Aryan Energy Pvt Ltd vs U O I & Ors
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Reserved on: 27 February, 2026
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Pronounced on: 01 June, 2026
+ CRL.M.C. 4350/2018
ARYAN ENGERY PVT. LTD.
43, Vasant Enclave
Rao Tula Ram Marg, New Delhi.
Through Its Company Secretary
Mr. Praveen Kataria. .....Petitioner
Through: Mr. Raghvendra K. Singh and
Mr. Ashish Shukla, Advocates.
versus
1. UNION OF INDIA
Rep. Through the Secretary,
Ministry of Corporate Affairs
Shastri Bhawan, New Delhi.
2. REGISTRAR OF COMPANIES
NCT of Delhi & Haryana
th
4 Floor, IFCI Tower,
61, Nehru Place, New Delhi.
3. ASSISTANT REGISTRAR OF COMPANIES
NCT of Deli & Haryana
th
4 Floor, IFCI Tower,
61, Nehru Place, New Delhi. .....Respondents
Through: Ms. Pratima N. Lakra, CGSC with
Mr. Shailendra Kumar Mishra and
Mr. Chanakya Kene, Advocates.
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
J U D G M E N T
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NEENA BANSAL KRISHNA, J.
1. Petition under Section 482 of the Code of Criminal Procedure, 1973
( hereinafter referred to as “Cr.P.C” ) read with Article 227 of Constitution
of India, 1950 has been filed by the Petitioner Company, Aryan Energy Pvt.
Ltd. , seeking quashing of the Complaint Case under Section 148(8)(a) read
with Section 147(1) of the Companies Act, 2013 which is pending trial in
the Court of learned Additional Chief Metropolitan Magistrate.
2. A Complaint Case bearing No.13222/2017 , under Section 148(8)(a)
read with Section 147(1) of the Companies Act, 2013, was filed by the
respondent.
3. The brief facts as narrated in the Complaint were that the Petitioner
Company incorporated on 23.02.2001 under the Companies Act, 1956, is
engaged in beneficiation of coal ( washing ) for the coal producing
Companies and has set up coal washeries at Gauri, Nagpur (Maharashtra),
Talcher (Odisha) and Ramakrishnapuram-1 (Telangana), for the mineral
producing subsidiaries of Coal India Limited. The petitioner claimed that it
is neither producing or extracting the mineral or coal from the mines nor is it
manufacturing any coal product.
4. Subsequently, Respondent No. 1 issued Notice dated 04.05.2016 to
the Petitioner Company, to explain the reasons for non-appointment of Cost
Auditor. The Petitioner Company vide its Reply dated 06.05.2016 , explained
that since the Petitioner Company was merely engaged in the activity of
washing coal and not in the production or manufacturing of any mineral or
coal, the Cost Auditor was not required to be appointed, under the
Companies Act, 2013. However, the aforesaid Reply of the Petitioner
Company was disregarded by Respondent No. 1, whereafter, it issued a
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Show Cause Notice dated 05.12.2016 to the Petitioner Company under
Section 148 of the Companies Act, 2013 on the ground of non-submission of
the Cost Audit Report as well as for not appointing the Cost Auditor .
5. The Petitioner Company gave a Reply dated 21.12.2016 to the Show
Cause Notice issued by Respondent No.1, wherein, it was explained that the
activities undertaken by the Petitioner Company, were not covered under the
category of Companies specified in Rule 3 of the Companies (Cost Records
and Audit) Rules, 2014 for having its Cost Records audited , as enshrined
under Rule 4 thereof. In view of the relevant Rules framed under the
Companies Act, in regard to the appointment of the Cost Auditor, the
Petitioner Company was not required to appoint the Cost Auditor for the
Financial Year 2015-16 in terms of Section 148 of the Companies Act, 2013
read with Sub-Rule (1) of Rule 6 of the Companies (Cost Records and
Audit) Rules, 2014. It was further claimed that, there are specified
categories of Companies fulfilling the threshold limits, as laid down in Rule
4 which are required to appoint a Cost Auditor as enshrined under Rule 6 of
the Companies (Cost Records and Audit) Rules, 2014. Since the activities
of the Petitioner Company were not covered under the specified categories,
the Cost Auditor was not required to be appointed.
6. It was further asserted that, M/s BSR & Company ( Auditors of the
Petitioner Company ) in their Audit Report for the year ending on
31.03.2015 reported that after due diligence, “The Central Government has
not prescribed the maintenance of cost records under Section 148(1) of the
Act for any services rendered by the Petitioner Company” .
