N. S. VEERABHADRAIAH, J. ( 1 ) THE present appeal is by the ESI corporation questioning the order passed in esi Application No. 5 of 1984 by the employees' Insurance Court, Mangalore, dated April 30, 1988 which allowed the application holding that the payment made was under the Production Incentive scheme and directing the ESI Corporation to refund Rs. 13,098. 90. ( 2 ) THE brief facts are as follows: the ESI Corporation by its letter dated october 15, 1982 demanded Lamina suspension Products Private Limited to pay contribution of Rs. 20,891. 39 for the period may 1981 to July 1982 towards the production allowance. In pursuance of the demand, the respondent-company deposited the amount of rs. 13,098. 90 on December 28, 1982 and intimated the ESI Corporation by their letter dated January 3, 1983. The respondent- company made representation by their letter dated April 2, 1984, disputing the payment of contribution on the ground that production incentive is not wages as defined under Section 2 (22) of the ESI Act. In spite of the reply, the esi Corporation by their letter dated June 13, 1984 demanded for payment, failing which the same will be recovered by revenue recovery action. Thereafter, the respondent-company sent a reply to the Deputy Regional Director, esi Corporation dated July 17, 1984 and also questioned the demand letter dated June 13, 1984 by filing an application under Section 75 of the ESI Act before the E. I. Court, bangalore, praying to quash the said letter dated June 13, 1984 and for refund or for adjustment of the contribution already paid in respect of the Production Incentive Scheme. The ESI Corporation, filed its objection statement contending that the amount paid under the Production Incentive Scheme comes within the meaning of 'wages' as defined under section 2 (22) of the ESI Act. Whereas, the agreement between the company and its employees are contrary to the provisions of the statute and the same is void. In fact, the ESI inspector inspected the records on August 19, 1982 and found that the applicant has paid an amount of Rs. 2,98,448. 50 as production allowance to its employees for the period from may 1, 1981 to July 31, 1982. The applicant was asked to pay the contribution and to submit contribution cards as per the ESI Act and regulations. 2,98,448. 50 as production allowance to its employees for the period from may 1, 1981 to July 31, 1982. The applicant was asked to pay the contribution and to submit contribution cards as per the ESI Act and regulations. Though the applicant sought time, finally paid the contribution on October 25, 1982 that the production incentive have to be treated as wages under Section 2 (22) of the ESI act. Therefore, the question of refund or adjustment of any amount does not arise and denied all other averments which are inconsistent with their objection statement and prayed to dismiss the application. On the basis of the application and the objection statement filed, the E. I. Court framed the following issues:" (1) Whether the applicant proves that it is not liable to pay contribution over production incentive as demanded, if so, whether the applicant is entitled for the refund? (2) What order?"on behalf of the company, examined one sadananda Shetty as A. W. 1 and produced exhibit A-1, memorandum of settlement and exhibit A-2, Standing Orders of the Lamina suspension Products Private Limited. Whereas the ESI Corporation produced Exhibits R-1 to r-8, the learned Judge of the Employees' insurance Court, after hearing both counsels allowed the application by its order dated April 30, 1988 directing the respondent-Corporation to stop recovery of contribution towards the amount of remuneration paid to the workers as production incentive bonus and refund Rs. 13,098. 90. It is this order which is now questioned by the ESI Corporation in the present appeal. ( 3 ) THE learned counsel Sri V. Narasimha holla for the appellant- ESI Corporation contended that the payments made towards the production Incentive Scheme is not voluntary. Therefore, any such payments made are 'wages', come within the definition of Section 2 (22) of the ESI Act. Nextly, he contended that in view of Regulation 40 of the ESI (General) regulations, 1950, the question of refund of the amount or adjusting the same does not arise as the same is not deposited under the erroneous belief. Further, submitted that no application is filed as required under Regulation 40 of the said regulations for refund of the amount. Therefore, not entitled for refund or adjustment. On the aforesaid contentions, the learned counsel prayed to set aside the impugned order of the E. I. Court by