Is Our Factory Liable for ESIC Contributions Before Production Started? Seeking Legal Advice

Seek guidance on the applicability of ESIC for a new unit. The organization I am working with started construction of a new factory in the year 2007, and the number of employees reached 12 in the month of April 2007. On 31st December 2007, we commenced commercial production (manufacturing process). We have been complying with ESIC norms since 01.01.2008.

During an inspection visit by the ESIC inspector, they noted that we were liable to comply with ESIC norms from 01.04.2007 and that we must pay contributions for the period 01.04.07 to 31.12.07.

Please advise on the legalities and suggest our stance.

As per my understanding, labor engaged during the period of construction of factory buildings and before the first sale of goods produced will not be covered under ESI. Please check it with the Inspector.

Regards,
Madhu.T.K

Hi Madhu T K! I have shared the remarks made by the inspector of the corporation who visited our site. Can anyone please share relevant circulars, notifications, or case laws in this regard?

Thanks!

Hiten

Rightly said by Mr. Madhu, before production, ESI may not be applicable, but the workers will be covered under the BOCW Act. ESIC will not be applicable to on-site workers. Once production starts and there are more than 10 employees, ESIC will be applicable.

Guidance on ESIC Applicability for a New Unit

Seek guidance on the applicability of ESIC for a new unit. The organization I am working with started the construction of a new factory in the year 2007, and the number of employees reached 12 in April 2007. On 31st December 2007, we commenced commercial production (manufacturing process). We have been complying with ESIC norms since 01.01.2008. During an inspection visit by the ESIC inspector, it was noted that we were liable to comply with ESIC norms from 01.04.2007 and that we have to pay contributions for the period 01.04.07 to 31.12.07.

Please advise on the legalities and suggest our course of action.

If the ESI inspector has recorded the date in the attendance, the possibility is less. You can claim with the EB power consumption increased after the production was initiated and the first sales invoice. You can approach the Asst Director ESI for further guidance.

Regards,
Balasundaram.E.S

Thank you, everyone, for the response. From all the replies, I am feeling confident that coverage is applicable after the commencement of manufacturing activities. Can someone please help me with relevant case laws, circulars, or notifications in this regard?

Regards,
Hiten

Dear Parekh,

As you mentioned, the inspector is requesting compliance from 01.04.2007. If you have the Electricity Bill with consumption details, showing higher EB power usage in Jan 2008 only, you can attend the hearing with the ESIC officials upon receiving the call letter for a personal hearing. Otherwise, you must provide these details to the ESI authorities.

Additionally, you are required to submit a copy of your First Invoice to the authority. The same applies to EPF if necessary. Please include any licenses/permissions obtained from the Local body, Sales tax, Central excise, Service tax, Panchayat, and SSI certificates to validate the date. Seek guidance on the applicability of ESIC for a new unit.

Regards,
Balasundaram E.S