Madras High Court
M/S.Raja Salt Corporation vs The Joint Regional Director on 24 April, 2023
C.M.A.(MD)No.108 of 2021
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 24.04.2023
CORAM:
THE HONOURABLE MR.JUSTICE N.SATHISH KUMAR
C.M.A.(MD)No.108 of 2021
and
C.M.P.(MD)No.949 of 2021
M/s.Raja Salt Corporation,
Rep. by its Partner S.Ponsekar,
S/o.Late P.Selvaraj Nadar,
having office at
No.3, Chidambaram Nadar, 2nd Street,
Tuticorin – 3. ... Appellant / petitioner
(The ESOP petition is amended as per order in
I.A.No.689/2014, dated 11.12.2014 by substituting
the partner name Tr.P.Selvaraj Nadar, S/o.Ponnusamy Nadar
with S.Ponsekar, S/o.Late Selvaraj Nadar in the cause title
of the petition)
Vs.
1.The Joint Regional Director,
The Employees State Insurance Corporation,
Sub-Regional Office, 4th Main Road,
K.K.Nagar, Madurai – 20.
2.The Recovery Officer,
The Employees State Insurance Corporation,
Sub-Regional Office, 4th Main Road,
K.K.Nagar, Madurai – 20. .. Respondents / respondents
1/18
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C.M.A.(MD)No.108 of 2021
PRAYER: This Civil Miscellaneous Appeal is filed under Section 82 of the
Employees State Insurance Act, 1948, challenging the Ex-order and Fair-order of
the ESI Court (Labour Court), Madurai dated 26.05.2020 made in E.S.I.O.P.No.86
of 2005.
For Appellant : Mr.B.Satish Sundar
For Respondents : Mr.P.Ganapathisamy
JUDGMENT
This Civil Miscellaneous Appeal has been filed challenging the order of
the ESI Court (Labour Court), Madurai dated 26.05.2020 made in E.S.I.O.P.No.86
of 2005, dismissing the application filed under Section 75(i)(g) of the 'Employees
State Insurance Act, 1948' (hereinafter referred to as 'ESI Act' for brevity) to set
aside the impugned notice of the 2nd respondent dated 28.11.2005 as null and void.
2. For the sake of convenience, the parties are arrayed as per their own
ranking before the Labour Court.
3. The brief facts of the petitioner's case are as follows:-
The petitioner concern is a small salt pan manufacturing salt from sea
water. The salt pan is of seasonal character and the same is not carried out
continuously. The petitioner used to employ the workers as and where their
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requirement was in need. Most of the employees working in the petitioner
concern were temporary in nature. As the petitioner concern is a seasonal
establishment, the provision of the ESI Act is not at all applicable to it. However,
the respondents' Insurance Inspector inspected the petitioner concern in the year
1997 and informed that the petitioner concern was covered under the ESI Act with
effect from 9/1992 itself. Without giving sufficient opportunity, the respondents
ESI Corporation demanded contribution on adhoc basis as if the petitioner had
engaged 12 employees as an assumed average wage of Rs.3,575/- per month per
employee without any materials and evidences, but on assumption passed orders
under Section 45(A) of ESI Act dated 16.11.1999, 08.11.2000, 12.01.2000,
12.01.2001, 16.07.2011 and 06.02.2022, determining the contribution to the tune
of Rs.1,42,566/- which is arbitrary. The petitioner has remitted the ESI
contribution from 4/2001 to till date on actual payments made to the employees.
Subsequently, the 2nd respondent had issued show cause notice for warrant of
arrest in No.57/RRC/32230/05, dated 28.11.2005. Hence, the petition.