allowing the appeal. Further, submitted that no application is filed as required under Regulation 40 of the said regulations for refund of the amount. Therefore, not entitled for refund or adjustment. On the aforesaid contentions, the learned counsel prayed to set aside the impugned order of the E. I. Court by allowing the appeal. ( 4 ) THE learned counsel Sri N. B. Bhat for the respondent-company firstly contended that it is clear from the very notice dated June 13, 1984 itself, that demand was made for payment of ESI contribution on the production incentive also. But, Section 2 (22) of the Act, makes it clear that any amount paid at intervals exceeding two months does not come within the meaning and definition of wages. In the present case, under the Production Incentive Scheme, the payments have been made with an interval of three months. Therefore, it would not constitute as wages under Section 2 (22) of the act. In support of his contention, relied on the decision in Whirlpool of India Limited v employees' State Insurance Corporation, AIR 2000 SC 1190 : 2000 (3) SCC 185 : 2000-I-LLJ- 1101 wherein it is held:"payments towards production incentive made under a scheme at intervals exceeding two months, held, not covered". Therefore, the demand of the ESI Corporation is illegal and cannot be justified. Nextly contended that the amount of Rs. 13,098. 90 was deposited on account of the compelling reasons and that it is not an amount paid under erroneous belief. Therefore, Regulation 40 of the ESI regulations does not apply to the facts of this case. It is only in case if any amount paid under an erroneous belief, then it contemplates to file an application for refund or adjustment of the amount. Whereas in this case, the amount was not deposited under any of the erroneous belief. Therefore, the question of filing an application for refund or adjustment before the ESI Corporation does not arise. On these grounds prayed to dismiss the appeal directing the ESI Corporation to refund the amount that has already been paid and also to set aside the demand notice dated June 13, 1984 by confirming the order of the E. I. Court. ( 5 ) IN the light of the submissions, the points for consideration that arise:"1. On these grounds prayed to dismiss the appeal directing the ESI Corporation to refund the amount that has already been paid and also to set aside the demand notice dated June 13, 1984 by confirming the order of the E. I. Court. ( 5 ) IN the light of the submissions, the points for consideration that arise:"1. Whether the payments made towards the Production Incentive Scheme at intervals exceeding two months or quarterly is not liable to be covered for payment of contribution under the ESI Act?2. Whether the company is not entitled for refund or adjustment by virtue of Regulation 40 of the ESI (General) Regulations, 1950?3. What order?" ( 6 ) THE scope and object of the enactment of the ESI Act is to extend certain benefits to the employees working in various industries, establishments, factories etc. , notified in the official Gazette in accordance with the provisions of the Act. The main source of the employees' State Insurance Fund is as defined under Section 26 of the ESI Act. It is likewise, the ESI Corporation, after inspection of the establishments or companies, industries which are covered under the Act demand for payment of ESI contribution. In the present case, the question that has to be considered is whether the demand by the ESI Corporation vide letter dated June 13, 1982 calling upon the company to pay contribution on the production incentive is sustainable? The letter of the ESI corporation No. KAR. INS. III. 53-2828-66, dated June 13, 1984 written by Sri B. C. Bharadwaj, Deputy Regional Director for regional Director to Lamina Suspension products Private Limited, Nos. 17 to 19, industrial Area, New Mangalore-575 011, is extracted hereunder: "sub: Regarding payment of contribution on production incentive. With reference to your letter No. LSP/17072/83-84, dated April 2, 1984 on the above subject I have to inform you that incentive paid to workers are also part of wages under Section 2 (22) and this has been confirmed by Full Bench of the High Court of Karnataka in case of NGEF Limited, in 1980 and also Kirloskar Limited, Harihar in 1982. Hence, you are advised to include incentive and deduct contributions in respect of them, failure to do so it will be recovered by revenue recovery action". Hence, you are advised to include incentive and deduct contributions in respect of them, failure to do so it will be recovered by revenue recovery action". It is in pursuance of the orders of