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Under Section45(2) in case any inspector/other authorized officer of ESIC may for the purpose of enquiring into correctness of any of the particulars stated in any return furnished under the ESI Act for the purpose of ascertaining whether any of the provisions of this Act has been complied with or not require any employer to furnish any record/information.
Under Section45A of the ESI Act,1948,where in respect of a factory/ establishment,no returns,particulars,registers or records are submitted,furnished or maintained in accordance with the provisions of Sec-44 OR any inspector or other officials of ESIC is prevented by either the principal employer or the the Contractor(immediate employer)in excercising his functions or discharging his duties under Sec-45 ,the ESIC may on the basis of information available to it by order determine the amount of contributions payable in respect of the employees of that factory or establishment.Under Sec-45B any such contribution assessed by the ESIC may be recovered as an arrear of land revenue.
In case of our factory every month as per the wages register of the contractors duly certified by the authorised representatives of the principal employer(in short ''P.E."),the ESI and PF contributions of the employees of the contractors are being deposited by the P.E. within due time.Also Half yearly returns of ESI contributions alongwith receipted challans against monthly deposit of ESI contributions are being submitted to ESI authorities in due time.The ESI Inspectors visits the factory from time to time and inspects the records of contribution paid by P.E.,attendance & wage registers under C.L.(R&A) Act and register of employees (Form-6) under ESI (G) Regulation maintained by contractors and other informations and put their signature in those records/documents.TheInspectors have also earlier observed in the Inspection Book as "the maintenance of the records are satisfactory."
But the dy.Director (Rev.) of Regional ESI Office has inspected our factory in subsequent years and even though the above documents/registers ,which were earlier inspected by Insurance Inspectors ,has assessed ESI contribution at much higher rate over the bills of the contractors paid by the P.E. during the relevant years taking labour components(wages) to be 25%to 40 % of the bill amounts ( the contractors are not labour supply contractors,they are only job contractors) and directed the P.E. to deposit the differential amount of contribution with interest within a limited time to avoid prosecution under the Act.Besides the ESI Authority may also levy damage @ upto 25% of the demanded amount of differential amount of contribution.
Now the management has gone to Employees' Insurance Court against the above order of Dy. Director (Rev.) ,ESIC.
Here the following questions arise as to
(i)whether there is any scope for assessment of contribution over the bills paid to the contractor ,where the ESI inspectors had earlier verified the relevant registers/documents ,deposited amount and were satisfied with the registers maintained under the Act and
(ii) Whether the Dy. DIr(Rev) is justified in taking 25 to 40% of the contractors' billed amount as wages of their labour,while labour cost of a firm/industry (CTC) is normally taken at around 10-15% of the cost of production/business.
I would like to request you all to enlighten me about the % rate of billed amount of the contractor generally taken by the ESI authority towards labour component in case the contractor has failed to produce wage and employees register in similar situations in your factory/organisations.Also please offer your valued suggestions over the action to be taken by the P.E. in such a situation like ours.
Head-HR,Jayshree Chemicals Ltd.,Orissa
We are referring to a Circular of ESI which is available in this link http://www.citehr.com/294729-esi-cir...#axzz19haSV1at
Pls revert under which category you will be assessed for ESI.
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684-9025792634
If the contractor /P.E. fails to comply on the labour component ,and no muster roll/wage register in respect of contractor's employees is made available for inspection, according to the present guidelines given by the Corporation to the inspecting authorities, they have to assess 25% of the total amount paid to the contractor as wage component if the amount paid to the contractor includes material costs also.
If he is exclusively labour contractor, and no material cost is involved in the total amount paaid to the contractor, the wage component is assessed at 60% of the total amount paid to the contractor.
These measures are taken only when both the contractor and P.E. failed to furnish the records to the inspecting authority and unable to assess the contribution on their own as a last resort.
In case, the employer has already complied on the payments made to the contractor, it is the duty of the P.E. to produce the relevant records for inspection. The contractor is also required to maintgain the employees' register under Regulation 32(1) (a) of the ESI (General) Regulations 1950, and the same is to be handed over to the principal employer at the time of settling his account as per section 41-(1A) which is re-produced below.
"41 (1A) The immediate employer shall maintain a register of employees employed by or through him as provided in the regulations and submit the same to the principal employer before the settlement of any amount payable under sub-section (1)".
Therefore the principal employer cannot evade the responsibility of either production of records or payment of contribution.
Section 45(4) provides for re-inspection/test inspection by a higher authority. Regulation 102 empowers the Deputy Director for such inspection.
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