JUDGMENT :

Challenge in the present appeal is to the order, dated 11.04.2007 in ESI No.54 of 2004 on the file of Chairman, Employees Insurance Court and Chairman, Industrial Tribunal-I, Hyderabad, whereunder and whereby, the application filed by the appellant impugning the notice, dated 13.05.2004, demanding the appellant to pay an amount of Rs.6,77,797/- in pursuance to the inspection report as well as the order, dated 27.09.2004 passed under Section 45-G of the Employees State Insurance Act, 1948 (for short, ‘the Act’) whereby claim for an amount of Rs.3,12,000/- with interest, was dismissed.

2. The present appeal is at the instance of the applicant-petitioner before the ESI Court. The 1st respondent and 2nd respondent herein are the respondents in the ESI Court.

3. For brevity, the ranks of the parties as were referred to before the Insurance Court is maintained.

4. The sum and substance of the case of the petitioner is that it is a Government Company and it is exempted from the operation of ESI Act. It is claimed that it has been paying the benefits more than the ESI Act. As such, the ESI Corporation has no jurisdiction over the petitioner company under the ESI Act to demand contributions from the company, even in respect of the temporary workers also.

5. The case of the respondents is that inspections were done on 15.12.2003 and 18.12.2003 and found the following deficiencies :

‘Ex.R-5: Observations of Insurance Inspector reads as follows :

Visited the unit under prior intimation and verified the pay rolls for the period from 01.04.1997 to 31.03.2000 and 01.01.2001 to 31.08.2001 and receipts and payments statement in Respect or Civil & Engineer contractors for the period from 04/2000 to 3/2003. On verification of the above records/statements, the following observations are made:

You have not paid the contributions in respect of the temporary status workers for the period from 01.04.1997 to 31.03.2000 and from 01.01.2001 to 31.08.2001. Total salary paid to them works out to Rs.60,45,406/- on which contributions @ 6.5% works out to Rs.3,92,952/- which may be paid immediately.

2. Further the security contractor M/s. Gurbani Security Private Limited Code No.52-14016-101 has not paid the contributions on conveyance allowance paid to the guards employed at your place for the period from 1/2003 to 11/2003 amount to 170310/- on which contributions @ 6.5% works out to Rs.11071/- which may be arranged to pay through your Sec.contractor.

3. Further M/s. Kiran, Code No.52-14348-101 has not submitted the R.C. for the CPE 9/03 so far which may be submitted through your contractor immediately.

4. Further, you have engaged 94 work contractors on various jobs for repairs and maintenance of lab buildings, staff, etc during the period and paid a consolidated amount of Rs.3,01,58,473-50 which includes cost of material labour charges etc. No contributions have been paid on the labour engaged through contractors and no segregation of labour charges, material cost was made available to us on the plea that the contractors are the employees within the meaning of Section 2 (9)(ii) of the Act and being the principal employer you are liable to pay contributions. Please arrange to pay the contributions on the labour charges incurred through contributions and keep the records ready for our verification. A further communication from Regional Officer will follows:

Please forward the HRD 325 directly to our Regional Office, after getting the approval/signature from the Director. A further communication as a result of this inspection will follow from Regional office.”

6. On the basis of said inspection, a demand was raised under Ex.P.2, dated 13.05.2004, demanding payment of contribution of Rs.6,77,797/- with interest. Basing on the said demand notice, the petitioner company has paid a sum of Rs.3,68,696/- before passing of the order, dated 27.09.2004, on account of attachment of bank accounts of the institution. Subsequently, the 1st respondent Corporation has passed