4. The respondents took a stand before the Labour Court that the
petitioner unit was inspected by a team of two Insurance Inspectors on 15.12.1994
and found that there were 10 employees working in the concern. The relevant visit
note containing these facts was countersigned by the partner of the petitioner
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C.M.A.(MD)No.108 of 2021
concern. The petitioner did not make compliance despite lawful coverage. The
petitioner unit is not a seasonal factory. They failed to pay contribution for the
period from 9/1992 to 3/2001 and from 4/2002 to 3/2003 and from 12/2001 to
3/2004. The claims were made on the basis of 12 employees in terms of the
inspection conducted by an Insurance Inspector of the respondents' ESI
Corporation. Whenever an employer is not produced the records, the wages per
month per employee is presumed to be 55% of the coverage limit and this is as per
the existing instructions of the respondents' Corporation which is followed
throughout the country.
4.1. The respondents had issued notice in Form C-18 dated 30.11.1998,
12.11.1999, 11.09.2000, 15.03.2001 & 24.07.2001 proposing to charge
contribution of Rs.11,619/-, Rs.55,770/-, Rs.16,731/-, Rs.16,731/- and Rs.16,731/-
for the period from 5/1997 to 9/1997 and from 10/1997 to 9/1999, 4/2000 to
9/2000 and from 10/2000 to 3/2001 respectively by affording personal hearing,
but there was no response. Thereafter, an order u/s 45(A) of ESI Act dated
16.11.1999, 08.11.2000, 12.01.2001, 11/16.07.2001 & 06.02.2002 have been
issued determining the contribution to the tune of Rs.11,619/-, Rs.55,770/-, Rs.
16,731/-, Rs.16,731/- and Rs.16,731/- for the period from 5/1997 to 9/1997 and
from 10/1997 to 9/1999, from 10/1999 to 3/2000, from 4/2000 to 9/2000 and from
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10/2000 to 3/2001 respectively. Further, it is the contention of the respondents
that the petition is barred by limitation and the petitioner has not discharged their
statutory duty. Hence, disputed the petition.
5. Based on the above pleadings, the Labour Court has framed the
following issues:
“1.Whether the notice of the 2nd respondent in No.
57/RRC/32230/05 dated 28.11.2005 is liable to be set aside and
declared as null and void?
2.Whether the petitioner is entitled for prohibitory injunction
as against the respondents?
3.Whether the petitioner is entitled for determination of
contribution on actual basis?
4.To what other relief the petitioner is entitled?”
6. Before the Labour Court, on the side of the petitioner, no oral
evidence was let in and 10 documents were marked as Ex.P1 to Ex.P10. On the
side of the respondents, its Social Security Officer was examined as R.W.1 and 20
documents were marked as Ex.R1 to Ex.R20.
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7. Based on the evidence adduced by both sides, the Labour Court has
negatived the contention raised by the learned counsel appearing for the petitioner
that the petitioner concern exempted from the provisions of ESI Act from the year
1992 – 2001 on the ground that exemption is subject to the condition which has
not been fulfilled by the petitioner and dismissed the application. As against the
same, the present Civil Miscellaneous Appeal has been filed.
8. The learned counsel appearing for the petitioner / appellant submitted
that the State of Tamil Nadu by invoking the provisions under Section 87 of ESI
Act, has passed a Government Order in G.O.(D)No.574, Labour and Employment
(L-II), dated 10.07.2000, wherein the State of Tamil Nadu exempts the salt
manufacturing process in the State of Tamil Nadu which is seasonal in character
though not seasonal under clause (12) of Section 2 of the said Act for the period
on and from the 1st July 1992 to 31st March 1996 from the operation of the said
Act. Therefore, it is his contention that the petitioner being the salt manufacturer
covered under the aforesaid Government Order. When the Government itself has
exempted the applicability of the provisions of the Act, the respondents passed an
order under Section 45(A) of the ESI Act, determining the contribution from the
year 1999 onwards is not according to law. Therefore, when the Government
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Order exempted the applicability of the provisions of the ESI Act, the show cause
notice issued pursuant to the order passed under Section 45(A) is not valid in the
eye of law. It is his contention that exemption being the nature of the exception
should be construed strictly.