7. The reply of the Petitioner Company was rejected and initiated
action against the Petitioner Company under Section 148 of the Companies
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Act, 2013, vide its Letter dated 22.08.2017 , whereafter, the present
Complaint under Section 148 of the Companies Act, 2013 was filed against
the Petitioner Company, in the Court of learned Additional Chief
Metropolitan Magistrate.
8. The learned Additional Chief Metropolitan Magistrate vide its Order
dated 23.12.2017, issued Notice to the Petitioner Company and its officials.
Thereafter, on 29.05.2018, the learned Additional Chief Metropolitan
Magistrate directed Notice under Section 251 of the Cr.P.C ., to be framed
against the Petitioner Company and its officials.
9. By way of the present Petition, the Petitioner Company has
sought quashing of the aforesaid Complaint . It is stated that it only
requires consideration qua application of law and there is no dispute
regarding the facts of the present case. It is submitted that no law has been
violated by the Petitioner Company, who was merely carrying out the
activity of coal beneficiation ( washing ) and has not committed any offence
under Section 148 of the Companies Act, 2013. It is, therefore, prayed that
the Complaint Case bearing No.13222/2017 filed against the Petitioner
Company be quashed .
10. The Respondents in their Reply to the present Petition have
asserted that Section 148 of the Companies Act, 2013 read with the
Companies (Cost Records and Audit) Rules, 2014 made thereunder,
provides that the Central Government may, by Order, in respect of such
class of Companies engaged in the production of such goods or providing
such services, as may be prescribed, direct the audit of Cost Records of such
Companies. Rule 3 and Rule 4 of the aforesaid Rules, prescribe the list of
goods or services along with the turnover criterion. The provision of Cost
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Audit is applicable to class of Companies that satisfy the conditions, as
prescribed under Rules 3 and 4.
11. The Petitioner Company in the present case, had furnished
information by filling Form AOC-4 XBRL, with the Central Government.
As per the information supplied by the Petitioner Company, for the
st
Financial Year ending on 31 March, 2015, conducting Cost Audit and
appointment of Cost Auditor, was mandatory. The Petitioner Company in
its product code had mentioned “ITC Code 27011910” , which is covered as
Mineral Fuels ( other than petroleum ) under Rule 3 of the Companies (Cost
Records and Audit) Rules, 2014. The Petitioner Company also satisfies the
turnover criteria. Therefore, the Petitioner Company was required to
appoint Cost Auditor for the Financial Year 2015-16.
12. However, no Cost Auditor was appointed and, therefore, Notice
dated 04.05.2016 was issued to explain the reasons for non-appointment of
Cost Auditor. A Reply dated 06.05.2016 was submitted by the Petitioner
Company, which was not found satisfactory. Therefore, Show Cause Notice
dated 05.12.2016 was issued. The Petitioner Company in its response dated
21.12.2016, claimed that it was engaged in providing services of coal
beneficiation ( washing ) and allied activities, which was not covered under
the category specified in Rule 3 of the Companies (Cost Records and Audit)
Rules, 2014 for getting its Cost Records audited.
13. On examination, it was found that coal beneficiation ( washing ) is a
process that is applied on raw coal and results in significant value addition in
the coal, by removing burnable coal from associated unburnable mineral
matter ( also known as ash ). The resultant coal, which is obtained after the
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aforesaid process, is a valuable and efficient product having improved/wide
marketability and is significantly different from the unwashed coal.
14. It was further noted that the Petitioner Company was engaged in the
activity of conversation of raw coal into beneficiated coal, through the
process of coal beneficiation ( washing ), at its Coal washeries. Both raw
coal as well as beneficiated coal, are covered under Cost Audit, vide Central
Excise Tariff Act ( “CETA” ) as well as Rule 3 of the Companies (Cost
Records and Audit) Rules, 2014. The Petitioner Company is, therefore,
liable to prepare and maintain Cost records and get them audited, by a duly
appointed Cost Auditor.
15. After analyzing the aforesaid issue in detail and considering non-
appointment of Cost Auditor by the Petitioner Company, approval was taken
by Respondent No.1 from Competent Authority through Letter dated
22.08.2017, and it was written to Respondent No.2, Registrar of Companies
for filing prosecution Complaint under Section 148 of the Companies Act,
2013, whereafter, the Complaint was filed. It was claimed that the default of
non-appointment of Cost Auditor under Section 148 of the Companies Act,
2013 continues till date.
