(Prayer: This MFA is filed U/S 82(2) of the ESI Act, against the order dated 5.7.2010 passed in E.S.I. Application No.40/2007 on the file of Employees State Insurance Court, Bangalore, partly allowing the application U/S 75 of Employees State Insurance Act challenging the Order U/S 45-A of the Act dt.04.10.2007.)

1. This Misc. First Appeal is filed against the order dated 5.7.2010 passed in E.S.I Application No.40/2007 on the file of ESI Court, Bengaluru partly allowing the application challenging the order under Section 45-A of the Employees State Insurance Act,1948.

2. The respondent is a covered establishment undertaken the works of catering as well as house keeping for two clients, namely, The International School Bangalore & Columbia Asia Hospital, Hebbal during the wage period 2004-05 & 2005-06 and only the work of catering to another client namely, B.G.S. International School, Kumbalgodu, during the wage period 2004-05. The work of preparation of food was being undertaken within the premises of the respective clients.

3. The Insurance Inspector visited and verified the records for the period April 2004 to March 2006 on 30.1.2007 and served observation slip and later submitted inspection report along with additional remarks to the Regional Office of the respondent Corporation. Based on the inspection report and additional remarks enclosed to it, the authorized officer issued notice to show cause as to why contribution on the expenditures under the heads of accounts detailed therein should not be levied.

4. The respondent appeared and produced certain records, while opposing the proposal made in the show cause notice. After hearing, the authorized officer passed the order determining the contribution under the different heads claiming a total contribution of Rs.3,50,868/- on adhoc basis under Section 45-A of the Act. The respondent challenged the order on various grounds before the ESI Court.

5. The appellant filed objections contending that the claim of contribution on the difference of wages of RS.72,677/- out of payment of Rs.3,73,883/- made to M/s.Tholasi Hotel is justified since the entire payment was towards wages alone. Similarly, it is contended that the claim of contribution on 60% of the expenditures under the head of accounts garbage maintenance as well as house keeping and garden maintenance is justified. The appellant contested the plea of the respondent about lesser quantum of wage element involved in the said expenditures and also major portion of the said expenditures being related to factors other than wages.

6. The ESI Court upheld the case of the respondent that amount of Rs.3,73,883/- for the period April, 2004 to March 2005 is towards payment of salary to the staff deputed by M/s.Tholasi Hotel Private Ltd., and the said establishment had remitted the contribution, negatived the contention of the respondent that the expenditure of Rs.1,27,014/- and Rs.82,480/- booked for the period April, 2004 to March 2005 and April 2005 to March 2006 include other expenditure not liable for contribution in addition to labour charges, that the expenditure of Rs.1,98,050/- under the head of Garden maintenance is in fact expenditure towards garbage maintenance and the expenditure relate to payment to the transporter for the disposal of garbage and is not liable for levy of contribution, and that the liability to pay contribution is limited to the expenditure of Rs.1,08,104/- for the period 2004 to 2005 and 2005 to 2006 towards garbage maintenance expenses. The ESI Court upheld the contention of the respondent that actual expenditure under the head of House keeping for the year 2004-05 is Rs.92,59,561/- and not Rs.92,77,182/- and so far as case of the respondent that he is not liable to pay contribution on 60% of the amount received under the head of house keeping is held in the affirmative holding that labour element considered by the respondent for compliance is justified. Being aggrieved, the appellant is in this appeal.

7. I have heard the learned counsel for the appellant and learned counsel for respondent and perused the impugned order. The point that arises for consideration is, whether the impugned order suffers from any irregularity or illegality so as to call for interference by this Court? My answer would be in the negative for the following reasons.

8. The respondent claimed that Rs.3,73,883/- was the amount paid to M/s.Tholasi Hotel towards service of the staff deputed for catering and other works. M/s.Tholasi Hotel is separately covered and it has paid the contribution in respect of the wages paid to their staff deputed to the respondent's establishment. There was no discussion in the levying order as to how the difference of wages of Rs.72,677/- was found and what was the expenditure considered for compliance out of the total expenditure booked. The respondent in support of the contention that M/s.Tholasi Hotel has paid contribution on the wages of its eligible employees deputed to the respondent's establishment during the period in question. Copies of returns submitted by M/s.Tholasi Hotel relating to the period in question was produced at Ext.A7, 9 to 13. Thus it is clearly established that the expenditure of Rs.3,73,883/- was towards payment made by the respondent to M/s.Tholasi Hotel regarding staff deputed. The approach treating the difference amount as wage element liable for payment of contribution was found to be not correct. The question of claiming contribution on the difference amount treating it as wages would arise only when there is a positive finding that the wage element considered by the employer for the purpose of compliance is disproportionate and records to that effect are unreliable, which is not the case in the instant case. Therefore, the finding recorded by the court below on issue No.1 is justified.

