrication from the appellant. Bills/vouchers to show payments made to the contractors have not been produced by the appellant. All these factors had weighed with the ESI Court to come to the conclusion, which according to the considered opinion of this Court was a correct conclusion, that the account books produced by the appellant purporting to be that of the contractors were not genuine and hence, they were not reliable. Under these circumstances, the second question suggested by the appellant cannot be accepted to be a substantial question of law involved in this appeal.
13. Let us now consider whether the other question suggested by the appellant is in fact involved in this appeal. According to the appellant, the amount paid by the appellant to the contractors for fabrication works should be equated with the price of the commodity, 15 of the said amount alone should be reckoned as labour charges and contribution to be levied only on the said amount. The learned counsel for the appellant cited the procedure prescribed under the Tamil Nadu General Sales Tax Act by which the labour charges are reckoned at 15 of the total price of the commodities manufactured and wanted this Court to apply the said principle to the appellant's case also. According to the submission made by the learned counsel for the appellant treating the entire amount paid by the appellant as fabrication charges to the contractors as labour charges is erroneous and "whether the entire amounts spent by the appellant for fabrication could be treated as wages?" - is a substantial question of law. This Court is not in a position to countenance the said submission made on behalf of the appellant.
14.In the instant case, it is not the price of the commodity which has been taken by the respondents as labour charges. It is not even the case of the appellant that a sum of Rs.8,00,650.05 found in its account books represents the price of the fabricated commodities. According to the appellant's case itself, raw materials were supplied and the said amount was paid as charges for fabrication. Therefore, the same cannot be equated to the price of the goods out of which alone 15 has to be reckoned as the labour charges. According to the appellant, the above said amount allegedly paid to the contractors includes labour charges as well as incidental expenses incurred by the so-called contractors like electricity charges, purchase of welding rods, rental expenses etc. If at all the above said amount was paid to the contractors as fabrication charges, there is possibility of holding that a part of the amount should be deducted towards incidental expenses and only the balance shall be reckoned as the labour charges. It cannot be done so in this case because the very contention of the appellant that raw materials were supplied to the contractors and the contractors did the fabrication work for the appellant and that the above said amount was paid to the contractors for fabrication work. As the ESI Court has come to a definite conclusion that the above said amount was not paid to the contractors and that the same represented the amount paid to the workers as wages or labour charges, the said finding of the ESI Court is only a finding on a question of fact. The said finding cannot even be construed as one based on no evidence or perverse. The first respondent as well as the ESI Court has factually found that the plea of the appellant that the fabrication work was entrusted to the contractors was not true. The non-production of any piece of paper to show the despatch of the raw materials from the factory premises, the non-production of any document to show the entry of the finished goods after fabrication into the factory, the admission of P.W.1 that no document evidencing the same were available and the non-production of any receipt or voucher to show payment made to the contractors were all the reasons cited for arriving at the said factual conclusion. On an appreciation of evidence, the lower Court has given a finding on the above said question of fact that the amount found in the records of the appellant as labour charges were infact paid as wages to the workers.
15.In view of the said finding, the question of application of the principle of reckoning labour charges out of the price of the commodity as prescribed under the Tamil Nadu General Sales Tax Act on analogy will not arise. Hence, the first question suggested by the appellant also cannot be construed as a substantial question of law involved in this case.
16.Therefore, this Court is not convinced that any substantial question of law has arisen in this case and that the questions suggested by the appellant in its memorandum of appeal are not infact substantial questions of law involved in this case. As no substantial question of law has arisen to be decided in this appeal, this Court comes to the further conclusion that the appeal must fail. Accordingly, the appeal fails and the same is dismissed with costs. Consequently, connected M.P. is also dismissed.
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