Actual working conditions define employee status under ESI Act, not just nomenclature; commission agents may not qualify as employees.

COMMON JUDGMENT

These Appeals are preferred against the Order passed in E.I.O.P.Nos.38 & 39 of 2006 dated 31.07.2018 on the file of the Employees Insurance Court, Principal Labour Court, Chennai.

2. Ms.G.Narmatha, learned counsel for the appellant/ESIC, submits that the respondent is a partnership firm engaged in the business of Textile goods and is covered under ESI Act. During a routine inspection of the respondent firm by the officials of the ESI Corporation, it was observed that an expenditure of Rs.1,87,22,527/- had been incurred by the respondent towards payment of wages to sales representatives and has been booked under the head “Sales Commission” and “Sales Incentives” in the general ledger. No satisfactory explanation was offered by the respondent regarding this huge expenditure except reiterating that the same was paid to individuals engaged for the purpose of bringing the customers and thereby aiding in the sales of the respondent's goods. Though vouchers were prepared in individual names, the said vouchers did not bear the signature of the payee and hence could not be accepted as genuine proof of the nature of expenditure. She further submits that the respondent was informed to come forward with the payment of contribution for the said amount as per the inspection report and spot letter dated 30.05.2005 which they failed to do so.

3.Her further contention is that in the absence of registers and records required to be maintained under Section 44 of the ESI Act, the authorities were constrained to invoke the procedure under Section 45 A to determine the contribution based on available information for the periods from 1992-93, 1995-96 and 1999-2000. The show cause notice in From C-18 (Adhoc) dated 14.07.2005 was issued to the respondent proposing to determine the contribution of Rs.53,61,258/- for the period from 4/92 to 3/96, 4/96 to 12/96, 1/97 to 3/99 and 4/99 to 3/04. An opportunity of hearing was accorded to the respondent on 02.08.2005 which was postponed to 16.08.2005 at the request of the respondent. The stand taken by the respondent before the ESI authorities during 45 A enquiry as well as before the ESI Court that, the individuals to whom the disputed amount was paid are exempted employees, is incorrect. However, the learned Judge of the ESI Court failed to understand the definition of “exempted employees” as contemplated under Section 2 (10) of the ESI Act and without adducing any reason has held that even if these persons are employees they are exempted employees. The said impugned order has been passed without assigning any valid reason. Further, the ESI Court erred in relying upon the vouchers which did not bear the signatures of the payee and could not in any manner be accepted as valid proof of transaction between the respondent and the alleged individuals, one of whom were even examined by the ESI Court. The respondent has manipulated the said vouchers to evade the payment of contribution payable on the amounts paid as wages and shown as commission as well as sales incentives. Despite the fact that, the adjudicating authority under Section 45 A order, which has clearly stated the reason for rejecting the said vouchers, the ESI Court, had erroneously observed that the said authority has not considered the records produced by the respondent. The ESI Court further, failed to consider the fact that, even if the alleged amounts were paid to the individuals engaged directly in promoting the sales of the respondent on receiving weekly / monthly remuneration for the said work are none other than the employees of the respondent as per Section 2(9) of the ESI Act and the respondent is liable to pay contribution as stipulated. She would