{"id":155578,"date":"2007-06-15T00:00:00","date_gmt":"2007-06-14T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/d-s-m-industries-vs-regional-employees-state-on-15-june-2007-2"},"modified":"2015-11-17T21:04:16","modified_gmt":"2015-11-17T15:34:16","slug":"d-s-m-industries-vs-regional-employees-state-on-15-june-2007-2","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/d-s-m-industries-vs-regional-employees-state-on-15-june-2007-2","title":{"rendered":"D.S.M.Industries vs Regional Employees State on 15 June, 2007"},"content":{"rendered":"<div class=\"docsource_main\">Madras High Court<\/div>\n<div class=\"doc_title\">D.S.M.Industries vs Regional Employees State on 15 June, 2007<\/div>\n<pre>       \n\n  \n\n  \n\n \n \n BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT\n\nDATED :  15\/06\/2007\n\nCORAM :\nTHE HONOURABLE MR.JUSTICE P.R.SHIVAKUMAR\n\nC.M.A.(MD).No.229 of 2000\nand\nC.M.P.(MD).No.2152 of 2000\n\nD.S.M.Industries,\nby its Partner\t\t\t... Appellant\n\nvs.\n\n1.Regional Employees State\n  State Insurance Corporation by its\n  Regional Director.\n\n2.The Deputy Director,\n  Employees State Insurance Corporation\n\t\t\t\t\n\t\t\t\t... Respondents\n\t\t\nPrayer\n\n\nAppeal filed under Section 173 of Motor Vehicles Act against the order\nand decretal order of the learned Principal District Judge, Thiruchirapalli\npassed in E.S.I.O.P.No.7 of 1990 dated 29.10.1998.\n\n!For Appellant\t\t... M\/s.L.N.V.Subramanian\n\t\t\t    L.N.S.Sethuraman\n^For Respondents\t... Mr.P.Sermakani\n\n\n:JUDGMENT\n<\/pre>\n<p>\tThis is an appeal filed under Section 82 of the Employees State Insurance<br \/>\nAct, 1948 against the order of the learned Principal District Judge (ESI Court),<br \/>\nTiruchirappalli, dated 29.10.1998 passed in E.S.I.O.P.No.7   of 1990 by which<br \/>\nthe order of the assessing authority dated 30.7.1990 was confirmed.\n<\/p>\n<p>\t2.The facts and circumstances leading to this Civil Miscellaneous Appeal<br \/>\ncan be briefly stated as under:\n<\/p>\n<p>\tThe appellant is a registered partnership firm running a factory in the<br \/>\nname of M\/s.D.S.M Industries at Coimbatore Road, LNS Post, Karur. The same is an<br \/>\nIndustrial Establishment governed by the provisions of ESI Act, 1948 and the<br \/>\nappellant being the employer is bound to pay contribution (both employers and<br \/>\nemployees contribution) to the ESI Corporation in accordance with Section 40 of<br \/>\nthe ESI Act. Inspection of the records of the appellant at the factory premises<br \/>\nfor the period from 1982 to 1984 was conducted by the ESI Inspector on 4.9.1984.<br \/>\nSimilarly inspection of the records pertaining to the period from 1.8.1984 to<br \/>\n30.1.1986 was conducted by him on 12.2.1986. During the inspections, default of<br \/>\npayment of contribution by the employer was noticed. Based on the inspection<br \/>\nreport, a show cause notice under form C 18 happened to be issued by the first<br \/>\nrespondent on 2.4.1986 calling upon the appellant to show cause why assessment<br \/>\nshould not be made under Section 45-A of the ESI Act. A calculation sheet<br \/>\nfurnishing details of arrears had also been sent along with the notice. The<br \/>\narrears of contribution claimed under the notice have been categorized into 4<br \/>\nitems as follows:\n<\/p>\n<p>Item No.<br \/>\nDemand Description<br \/>\nWages Reckoned<br \/>\nRs. P.\n<\/p>\n<p>Contribution<br \/>\nRs. P.\n<\/p>\n<p><span class=\"hidden_text\">1<\/span><\/p>\n<p>Contribution on adhoc basis 1979-80, 1981-82 and 1983-84<br \/>\n21,950-00<br \/>\n1536-00<br \/>\n<span class=\"hidden_text\">2<\/span><br \/>\nShort payment of contribution for CPE 9\/81\n<\/p>\n<p>&#8212;\n<\/p>\n<p>52-20<br \/>\n<span class=\"hidden_text\">3<\/span><br \/>\nContribution on adhoc basis on labour charges ex-gratia, cooly, casting batta<br \/>\netc., from 1-4-82 to 31-3-83<br \/>\n8,00,650-05<br \/>\n56,045-40<br \/>\n<span class=\"hidden_text\">4<\/span><br \/>\nShort payment of contribution for the period from 27-1-85 to 31-12-85\n<\/p>\n<p>&#8212;\n<\/p>\n<p>2-35<\/p>\n<p>\t3.The appellant after initially making a total denial of liability to pay<br \/>\nthe contribution as demanded under the notice, subsequently admitted his<br \/>\nliability to pay the contributions noted in items 1, 2 and 4 alone and remitted<br \/>\na sum of Rs.1,591.05 on 12.5.1986. So far as the contribution of Rs.56,045.40<br \/>\ndemanded in item 3 was concerned, the appellant disputed its liability stating<br \/>\nthat the said amount was paid to Sub-contractors for fabrication works done<br \/>\noutside the factory without the control and supervision of the appellant and<br \/>\nthat the entire amount paid to the Sub-contractors could not be termed wages or<br \/>\nlabour charges attracting ESI contribution and that the levy of contribution for<br \/>\nthe entire amount was not justified. The appellant took time for production of<br \/>\ndocuments in proof of the contention that the amount noted as wages in item 3<br \/>\nwas paid to the Sub-contractors which included the cost of the material and<br \/>\nother incidental expenses to be born by the Sub-contractors.\n<\/p>\n<p>\t4.But later on, without producing any documents, the appellant calculated<br \/>\n15% of the above said amount noted in item 3 as wages (Rs.8,00,650.05) as actual<br \/>\nlabour charges, calculated 7% contribution on the same and paid a sum of<br \/>\nRs.8,605.90. The same was not acceptable to the respondents. Thereafter, the<br \/>\nappellant took several adjournments to produce break-up details and necessary<br \/>\nrecords to substantiate his contention, but failed to do so. Consequently based<br \/>\non the report of the ESI Inspector, the first respondent passed an order under<br \/>\nSection 45-A fixing the total contribution on all 4 items at Rs.57,636.55<br \/>\ndeducted a sum of Rs.10,196.95 paid by the appellant during enquiry as indicated<br \/>\nabove and fixed the arrears of contribution at Rs.47,439.65 which amount was<br \/>\ndirected to be paid. A sum of Rs.1,525\/- as interest for the arrears from the<br \/>\ndate of default till the date of order was also incorporated in the order. The<br \/>\ncontradiction for payment of Rs.47,439.65 and for future payment of interest at<br \/>\nthe rate<br \/>\nof 6% per annum had also been incorporated in the said order. The said order was<br \/>\nchallenged by the appellant before the Principal District Judge (ESI Court),<br \/>\nTriuchirappalli in E.S.I.O.P.No.13 of 1986. The said Court, after enquiry, set<br \/>\naside the assessment order dated 7.11.1986 and remitted the matter back to the<br \/>\nfirst respondent, directing to pass an order after giving an opportunity to the<br \/>\nappellant to obtain the break-up particulars from the alleged Sub-contractors<br \/>\nand produce the records for the proof of the same. The appellant had produced 2<br \/>\nday books and ledgers purporting to be maintained by two of its alleged<br \/>\ncontractors for the period from 1982-83 before the ESI Court during the enquiry<br \/>\nin E.S.I.O.P.No.13 of 1986. In addition to the same, two volumes of day books<br \/>\nfor the period 27.3.1982 to 30.3.1983 and ledger for the period 1982 to 1983<br \/>\nalone were produced as fresh documents before the first respondent during<br \/>\nenquiry after remand.\n<\/p>\n<p>\t5.At the conclusion of enquiry, the first respondent disbelieved the<br \/>\ngenuineness of the above said documents and assessed the contribution of the<br \/>\nthird item of demand with break up particulars as follows:<br \/>\nDescription Charges<br \/>\nAmountRs.P.\n<\/p>\n<p>Contribution at 7% Rs. P.\n<\/p>\n<p>Contributio remitted Rs.P.\n<\/p>\n<p>i) Labour charges<br \/>\n7,42,397-25<br \/>\n51,967-80<br \/>\n7,795-15\n<\/p>\n<p>ii) Casting batta<br \/>\n   6,898-50<br \/>\n   482-90\n<\/p>\n<p>&#8212;\n<\/p>\n<p>iii) Ex-gratia payment<br \/>\n  15,282-00<br \/>\n  1,069-75<br \/>\n   810-75\n<\/p>\n<p>iv) Miscellaneous wages LF 62<br \/>\n  36,072-30<br \/>\n  2,525-10\n<\/p>\n<p>&#8212;\n<\/p>\n<p>A sum of Rs.8,605.90 already paid during enquiry in respect of item 3 was<br \/>\ndeducted from the said amount and the arrears of contribution to be paid was<br \/>\nfixed at RS.47,439.65. It was also observed in the said order that the said<br \/>\namount shall carry interest at the rate of 6% per annum from the date of<br \/>\ndefault. The above said assessment order made under Section 45-A of the ESI Act<br \/>\nwas passed on 30.7.1990 by the first respondent in his proceedings<br \/>\nNo.TN\/INS.II.51-12518-67.1239-41 dated 30.7.1990. The said order was challenged<br \/>\nbefore the ESI Court in E.S.I.O.P.No.7 of 1990.