The Supreme Court (SC) has observed that conveyance allowance paid to employees is excluded from the definition of wages, so it can’t be part of the wages paid to them for computation of the ESI contribution.
The apex court rules conveyance allowance paid to employees is excluded from the definition of wages.
The ESI Court held as under Section 2(22) of the Employees’ State Insurance Act, 1948 the “conveyance allowance” paid to the employees is not included in the definition of “wages”. As per Section 2(22) (b) of the ESI Act, the wages do not include any travelling allowance or the value of any travelling concession.
The ESI Court had held the “conveyance allowance” paid to the employees by the appellant does not include the wages.
The employer (Talema Electronics India Private Ltd) was dissatisfied with the judgment passed by the High Court of Judicature at Madras, in which it allowed the said appeal preferred by the respondent, ESI Corporation, and set aside the order passed by the ESI Court had preferred to approach the Supreme Court.
The Madras High Court set aside the said order by allowing the appeal filed by ESI Corporation. The High Court held that all remuneration paid or payable in cash and the additional remuneration if any paid at intervals not exceeding two months are liable for assessment for the purpose of determining the contribution payable.
The High Court also termed the view taken by ESI Court as ‘perverse’ observing that if such interpretation is given the employers would unnecessarily take undue advantage and evade the payment to be paid under the ESI Act.
The SC had also taken into consideration the recent decision of the court in the case of Employees State Insurance Corporation vs Texmo Industries, 2021, by which on the interpretation of Section 2(22)(d) of the ESI Act, it was observed the “conveyance allowance” is equivalent to the “travelling allowance” and therefore any “conveyance allowance/travelling allowance” is excluded from the definition of “wages”.
Allowing the appeal, the bench comprising Justices M R Shah and B V Nagarathna said, “In view of the above and for the reasons stated, the present appeal is allowed.
The judgment and order passed by the HC are quashed and set aside, and the order dated August 1, 2017, passed by the ESI Court is, hereby, restored. No costs.”