JUDGMENT : Vipul M. Pancholi, J. This appeal is filed by Employee State Insurance Corporation original defendant (hereinafter referred to as 'ESI Corporation' for short) under Section 82 of Employee State Insurance Act (hereinafter referred to as 'ESI Act' for short) against an order dated 25.05.2001 passed by ESI Court in ESI Application No.59 of 1990, whereby, the application filed by the present respondent-original applicant has been allowed and the notices issued by the ESI Corporation are held to be illegal. 2. Brief facts of the present case are as under: 2.1 The present respondent-original applicant filed an application under Section 75 of ESI Act before ESI Court, Ahmedabad. The same was registered as ESI Application No.59 of 1990. It is the case of the applicant that applicant is a proprietary establishment and engaged in the business of tobacco as the tobacco merchant. In the said business, the tobacco leaves are manually broken and made into small pieces and thereafter sold to the customers which is known as 'Jarda-Tamaku'. For the said business, applicant engaged workers. It is a case of the applicant that ESI Corporation after thorough investigation applied the provisions of the Act as the applicant has employed more than 20 employees and carrying on the work of Tobacco into small pieces. Thereafter the ESI Corporation has intimated to the applicant vide its communication dated 29.11.1988 that establishment of the applicant has been covered in view of Section 22(2) of ESI Court with effect from 20.03.1981 though the establishment was not amenable to the said provision. It is the case of the applicant that applicant establishment is engaged in the business of Jarda known as unmanufactured Tobacco because it is merely production by pounding. Therefore the concerned authority under the Central Excise Act thoroughly investigated the case of the applicant and thereafter certified that jarda is unmanufactured tobacco. Tobacco is merely production by pounding and then served and packed in retail packets with or without brands as chewing tobacco and therefore the same is not falling under the concerned head of the schedule to the Central Government Excise Tariff Act of 1985. Thus, the exemption certificate was issued by the Excise Department on 22.01.1990 to that effect. Tobacco is merely production by pounding and then served and packed in retail packets with or without brands as chewing tobacco and therefore the same is not falling under the concerned head of the schedule to the Central Government Excise Tariff Act of 1985. Thus, the exemption certificate was issued by the Excise Department on 22.01.1990 to that effect. 2.2 It is further case of the applicant that the ESI Corporation initiated the proceedings for coverage of the applicant under the ESI Act and issued demand letter on 04.01.1990 in form of C18 and demanded the amount for the period between March 81 to 30.06.1988. The said demand was thereafter revised by another communication dated 12.02.1990. The applicant therefore made representation to the ESI Corporation. Re-inspection/ test inspection was carried out by the concerned officer. Thereafter also, the ESI Corporation has wrongly applied the provisions of the ESI Act. It is further pointed out by the applicant that during that period, the applicant purchased one machine known as "chrna machine" on its trial base with effect from 21.03.1978. However, it was difficult for the workmen to use and operate the said machine and therefore it was not used and kept idle for a long time. Thereafter, the said machine was sold on 23.08.1984. The applicant produced necessary documents to that effect before the ESI Court. Applicant has therefore prayed that letter of coverage under form No.C11 and notices dated 04.01.1990 and 12.02.1990 issued by ESI Corporation be declared illegal and against the statutory provisions of the Act. 2.3 The ESI Corporation filed written statement pursuant to the application filed by the applicant, wherein, it has been pointed out that the Insurance Inspector of the Corporation visited the premises of the applicant on 21.09.1988 and 22.09.1988 and inspected certain records. It was revealed during the said inspection that electric power as per license issued with effect from 20.03.1981 for 10HP electric power. The said machine is being used in the manufacturing process and more than 20 workers were engaged for the said work. Thus, it was decided that provisions of ESI Act are applicable to the applicant with effect from 20.03.1981. Accordingly, the factory was covered from the said date. Decision to that effect was conveyed by communication dated 29.11.1988 and it was requested to the applicant to comply the provisions of the ESI Act. Thus, it was decided that provisions of ESI Act are applicable to the applicant with effect from 20.03.1981. Accordingly, the factory was covered from the said date. Decision to that effect was conveyed by communication dated 29.11.1988 and it was requested to the applicant to comply the provisions of the ESI Act. However, applicant did not comply the provisions and therefore show cause notice was issued in April 1989. Applicant did not comply with the said show cause notice and therefore C18 notice was issued on 04.01.1990 and thereafter another notice was issued on 12.02.1990. The ESI Corporation demanded contribution of Rs. 1,18,965/-from the applicant. It was therefore requested that application be dismissed. 