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Pankaj Tyagi
| Updated: 24 May, 2022 | Category: Factory License

Is a Factory certificate Mandatory for a Business?

Factory Certificate

Not all businesses fall under the purview of the Factory Act of 1948. The said act regulates the entire aspects of the Factory certificate in India. But, despite this well-known fact, some entities often come across a query about whether a Factory certificate is mandatory for a Business or not? Well, it entirely depends on the nature of the operation and the compliances they served under given legislation. To better understand this concept, let us drill down the applicability of Factory certificates in detail.

Commercial establishments, hotels, eating houses, and warehouses have nothing to do with this license. They are needed to abide by the provisions of other legislation such as the Shop and Establishment Act, food license, and trade license. Simply put, a Factory certificate is mandatory for establishments that deal with production-related activities.

What is Factory certificate, and which authority grants it?

According to the Factory Act, 1948[1], the Factory certificate is a mandate for entities who have;

  1. Ten or more workers in its production facility driven by power on any day of the preceding 12 months or
  2. Twenty or more workers are serving the production undertaking in any facility without the aid of power on any day of the preceding 12 months.

Before commencing the construction of a production facility, or in the case of expansion of the present facility, the applicant should apply for the approval of the factory plan and secure consent from the authority concerned for construction.

What are the registration formalities under the Factory Act, 1948?

Following steps need to be followed by the applicant for securing the Factory certificate in India:

Step 1: Submission of factory plan

The state government has the right to underpin provisions around plan submission for a given facility. The provisions provide for the chief reviewer’s and state government’s permission for the construction or expansion of any production facility.

Step 2: Notice by occupier

  • Manufacturing process type
  • Facilitate the name & addresses of the production facility and its owner
  • Contact address of the person-in-charge
  • Machines available in the production facility
  • Employees serving the establishment
  • Name of the manager

Step 3: Application for Factory certificate

The applicant seeking the Factory certificate needs to submit the standard application form (Form 1) along with the documents mentioned above and the prescribed fee.

Step 4: Verification and inspection

The inspection process shall be conducted in two phases: In the first phase, the Deputy Factories Director shall go through the application and proposal to make some compliance checks. Once done, the said official will forward his/her finding along with the application to the senior person, i.e. Director.

The Director concerned shall conduct the second-phase investigation under which he/she will go through the deputy director’s findings and the concerned documents.

Step 5: Grant of license

After successful vetting, the licensing department shall grant the Factory certificate.

Benefits of Factory certificate from owner and employees’ viewpoint

  • The Factory certificate makes sure that the rights of the workers remain intact and protected
  • A Factory certificate safeguards workplace integrity and ensures an eco-friendly environment for the workers.
  • Factory certificate underpins a proper legal framework for the factory owners so that they can stay compliant with the underlying norms.
  • Even though it is a mandate, a Factory certificate ensures various benefits for the licensee, such as increased credibility and improved market presence.

Conclusion

So it is clear from the above that the Factory certificate is generally secured by a production facility (power or non-power based) in India. Its applicability also depends on the number of workers serving the facility. Thus, it can be concluded that the Factory certificate is not a mandate for all types of businesses in India.

Read our Article:An Overview of License for Plywood Factory in UP

Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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