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Issues involved: Challenge to the judgment of the learned Single Judge of the Karnataka High Court dismissing the appeal filed by the appellant regarding the order of the Employees' State Insurance Court (ESI Court) in ESI application No.123/89 under Section 82(2) of the Employees' State Insurance Act, 1948.
Background: A show-cause notice was issued to the appellant to contribute premium for a specific period, which was challenged under Section 75 of the Act. The ESI Court upheld the order, determining the contribution payable, stating that the service charges collected by the hotel management and distributed among employees constituted "additional reimbursement." Appellant's Argument: The appellant contended that the service charges collected did not amount to "wages" under Section 2(22) of the Act, as they were distributed equally among employees periodically. Reference was made to a previous court decision, but the High Court distinguished it, focusing on whether the charges were covered by the term "reimbursement." ESI Court's Decision: The ESI Court held that the service charges, collected as part of the bills paid by customers without an option, were under the control of the appellant and were not considered as "tips." The High Court upheld this view, emphasizing that the charges were not directly paid by customers to employees. Legal Interpretation: The definition of "wages" under Section 2(22) includes remuneration paid to employees, but excludes certain payments like contributions to pension funds. A circular clarified that service charges collected by the hotel management did not constitute wages, as they were not given to employees under the terms of the employment contract. Conclusion: Considering the office memorandum and a different view taken by the Madras High Court, the orders of the ESI Court and the High Court were set aside. The appeal was allowed without costs.
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