9. It is the further contention of the learned counsel appearing for the
petitioner / appellant that though there are some conditions stipulated in the
Government Order, the trial Court has not recorded the finding that the conditions
are in substantive nature or mandatory or mere procedure. When the substantive
conditions or mandatory conditions have been violated, the exemption cannot be
claimed. Whereas merely a procedure said to have been violated, the same is not a
ground to reject the very exemption provided under the Government Order
exempting the applicability of the provisions of the ESI Act.
10. In support of his submissions, he has relied upon the following
judgments:
1. Mangalore Chemicals & Fertilizers Ltd., Vs. Deputy Commissioner
reported in 1991 (55) E.L.T. 437 (S.C.); and
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2. Novopan India Limited Vs. Collector of Central Excise and
Customs, Hyderabad reported in 1994 (73) E.L.T. 769 (S.C.)
11. The learned counsel appearing for the respondents would submit that
the petitioner unit was covered under the ESI Act. They are remitting the
contribution from 04.01.2001 and orders have been passed under Section 45-A of
ESI Act long back. The same ought to have been challenged within a period of
three years, whereas the application has been filed beyond the period of three
years and therefore, the said application is not maintainable under law. Besides,
petitioner / appellant has not produced any witnesses before the trial Court to
show that they complied the mandatory conditions stipulated in the Government
Order to avail the exemption. The petitioner / appellant has not produced any
records like attendance Register, ledger etc. Further, the petitioner / appellant has
also not proved that their concern is a seasonal factory. Hence, it is submitted that
the very application filed by the petitioner belatedly is not maintainable. In
support of his submissions, he has relied upon the following judgments:
1.Tamil Nadu Petro products Limited Vs. Employees' State Insurance
Corporation reported in 2011 (1) LLN 633 (Mad.); and
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2. Ambikanathan P.S. Vs. Employees State Insurance Corporation
reported in 1999 (3) LLJ 173.
12. In the light of the above submissions, now the substantial questions
of law arise for consideration in this appeal are as follows:
1. Whether the petitioner / appellant concern was exempted from the
applicability of ESI Act from the year 1992 to March 2001?
2. If so, whether the petitioner / appellant has fulfilled all the mandatory
conditions to avail the exemption?
3. To what other reliefs, the petitioner / appellant is entitled?
13. As far as the facts are concerned, the inspection made by the
authorities in the year 1994 is not disputed and several orders have been passed
under Section 45(A) of ESI Act, vide order dated 16.11.1999, 08.11.2000,
12.01.2001, 11/16.7.2001 and 06.02.2002, determining the contribution. These
facts also are not disputed. It is relevant to note that the orders passed under
Section 45-A of the ESI Act has not challenged within a period of 60 days as
contemplated under the ESI Act viz., Section 45-AA of the ESI Act by depositing
twenty-five per cent of the contribution so ordered or the contribution as per his
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own calculation, whichever is higher, with the corporation. That apart, those
orders also not challenged within a period of three years before the Labour Court
as per Section 77 of the ESI Act. What has been challenged before the Labour
Court is only a show cause notice issued in a recovery proceedings dated
28.11.2005 in No.57/RRC/32230/05. Therefore, when the order passed under
Section 45 of the ESI Act is neither appealed nor challenged, within a period of
three years, this Court is of the view that the show cause notice issued in a
recovery proceedings itself cannot be challenged on the ground that orders passed
under Section 45 of ESI Act is not authority in the eye of law. The only ground
canvassed by the learned counsel for the petitioner / appellant before this Court is
that since the Government of Tamil Nadu has exempted certain units from the
provisions of the ESI Act, the petitioner's concern is also falls within that category.
Therefore, they are exempted from the ESI Act from 1st July 1992 to 31st March
1996 as per G.O.(D)No.574, Labour and Employment (L-II), dated 10.07.2000.
For the purpose of convenience, the said Government Order is extracted
hereunder:
“Exemption to the salt manufacturing process in the State of Tamil
Nadu under certain section for certain period under the Employees'
State Insurance Act
(G.O.(D) No.574, Labour and Employment (L-11) , 10th July 2000)
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No. II/(2)/LE/803/2000.- In exercise of the powers conferred by
section 88 read with sub-section 91A of the ESI Act, 1948 (Central Act
XXXIV of 1948), the Governor of Tamil Nadu hereby exempts the salt
manufacturing process in the State of Tamil Nadu which is seasonal in
character though not seasonal under clause (12) of section 2 of the said
Act for the period on and from the 1st July 1992 to the 31st March 1996
from the operation of the said Act.