9. The respondent contended that wage element involved in the total expenditure of Rs.4,07,544/- was only Rs.1,08,104/- and the liability of contribution on it is Rs.7,026/-. AW-1 witness gave evidence with reference to copies of bills and vouchers at Exts.A16 to A18 series relating to the said expenditures. It is stated that the individual contractors used to raise bills which included transportation charges, wages and other expenses incurred by them. The total wage element as per the said bills at Ext.A16 to A18 series is only Rs.1,08,104/- and as such the liability of the applicant is limited to Rs.7,026/-. The said evidence of AW-1 was challenged on the ground that no written agreement regarding entrusting collection & transportation of the garbage was produced. The bifurcation of labour element detailed in the statements in the form of tables annexed to Ext.A16 to A18 series appear to be imaginary and not based on actuals. An adhoc assessment cannot be substituted by another adhoc assessment, unless the one under challenge is either unreasonable or excessive or illogical and the one suggested is more realistic or more reasonable or more logical. In that view of the matter the findings recorded on Issues No.2 to 4 by the court below are justified.

10. In the inspection report at Ex.R5 the insurance Inspector found the actual amount received under the head of account house keeping & garden maintenance for 2004-05 is Rs.92,59,561/-. The amount mentioned in the levying order at Rs.92,77,182/- is without any basis and therefore it is corrected as Rs.92,59,561/- and no error could be found in that.

11. The issue No.6 related to levy of contribution of Rs.1,76,723/- and Rs.1,60,838/- on Rs.27,18,820/- and Rs.24,74,425/- out of total receipts of Rs.92,59,561/- and Rs.1,25,41,199/- respectively for the wage periods 4/04 to 3/2005and 4/2005 to 3/2006. The contention of the respondent was that the insurance inspector had not referred about the expenditure in question in the observation slip served on the respondent and as such it could not have been the subject matter of either the show cause notice in Form-C.18 (adhoc) or the order passed under Section 45-A of the Act. It is stated that the booked amount was not the subject matter of the show cause notice and consequently, it could not have been the subject matter of the order under Section 45-A. Even though the booked amount was not the subject matter of the inspection observation slip served on the respondent, it was very much the subject matter of Form-C.18. Based on the additional remarks made by the Insurance Inspector in regard to this booked amount, the Authorised Officer proceeded to issue show cause notice proposing to levy contribution on the difference of wages under this head of account. The insurance inspector made reference about it in the additional remarks enclosed inspection report at Ex.R5. Section 45-A of the Act does not permit exercise of jurisdiction in a case where the employer has made available all the required records including the returns submitted in respect of the wage element considered by him during the wage period for the purpose of verification by the Insurance Inspector. On perusal of additional remarks enclosed to inspection report at Ext.R5, it is clear that the insurance inspector had verified the records in regard to the amounts received under the head of account house keeping and garden maintenance for both wage periods and also the returns submitted by the applicant and found that the applicant has made payment of contribution on the amounts of Rs.18,14,854/- and Rs.28,51,670/- in respect of the amounts of Rs.92,59,561/- and Rs.1,25,41,199/- received during the wage periods 2004-05 and 2005-06. Hence considering scope of Section 45-A of the Act, it has to be held that it is not a case for invoking the said provision having regard to the facts obtainable in the case.

12. The basis for invoking the provision would be the report submitted by the Inspector after verification of the records. It is nowhere stated in the additional remarks enclosed to the inspection report at Ex.R5, which was not in fact referred to in the observation slip served on the respondent, that the compliance reported and demonstrated during verification of records was either inadequate or unrealistic. The order simply stated that the respondent should have treated 60% of the total receipts as wage element for compliance and as such there is difference of wages amounting to RS.27,29,392.75 and Rs.24,74,427/-. Without making observation that the wage element considered by the respondent based on the wage records was either unrealistic or ina

dequate and the records of wages produced for verification were so prepared to conceal the actual and real wages. Hence the Court opined that it was not permissible to invoke Section 45-A of the Act. Unless the authority is empowered under the provisions of the Act to decide the quantum of wages to be paid to the employees, it is not permissible for the authority to dictate the employer to treat specified percentage of the amounts received as wages for the purpose of compliance of the provisions of the Act. The wage records produced for verification are uncreditworthy and so maintained to conceal the real and factual wages, treating 60% of the total as wage element and demanding contribution on the difference amount is not justified. Accordingly, the labour element considered by the respondent for compliance was held to be justified, calling for no interference. 13. The court below has properly considered the facts and evidence on record and has reached to correct conclusions. There is no ground to interfere with the impugned order and the impugned order is justified in the facts and circumstances of the case. Accordingly, the appeal is dismissed.