Facing an ESI Inspection: Can We Challenge These Expense Calculations in Court?

Dear All, we are facing an ESI Inspection. The inspector has calculated agricultural expenses, loading & unloading charges, maintenance of garden expenses, etc., in the ESI payable list. Is it justifiable? Can we challenge this in ESI Court?

Regards,
Hareesh

Loading, unloading, and maintenance of garden expenses will attract ESI contributions in case it involves any labor wages. Regarding agricultural expenses, the issue should be dealt with as per the specifics of the case, as merely by category, we cannot presume the liability.

With regards.

What the inspector has pointed out is correct. The only way you could have come out of this liability, and still can, is by producing proof that the loading/unloading, agricultural expenses, etc., you have mentioned were already covered by their respective employers. I presume that you hired contract labor here.

Contributions Under the ESI Act

Contributions on loading and unloading charges, as well as agriculture expenses, are payable under the ESI Act, provided the work is done in factory/establishment premises or in connection with the work relating to such factory/establishment. In case the work is done outside or in non-implemented areas (where the ESI scheme is not implemented), in my opinion, no contribution will be payable.

In accordance with the ESIC Act 1948 - Section 2(9), an employee is defined. It is essential to be more careful while booking the head of the account in the balance sheet. We must deduct ESIC contributions, even for one day's wages, from contract workers and remit them to ESIC. Now, you can assess and resolve the issue regarding the exclusion of workmen who earn more than ₹15,000 per month.

Please let me know if you need any further clarification or assistance.

Thank you.

Regards

It all depends on how we account for the expenses. As far as ESI inspectors are concerned, they gather more information from the balance sheet only. Therefore, accountants should take care when writing the account narratives. Even if the contract laborers work under our supervision, we are liable to pay.

Regards,
Ravi

ESI Deductibility for Various Expenses

Loading, unloading, agriculture, and maintenance of the garden are ESI deductible. In the case of maintenance expenses, the whole amount should not be ESI deductible. It is reasonable to assume that 15% to 20% of the total maintenance amount is involved with labor expenses, and ESI expenses can be deducted on that amount only. What I am saying is based on logic and past records of inspection.

Regards,
Kamal Datta

As per the ESI Act, ESIC is payable on all the wages paid for any type of labor work on the premises or outside the premises. However, based on my knowledge, if the work is done within your premises and by your employees, then ESIC is not payable. If the labor works are done outside your premises and you have a gate pass or entry of the materials at the gate, then you are not eligible for ESIC payments. Before proceeding, you should confirm with your accounts department because, according to their bills, it is the responsibility of the accounts department to deduct ESIC and TDS for every job or labor work from the bills before payment.

Regards,
Shamsher

Respected All Seniors,

I am working in a small-scale industry. My question is that we have one pending job work for ESIC inspection since 2011 due to our records being ceased in the excise department. We have already taken extended dates from the ESIC department, but the main issue is the interest rate that has been accruing for the past 3 years, which is very burdensome for the company. The inspection is now approaching in a few days. How should we deal with this situation? Please guide me.

Thank you,
Anil

I would like a little bit of help. We are also facing the same issue. The inspector has included whitewash charges and renovation work in the ESIC payable list. Is this justifiable? Also, how can we deduct the ESIC contribution from the renovation contractor's bill, and how can we deposit it? Please guide us according to the ECT.

Regards,