O R D E R
1. The petitioner is an Employer covered by the provisions of Employees State Insurance Corporation Act (for short ESI Act). They have come forward to file the present writ petition, challenging the notice dated 15.4.08/23.4.08 issued by the respondent.
2. By the impugned notice, the petitioner was directed to cover the conveyance charges paid to the employees for the purpose of calculating the contribution for the period from April 2005 to March 2006. The amount of contribution worked out to Rs.3,33,820/-. The petitioner was advised that if the amount is not covered for the purpose of contribution, further proceedings will be initiated for recovering the amount. Before the issuance of notice, the petitioner was advised by the Regional Office, ESI that an Insurance Inspector on verifying with the records found that a sum of Rs.30,76,627/- was paid during the year 2004-2005 and Rs.51,35,697/- was paid during 2005-2006 as salary conveyance. The petitioner was asked to explain as to the nature of payment and whether it was re-imbursement or for the actual conveyance incurred. The petitioner was also asked to give supporting documents for the same.
3. The petitioner in response to the said letter took the plea that the conveyance allowance was not covered for the purpose of computing wages in terms of Section 2(22) of the ESI Act. After referring to certain case laws, in paragraph 2 of the reply dated 14.02.2008, they had stated as follows:- "Conveyance allowance/Travel allowance is paid to our employees to compensate the expenses incurred by them for attending the work. We are running domestic call centre and our employees working in odd hours and late night. To compensate Auto fare, Taxi fare etc., we have paid the conveyance along with the salaries. The value of conveyance is less than 25% on Basic salary and hence it is not chargeable under the ESIC Act." It is after this correspondence, the impugned notice came to be issued.
4. Subsequent to the impugned notice, the petitioner issued a legal notice to the respondent stating that a Division Bench of this Court in Regional Director, ESIC, Madras v. Sundaram Clayton, Ltd., Moppet Division, Madras reported in 2004 (1) L.L.N. 630 decided the said question and therefore, their notice was without jurisdiction.
5. The writ petition was admitted on 29.09.2008. Pending the writ petition, an order of interim injunction was granted.
6. On notice from this Court, the respondent has filed a counter affidavit dated 06.10.2009. In the counter affidavit, it was stated that huge amounts were paid as conveyance allowance, which is more than 60% of the Basic pay of an individual. After notice, personal hearing was also given to the petitioner. Even before any order was passed, they moved this Court and got an order of injunction. It is further submitted that a show cause notice cannot be challenged in a writ petition. For this purpose, reliance was placed upon a judgment of this Court in Regional Director, E.S.I. Corporation v. Nizam's International reported in 2008-II-LLJ-50. This Court in that judgment held that even after the explanation offered, if any orders are passed, the same can be challenged only by a dispute raised under Section 75 of the ESI Act before the appropriate ESI Court. Hence, prayed for dismissal of the writ petition.
7. Taking the last argument, Mr.S.Ravindran representing M/s.T.S.Gopalan and Co., counsel for the petitioner submitted that it is not necessary in every case, parties must go before ESI Court. When there is a fundamental flaw in the demand made and when the respondent ESIC has already concluded the issue and when the matter was already decided in some other matter, there was no necessity to go before the authorities. With reference to the merits of the case, reliance was placed upon Sundaram Clayton's case (cited supra).
8. It was further pointed out that a learned Judge of this Court in an unreported decision in W.P.No.46005 of 2002 dated 17.09.2009 (Cosmopolitan Club v. The Deputy Director (Inspn)Regional Office (Tamil Nadu), Employees' State Insurance Corporation) agreed with the similar submission. In paragraph 2, it was observed as follows:- "2.The learned counsel appearing for the petitioner would rely on a judgment of the Hon'ble Supreme Court in Regional Director Employees' State Insurance Corporation, Madras v. Sundaram Clayton Ltd., Moppet Division, Madras reported in 2004 (1) L.L.N. 630 wherein the Hon'ble Supreme Court has held that conveyance allowance shall not form part of the wages for the purpose of E.S.I.Act." Therefore, the learned counsel for the petitioner prayed for setting aside the impugned order.
9. A reading of the above passage shows that there was an error found while describing the Sundaram Clayton's judgment as the judgment of the Supreme Court. Further, it cannot be said that Sundaram Clayton's case sets out the law on the field. Similarly, Sundaram Clayton's case itself arose out of a dispute raised by the Employer before the ESI Court under Section 75. Aggrieved by the order of the ESI Court, appeals were filed under Section 82 before this Court and they were heard by a Division Bench. Therefore, the fundamental flaw in the contention of the petitioner was that the said judgment supports the theory that if a demand was made by the ESI Court, it can straightaway be questioned in a writ petition under Article 226 of the Constitution. Further in the Sundaram Clayton's judgment, the Court dealt with the definition of the term 'wages' found under Section 2(22) of the ESI Act and thereafter gave its own interpretation as to how the conveyance allowance cannot be construed as wages.
10. It is necessary to refer to the definition of the term 'Wages' under Section 2(22) of the ESI Act, which is as follows:-
"'Wages' means all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment, express of implied, were fulfilled and includes any payment to an employee in respect of any period of authorised leave, lockout, strike which is not illegal or lay-off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include- (a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b)any travelling allowance or the value of any travelling concession;
(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment."
