Chattisgarh High Court
M/S Prem Stores vs Employees State Insurance Corporation ... on 5 February, 2025
1
2025:CGHC:6659-DB
NAFR
HIGH COURT OF CHHATTISGARH AT BILASPUR
MA No. 48 of 2015
M/s Prem Stores Through Shri Anil Nachrani S/o Late Shri Mohan Lal Nachrani,
Partner, , Chhattisgarh
... Appellant
versus
1 - Employees State Insurance Corporation Regional Office, Through Amarnath
Prasad, Deputy Director Insurance, 1, Panchdeep Bhwan, Nand Nagar, Indore
M.P. At Present E.S.I. Corporation 107, Ramnagara Road, Kota Raipur,
Chhattisgarh, Chhattisgarh
2 - The Manager Through Local Office Employees State Corporation, M.I.G.D-
27, Sector-1 Devendra Nagar, Raipur, Chhattisgarh, District : Raipur,
Chhattisgarh
... Respondents
(Cause title taken from Case Information System)
[
For Appellant : Mr. Harshal Chouhan, Advocate.
For Respondent(s) : Mr. Pranav Saxena, Advocate.
Hon'ble Mr. Justice Naresh Kumar Chandravanshi
Order on Board
05/02/2025
1. This appeal has been preferred by the appellant under Section 82(2) of
the Employees State Insurance Act, 1948 (henceforth "ESI Act, 1948')
challenging the order dated 09.02.2015 passed by Employees Insurance Court
- Labour Court No. 1, Raipur (C.G.) in Case No. 129/E.S.I. Act/2002 whereby
Employees Insurance Court has held that the premises of the shop of the
appellant comes under the definition of "factory" as per E.S.I. Act, 1948, as it
carries out 'manufacturing process'.
2. Facts of the case, in nutshell, is that the Appellant is a registered
partnership Firm running a small readymade garment's shop at Raipur, which
was registered under M.P. Shops and Establishment Act, 1958. On 12.03.2001,
establishment of the appellant was inspected by the Insurance Inspector, E.S.I.,
Raipur and on the basis of inspection carried out by the Inspector and
considering the work of alteration of cloth and ironing done by the Appellant in
the premises of shop as "manufacturing process" as per the definition of E.S.I.
Act, 1948, respondent No. 1 vide its order No. 402, dated 27.04.2021 held that
the shop of the appellant comes under the coverage of provisions contained in
E.S.I. Act, 1948, as the premises of the appellant comes under the definition of
factory as per Section 2(12)(a) & 2(12)(b) of the E.S.I. Act, 1948.
3. Aforesaid order was challenged by the appellant before learned Court of
Employees Insurance Court, Labour Court No. 1, Raipur, who dismissed the
application filed by the appellant herein. Hence, this appeal.
4. This appeal is admitted for hearing on the following substantial questions
of law :-
"(i) Whether the activity of selling of ready-
made garments and its alteration can be
considered as "Manufacturing" under the
definition of E.S.I. Act 1948 ?
(ii) Whether the premises of the shop of the
appellant comes under the definition of "factory"
as per E.S.I. Act 1948 ?
5. Learned counsel for the appellant would submit that alteration of the
ready-made garments will not come under the definition of "Manufacturing" as
per the ESI Act, 1948 and if the manufacturing of garments was not happening
in the premises of the shop of the appellant, then the premises of the appellant's
shop will not fall under the definition of "Factory" as defined under Section 2( k)
of the Factories Act, 1948. In this regard, he placed reliance upon the judgment
of the Supreme Court in the matter of Kores India Ltd., Chennai vs.
Commissioner of Central Excise, Chennai 1 and Hotel New Nalanda vs.
Regional Director, Employees' State Insurance Corporation 2 in support of
his submission.
6. In reply, learned counsel appearing for respondents would submit that the
appellant used to sell ready-made garments in its shop by altering and ironing
the same. It is submitted that 17 employees were working in the shop of
appellant, as such, the appellant's Firm very well come under the definition of
"Factory" under the Factories Act, 1948. He submits that 'manufacture of any
article' and 'manufacturing process' is totally different, therefore, case law cited
by the appellant is not helpful to him.
7. I have heard learned counsel appearing for the parties and perused the
material available on record.
8. In the case of Kores India Ltd., Chennai (supra), their Lordships of the
Supreme Court have held as under :-
"12. 'Manufacture' is a transformation of an article,
which is commercially different from the one, which is
converted. The essence of manufacture is the change
of one object to another for the purpose of making it
marketable. The essential point thus is that in
manufacture something is brought into existence,
which is different from that, which originally existed in
the sense that the thing produced is by itself a
commercially different commodity whereas in the case
of processing it is not necessary to produce a
commercially different article. (See Mis. Saraswati
1 (2005) 1 SCC 385
2 (2009) 14 SCC 558
Sugar Mills and Others v. Haryana State Board and
Others, [1992] 1 SCC 418).