this court in the case of NGEF Limited and kirloskar Limited, Harihar, the appellant- corporation demanded for payment of contribution on the production incentive paid. In the earlier judgment, rendered in M. F. A. No. 419 of 1977, so also in the case of NGEF limited and Kirloskar Limited, it is held that incentive bonus paid by the company to its employees, falls within the definition of wages under the ESI Act. It is therefore, demanded for payment of contribution on the production incentives paid to the employees. But the above decisions are no more a good law in view of the judgment rendered in Whirlpool of India limited's case, (supra) wherein it is held that under the Production Incentive Scheme, the payments made to workers does not fall within the scope and ambit of wages as defined under the Act. Thus, the position of law is settled when contribution is not liable to be paid on the production Incentive Schemes. It is in this context, we have to examine the evidence available on record in this case. ( 7 ) THE Assistant General Manager of the applicant, namely Sadananda Shetty has stated in his evidence that while he was working as assistant General Manager, they have entered into an agreement with the workmen, pertaining to various matters including the payment of production incentive bonus. Exhibit a-l is the agreement and he is the signatory for the agreement. He has further stated that exhibit A-2 is the certified copy of the standing orders applicable to their company. According to Clause 9 of the "memorandum of settlement" agreement dated February 15, 1985 Exhibit A-l and Section 25 of the "standing Orders" Exhibit A-2, the production incentive bonus payable to the workers shall not be considered as wages/salaries under any circumstances. Accordingly, the production incentive bonus has been paid once in three months and it is not paid along with the wages. In the cross-examination, he has stated that they had previous agreement dated November 1, 1982 wherein they have stated about the production Incentive Scheme. As per the earlier agreement dated November 1, 1982, under the Production Incentive Scheme, the money have been paid monthly. In the cross-examination, he has stated that they had previous agreement dated November 1, 1982 wherein they have stated about the production Incentive Scheme. As per the earlier agreement dated November 1, 1982, under the Production Incentive Scheme, the money have been paid monthly. In accordance with the agreement dated November 1, 1982, they have considered the payment under production Incentive Scheme as wages and paid the ESI contribution on it. He denied the suggestion that to get over the payment of ESI contribution, they have incorporated the standing Order No. 25 in Exhibit A-2 and clause 9 in Exhibit A-l. The evidence of the assistant General Manager makes clear that under the agreement dated November 1, 1982 though there was Production Incentive scheme, the same was paid monthly till a new agreement Exhibit A-l came into force. It is further stated in the evidence of Sadananda shetty that the production incentive bonus was payable once in three months and it is not paid along with the wages. ( 8 ) ON a perusal of Exhibit A-l, the memorandum of settlement between the management and the workmen, came into force, with effect from February 15, 1985. Clause 9 of the agreement thus reads: "9. The existing and prevailing Production incentive Scheme for production and dispatches as per previous agreement dated november 1, 1982, shall be continued with the change that the same is payable once in three months and not once in every month and the same shall not be considered as 'wages' for any legal benefits, including for ESI benefits/contributions. The wage period of the workers shall be monthly as at present". Clause 9, which came to be incorporated makes it clear that if any production incentive paid once in 3 months or at intervals of more than 2 months, shall not be considered as wages. But the witness Sadananda Shetty in his evidence has admitted that in the agreement dated November 1, 1982, the payments used to be made once in a month. In view of the admitted fact, and all these payments are made in pursuant to the agreement dated November 1, 1982, even though it is categorised as the production incentive it comes within the meaning of wages as payments are made monthly. In view of the admitted fact, and all these payments are made in pursuant to the agreement dated November 1, 1982, even though it is categorised as the production incentive it comes within the meaning of wages as payments are made monthly. The demand notice of the