Coverage Of Petrol Pumps Under Factories Act,1948 - PDF Download

Dear Seniors,

The other day, one of my colleagues asked me whether the petrol pumps for the distribution of fuel (petrol, diesel, etc.) are covered under the Factories Act, 1948. My response to him was "YES," subject to meeting the criteria laid down in Section 2(m) of the Factories Act, 1948; that is, if ten or more workers are engaged with the aid of power and twenty or more without power. However, I am still unable to understand whether the distribution of petrol, diesel, etc. is really covered under the "Manufacturing process" as defined in Section 2(k) of the Factories Act, 1948.

BS Kalsi

I feel petrol pumps are not factories because there is no production process or value addition in the final product at a petrol pump. The basic concept of factories, as defined under section 2, is that if 10 or more persons are employed for production with the use of power. The meaning of production entails the "change of state of raw material with value addition." At a petrol pump, there is no value addition in the fuels delivered by oil companies.

Regards

Sir,

The requirement of petroleum products is for the generation of power for factories, but it will not cover the Factories Act. Nevertheless, you should obtain a Petroleum Storage License, and as per the license, only the permitted quantity of petrol or HSD has to be stored. This storage should not be in the factory but in separate sheds constructed as per the specifications, away from the factory.

With regards,
Jagdish.K

Dear friends,

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 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 favor, 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 am not wrong, petrol bunks are inspected under the Shops and Establishments Act in many states, and I am very sure in this regard, certainly in Tamil Nadu.

It should be admitted that always courts, in their unbiased wisdom, try to interpret definitions only in the backdrop of the mischief attempted to be remedied by the respective statute. Hence, the answer appears to me more appropriate to the question raised: petrol bunks are shops, for the predominant activity from that particular premises is the "retail sale" of petroleum products and not related to any manufacturing process other than pumping 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 the 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.

Hotels, restaurants, and eating places were excluded from the manufacturing process in 1976. In the strict interpretation, petrol pumps are considered factories if they have 10 or more workers. If they have fewer than 10 workers, they come under the Shop & Commercial Est Act.

Varghese Mathew

Petrol pumps are selling petroleum products like petrol, diesel, CNG, etc. They are purchasing the petroleum product from the authorized supplier and selling the same to end users. They are neither producing nor manufacturing any product. Therefore, petrol pumps are not coming under the purview of the Factories Act.

Coverage of ESI in petrol pumps and its employees should be determined by the ESI Act and the Notification of ESIC.

Sir,

Pumping of oil is treated as a "manufacturing process." Therefore, Petrol Pumps employing 10 or more persons are coverable as "factories." However, in my opinion, while calculating the number of employees, the employees of the contractors doing repair and maintenance or services of the vehicles on the premises of the petrol pumps, if any, are also to be counted and clubbed with the main unit. A copy of the Hon'ble Supreme Court Judgment dated 29-07-2009 deciding that pumping of oil is a manufacturing process is enclosed for the kind perusal of the members.

Further, one of the members has expressed the opinion that hotels, restaurants, and eating places were excluded from the 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 the ESI Act as "factories." A copy of the judgment dated 2-09-2009 of the Hon'ble Supreme Court of India is also enclosed herewith for the kind consideration of the members. However, I do not have a copy of the notification excluding hotels, restaurants, and eating places from the purview of the "manufacturing process," as mentioned by one of the members above. I hope the member will upload the same in this thread for the information of all.

Though, in common language, it seems very strange to say that pumping of oil or preparing food with power is manufacturing, but the question is whether the policymakers 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 the above types 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 the ESI Act, 1948, to the employees in the above types of establishments arises, the coverage is to be decided as per the definition of "manufacturing process" under the Factories Act, 1948, as required under section 2(14AA) of the 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 the ESI Act, 1948.

Dear Kartik Chandra Datta,

What you say is very correct. It is very difficult to accept by any layman conceptually that merely pumping petrol is manufacturing. But the fact is, pumping petrol in a petrol pump is a manufacturing process as per the Supreme Court Judgement as stated by Harsh Kumar ji. The definition of a manufacturing process in the Factories Act is very wide. This definition includes many activities that are not strictly manufacturing as we understand in common parlance. Even the preparation of food with power is a manufacturing process as per another Judgement of the Supreme Court as stated by Harsh Kumar ji. Harsh Kumar ji has provided both judgments in attachments. The Judgement of Restaurant / Hotel is from 2009, and the notification of excluding Restaurant / Hotels from the manufacturing process is a very old one. The Judgement of the Supreme Court supersedes the old notification. Likewise, construction activity should also fall under the scope of the Factory Act. Experts are requested to comment.

This is in response to what Varghese and Harsh Kumar's mentioned about hotels and restaurants in this context.

In Tamil Nadu earlier, hotels and restaurants were covered under the Factories Act, 1948 only. Responding to the suggestion of the Government of Tamil Nadu in 1951 for amending the Factories Act to remove hotels and similar establishments from its purview and for undertaking a separate Central Legislation to regulate the conditions of service in hotels, etc., the Government of India expressed no objection to cover them under the Madras Shops and Establishments Act, 1947.

The question of the suitability of the MS&E Act, 1947 for application to hotels and other catering establishments was discussed by the Commissioner of Labour in 1953 with some hotel owners and labor leaders, and it was agreed that a separate legislation was necessary. Hence, the Tamil Nadu Catering Establishments Act, 1958, was passed incorporating certain provisions of the Factories Act such as registration of the premises used as catering establishments based on the number of employees, leave with wages, etc.

