JUDGMENT
K.S. Radhakrishnan, J.
1. This appeal has been preferred by the E.S.I. Corporation aggrieved by the order passed by the Insurance Court in I.C. No. 56 of 2003, Respondent herein was the applicant before the Insurance Court. Application was preferred under Section 75 read with Section 77 of the Employees State Insurance Act, 1948 seeking a declaration that the applicant is eligible to get refund of Rs. 2,23,771.90 with 18% interest from 11-5-1994 being the contribution remitted by the applicant during the period from 1-4-1993 to 31-3-1994 daring which the applicant establishment was exempted from the provisions of the E.S.I. Act by the Government of Kerala in exercise of the powers conferred by Sections 87 and 91A of the E.S.I. Act. Insurance Court allowed the application and gave a declaration that the applicant is eligible to get refund of Rs. 2,23,771.90 with simple interest at me rate of 6% per annum from 11-5-1994 onwards.
2. Learned Counsel appearing for the Corporation submitted that the Insurance Court has committed an error in ordering refund with interest, which according to the counsel, is in violation of provisions contained in Regulation 40 of ESIC (General) Regulation. Learned Counsel appearing for the respondent applicant submitted that the Insurance Court has correctly interpreted Regulation 40 and granted only a reasonable interest and there is no substantial question of law raised before this Court for consideration.
3. We are in this case primarily concerned with the scope of Regulation 40 of the E.S.I.C (General) Regulation, 1950 and whether there is any justification in awarding interest to the applicant. Regulation 40 is extracted hereunder for easy reference.
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 the Act may be refunded without interest by the Corporation to that person, if the application to that effect is made in writing before the Commencement of the benefit period corresponding to the contribution period in which such contribution was paid.
(2) Where any contribution has been paid by a person 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.
(4) Where the whole or part of the amount of any contribution referred to in Sub-regulations (1) and (2), was recovered from in immediate employer or deducted from the wages of an employee by the principal employer, he shall, on getting the refund of the amount from the corporation be liable to pay back the amount so recovered or deducted to the period 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.
Regulation 40 would apply only to a case where contribution is paid by a person on an erroneous belief that the contributions were payable by that person under tie Act. In such cases the contribution erroneously paid will have to be refunded but without interest to that person. There is no element of heretical, inexact or wrong conduct on the part of a person when he makes a contribution erroneously and therefore rule making authority felt that even though the amount has to be refunded the corporation need not pay interest because such payment was made by the party erroneously. So far as the present case is concerned no payment was made erroneously. The applicant remitted the amount in accordance with law. Amount was paid on an erroneous belief. In other words, the applicant was bound to pay the amount legally. Government exempted the employees retrospectively from the provisions of E.S.I. Act in consultation with the E.S.I. Corporation in exercise of their powers conferred on them as per Sections 87 and 91 of the E.S.I. Act. Government vide Ext. P7 notification No. G.O. (Rt.) No. 1416/93 dated 27-5-93 exempted the employees of the applicant establishment from the operation of the provisions of the E.S.I. Act for a period of one year from 1-4-1992 to 31-3-1993.The exemption was granted subject to certain conditions and there is no stipulation that the interest need not be paid when refund is made in view of the exemption order. Further there is no condition in the Government order that the applicant would not be entitled to interest. On the strength of the Government order Government is not legally entitled to collect contribution and the refund of the contribution would be unauthorised. In the absence of any conditions stipulate d in the Government Order in our view, the applicant is entitled to get reasonable interest. Regulation 40 would come to the rescue of the corporation only if a person makes a contribution on an erroneous belief that the contribution was not payable by that person.
4. Under such circumstances, in our view, the applicant is entitled to get a reasonable interest since the amount was paid not or an erroneous belief, but in accordance with law. But by virtue of an order of exemption refund was ordered, in our view with reasonable interest. 18% interest was claimed, but Insurance Court awarded only 6%, which in the facts and circumstances of the case is just and proper.
Appeal therefore lacks merit and the same is dismissed.