Judgment : Valmiki J. Mehta, J. (Oral) 1. The challenge by means of this appeal under Section 82 of the Employees’ State Insurance Act, 1948 is to the judgment of the ESI Court dated 23.5.2013 which has quashed the demand for interest and penalty against the respondent. 2. The demand for interest and penalty has been quashed on two grounds. The first is the silence of the appellant for the period from 1993 to 1997 and the second is on the ground of ambiguity as to whether use of power includes use of LPG for preparing tea, coffee etc. The claim of interest and damages in this case is for the period from 30.4.1993 to 13.8.1997. 3. Learned counsel for the appellant argued that the ESI Court has wrongly relied upon the letter dated 30.4.1993 of the respondent inasmuch as this letter has not been proved to have been sent to or received by the appellant. It is also argued that once there is an issue of delay, the department should be entitled to interest and penalty. 4. Before me, it is not disputed that the provision which will apply in the present case is regulation 31C of the Employees’ State Insurance (General) Regulations, 1950 and which reads as under:- “31C. Damages on contribution or any other amount due, but not paid in time.- If an employer fails to pay contributions within the periods specified under regulation 31, or any other amount payable under the Act, the corporation may recover damages, not exceeding the rates mentioned below, by way of penalty: Period of delay Maximum rate of damages in per cent. per annum of the amount due (i) Less than 2 months 5% (ii) 2 months and above but less than 4 months 10% (iii) 4 months and above but less than 6 months 15% (iv) 6 months and above 25% Provided that the Corporation, in relation to a factory or establishment which is declared as sick industrial company and in respect of which a rehabilitation scheme has been sanctioned by the Board for Industrial and Financial Reconstruction, may:- (a) in case of a change of management including transfer of undertaking (s) to workers’ Co-operative(s) or in case of merger or completely waive the damages levied or leviable. (b) in other cases, depending on its merits, waive upto 50 per cent. damages levied or leviable. (b) in other cases, depending on its merits, waive upto 50 per cent. damages levied or leviable. (c) in exceptional hard cases, waive either totally or partially the damages levied or leviable.” It is also agreed that the sub Regulation (c) of the aforesaid provision gives a right to the corporation to waive interest and penalty in exceptional/hard cases. The dispute is that whether the facts of the present case can be brought by the respondent within the provision of 31C proviso (c) to deny the claim of interest and penalty by the appellant. 5. Even if I accept the first argument urged on behalf of the appellant that letter dated 30.4.1993 has not been received by the appellant, however, the impugned judgment in para 29 rightly observes that there was a valid issue of whether the expression “ use of power” as per the meaning of that expression contained in the ESI Act includes use of LPG gas. This vexed question as to whether use of LPG gas for the purpose of preparing of tea and coffee by the use of power was resolved by the Supreme Court only in the year 2009 as per the judgment in the case of Bombay Anand Bhavan Restaurant Vs. The Deputy Director, ESI Corporation and Anr. (2009) 9 SCC 61. Therefore, once the respondent had a valid basis to contest the coverage under the ESI Act it cannot be said that respondent was unjustifiably and arbitrarily refusing to pay the original demand. If there is a valid basis to dispute the coverage and the original demand, consequently there would be unnecessarily hardship upon any person if he is asked to pay interest and penalty on the original demand because to impose penalty and interest would be to deny opportunity to get a vexed legal issue decided by the Court. 6. In view of the above, there is no merit in the appeal and the same is therefore dismissed, leaving the parties to bear their own costs.