Employees' State Insurance
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An AC room is not a cold storage
The Times of India, Oct 29 2015
24 years on, HC finds AC room is not cold storage
It took the judiciary 24 years to declare that an air conditioner makes a room cool and does not turn it into a cold storage. This happened in a case pertaining to a city-based trading firm, Gokaldas Trading Co, which is a commission agent of chocolates, tomato ketchup and other food items.This firm had 10 employees and an AC was installed in the manager's room.
Employees State Insurance Corporation (ESIC) declared it a factory saying it had more than 10 employees and was carrying out manufacturing with the aid of power. It showed an AC as the instrument used in the manufacturing activity .
ESIC concluded that according to Section 2K(vi) of the Factories Act, by employing more than 10 persons and preserving and storing food articles in a cold storage, which is a manufacturing activity, the firm fell in the category of a factory . With this, ESIC sent a notice to the firm, asking it to pay Rs 68,278 as tax from 1983 and 1988.
After due communication with ESIC, the firm filed an application before an ESI court in 1991. This court dismissed the plea requesting that ESI Act should not be made applicable to it merely on the ground that an AC was installed in the manager's room. The firm moved the Gujarat high court in 1994 and argued that the AC was not meant to preserve food items, which were kept in a different room. The AC was used during office hours.
ESIC argued the manager was receiving a salary of just Rs 1,100 and no company would bother to provide AC facility to an employee with such a meager salary . It insisted that the AC was used to keep articles in cold storage.
After hearing the case, the HC said, “This court is of the opinion that the court below (ESI court) committed an error while giving the finding that chocolates, bournvita etc.are preserved in the AC room and the manager's AC chamber is a cold storage.“