Case Note & Summary
The appellant, Paramount Agencies Pvt. Ltd., a company covered under the Employees' State Insurance Act, 1948, received a letter dated 31.01.1991 from the Assistant Regional Director, ESI Corporation, claiming an amount of Rs. 11,584/- towards contribution on conveyance allowance paid to employees for the period from July 1985 to September 1990. The appellant replied on 25.02.1991 contending that the conveyance allowance was exempted from the definition of 'wages' under Section 2(22)(b) of the ESI Act. Despite this, the respondents issued another notice on 15.04.1991 demanding deposit within 15 days with 12% interest. The appellant filed Application (E.S.I.) No. 4/1991 before the Employees' State Insurance Court, Aurangabad, which was rejected on 30.11.1994. Aggrieved, the appellant filed the present appeal. The respondents argued that the conveyance allowance was part of wages and contribution was payable. The court analyzed the definition of 'wages' under Section 2(22) of the ESI Act, which excludes any allowance paid for actual travel expenses under clause (b). The court noted that the appellant had produced evidence, including salary registers and vouchers, to show that the conveyance allowance was paid for actual travel expenses incurred by employees. The court held that the burden was on the employer to prove the nature of the allowance, and the appellant had discharged that burden. Therefore, the conveyance allowance was excluded from wages, and no contribution was payable. The court allowed the appeal, set aside the trial court's order, and directed the respondents to refund any amount recovered with interest.
Headnote
A) Employees' State Insurance - Definition of Wages - Section 2(22)(b) ESI Act, 1948 - Conveyance Allowance - The issue was whether conveyance allowance paid to employees for actual travel expenses falls within the definition of 'wages' under Section 2(22) of the ESI Act. The court held that such allowance, when paid for actual travel expenses, is excluded from 'wages' under Section 2(22)(b) as it is an allowance not paid for work done but for reimbursement of expenses. The employer must prove that the allowance is for actual travel expenses. (Paras 1-10) B) Employees' State Insurance - Burden of Proof - Section 2(22) ESI Act, 1948 - The burden is on the employer to show that the conveyance allowance is paid for actual travel expenses and not as part of wages. The appellant succeeded in proving that the allowance was for actual travel expenses, and thus no contribution was payable. (Paras 5-10) C) Employees' State Insurance - Contribution - Section 40 ESI Act, 1948 - The court held that the ESI Corporation cannot demand contribution on conveyance allowance if it is excluded from wages. The demand of Rs. 11,584/- was set aside. (Paras 10-12)
Issue of Consideration
Whether the conveyance allowance paid by the appellant to its employees is covered under the definition of 'wages' under Section 2(22) of the Employees' State Insurance Act, 1948, and whether the appellant is liable to pay ESI contribution on such allowance.
Final Decision
The appeal is allowed. The judgment and order dated 30.11.1994 passed by the learned Judge, Employees' State Insurance Court, Aurangabad in Application (E.S.I.) No. 4/1991 is set aside. The demand of Rs. 11,584/- towards ESI contribution on conveyance allowance is quashed. The respondents are directed to refund any amount recovered from the appellant with interest at 6% per annum from the date of recovery till payment.
Law Points
- Conveyance allowance paid for actual travel expenses is excluded from definition of 'wages' under Section 2(22)(b) of ESI Act
- 1948
- Burden of proof on employer to show allowance is for actual travel expenses
- ESI contribution not payable on such allowance