13. The prevalent and generally accepted test to
ascertain that there is 'manufacture' is whether the change
or the series of changes brought about by the application of
processes take the commodity to the point where,
commercially, it can no longer be regarded as the original
commodity but is, instead, recognized as a distinct and new
article that has emerged as a result of the process. There
might be borderline cases where either conclusion with
equal justification can be reached. Insistence on any sharp
or intrinsic distinction between 'processing and
manufacture', results in an oversimplification of both and
tends to blur their interdependence. (See Ujagar Prints v.
Union of India, [1989] 3 SCC 488).
14. To put differently, the test to determine whether a
particular activity amounts to 'manufacture' or not is: Does
new and different goods emerge having distinctive name,
use and character. The moment there is transformation into a
new commodity commercially known as a distinct and
separate commodity having its own character, use and
name, whether be it the result of one process or several
processes 'manufacture' takes place and liability to duty is
attracted. Etymologically the word 'manufacture' properly
construed would doubtless cover the transformation. It is the
transformation of a matter into something else and that
something else is a question of degree, whether that
something else is a different commercial commodity
having its distinct character, use and name and commercially
known as such from that point of view is a question depending
upon the facts and circumstances of the case. (See Empire
Industries Ltd. v. Union of India, [1985] 3 sec 314.
9. In the matter of Hotel New Nalanda (supra), their Lordships of the
Supreme Court have held as under :-
"18. For holding an establishment to be a 'factory' within
the meaning of section 2(12) of the Act it must first be '
established that some work or process is carried on in
any part of the establishment that amount to
'manufacturing process' as defined under section 2(k)
of the Factories Act, 1948. In case the number of
persons employed in the establishment is less than
twenty but more than ten then it must further be
established that the manufacturing process in the
establishment is being carried on with the aid of power.
19. Further, the use of power in the manufacturing
process should be direct and proximate. The
expression 'manufacturing process being carried on
with the aid-of power' in section 2(12) of the Act does
not mean a very indirect application of power such as
use of electric bulbs for providing light in the work-
area.
20. Unless the links are established, that is to say, it
is shown that some process or work is carried on in the
establishment which qualifies as 'manufacturing
process' within the meaning of section 2(k) of the
Factories Act and the manufacturing process is carried
on with the aid of power, the mere presence of a
refrigerator and a grinder there, even though connected
to the main power line may not necessarily lead to the
inference that the establishment is a factory as defined
under section 2(12) of the Act.
10. During course of arguments, learned counsel appearing for the appellant
stated that the appellant did not dispute that 17 employees were working in the
ready-made garments shop of appellant. Perusal of oral & documentary
evidence available on record adduced by the respondents, particularly, survey
report (Ex.D-1c), which has been proved by S.K. Vernwal (NAW-1), Social
Security Officer show that alteration and ironing of ready-made garments were
being carried out at the premises of the appellant. Nothing has been elicited by
the appellant in his cross-examination to discard his deposition as well as
inspection report (Ex.D-1c).
11. From perusal of evidence adduced by the parties specifically shows that
appellant's firm used to sell ready-made garments and in this process, he also
used to alter the garments and, thereafter, ironing it by using electricity. his
activity of the appellant brings it within the definition of Section 2(k)(i) of the
Factories Act, 1948 and using electricity for ironing the altered finished
garments, as provided in Section 2(12)(a) of the E.S.I. Act, 1948 [as the
provision was before 2010], also brings the appellant's firm within the purview of
the definition of "factory".
12. In the ready-made garments, there is no need of ironing them. But, in the
instant case, appellant used to iron the ready-made garments after its alteration,
therefore, case of Hotel New Nalanda (supra) cited by the appellant is not
helpful to him in the instant case, rather in aforesaid case, Hon'ble Supreme
Court has held that, "use of power in the manufacturing process should be direct
and proximate. The expression "manufacturing process being carried on with
the aid of power" in Section 2(12) of the E.S.I. Act, 1948 does not mean a very
indirect application of power such as use of electric bulbs for providing light in
the work area. But, in the instant case, it is evident that appellant used to electric
power for ironing the altered ready-made clothes, therefore, such use of
electricity is found to be direct and proximate to the 'manufacturing process'.
13. 'Manufacture' and 'manufacturing process' is different nature of activity.
'Manufacturing process' has been defined in Section 2(k) of the Factories Act,
1948, which includes, altering, repairing & finishing, etc., therefore, judgment of
Kores India Limited, Chennai (supra) relied by the appellant, is also not helpful
in the instant case, as in the present case, appellant was ironing the ready-
made clothes after altering the same for the purpose of making it marketable.
14. In view of above, I do not find any illegality or infirmity in the impugned
order dated 09.02.2015 passed by State Employees Insurance Court- Labour
Court No. 1, Raipur (C.G.), hence, the same deserves to be upheld. As such,
both the substantial questions of law are answered accordingly in favour of
respondents and against the appellant.
15. As a consequence, the misc. appeal, being devoid of merit, is liable to be
and is hereby dismissed.
Sd/-
(Naresh Kumar Chandravanshi)
Judge
Amit
AMIT by AMIT
KUMAR DUBEY
KUMAR Date:
DUBEY 2025.02.14
11:54:39 +0530
