No ESI Contribution on Construction Wages Before Manufacturing Begins | HC

Case Details: E S I C vs. Minaxi Taxtiles Ltd. [2026] 186 taxmann.com 253 (HC-Gujarat)

Judiciary and Counsel Details

• Hemant M. Prachchhak, J.
• Sachin D. Vasavada for the Appellant.
• KV Gadhia for the Respondent.

Facts of the Case

In the instant case, the Respondent company was covered under ESI Act since 1995. It ran Unit No. 1 and, for expansion, constructed adjacent Unit No. 2. The appellant Corporation noticed that respondent had incurred labour expenses towards construction of new factory building and had spent about Rs. 23.46 lakhs on factory construction without paying contribution.

Notice was issued seeking recovery of contribution with interest. The ESI Court allowed the application filed by respondent and restrained Corporation from recovering contribution.

High Court Held

The High Court held that construction activity was carried out prior to commencement of manufacturing activity in new unit and, therefore, premises where construction activity was undertaken could not be termed as a factory within meaning of section 2(12) of Employees State Insurance Act, 1948.

Therefore recovery of contribution on wages paid to construction workers was not legally sustainable. Consequently, there was no infirmity or illegality in the impugned judgment and order passed by the ESI Court.

List of Cases Referred to

• Regional Director, ESI Corporation v. Patel Printing Press [2003] 2 GLH 425 (para 6.1).