Labour Law & Hr Consultant
Harsh Kumar Mehta
Consultant In Labour Laws/hr
Labour Laws Consultants
Industrial Labour Laws In Kerala
Korgaonkar K A
Asso.prof.(commerce & Management) Pg
Private Consultant On Labour Laws
Basic concept of factories are under sec 2 is if 10 or more persons are employed for production with uses of power.
The meaning of production means " change of state of raw material with value addition" At petrol pump there is no value addition in fuels delivered by oil companies.
Requirement of Petroleum Products are for generation of power for factories but it will not cover Factories Act. Nevertheless, you should obtain a Petroleum Storage Licence and as per the licence only the permitted quantity of Petrol or HSD has to be stored not in the factory but separate sheds constructed as per the specifications away from the factory.
The question raised by Mr.Kalsi is one of the baffling questions in law always eluding a precise and unquestionable answer. By "baffling question" what I mean is the presence of multiple interpretations each of which will appear to be appropriate.Particularly, the difficulty becomes more pronounced when the constituent elements of a single definition are also have their own definitions. In such a hazy situation every authority charged with the responsibility of enforcing a particular Labour Enactment will have the tendency to advance an interpretation only to its favour limiting it to the object of the particular Law. I faintly remember a judgment of some High Court upholding the applicability of the ESI Act to a Petroleum Dispensing Retail Outlet or Petrol Bunk as a 'factory' some years ago relying on the definition of the term ' manufacturing process'. But in actual practice, if I were not wrong, petrol bunks are inspected under the Shops and Establishments Act in many States and I am very sure in this regard certainly TamilNadu.It should be admitted that always Courts in their unbiased wisdom try to interpret definitions only in the back-drop of the mischief attempted to be remedied by the respective Statute. Hence the answer appears to me more appropriate to the question raised is petrol bunks are shops for the predominent activity from that particular premises is "retail sale " of petroleum products and not related to any manufacturing process other than pumping of oil for the purpose of delivery through dispensing pumps with the aid of power.If all the emphasis is added exclusively upon the terms " factory" and "manufacturing process"only, then every restaurant or eating house will be a factory because manufacturing of food is carried on invariably with the aid of power for the incidental works. It's my personal view - contrary views are welcome.
Coverage of ESI in pertol pumps and its employees should be determined by ESI act and Notification of ESIC.
1. Pumping of oil is treated as "manufacturing process". Therefore, Petrol Pumps employing 10 or more persons are coverable as "factories". However, in my opinion, while calculating number of employees , the employees of the contractors doing repair and maintenances or services of the vehicles in the premises of the petrol pumps, if any, are also to be counted and to be clubbed with the main unit. A copy of the Hon'ble Supreme Court Judgment dated 29-07-2009 deciding that pumping of oil is manufacturing process is enclosed for kind perusal of the members.
2. Further one of members has expressed the opinion that hotels,restaurants and eating places were excluded from manufacturing process and are not factories. In this connection, it is submitted that hotels, restaurants etc. using power for preparing food items and preservations are already covered under ESI Act as "factories". A copy of judgment dated 2-09-2009 of the Hon'ble Supreme Court of India is also enclosed herewith for kind consideration of the members. However, I am not having a copy of notification excluding hotels restaurants and eating places from purview of "manufacturing process" as mentioned by one of members above. I hope member will upload the same in this thread for information of all.
3.Though, in common language, it seems to be very strange to say that pumping of oil or preparing of food with power is manufacturing, but the question is that the policy-makers or our legislature may have used these words after detailed deliberations, consultations and keeping in view the safety of the person handling such products. The coverage of above type of establishments under the Factories Act is within the powers of appropriate State Govt. authorities, but when the question with reference to claims of contributions and benefits under ESI Act, 1948 to the employees in above type of establishments arises, the coverage is to be decided as per definition of "manufacturing process" under Factories Act, 1948 as required under section 2(14AA) of ESI Act. Perhaps this is one of the main reasons that some of the leading cases on issues relating to "manufacturing process" have been decided with reference to claims under ESI Act, 1948.