16. The Respondents further asserted that the applicability of Cost Audit
is based on production/processing of the product and the Rules nowhere
provides any relaxation or exemption in the case of production/processing of
raw material owned by the third party. The output of coal beneficiation
process, is significantly different from the raw material and the activity of
coal beneficiation, is an integral part of the entire value chain of coal.
17. The legislative intent is to mandate preparation of detailed Cost
Records for each product separately, for which it is necessary that the Cost
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Records are prepared of all the activities, till the product is a finished
product. Even if the contention of the Petitioner Company is accepted, then
such exclusion of preparation of Cost Records for certain processes, would
not allow the Central Government to have the access of the Cost Records of
the entire value chain. This would defeat the entire purpose of mandating of
Cost Records for certain sectors.
18. It is, therefore, prayed on behalf of the Respondents that there is no
merit in the contentions of the Petitioner Company and the present Petition
is liable to be dismissed.
19. The Petitioner Company as well as the Respondents have submitted
the Written Submissions on similar lines, as their respective contentions in
the pleadings.
Submissions heard and records perused .
20. The Petitioner Company has claimed that it was only doing the
activity of beneficiation of coal ( washing ), which was not an activity, as per
the Companies (Cost Records and Audit) Rules, 2014, which mandated
maintaining Cost Records or carrying out Cost Audits.
21. In order to appreciate the contention of the Petitioner Company, it is
firstly pertinent to refer to the Memorandum of Association of the Petitioner
Company, which provides in Clause 3, which reads as under:
“ To carry on any business relating to the mining and
working of minerals (metallic and non-metallic) the
production and working of metals, ferrous & non-
ferrous, bricks, refractory and otherwise, coal, clay,
soapstone, limestone, silica, dolomite, venellum,
galine, lead graphite, hyalite chromite beryl, limonite
and monosit, sand, asbestors etc. and other materials
and either for the purpose only of such contracts or as
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independent business and to undertake and execute any
contract for works involving the supply or use of any
machinery and to carry out any ancillary or other
works comprised in such contracts.”
22. The Memorandum of Association itself reflects that the business of
the Petitioner Company related to the mining and working of minerals
( metallic and non-metallic ), as well as their production.
23. Secondly , the document of relevance is the Form No. AOC-4 XBRL,
wherein, the Petitioner Company had declared “ITC Code 27011910” . The
Petitioner Company had annexed the Standalone Financial Statements for
the period commencing from 01.04.2014 to 31.03.2015. The general
information about the Petitioner Company, was disclosed therein. The
description of product or service category was stated as “coal briquettes
ovoid & similar solid fuels manufactured from coal” . The description of
product or service was given as “Coal Beneficiation and Allied activities” .
The most conspicuous thing, which emerges is that, it is not only the Coal
Beneficiation but Allied Services , which were mentioned. The said term has
not been explained by the Petitioner Company, in the present Petition.
24. The next relevant factor is the reference to Clause 3 of the Companies
(Cost Records and Audit) Rules, 2014, which deals with Application of Cost
Records. Clause „C‟ reads as under:-
(C) The Companies operating in areas involving
public interest such as:
(a) (i) Railway or tramway locomotives,
rolling stock, railway or tramway fixtures and
fittings, mechanical (including electro
mechanical) traffic signalling equipment‟s of
all kind;
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(ii) Mineral products inclining cement;
(iii) Ores;
(iv) Mineral fuels (other than Petroleum)
mineral oils etc.
25. Rule 4 of the Companies (Cost Records and Audit) Rules, 2014
provides for Applicability for Cost Audit. The relevant part of the said Rule
reads as under:
Rule 4 Applicability for cost audit:-
(i) ------
(ii) In the case of a multi-product or a
multi services company specified in sub-clause (b)
of clause (B) and sub-clause (b) of Clause (C) of
Rule 3, the requirement for cost audit shall apply to
a product or a service for which the individual
turnover (from such specific product or such
specific service) is rupees one hundred crore or
more.”
26. The main contention of the Petitioner Company was that it was
merely offering Coal Beneficiation ( washing ) services and was not in the
business of manufacturing of coal fuel. To understand this contention, it is
relevant to understand what exactly is meant by Coal Beneficiation
( washing ).
27. Coal Beneficiation or coal preparation refers to the process through
which inorganic impurities are separated from raw coal; thereby, providing
improved combustion characteristics to the fuel produced. The separation
processes used are primarily based on exploiting the physical differences
between organic that is coal and inorganic i.e. ash components.