ESI corporation is dated June 13, 1984 i. e. , before the settlement dated February 15, 1985 came into force. In that view of the matter, it is only in respect of payments made with interval exceeding two months not liable to pay the contribution on such Production Incentive Scheme. In this case, absolutely there is no evidence to show that whether the amount was paid at the interval exceeding two months or not. That apart, the company has not produced any materials to show that the payments are made at the interval of quarter. The letter exhibit R-3 written by the respondent-company to the Regional Director, ESI Corporation, No. 83, M. G. Road, Bangalore-560 001 vide No. LSP/10370/82-83, dated January 3, 1983, is extracted hereunder: "sub: Inspection of records under Section 45 (2) of the ESI Act, 1948. Ref. : Your KAR. Ins. III/53-2828, dated november 13, 1982. With reference to the above, we wish to inform you that we have remitted Rs. 13,098. 90 on December 28, 1982 being the difference of ESI contribution towards payment of production incentive from 5/1981 to 7/1982 as detailed here below. The supplementary cards will be sent shortly along with challans. Set C from May 31, 1981 to May 29, 1982 Rs. 3,969. 90 Set A from July 26, 1981 to July 31, 1982 Rs. 4,536. 00 Set B from September 27, 1981 to September 25, 1982 Rs. 4,593. 00 Total amount Rs. 13,098. 90 the deposit refers in respect of the payments made under the Production Incentive Scheme from 5/1981 to 7/1982, during which period, the old agreement dated November 1, 1982 was in force and when once it is admitted that such payments were paid monthly, it comes within the meaning of wages' as defined under Section 2 (22) of the esi Act. In the case of Whirlpool of India Limited, supra, at paras 13 and 14 of 2000-I-LLJ-1101 at 1103-1104 thus observed:"13. In the case of Whirlpool of India Limited, supra, at paras 13 and 14 of 2000-I-LLJ-1101 at 1103-1104 thus observed:"13. Learned counsel for the respondent made a feeble attempt to contend that the payment in the present case would fall within the first part of the definition of "wages" as there is an implied contract for payment of the said amount. As already noticed, none of the Courts has held that the amount in question was paid or was payable on fulfilment of the terms of the contract of employment. Further, learned counsel fairly conceded that the payment under the scheme cannot be termed a payment under settlement as contemplated by Section 2 (p) of the Industrial Disputes Act. It also cannot be held that the payment in question under the Scheme would amount to a condition of service requiring compliance of Section 9-A of the Industrial Disputes Act for effecting any change in the conditions of service. The payment thus does not fall within the first part of definition of 'wages. 14 It is evident that the additional remuneration to become wages has to be "paid" at intervals not exceeding two months as distinguished from "being payable". Thus, under the last part there has to be actual payment. The High Court has found that the payment was made quarterly. It is not for us to rewrite the definition of wages even if we assume that there is a possibility of misuse by employers by making the payment at a period exceeding two months and thus circumventing the provisions of the Act. When in the last part of Section 2 (22), the word used is "paid", we cannot add the word "payable" or other similar expression thereto". In view of the judicial pronouncements in the wliirlpool's case, (supra), if any amount paid under the Contract of Employment Act, it comes within the definition of wages as defined under Section 2 (22) of the ESI Act. In case if any amount is paid under the incentive scheme, at intervals exceeding two months, it does not constitute as 'wages'. In the present case, clause 9 came to be incorporated in the memorandum of settlement and the same came into force with effect from February 15, 1985. In case if any amount is paid under the incentive scheme, at intervals exceeding two months, it does not constitute as 'wages'. In the present case, clause 9 came to be incorporated in the memorandum of settlement and the same came into force with effect from February 15, 1985. If such payments are made after February 15, 1985 at intervals exceeding two months, it does not constitute as wages, as defined under Section 2 (22) of the Act. In the light of the above, the demand of the ESI Corporation by their notice dated June 13, 1984 demanding for payment of contribution on production incentive is not sustainable. Accordingly, point No. 1 is answered. ( 9 ) THE next point for consideration that arises is whether the amount of Rs. 13,098. 