What you say is very correct. It is very difficult to accept by any layman conceptually that merely pumping petrol is manufacturing. But fact is, pumping petrol in petrol pump is manufacturing process as per the Supreme Court Judgement as stated by Harsh Kumar ji.
The definition of manufacturing process in Factories Act is very wide. This definition includes so many activities which are strictly not manufacturing as we understand in common parlance.
Even preparing of food with power is a manufacturing process as per another Judgement of Supreme Court as stated by Harsh Kumar ji.
Harsh Kumar ji has given both judgments in attachments.
The Judgement of Restaurant / Hotel is of 2009 and the notification of excluding Restaurant / Hotels from manufacturing process is a very old one. The Judgement of Supreme Court supersedes the old notification.
Likewise, construction activity also should fall under the scope of Factory Act.
Experts are requested to comment.
It may be appropriate to take note discussion took place in this forum some time back - refer link -
There has been judgments and opinions for and against what constitutes "a factory". There are judgments of various state High Courts and Supreme Court as well. It is also to be noted various activities are being added in the list of "factory". And if we see these lists and activities associated with it in many instances literally no manufacturing activities or transformation from one product to a new products takes place. But still these processes are declared as "manufacturing process" and therefore they are factories. Coming to the Petrol Pump (bunks) which are retail outlets of petrol/diesel or oil distribution network a natural question arises what exactly " a process" takes place in this retail distribution. And how it could be termed as a "factory" . Going by various diff. definitions provided under various Acts, please consider the following observations:
Quote: Business Standard dt. May 8, 2014:
Pumping oil in a petrol pump is manufacturing process, so ruled the Supreme Court in a very recent judgement. But it is not manufacture under Central Excise Law. It is manufacture under the Factories Act, 1948. The principle is that the definition is one law is not valid for another law.
Employees’ State Insurance Act 1948 applies to all factories. Petrol pump is a factory by dint of Section 2(12) of this Act because factory means any premises where 10 or more persons are employed for wages and in any part of which a man-ufacturing process is carried out. Now manufacturing process includes pumping oil under Section 2(k)(ii) of the Factories Act 1948. Thus, legally a petrol pump is carrying on manufacturing process. Therefore it is liable to pay contribution under the Employees’ State Insurance Act. After holding this legal position, the Supre-me Court has observed by way of clarification that the word manufacturing process or manufacture does not mean the same thing in all the statutes. The word manufacture under the Central Excise Act means bringing into existence a different commodity, whereas under the Factories Act simply pumping oil becomes a manufacturing process.
To a layman, it is conceptually somewhat difficult to accept that merely pumping petrol in petrol pump is manufacture. But, when the purpose is taken into account, it becomes easy to understand. The idea is to provide insurance cover to the workers when they are more than 10 working in an enterprise where pumping oil or water or sewerage or any other substance is going on. That is why in the Factories Act the definition of manufacturing process is very wide. The definition also includes repairing, refitting, finishing of ship or vessel. This definition includes so many activities which are strictly not manufacture as we understand in common parlance.
Definition goes with the purpose of the Act. A definition in one Act is not applicable in another Act because the purposes are different. The Prevention of Food Adulteration Act has its purpose so wide that practically anything a person puts into his mount comes under its fold. But excise or customs law does not have such wide range of purpose. In Central Excise food is understood in a completely different meaning. Gambier which is a condiment taken with betel leaf is by no means regarded as food by anybody. But gambier is a food under the prevention of Food Adulteration Act because the idea of this Act to prevent food adulteration. Even biscuits or ice cream or cold drinks are not regarded as food in common parlance. So they don’t get the benefit of exemption on food but they are food under the Prevention of Food Adulteration Act.
However, the Bombay High Court has observed that the principle that a definition given to a word or expression in a particular
Act cannot be utilised for the interpretation of a similar word or expression occurring in a different Act is not ‘an absolute principle of law’. Said the Court, ‘generally it is so but in a given case the definition given in a particular statute not being repugnant, may be used to construe and interpret the same expression occurring in another statute. In this Bombay case the popular meaning of drugs for the purpose of excise law and the definition of drugs in the Drugs and Cosmetics Act are not different and so there was no harm in consulting the definition of the other Act."