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2006 DIGILAW 842 (KER)

Cannanore Drug Lines v. E. S. I. Corporation

2006-12-12

K.S.RADHAKRISHNAN, M.N.KRISHNAN

body2006
Judgment :- K.S. Radhakrishnan, J. This appeal is preferred by the applicant in E.I.C. No.22 of 2000. Application was preferred under S.75 read with S.77 of the Employees' State Insurance Act, 1948 seeking for a declaration that the assessment and demand of interest of Rs.89,599/- for the delayed payment of E.S.I. contribution for the wage periods from 1.3.1992 to 30.9.1998 as per Ext.P3 notice and a sum of Rs.863/- as interest for the delayed payment of contribution for the wage periods from 1.10.98 to 31.3.1999 as per Ext.P5 notice and imposition of damages of Rs.42,854/- by way of penalty for the delayed payment of contribution for the wage periods from 1.3.92 to 30.9.98 as per Ext.P11 are unsustainable. 2. E.S.I. Court disposed of the application holding that the assessment and levy of interest as per Exts.P3 and P5 notices cannot be interfered with. With regard to the imposition of Rs.42,854/- as damages by way of penalty as per Ext.P11 order, Insurance Court set aside the same. This appeal has been preferred mainly against the demand of interest as per Exts.P3 and P5 notices. 3. Facts are undisputed. Contention was raised that the date fixed for payment of E.S.I. contribution is not absolute going by S.39(4) of the E.S.I. Act. Reference was made to the expression "ordinarily fall due". Further it was stated that Insurance Court held that though the two establishments of the applicant can be clubbed and treated as a single establishment for coverage under the E.S.I. Act, that decision was taken only on 12.1.1999 and even on that day no demand was made. Further, it is also stated that the finding of the Insurance Court that there is no statutory provision for relaxation of payment of interest on account of pendency of litigation is also incorrect. Liability to pay interest, it was contended, is not absolute and always flexible depending upon the facts and circumstances of each case. Department has taken a specific contention that the contribution has become payable as per the time fame set out under S.39 of the E.S.I. Act and since there was no payment, interest will accrue, as per S.39(5)(a) read with Regulations 31 and 31A of the E.S.I. (General) Regulations, 1950. 4. We notice that the scope of the above mentioned provision has been elaborately considered by a Division Bench of this court in W.A.1277 of 2003 with which we fully concur. 4. We notice that the scope of the above mentioned provision has been elaborately considered by a Division Bench of this court in W.A.1277 of 2003 with which we fully concur. S.39(4) of the E.S.I. Act states that the contributions payable in respect of each wage period shall ordinarily fall due on the last day of the wage period. Regulation 31 of the Employees' State Insurance (General) Regulations, 1950 stipulates that an employer who is liable to pay contributions in respect of any employee shall pay these contributions within 21 days of the last day of the calendar month in which contributions fall due. S.39(5)(a) of the E.S.I. Act states that if any contribution payable under the said Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of 12% per annum or at such higher rate as may be specified in the regulations till the date of its actual payment. Regulation 31A states that an employer who fails to pay contribution within the period specified in Regulation 31 shall be liable to pay simple interest at the rate of 12% per annum in respect of each day of default or delay in payment of contribution. Above statutory provisions make it clear that the appellant was liable to pay the E.S.I. contributions which fell due on the last day of the wage period within 21 days of the last day of the calendar month in which the contributions fell due. 5. Merely because the appellant failed to pay contribution allegedly under a bona fide impression or belief that the establishment was not covered under the provisions of the E.S.I. Act cannot absolve the appellant from the liability of paying interest on the delayed payment of E.S.I. contribution under S.39(5) read with Regulation 31A. S.39(5)(a) uses the expression "if any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due". Regulation 31A uses the expression "an employer who fails to pay contribution within the periods specified in Regulation 3 F. Neither the provisions in the E.S.I. Act nor the provisions in the E.S.I. (General) Regulations give any discretion to the respondent to exempt the appellant from the liability to pay interest on the delayed payment of E.S.I. contribution. Regulation 31A uses the expression "an employer who fails to pay contribution within the periods specified in Regulation 3 F. Neither the provisions in the E.S.I. Act nor the provisions in the E.S.I. (General) Regulations give any discretion to the respondent to exempt the appellant from the liability to pay interest on the delayed payment of E.S.I. contribution. The bona fide impression of the appellant that his establishment was not covered under the provisions of the E.S.I. Act or the pendency of a dispute before the E.S.I. Court regarding the appellant's liability to pay E.S.I. contribution cannot be a valid ground for exempting the appellant from paying interest in terms of S.39(5)(a) and Regulation 31 A. When the statute does not provide for any such exemption the respondent cannot exclude the amount of interest from the demand made against the appellant. 6. E.S.I. Court has also elaborately considered the scope of those provisions and took the view that one the establishment becomes liable to be covered under the E.S.I. Act, the contribution also starts accruing in every wage period from the date of commencement of coverage and non payment of contribution within 21 days of the expiry of the relevant wage period attracts interest at the prescribed rates. We are of the view, so far as this case is concerned those provisions have been scrupulously followed by the department while issuing Exts.P3 and P5 notices which in our view calls for no interference since they are in conformity with the judgment of this court in W.A. No. 1277 of 2004. Under such circumstance appeal lacks merit and the same is dismissed.