Dear Friends,

It may be appropriate to take note discussion took place in this forum some time back - refer link -

https://www.citehr.com/471221-factor...-does-car.html

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[2] 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."

Dear all,

Greetings of the day. In my opinion and in the light of the definition of "Manufacturing process," petrol pumps fall within the definition of factories. Even power distribution is also considered a factory, as the power is generated by someone and somewhere and is distributed by Electricity Boards, etc.

Regards.

Dear Members,

I am grateful to the CiteHR members for wholeheartedly participating in the discussion and dissemination of their experience and knowledge. Similarly, during my search on the internet, I came across a judgment reported in Labour Law Reporter, page no. 1066, Supreme Court of India, October 2009, where it has been held that in M/S Qazi Noorul H.H.H Petrol Pump and Another vs. Deputy Director, E.S.I. Corporation, that "Pumping oil is a manufacturing process."

A copy of the extract is attached for the members' perusal.

BS Kalsi

Dear Members,

Due to some error on the linked page, I am sorry I have not been able to upload the judgment despite my best efforts. I shall seek someone's assistance and try again.

BS Kalsi

Dear Mr.kalsi

It is a great and interesting discussion on the vexatious question whether pumping oil falls within the definition of manufacturing process under Sec.2(k) of the Factories Act. There are indeed valuable contributions from all learned members each of which has it’s own merit and substance. I can’t but agree with them. The question nevertheless is baffling as Mr.Umakantan has rightly said. Yes it is puzzling to accept the process of pumping oil as a manufacturing process because it defies the normal understanding of manufacturing process that is etched even in prudent minds and for all purposes the petrol pump after all engages in the sale of petrol and should qualify to be a shop.

We normally associate the idea of manufacturing process with any process which either transforms or converts a substance into a different article/substance that is marketable. However the case of Baranagar Service Station V.ESIC 1987(54) FLR 635(Cal.DB) has dispelled this notion by holding that manufacturing process need not cause any transformation of an existing substance or result in the emergence of new product. For example washing and cleaning are also included in the definition of manufacturing process though they do not result in the emergence of a new product.

Then the question that arises is whether the process of pumping oil in order to be a manufacturing process shall be linked to pumping oil from a refinery or any processing unit. This question was addressed exactly by the case of ESIC v. Bhag Singh 1988 II LLN 417.Repelling the same view in the said case, the Hon’ble Punjab & Haryana High Court held that the expression ‘manufacturing process’ shall not be understood in a narrow and restricted sense of bringing out a different product. Even if a process brings out a special result in the goods or substance, it falls within the definition of manufacturing process. The court cites the example of washing or cleaning or oiling which are included as manufacturing process. Though these processes do not make a new car out of the ones that are brought to the service station for the said purposes, they nevertheless bring out a special result in the vehicle namely a lubricated and cleanse vehicle and pumping oil too shall similarly be understood as bringing out special result in the car that is brought for filling fuel.

Thus the above case law together with Quazi Nurul petrol Pump furnished by learned member Mr.Harsh Kumar Mehta may largely address your query. Though the cases cited were under ESI Act , they are nevertheless relevant to the subject under discussion since the definition of manufacturing process under Sec.2(14 AA) of ESI Act is pari materia with that under Factories Act

The courts have given such plain and liberal meaning to the manufacturing process under Factories Act keeping in view the social objectives of the factories Act namely the health and safety of workers employed at work places. Therefore the meaning of manufacturing process needs to be understood in the sense the legislature gave it but not in the ordinary sense of the meaning.

B.Saikumar

In-House HR & IR Advisor

navi Mumbai

Please see the definition of Factory under sec 2(m) of The Factories Act. By an amendment to it w.e.f. 26.10.1976, the following are excluded from the definition of a factory:

1. mobile unit attached to the armed forces of the union,
2. Railway running shed,
3. hotel, restaurant, or eating place.

Though hotels, etc., are not considered factories under the Factories Act due to the above exclusions, they are classified as factories under the ESI Act because in the definition of a factory in the ESI Act, they are not excluded (sec 2(12) of ESI Act).

Varghese Mathew

Dear BS Kalsi ji,

The aforementioned judgment has already been uploaded this morning in this thread by our esteemed member, Harsh Kumar ji.

I feel petrol pumps do not come under the Factory Act because they are only selling points; there is no repair process or productive activity.

Dear all friends,

With the views put forward and the arguments advanced by Harsh Kumar and Loginmiracle about the classification of retail outlets mechanically distributing petroleum products as "factories" under cross-reference to various cognate definitions in different statutes associated with the subject matter as per the ratio decidendi of the decisions of the Apex Court and various High Courts, bring the present discussion to its finality. The well-thought-out and convincingly drafted explanation by Saikumar adds beauty to the finality.

As we are all well-aware, all our labor laws could be brought under the following classifications - (1) Laws relating to a particular type of establishments, (2) Laws relating to service conditions, (3) Laws relating to Industrial Relations, (4) Monetary Labor Laws, and (5) Laws relating to the social security of labor.

So, my reply to Mr. Korgaonkar is: Unless and until there is a direct judicial decision on the classificatory aspect arising out of any two establishment-oriented Laws, these petroleum retail outlets or petrol bunks, as commonly called, are "factories" because of the supremacy of the law declared by the Supreme Court as per Article 141 of our Constitution.