\n<\/p>\n<p>\t6.In the enquiry before the ESI Court, one witness was examined and 28<br \/>\ndocuments were marked on the side of the petitioners. No witness was examined<br \/>\nand no document was marked on the side of the respondents.\n<\/p>\n<p>\t7.The learned Principal District Judge, Tiruchirappalli in his capacity as<br \/>\nJudge of the ESI Court, after enquiry, by his impugned order dated 29.10.1998,<br \/>\nconfirmed the assessment made by the first respondent and dismissed the<br \/>\nE.S.I.O.P.No.7 of 1990. Aggrieved by and impugning the said order dated<br \/>\n29.10.1998 passed by the ESI Court, the appellant has preferred this present<br \/>\nCivil Miscellaneous Appeal under Section 82 of the ESI Act.\n<\/p>\n<p>\t8.The Court heard the arguments advanced by Mr.L.N.V.Subramanian, the<br \/>\nlearned counsel for the appellant and also by Mr.P.Sermakani, the learned<br \/>\ncounsel for the respondents and paid its considerations to the same.\n<\/p>\n<p>\t9.It is not in dispute that the appellant is running a factory and is an<br \/>\nemployer coming under the purview of the ESI Act to pay contribution to the ESI<br \/>\nCorporation based on the wages paid to its workers. Pursuant to the inspection<br \/>\nreports submitted by the ESI Inspector after conducting inspection of records of<br \/>\nthe appellant&#8217;s factory, default in payment of contributions to the ESI<br \/>\nCorporation to a large extent was noticed by the ESI authorities. After issuing<br \/>\na show cause notice in form C 18 and after giving an opportunity to the<br \/>\nappellant to represent his case, the arrears of contribution was assessed by the<br \/>\nfirst respondent under Section 45-A of the Act. The said assessment was<br \/>\nchallenged before the ESI Court and it proved unsuccessful. Hence, the appellant<br \/>\nis before this Court.\n<\/p>\n<p>\t10.The appeal against the order of the ESI Court can be filed in the High<br \/>\nCourt only on a substantial question of law. Section 82 Sub-clause 1 of the ESI<br \/>\nAct provides an abstent clause that no appeal shall lie from an order of an ESI<br \/>\nCourt save as otherwise provided in the sub-Section 2. Sub-section 2 is the<br \/>\nenabling provision which says that an appeal shall lie to the High Court from an<br \/>\norder of an Employees Insurance Court if it involves a substantial question of<br \/>\nlaw. A reading of the said Section will make it clear that an appeal against the<br \/>\norder of the ESI Court can be entertained only if it involves a substantial<br \/>\nquestion of law. On the other hand, no appeal can be maintained the questions of<br \/>\nfact alone. In the instant case, the appellant has framed two questions and<br \/>\nincorporated the same in its memorandum of appeal as the substantial question of<br \/>\nlaw involved in this case. They are<br \/>\n\t&#8220;1) Was not the non-appreciation of the relevant materials with proper<br \/>\nperspective apparent from the finding that the entire payments made by the<br \/>\nappellant to its contractor amount to Labour Charges attracting payment of<br \/>\nE.S.I. Contributions on the whole amounts despite the statutory recognition of<br \/>\n15% of the total price alone amounts to labour expenses with respect to<br \/>\nfabrication works, contracts, under the Tamil Nadu General Sales Tax Act?\n<\/p>\n<p>2) Can adverse inference can be drawn with respect to account books maintained<br \/>\nin the regular course of business merely on the ground that entries they are<br \/>\nidentical and stereo-typed when particularly the works were entrusted to the<br \/>\ncontractors on the same dates and to be completed on a particular date?