2.The above exemption is subject to the following conditions
namely:-
(a) The aforesaid factory wherein the employees are employed shall
maintain a register showing the names and designation of the exempted
employees.
(b) Notwithstanding this exemption, the employees shall continue to
receive such benefits under the said Act to which they might have become
entitled to on the basis of the contributions paid prior to the date from
which exemption granted by the notification operates.
(c) The contributions for the exempted period, if already paid shall
not be refunded.
(1) The employer of the said factory shall submit in respect of
the period during which that factory was subject to the operation of the
said Act thereinafter referred to as the said period, said returns in such
form and containing such particulars as were due from it in respect of the
said period under the Employees State Insurance (General) Regulations,
1950.
(2) Any Inspector appointed by the Corporation under sub-
section (1) of section 45 of the said Act or other official of the Corporation
authorized in this behalf shall for the purpose of him.
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(i) verifying the particulars contained in any return
submitted under sub-section (1) of Section 44 for the said period or
(ii) ascertaining whether registers and records were
maintained as required by the Employees State Insurance (General)
Regulations, 1950 for the said period or
(iii) ascertaining whether the employees continues to
be entitled to benefits provided by the employer in cash and kind being
benefits in considerations of which exemptions being granted under this
notification; or
(iv) ascertaining whether any of the provision of the
Act had been complied with during the period when such provisions were
in force in relation to the said factor be empowered to-
(a) require the principal or immediate
employer to furnish to him such information as the case may consider
necessary; or
(b) enter any factory, establishment, office or
other premises occupied by such principal of immediate employer at any
reasonable from and require any person found in charge thereof to
produce to such Inspector or other official and allow him to examine such
documents, 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 the principal or immediate
employer, his agent or servant, or any persons found in such factory,
establishment, office of other premises, or any person whom the said
inspector or other official has reasonable cause to believe to have been an
employee; or
(d) make copies of or take extracts from any
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register, account book or other document maintained in such factory,
establishment, office or other premises.
Revision of minimum rates of wages for employment in Printing Presses
under
Minimum Wages Act, 1948.
(G.O.(2D) No.40, Labour and Employment (J-1), 11th July, 2001)
No.II (2)LE/924/2000- In exercise of the powers conferred by clause
(b) sub- section (1) of section 3 and sub-section (2) of section 5 of the
Minimum Wages Act. 1948 (Central Act II of 1948), and in supersession of
the Labour and Employment Department Notification No.
11(2)/LE/3689/95, published at pages 1035 to 1037 of Part II-Section 2 of
the Tamil Nadu Government Gazette, dated the 29th November 1995, the
Governor of Tamil Nadu after consultation with the Advisory Board,
hereby revises the minimum rates of wages payable to the classes of
employees in
(2) in rule 7, in sub-rule (3), for the words "rupees twenty", the
words "rupees thirty" shall be substituted;
(3) in rule 9, in sub-rule (2), for the words "rupees fifteen", the
words "rupees thirty" shall be substituted
(4) in rule 11, in sub-rule(1), for the words "rupees twenty", the
words "rupees thirty shall be substituted.”
14. The abovesaid Government Order has been issued pursuant to the
powers conferred under Section 88 read with sub-Section 91-A of the ESI Act,
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1948, exempting the salt manufacturing process in the State of Tamil Nadu which
is seasonal in character though not seasonal for the period from 01.07.1992 to
31.03.1996 from the operation of the said Act. The said exemption is not absolute
with the caveat of fulfilling certain conditions. The concerned factory or any
factory seeks to avail exemption provided under said Government Order, has to
establish that they maintain proper register showing the names and designation of
the exempted employees. Besides, the employees shall continue to receive such
benefits under the said Act to which they might have become entitled to on the
basis of the contribution paid prior to the date from which exemption granted by
the notification operates. Only on fulfilling certain conditions, which is in the
nature of mandatory in nature, the concern can avail the benefits as per the
Government Order. It is the contention of the learned counsel appearing for the
petitioner /appellant that once the provision itself has been exempted, the mere
procedure violation will not take away the right of the person to claim exemption.
