Statutory Provision for Penalty

• The Employees’ State Insurance Act prescribes penalties for late filing.
  
• Non-compliance includes delayed payments and return submissions.
  
• Section 85 of the Act empowers authorities to impose penalties.
  
• Penalty enforcement is based on inspection and system records.
  
• Each instance of delay may be treated as a separate offense.
  

Interest on Late Payment

• An interest of 12% per annum is charged on delayed contributions.
  
• Interest is calculated from the due date until the date of payment.
  
• It is payable even if the default is unintentional.
  
• Employers cannot seek waiver of interest under normal conditions.
  
• Timely payment avoids this recurring financial burden.
  

Damage Charges for Prolonged Delay

• In addition to interest, damages may be levied for continued non-payment.
  
• Damages range from 5% to 25% of the contribution amount.
  
• The rate depends on the period of delay and severity of default.
  
• These charges are determined under Regulation 31C of the ESIC rules.
  
• Separate notices are issued for damages after verification.
  

Legal Consequences of Repeated Defaults

• Repeated late filings may result in prosecution under the ESIC Act.
  
• Employers can face imprisonment for up to 3 years or fines.
  
• Courts may also direct recovery through attachment proceedings.
  
• Non-compliance can lead to cancellation of ESIC code in extreme cases.
  
• Directors or partners may be held personally liable in some cases.
  

Avoiding Penalties and Legal Risk

• Employers should maintain a filing calendar and internal deadlines.
  
• Contributions should be paid and returns filed by the 10th of each month.
  
• Automated reminders and payroll integration can help track compliance.
  
• A compliance officer or consultant should review ESIC filings monthly.
  
• Documentation of timely payment and returns should be preserved.