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 calculating the ESI contribution.

Feeling dissatisfied with the judgment passed on March 30, 2021, 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 on August 1, 2017, the employer (Talema Electronics India Private Ltd) had preferred to approach the Supreme Court.

The ESI Court had held the "conveyance allowance" paid to the employees by the appellant does not include the wages.

The HC had observed that such an interpretation could allow some employers to take undue advantage as they could evade payment of ESI contribution mandated under the ESI Act.

The Supreme Court bench comprising Justices M.R. Shah and B.V. Nagarathna, in its judgement, after hearing the counsels appearing for both sides, ruled the judgment passed by the High Court is "unsustainable" and "deserves to be quashed and set aside".

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".

"In view of the above and for the reasons stated above, 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," the SC observed.

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