Any contribution due under the Act and not paid, can be recovered under Section 45-C to  Section 45-I by the Revenue Recovery Officer of the ESI Corporation.  The employer can raise any dispute for adjudication in the Employees Insurance Court of the area set up under Section 74 of the Act within the prescribed time limit from the date on which the cause for action arose. This limitation period as provided in Section 77 of the Act is not applicable to revenue  recovery action under section 45-C to 45-I of the Act.

               The sections, rules and regulations which empower the Corporation to make such claim and recover the contribution are as follows :

1) Sections 39, 40, 44, 45A, 45C to 45-I and 85B of the ESI Act, 1948

2) Rule 51 of the ESI Central Rules, 1950

3) Regulations 26,29,31, 31A, 31C and of ESI(General) Regulations, 1950

The notice forms and letters that are being used to raise such demands along with brief procedures of compliance are detailed below:

RATE OF CONTRIBUTION:

Up to 26.01.1985 Total 7% (E.C. -2.25% + E.S. -4.75%)
27.01.1985 to 31.03.1992 Total 7.25% (E.C. -2.25% + E.S. -5%)
01.04.1992 to 31.12.1996 Total 5.5% (E.C. -1.5% + E.S. -4.00%)
01.01.1997 onwards Total 6.5% (E.C. -1.75 % + E.S. -4.75%)

1)  C-18 Actual Basis-This is issued when actual amount of contribution has been known to the Corporation or determined by an assessing officer. Also the claim is made on the amount due as a result of non-payment or short payment of any ESI contribution.

2)  C-18 Adhoc Basis
- This occurs in two situations:

 i)  When the employer has not paid the regular contribution in respect of its employees, claim is made on the assumed wages in respect of the total number employees as per last record of the employer.  The  assumed notional wages is Rs.8250 per employee per month w.e.f. 01.05.2010

 ii)  When an inspection of any unit is conducted and it is seen that there are some additional employees in respect of whom, records reflecting the wages amount (known as the Omitted Wages) are not maintained by the employer, the claim is made on adhoc basis either based on the amount booked under the relevant Head of Accounts or as observed by the Social Security Officer after verification of records.

               In both these cases, the employer is given an opportunity to represent his case, in case he is not agreeing to the amount being claimed from him.  His submission must be substantiated with documentary evidence wherein he will have to clearly bring out the wages components on which contribution is Chargeable / not chargeable.

ASSUMED NOTIONAL WAGES PER EMPLOYEE PER MONTH FOR ISSUING DEMAND NOTICE IN FORM OF C-18 (Adhoc).

Up to 31.03.1992 – 880/-
01.04.1992 to 31.12.1996 – 1650/-
01.01.1997 to 31.03.2004 – 3575/-
01.04.2004 to 30.09.2006 – 4125/-
01.10.2006 onwards – 5500/-
01.05.2010 onwards – 8250/-

3)   C-18 Interest-This is a claim raised because of late payment of contribution.
               In case of regular contribution, claim is calculated on the number of days by which payment has been delayed from the due date. The due date for payment of contribution in respect of a particular month is the 21st day of the subsequent month. But if the 21st day of the month happens to be an holiday, the due date will be the next working day.

               In case, the wages amount has been determined as a result of inspection, the due date of payment of contribution is 21 days from the date of issue of demand notice i.e C-18 .

 

               The employer is liable to pay simple interest @12% with effect from 01.10.05 from each day of default.

               If any contribution payable under this Act is not paid by the Principal Employer on the date on which such contribution has become due for payment, he shall be liable to pay simple interest at the rate of 12% per month or such higher rate as may be specified in the regulations till the date of its actual payment.

RATE OF INTEREST:

Up to 19.10.1989- 6%
20.10.1989 to 31.08.1994 – 12%
01.09.1994 to 30.09.2005 – 15%
01.10.2005 onwards – 12%

 4)  D-18-This claim is invoked to claim the damages levied because of late payment of contribution. The Corporation is empowered to recover damages under section 85(B) of the Act as under.
               In case of regular contribution the period of delay is calculated wage period wise. Relaxing 21 days (if it falls on Sunday/holiday 22nd day) from the last day of the calendar month in which the contribution falls due for payment.
               In case of new coverage, the delayed  is calculated after relaxing 21 days from the date of issue of coverage notice/C-11 upto date of payment.

The rate of damages is as under :

i) On the delay of up to 2 months - @ 5% per annum
ii) On the delay of 2 months and above but less than 4 months -  @ 10% per annum
iii) On the delay of 4 months and above but less than 6 months  - @15% per annum
iv)   On the delay of 6 months and above - @ 25% per annum. In case of contribution claimed on omitted wages, no damages is claimed  if payment made within four calendar months from the date of inspection or 21 days from date of issue of speaking order, whichever is earlier.

The employer is afforded an opportunity of making representation, if any, at the time of personal Hearing before any determination of damages.

 5) Orders-Once Personal Hearing is held over C-18/D-18, speaking orders are issued wherein the assessment of the Branch Officer is clearly brought out.  The employer has to deposit the amount within 15 days from the date of issuance of that order, failing which the amount is recovered as arrears of land revenue.  In case of C-18 (Adhoc), speaking orders are issued under Section 45-A whereas in case of D-18, speaking orders are issued under Section 85-B of the Act.Speaking Orders can also be issued on exparte basis in case of failure on the part of the employer to attend the hearings and noncompliance.

After the amendment of the Act in 2010,any assessment of contribution made u/s 45-A is subject to the following proviso : [ provided further that no such order shall be passed by the Corporation in respect of the period beyond five years from the date on which the contribution shall become payable.]

Creation of Appellate Authority ( section 45AA ) : The above amendment also added a new subsection to section 45A, wherein a provision for appeal and creation of an Appellate Authority has been made. The subsection reads as under:

“If an employer is not satisfied with the order referred in section 45-A, he may prefer an appeal to an appellate authority as may be provided by regulation, within sixty days of the date of such order after depositing  twenty-five per cent. of the contribution so ordered or the contribution as per his own calculation, whichever is higher, with the Corporation :

Provided that if the employer finally succeeds in the appeal, the Corporation shall refund such deposit to the employer together with such interest as may be specified in the regulation.]

The Appellate Authority for the purpose of section 45AA of the Act is as under :

Sl. No.

Authorised Officer

Appellate Authority

1

Asst. Dir. / Dy. Dir.

Joint Director

2

Joint Director

Not below the rank of Director.

3

Joint Director I/c

Regional Director Grade- I & if not posted, then Insurance Commissioner

4

Director

Add. Commissioner cum RD. If not posted, then Insurance Commissioner.

5

Director I/c

Not below the rank of AC cum RD and if not posted then IC

6

Regional Director Grade- I

Insurance Commissioner

7

AC cum Regional Director

Insurance Commissioner

Note : Any contribution / interest / damages payable under the Act may be recovered as an arrear of land revenue.

 N.B. There is no provision for reduction or waiver of interest and in case of damages, except in the case of sick industrial units where a rehabilitation scheme has been sanctioned by BIFR and as per cases mentioned in regulation 31-C (a) to (c ).

 
Wages  
 
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