Much emphasis has been made to the judgment of the Hon'ble Apex Court in
Manglore Chemicals & Fertilizers Ltd., VS. Deputy Commissioner reported in
1991 (55) E.L.T. 437 (S.C.), wherein, the Hon'ble Apex Court has held that if the
condition is a mere procedural condition of a technical in nature, mere non-
observation of such conditions are condonable.
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15. In Novopan India Ltd., Vs. Collector of Central Excise and
Customs, Hyderabad reported in 1994 (73) E.L.T. 769 (S.C.), the Hon'ble Apex
Court has held that exemption being in the nature of exception to be construed
strictly at the stage of determination whether assessee falls within its terms or not
and in case of doubt or ambiguity, benefit of it must go to the State. It is relevant
to note that the Hon'ble Apex Court in a Constitution of Bench, with regard to the
matter relating to exemption claimed by the assessee, summed up as follows:
“52.To sum up, we answer the reference holding as under:
(1) Exemption notification should be interpreted strictly; the
burden of proving applicability would be on the assessee to show that
his case comes within the parameters of the exemption clause or
exemption notification.
(2) When there is ambiguity in exemption notification which
is subject to strict interpretation, the benefit of such ambiguity cannot
be claimed by the subject / assessee and it must be interpreted in favour
of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all
the decisions which took similar view as in Sun Export case (supra)
stands overruled.”
16. The dictum laid down by the Constitution Bench makes it clear that
of any person claiming exemption, the burden lies on them to show that their case
comes within the parameters of the exemption clauses or exemption notification.
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One of the main conditions set out in the Government Order referred above makes
it clear that the concerned Unit shall maintain a register showing the names and
designation of the exempted employees. The employees shall continue to receive
such benefits under the said Act which they might have become entitled to on the
basis of the contributions paid prior to the date from which exemption granted by
this notification operates. Besides, the contribution for the exempted period, if
already paid, shall not be refunded. Therefore, only on establishing those facts,
the exemption can be claimed as per the notification. Admittedly, in this case
except stating that they are exempted, no evidence has been given to show that the
petitioner / appellant concern fall within the parameters of this clause and no oral
evidence has been adduced. Whereas, the inspection report which has also been
marked as Ex.R1 and Ex.R2, make it clear that at the time of inspection there were
more than 10 employees working in the petitioner / appellant concern. The said
reports also counter signed and acknowledged by one of the partner of the
petitioner concern. Therefore, in the absence of any evidence to show that they
complied the substantive conditions, mentioned in the Government Order, this
Court is of the view that the petitioner / appellant cannot claim exemption merely
on the basis of the Government Order issued by the Government of Tamil Nadu
for the period from 01.07.1992 to 31.03.1996.
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17. Such view of the matter, this Court is of the view that the petitioner
cannot avail the exemption unless they fulfil the conditions incorporate in the
above Government Order. As they failed to establish the fulfilment of the
conditions merely on the basis of the said Government Order, they cannot non-suit
the orders already passed under Section 45 of the ESI Act under the guise of
challenging the show cause notice issued much later in the year 2015.
Accordingly, all the points are answered.
18. In the result, this Civil Miscellaneous Appeal is dismissed. No costs.
Consequently, connected miscellaneous petition is closed.
24.04.2023
NCC : Yes/No
Index : Yes/No
vsm
To
1.The ESI Court (Labour Court), Madurai.
2.The Section Officer,
Vernacular Records,
Madurai Bench of Madras High Court,
Madurai.
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C.M.A.(MD)No.108 of 2021
N.SATHISH KUMAR, J.
vsm
C.M.A.(MD)No.108 of 2021
24.04.2023
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