11. It is misnomer to construe a travelling allowance or the value of travel allowance as conveyance allowance. But in that case, the Division Bench referred to the earlier judgment in Management of Oriental Hotels Ltd., v. Employees' State Insurance Corporation [2001 (1) L.L.N. 943], wherein the Court found that a conveyance allowance will be paid in the nature of travelling allowance as the object of payment is to enable the employee to reach his place of work and to defray a part of the cost incurred on the travel from his place of residence to the place of work. If instead of paying the conveyance allowance, the employer had provided free transport to the employees, the monetary value of the benefit of free travel from his residence to the place of work would not have been capable of being regarded as forming part of the wages. The conveyance allowance paid in cash for the purpose of being utilised on the travel from place of residence to the place of work, is of the same character and there is no reason why it should not be regarded as travelling allowance for the purpose of Section 2(22)(b), of the E.S.I. Act. From the judgment in Management of Oriental Hotels' case, the Division Bench in Sundaram Clayton's case held that though the allowance labelled as a conveyance allowance, it will form part as an additional remuneration and will come under the exclusion provided under Section 2(22) of the Act.
12. In paragraph 13 of Sundarama Clayton's case (cited supra), the Division bench had observed as follows:-
"13. ... The conveyance allowance paid to the employees for the purpose of being utilised on the travel from the place of residence to the place of work has to be construed as travelling allowance and thereby it cannot be construed as wages, as travelling allowance has been excluded from the purview of the said definition. We agree with the said decision reported in 2001 (1) L.L.N. 943 (vide supra) and so the Employees' Insurance Court is correct in holding that the conveyance allowance cannot be construed as "wages" and the respondents are not liable to pay contribution taking into consideration the said amount as "wages"."
13. A reading of the judgment of the Division Bench will clearly show that the Division Bench was willing to accept the conveyance allowance only if it is proved as travelling allowance for the purpose of utilising the allowance for travelling from the place of residence to place of work. In that case, the parties went before the ESI Court and let in evidence. On behalf of the Employer, 3 witnesses were examined and 5 documents were filed in the case of Sundaram Clayton, 2 witnesses were examined and 4 exhibits were filed in the case of M/s.T.V.S. Suzuki Ltd. In the third case, again two witnesses were examined and two exhibits were marked. The ESI Corporation examined one witness and marked 6 documents. In that case, the contention of the Employer was that fixed conveyance allowance was paid to the employees and it was towards reimbursement of the expenses incurred by the employee and it was not an allowance but was paid under an agreement entered into with the employees' Union.
14. In the present case, the stand of the ESI Corporation was that the conveyance allowance paid was more than 60% of the Basic pay of an individual and therefore, it was unbelievable. But the petitioner in their original reply dated 14.02.2008 have claimed that the value was less than 25% of the basic salary. It cannot also be said that the amounts were paid pursuant to any settlement between the Management and the Union. There is a vast difference between the stand of the petitioner and the ESI Corporation. The petitioner claims it was less than 25% whereas, ESI claims it was 65% of the wages. As held in Sundaram Clayton's case, unless it is proved that the amount was paid only in lieu of travelling allowance or the petitioner is paying the actuals of the expenditure incurred by the employees and in the absence of these ingredients, there cannot be any automatic presumption in favour of the petitioner's company and that a direction to the respondent must be issued to desist from passing final orders.
15. In the present case, whether conveyance allowance can be treated as travelling allowance coming within the definition of Section 2(22)(b) of the ESI Act is essentially a question of fact for which evidence will have to be let in by the parties as was done in the case of M/s.Sundaram Clayton. It is for this purpose the Act itself has created a forum under Section 75 of the ESI Act and the petitioner need not even wait for any formal order to be passed by the ESIC, since the nature of dispute that can be entertained by ESI Court is very wide. If even after such evidence the ESI Court comes to an erroneous conclusion, the Act itself provides for remedy by way of appeal to this Court under Section 82 of the ESI Act. The Act is a self contained Court providing for hierarchy of remedies. Therefore there is no necessity to bypass such a remedy.
16. The Supreme Court in Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement and another reported in 2010 (4) LW 1 has held that the statutory forum is created for redressal of grievance that too in a fiscal statute, a writ petition should not be entertained. In that case, an appeal itself was available to the High Court. In repelling that contention, in paragraphs 44 and 45, it was observed as follows: "44.Therefore, principle laid down in the Ratan's case (supra) applies in the facts and circumstances of this case. If the appellant in this case is allowed to file a writ petition despite the existence of an efficacious remedy by way of appeal under Section 35 of FEMA this will enable him to defeat the provisions of the Statute which may provide for certain conditions for filing the appeal, like limitation, payment of court fees or deposit of some amount of penalty or fulfillment of some other conditions for entertaining the appeal. (See para 13 at page 408 of the report). It is obvious that a writ court should not encourage the aforesaid trend of by-passing a statutory provision. 45.Learned counsel for the appellant relied on a decision of this Court in Monotosh Saha v. Special Director, Enforcement Directorate and another (2008) 12 SCC 359. That was a decision entirely on different facts. In that decision Saha preferred an appeal before the appellate tribunal with a request for dispensing with requirement of pre-deposit, but the tribunal directed the deposit of 60% of the penalty amount before entertaining the appeal. When an appeal was preferred before the High Court under Section 35 of the FEMA, the same was dismissed by the High Court holding that no case for hardship was made out either before the tribunal or before it. In the background of those facts, this Court observed that since pursuant to this Court's interim order Rs.10 lacs have been deposited with the Directorate, the appellant was directed to furnish further such security as may be stipulated by the tribunal and directed that on such deposit tribunal is to hear the appeal without requiring further deposit."
17. In the light of the above, there is no case made out to entertain the writ petition at the stage of Show Cause Notice. Accordingly, the writ petition stands dismissed. No costs. Consequently, connected miscellaneous petition is closed.