&#8221;\n<\/p>\n<p>\t11.The Court considered the above said questions and upon such<br \/>\nconsideration, comes to the conclusion that out of the two questions cited<br \/>\nabove, the second one relates to the appreciation of evidence and the same<br \/>\ncannot be accepted as a substantial question of law. Appreciation of evidence is<br \/>\nthe process by which question of facts are decided. A question of fact may at<br \/>\ntimes attain the position of a question of law, if such a finding is perverse or<br \/>\nbased on no evidence. The question &#8220;whether the account books produced by the<br \/>\nappellant purporting to be maintained by the so-called contractors of the<br \/>\nappellant are genuine and reliable?&#8221; &#8211; is nothing but a question of fact. The<br \/>\nsame cannot be termed a question of law, much less a substantial question of<br \/>\nlaw. Even if it is assumed that the reliability of a particular document will be<br \/>\na question of law, unless the same is proved to have been decided wrongly by the<br \/>\nlower Court, the appellant cannot succeeded in his appeal. In the instant case,<br \/>\nit is not correct to state that the account books allegedly maintained by the<br \/>\nsupposed contractors of the appellant were held unreliable only on the ground<br \/>\nthat the entries found therein were identical and stereo-type. The same happened<br \/>\nto be one of several reasons for arriving at the conclusion. Even in the absence<br \/>\nof the said reason, the other reasons assigned by the ESI Court are enough to<br \/>\nsustain the finding regarding the reliability of the said documents.\n<\/p>\n<p>\t12.None of the supposed contractors were examined. P.W.1 admitted in his<br \/>\nevidence that the contractors did not submit their accounts to the Income Tax<br \/>\nDepartment and that they had not produced any proof for the receipt of raw<br \/>\nmaterials for fabrication from the appellant. Bills\/vouchers to show payments<br \/>\nmade to the contractors have not been produced by the appellant. All these<br \/>\nfactors had weighed with the ESI Court to come to the conclusion, which<br \/>\naccording to the considered opinion of this Court was a correct conclusion, that<br \/>\nthe account books produced by the appellant purporting to be that of the<br \/>\ncontractors were not genuine and hence, they were not reliable. Under these<br \/>\ncircumstances, the second question suggested by the appellant cannot be accepted<br \/>\nto be a substantial question of law involved in this appeal.\n<\/p>\n<p>\t13. Let us now consider whether the other question suggested by the<br \/>\nappellant is in fact involved in this appeal. According to the appellant, the<br \/>\namount paid by the appellant to the contractors for fabrication works should be<br \/>\nequated with the price of the commodity, 15% of the said amount alone should be<br \/>\nreckoned as labour charges and  contribution to be levied only on the said<br \/>\namount. The learned counsel for the appellant cited the procedure prescribed<br \/>\nunder the Tamil Nadu General Sales Tax Act by which the labour charges are<br \/>\nreckoned at 15% of the total price of the commodities manufactured and wanted<br \/>\nthis Court to apply the said principle to the appellant&#8217;s case also. According<br \/>\nto the submission made by the learned counsel for the appellant treating the<br \/>\nentire amount paid by the appellant as fabrication charges to the contractors as<br \/>\nlabour charges is erroneous and &#8220;whether the entire amounts spent by the<br \/>\nappellant for fabrication could be treated as wages?&#8221; &#8211; is a substantial<br \/>\nquestion of law. This Court is not in a position to countenance the said<br \/>\nsubmission made on behalf of the appellant.\n<\/p>\n<p>\t14.In the instant case, it is not the price of the commodity which has<br \/>\nbeen taken by the respondents as labour charges. It is not even the case of the<br \/>\nappellant that a sum of Rs.8,00,650.05 found in its account books represents the<br \/>\nprice of the fabricated commodities. According to the appellant&#8217;s case itself,<br \/>\nraw materials were supplied and the said amount was paid as charges for<br \/>\nfabrication. Therefore, the same cannot be equated to the price of the goods out<br \/>\nof which alone 15% has to be reckoned as the labour charges.  