ESI Department's Unexpected Claim: How Can We Handle Missing Records from 1995-1999?

Hi seniors,

We have received a letter from the ESI department claiming a recovery of 3.5 lakhs for the period from 1995 to 1999. They claim to have sent a Form C-18 in February 2003 for this amount.

During the same period, they raised another Form C-18 and within two months issued a Form 45A for recovery of 1.5 lakhs, which we paid at that time.

We have been in contact with the ESI department during this period, and this claim was never mentioned. We have been consistently paying ESI contributions every month, and ESI Inspectors audited us until 2006 without any mention of this issue.

How can we provide salary registers, attendance registers, and all relevant documents like ledgers and bank statements from 10 to 13 years ago? Is there any action we can take regarding why this claim was not settled earlier? Are there any legal precedents stating that documents need not be produced, or is it the responsibility of the ESI department to support their claim?

Aslam Sha
daudaslamsha@gmail.com

If you attach the copies of the claims, such as C-18, 45-A order, C-19, and Recovery Certificate, I can suggest to you to some extent.

Hi Prasad,

Please send me your email ID. I am only able to see a picture icon, not your email ID. Kindly update your email ID to mine: "daudaslamsha@gmail.com."

Ravi, your suggestion is fine. The only thing is, it must be the last option. Is there any rule that restricts the scrutiny period for ESI, like the 7-year restriction for income tax?

Thanks,
Aslam Sha

Hi,

Usually, ESI accepts a letter stating unavailability of records prior to five years. Also, ESI inspectors ordinarily explain the basis for arriving at an amount in their observation reports. It might help if you dig out the files and go through their observation reports.

Regards,
Mahesh

Dear All,

It is only appropriate that you take up the issue with the ESI and build a good and healthy relationship with them if your company is willing to do so. Any default on your side without paying the contribution is not only wrong but acts against the interests of the employees. Go through the previous files, returns, and registers. Get opinions and take your management into full confidence before you act. As an individual, it would be appropriate to deal with laws in the right earnest and protect the company's interests simultaneously.

V. Rangarajan.

Hi Rangarajan,

As explained, we have been regularly paying the ESI, and there has been an audit by ESI inspectors up to March 2006. They cannot claim that there was a default from 1995 to 1999 and claim to have sent a notice in 2003 and again in 2009 calling for records. It's interesting to note that exactly during this period, they made a claim based on the audit, and we paid the dues immediately even though it was not technically correct. They asked us to pay 6.5% for the interior contract given by us to build another floor, and we paid as we did not want to get into legal complications.

Regards,
Aslam Sha

Thanks Prasad, please send me your email ID. I am only able to see a picture icon, not your email ID. Please make your email ID similar to mine: "daudaslamsha@gmail.com". Ravi, your suggestion is fine, the only requirement is that it must be the last option. Is there any rule that restricts the scrutiny period for ESI, like the 7 years for income tax? Aslam Sha

In general, the retention period is 15 years. Therefore, HR cannot dispose of any employee records. You can support this with your business volume and transactions, stating that you won't be able to maintain anything beyond 10 years, along with your good standing report for the last 10 years.

Dear,

First of all, check from your records whether your company was liable to pay any contributions. If so, did they not make the payment? If you are unable to locate your records, go to ESI authorities and ask them on what basis they have issued. Of course, to do this, you have to be a little tactful and make them believe that you are trying to convince your management so that the reality will come up.

Best of luck,
GLN

Instead of being afraid of any department, whether it is ESI or EPF or others, as an educated individual, you should try to approach the concerned officers or the Head of the Office. In your case, you can approach the concerned Regional Director along with a written representation requesting the details of the claim and its documentary evidence. I am an employee of the ESI Corporation and have the utmost respect for my department's procedures. Without any evidence, ESI cannot initiate such harsh actions. Otherwise, of course, I should not suggest to you. You can also request the details of such a claim in writing through the RTI Act. If you need further help, do not hesitate to contact me at vsyamprasad@gmail.com or via Yahoo Mail.

Please let me know if you need more assistance.

Hello Aslam,

Never bribe. It is going to increase your problem. Take the legal route. For that, go through the file to see whether you had asked for postponement of inspection at any time, whether you had asked for postponement of hearing on C18 at any time in the past, or whether you failed to attend a hearing. I was in the ESI department, in a very senior position, having authored several of the internal instructions. There are instructions against repeated inspection for the same period, the need to give a standard observation slip by inspectors, etc. Please go through your file and gather all the papers. If I can see all the papers including the inspector's observation letter, C18, your response, and 45A order, I could perhaps give you some suggestions. If the claim is wrong, you need to take it up with DG, ESIC, and if it fails there, you could go to EI Court, where the procedure is simple. If after going through all the documents, it is professionally found to be correct, do not go to court, since that is going to pile up your interest and penalty liability.

Regards,
O Abdul Hameed
Formerly Additional Commissioner, ESIC, New Delhi
Presently General Manager, Peekay Steels, Calicut/Coimbatore
Email: oahamid@yahoo.com

Thanks for the comments from all. We are trying to recover documents for that period and had a breakthrough. We got one or two payment challans and will excavate the balance to produce to the department. Generally, in the interest of the scheme, I personally prefer that not so many companies mushroom and vanish. The department must act swiftly to recover the dues from the employers and not wait for 10 years to get the money. With ESIC signing a migration to e-governance with Wipro, it would be better.

Dear Mr. Aslamsha,

1. Where Form C-18 (you have not mentioned the date) has been issued followed by a Recovery Order under Form 45A (date of the order and the period of demand not mentioned) for the recovery of Rs.1.5 lakhs for a specific period, no further demand can be made by ESIC for the same period.

2. Assessment under C-18 is based on the inspection of records and documents verified by the Inspector, and subsequent Orders under 45 A are passed only after a personal hearing.

3. You have not mentioned whether you have paid Rs.1.5 lakhs as claimed in the 45 A order. Or in case you have not settled the payment of Rs. 1.5 lakhs, whether you intend to contest both the assessment/orders?

4. ESIC has the power to demand records from the date of coverage, and therefore, it is the responsibility of the Employer to produce the records to ESIC.

5. There is no need for bribing any officer in ESIC as suggested in some postings. It would not solve the problem.

6. You have a strong case since prima facie, there are two conflicting demands/assessments for the same period, and legally, you can counter them. Even if there is a demand, C-18 is only an ad hoc assessment, and hence there is a possibility of reducing the liability substantially.

I myself was in ESIC and so will be able to advise you further.

A. Irudayam MA, MBA, LLB
Advocate & HR Consultant
+91 99406 86632