2.4 The applicant examined Ambalal Bhikhabhai vide Exh. 17, whereas the ESI Corporation examined Narendrabhai Govind vide Exh.75. The applicant had produced documentary evidence with the list at Exh.40 and Exh.50. The said documents are exhibited vide Exh.18, 19, 20 to 40 and Exh.53, whereas, ESI Corporation has produced documentary evidence vide list at Exh.11 i.e. documents vide Exh.42 to 50. 2.5 The ESI Court after considering the documentary as well as oral evidence produced on record, allowed the application filed by the present respondent-applicant and thereby held that the decision taken by ESI Corporation which was informed to the applicant in form No.C11 on 29.11.1988 that the provisions of ESI Act is applicable to the applicant from March 1981 to June 1988 is illegal. The Court below has also held that demand notices dated 04.01.1990 and 12.02.1990 issued by the ESI Corporation are also illegal and Corporation is not entitled to claim any contribution from the applicant. 3. Heard learned advocate Mr. B.P. Bhatt for the appellant-Corporation and learned advocate Mr. Pranav Dave for learned advocate Ms. Maithili Mehta for the respondent-original applicant. 4. Learned advocate appearing for the appellant mainly contended that the ESI Court has not properly considered the deposition given by Narendrabhai Govind, Exh.75 and the documentary evidence produced by the Corporation vide Exh.42 to 50. It is submitted that when the inspector of the Corporation visited the premises of the applicant in September 1988, it was revealed that "chrna machine" was purchased by the applicant unit in 1978. At the time of inspection, the said machine was lying in the premises for the use of the said machine, license was also obtained for getting 10HP electric power. At the time of inspection, the said machine was lying in the premises for the use of the said machine, license was also obtained for getting 10HP electric power. The said machine is being used in the manufacturing process and it is not in dispute that more than 20 workers were engaged in the premises of the applicant. Learned advocate further contended that it is not in dispute that machine was sold by the applicant in August 1984 and therefore, the unit of the applicant is covered under the ESI Act and hence, the demand notice was issued. ESI Court has therefore wrongly allowed the application by holding that the demand of the Corporation is illegal. He further contended that in the premises, the manufacturing process is being carried on with the aid of the power and more than 20 workers are working, such establishment is covered under the provisions of the ESI Act and therefore, order passed by ESI Court be quashed and set aside. 5. On the other hand, learned advocate Mr. Pranav Dave appearing for the present respondent original applicant submitted that "chrna machine" was purchased in the year 1978. However, it was difficult for the workers to use and operate the said machine and therefore, the same was not used and kept idle for long time. It was sold in August 1984. The applicant has therefore produced necessary documentary evidence before the ESI Court. He further contended that the applicant establishment is engaged in the business of 'Jarda-Tamaku' known as unmanufactured tobacco. Learned advocate explained the process involved in preparing Jarda. He submitted that Jarda is merely production by pounding the tobacco leaves. Therefore, it is unmanufactured tobacco as per the exemption certificate issued by the Excise Department issued on 22.01.1990. He further submitted that when the Excise Department has considered the said product as unmanufactured tobacco, it is not proper for the ESI corporation to consider the same as manufacturing activity with the aid of "chrna machine". In fact, the said machine was never used and therefore, ESI Court has not committed any error while passing the impugned order and therefore present appeal be dismissed. 6. In fact, the said machine was never used and therefore, ESI Court has not committed any error while passing the impugned order and therefore present appeal be dismissed. 6. I have heard arguments advanced on behalf of learned advocates and having gone through the records and proceedings called for from the ESI Court, it has emerged from the record that process of pounding of tobacco leaves is involved in preparing Jarda-Tamaku as per the certificate issued by the Excise Department. The said product is unmanufactured tobacco. Though machine was purchased in the year 1978, from the evidence on record, it is clear that the said machine was not used in the process of preparing Jarda. Machine was sold in the year 1984. In the process of preparing Jarda, electric power is not used and therefore provision of ESI Court is not applicable to the applicant before 1988. Thus, the demand notices dated 04.01.1990 and 12.02.1990 issued by Corporation can be said to be illegal. 7. ESI Court has rightly held that when the machine was not used in the process of preparation of Jarda, the unit of the applicant cannot be considered as factory and during the period between 1981 to 1988, no manufacturing process was carried out with the aid of power and therefore, the same is not covered under Section 2(12) of the ESI Act. 8. I have also gone through the order passed by the ESI Court and I am of the opinion that no illegality is committed by the said Court and therefore this appeal is required to be dismissed. Accordingly, the same is dismissed. Records and proceedings be sent to the concerned ESI Court. Appeal dismissed.