According to the<br \/>\nappellant, the above said amount allegedly paid to the contractors includes<br \/>\nlabour charges as well as incidental expenses incurred by the so-called<br \/>\ncontractors like electricity charges, purchase of welding rods, rental expenses<br \/>\netc. If at all the above said amount was paid to the contractors as fabrication<br \/>\ncharges, there is possibility of holding that a part of the amount should be<br \/>\ndeducted towards incidental expenses and only the balance shall be reckoned as<br \/>\nthe labour charges. It cannot be done so in this case because the very<br \/>\ncontention of the appellant that raw materials were supplied to the contractors<br \/>\nand the contractors did the fabrication work for the appellant and that the<br \/>\nabove said amount was paid to the contractors for fabrication work. As the ESI<br \/>\nCourt has come to a definite conclusion that the above said amount was not paid<br \/>\nto the contractors and that the same represented the amount paid to the workers<br \/>\nas wages or labour charges, the said finding of the ESI Court is only a finding<br \/>\non a question of fact. The said finding cannot even be construed as one based on<br \/>\nno evidence or perverse. The first respondent as well as the ESI Court has<br \/>\nfactually found that the plea of the appellant that the fabrication work was<br \/>\nentrusted to the contractors was not true. The non-production of any piece of<br \/>\npaper to show the despatch of the raw materials from the factory premises, the<br \/>\nnon-production of any document to show the entry of the finished goods after<br \/>\nfabrication into the factory, the admission of P.W.1 that no document evidencing<br \/>\nthe same were available and the non-production of any receipt or voucher to show<br \/>\npayment made to the contractors were all the reasons cited for arriving at the<br \/>\nsaid factual conclusion. On an appreciation of evidence, the lower Court has<br \/>\ngiven a finding on the above said question of fact that the amount found in the<br \/>\nrecords of the appellant as labour charges were infact paid as wages to the<br \/>\nworkers.\n<\/p>\n<p>\t15.In view of the said finding, the question of application of the<br \/>\nprinciple of reckoning labour charges out of the price of the commodity as<br \/>\nprescribed under the Tamil Nadu General Sales Tax Act on analogy will not arise.<br \/>\nHence, the first question suggested by the appellant also cannot be construed as<br \/>\na substantial question of law involved in this case.\n<\/p>\n<p>\t16.Therefore, this Court is not convinced that any substantial question of<br \/>\nlaw has arisen in this case and that the questions suggested by the appellant in<br \/>\nits memorandum of appeal are not infact substantial questions of law involved in<br \/>\nthis case. As no substantial question of law has arisen to be decided in this<br \/>\nappeal, this Court comes to the further conclusion that the appeal must fail.<br \/>\nAccordingly, the appeal fails and the same is dismissed with costs.<br \/>\nConsequently, connected M.P. is also dismissed.\n<\/p>\n<p>sgl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Madras High Court D.S.M.Industries vs Regional Employees State on 15 June, 2007 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED : 15\/06\/2007 CORAM : THE HONOURABLE MR.JUSTICE P.R.SHIVAKUMAR C.M.A.(MD).No.229 of 2000 and C.M.P.(MD).No.2152 of 2000 D.S.M.Industries, by its Partner &#8230; Appellant vs. 1.Regional Employees State State Insurance Corporation by its Regional Director. 2.The Deputy [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,13],"tags":[],"class_list":["post-155578","post","type-post","status-publish","format-standard","hentry","category-high-court","category-madras-high-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>D.S.M.Industries vs Regional Employees State on 15 June, 2007 - Free Judgements of Supreme Court &amp; 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