90 paid was under erroneous belief and is entitled for refund or adjustment. It is no doubt true that an amount of Rs. 13,098. 90 was not deposited under erroneous belief. It is in pursuance of a demand made, the said amount came to be deposited. Regulation 40 of the ESI (General) regulations, 1950 is extracted hereunder:"40. Refund of contribution erroneously paid.- (1) Any contribution paid by a person under the erroneous belief that the contributions were payable by that person under that Act may be refunded without interest by the Corporation to the person, if application to that effect is made in writing before the commencement of the benefit period corresponding to the contribution period in which contribution was paid. (2) Where any contribution has been paid at a rate higher than that at which it was payable the excess of the amount so paid over the amount payable may be refunded without interest by the Corporation to that person, if application to that effect is made before the commencement of the benefit period corresponding to the contribution period in which such contribution was paid. (3) In calculating the amount of any refund to be made under this regulation there may be deducted the amount, if any, paid to any person by way of benefit on the basis of the contribution erroneously paid and for the refund of which the application is made. (3) In calculating the amount of any refund to be made under this regulation there may be deducted the amount, if any, paid to any person by way of benefit on the basis of the contribution erroneously paid and for the refund of which the application is made. (4) Where the whole or part of the amount of any contribution referred to in sub-regulations (1) and (2) was recovered from an immediate employer or deducted from the wages of an employee by the principal employer, he shall, on getting the refund of the amount due from the corporation, be liable to pay back the amount so recovered or deducted to the person from whom the amount was so recovered or deducted. (5) Applications for refund under this regulation shall be made in such form and in such manner and shall be supported by such documents as the Director General may, from time to time, determine. "this Court, while considering the provisions of regulation 40, in the case of Mysore Kirloskar limited v. Deputy Regional Director, E. S. I. Corporation, 2000-III-LLJ (Suppl)-213 (Kant) thus observed at p. 217 of LLJ:"there is no dispute that the appellant-company has not raised the issue at the relevant time that if incentive is added to the wages, some of the employees will go out of the purview of the Act, either in the application filed before the Employees' insurance Court in the year 1976 or they have taken such a plea in the appeal filed against the said judgment". In the decision (supra), on facts it is held that no such application was filed as required under regulation 40 for refund of the amount before the commencement of the benefit period. It is the case, where contribution was paid with an erroneous belief. In that view of the matter, the question of invoking the provisions of Regulation 40 of the ESI Regulations, to file an application for refund of the contributions made, does not arise. But the fact remains that the production incentive was paid in pursuance of the earlier agreement dated November 1, 1982 wherein such payments were made monthly. It is therefore, on the monthly payments made an amount of Rs. 13,098. 90 was deposited. Therefore, the benefit of the decision in Whirlpool India Limited's case (supra), cannot be extended to the present case. It is therefore, on the monthly payments made an amount of Rs. 13,098. 90 was deposited. Therefore, the benefit of the decision in Whirlpool India Limited's case (supra), cannot be extended to the present case. In that view of the matter, the question of refund or adjustment of the amount does not arise. ( 10 ) FOR the foregoing reasons, the notice of demand dated June 13, 1984 calling upon the company to pay the contribution on the production incentive with effect from February 15, 1985 is not sustainable. Insofar as the order of the E. I. Court is concerned, directing the respondent-Corporation to refund an amount of rs. 13,098. 90 is not sustainable on facts of this case since the payments have been made on monthly basis (sic ). To that extent, the impugned order of the E. I. Court is liable to be interfered with and the Corporation is not liable to refund any amount or make adjustment. ( 11 ) ACCORDINGLY, the appeal is disposed of in terms of the above. --- *** --- .