Is Factory License mandatory for MSME sector?

FACTORY LICENSE:

‘Factory’ means any premises including the precincts thereof—

♦ whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or

♦ whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on,

As per the above provisions, the factory license is mandatory when the employees count increased to 10 / 20 as per the above specifications.

However, as per notification no 412 dated 25^th July 1991 issued by the Ministry of Industry [Department of Industrial Development], the licensing for the manufacture of the schedule III products is not compulsory for the small-scale sector (Industry in which investment in plant & Machinery does not exceed three crore rupees). The relevant list of the items is given below.

Moreover, vide notification dated 4(1)/92 – SSI  issued by the Ministry of Industry [Department of Industrial Development], It is further clarified that any item which is compulsorily licensable and is reserved for exclusive manufacture in the small scale sector, will not require a license even if the number of employees is more than 50/100 with/without the aid of power.

The list of the item reserved for Small Scale Industries covered in the above-said paragraph are as follows which is not require Factory License: [ Few Lists added for reference ]

• 319911 Writing inks and fountain pen inks
• 387101 Balpoint pens
• 387103 Fountain pens
• 387104 Pen nibs
• 387105 Fountain pens and ball pens components excluding metallic tips
• 387201 Pencils
• 387401 Hand stapling machine
• 387501 Paper pins
• 387601 Carbon paper
• 38760210 Typewriter ribbon for mechanical typewriters
• 387901 Hand numbering machines
• 387903 Pencil sharpeners
• 387907 Pen holders.
• 303843 Pencil boxes
• 324902 Chalk crayons including tailors chalk
• 260103 Cotton socks
• 260203 Woollen socks
• 260310 Synthetic knitted socks
• 301201 shoes
• 291101 leather shoes
• 30392801 Bagsl

Note:

As per the above notification, the definition of the small scale industry is an industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees three crores and ancillary industrial undertaking means an industrial undertaking which is engaged or is proposed to be engaged in the manufacturing or production of parts components, sub-assemblies, tooling for intermediates or the rendering of services, and undertaking supplies or proposes or supply or renders no more than fifty percent of its production or services, as the case may be, to one or more other industrial undertakings and whose investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees three cores.