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28. This aspect has been explained in the case of Commissioner of Service
Tax Delhi and Global Coal and Mining Pvt. Ltd. , Civil Appeal No.
23105/2020, decided by the Hon‟ble Supreme Court of India on 27.08.2021 .
It is stated that the activity of beneficiation of coal involves quashing of coal
with a view to remove the high ash content and to make it fit for use in the
generation of power.
29. The phenomenon of Beneficiation is discussed in detail by the Apex
Court in the case of Tata Steel Ltd. v. Union of India and Ors. (2015) 6 SCC
193. It was explained that the Coal Beneficiation , also known as coal
washing of coal preparation, is an industrial process that improves the
quality of raw coal by improving non-combustible impurities, like ash,
sulphur, etc. This mechanical upgrading process increases the coal‟s heating
value ( Gross Calorific Value ), standardises its sizing and gives a cleaner
more efficient fuel before it is burnt.
30. The Coal Beneficiation thus, involves separation of pure coal from
unwanted geologic base material relies on different physical and chemical
properties. It is primarily categorised into two types: one physical
Beneficiation which may be done by wet process or dry process; and second
is the chemical Beneficiation, which involves sweating the coal with
chemical agents.
31. The Beneficiation of coal by way of wet process was considered in
detail in the case of Tata Steel Ltd. (supra) . It was explained that when
Beneficiation is done through wet process, it increases the moisture
percentage of Beneficiated coal by around 8% to 15%. After Beneficiation,
apart from the clean coal ( required in Blast furnace for Steel making
coal ), the by-products named as Middling ( ash 40-45% ), Tailings ( ash 40-
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45% ) and Rejects ( ash 60-65% ), are also obtained. Thus, 100 tonnes of raw
coal would produce approximately 115 tonnes of washed product.
32. It was thus, concluded in Tata Steel Ltd. (supra), that the
Beneficiation process is a physical separation process to separate higher ash
coal and lower ash coal, so no chemical changes are made in the coal
mineral, as there are no chemical reactions involved during the said
Beneficiation process.
33. Furthermore, due to addition of water during wet Beneficiation,
summation of Beneficiated coal product quantity is higher than raw coal
quantity. There are two significant consequences of Beneficiation process:-
(i) the grade of coal improves ( from Washery Grade IV it could
improve to Steel Grade I ) and
(ii) the weight of coal increases from 100 tons of raw coal to 105
tons [excluding rejects] of Beneficiated coal.
34. Therefore, from the aforesaid discussion, it emerges that the raw coal
when subjected to Beneficiation, results in a product which is much better
and is s higher quality of coal . Not only this, there are certain by-products,
some of which can be used for producing charcoal and other products.
35. In this context, it would also be relevant to understand whether such
process would be covered, under the definition of “manufacture” . In the
case of Commissioner of Income Tax, Kerala vs. Tara Agencies , (2007) 6
SCC 429. The distinction between the three processes, namely,
“ manufacture”, “production” and “processing”, were considered.
36. The other terms which needs to be understood is ‘ Production ’ . In
Black’ Law Dictionary (5th Edition), the term „ production ‟ has been
defined as under:
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“Production: Process or act of producing. That which
is produced or made; i.e. goods. Fruit of labor, as the
productions of the earth, comprehending all vegetables
and fruits; the productions of intellect, or genius, as
poems and prose compositions; the productions or art,
as manufactures of every kind.”
37. The term „produce‟ , as defined in the New Webster‟s Dictionary of
the English Language (Deluxe Encyclopedic Edition), is as follows:
“Produce: To bring forth into existence; to bring about;
to cause or effect, esp. intellectually or creatively; to
give birth to; to bear, furnish, yield; to make accrue; to
bring about the performance of, as a movie or play; to
extend, as a line.- v.i. To bring forth or yield
appropriate offspring, products, or consequences.”
38. The Supreme Court in the case of Deputy Commissioner of
Agricultural Income-tax & Sales Tax, Central, Zone, Ernakulam vs. M/s
Palampadam Plantations Ltd. , AIR 1969 SC 930, had considered the
meaning of the term „produce‟ used in the Kerala General Sales Tax Act,
1963. The expression used was the person who sells goods produced by him
by manufacture, agriculture, horticulture or otherwise.
39. In the case of Tara Agencies (supra), after referring to the aforesaid
definitions, it was concluded that the expression “produced” was given a
wider meaning than the word “manufacture ,” pointing out that the word
„produced‟ will include an activity of manufacturing the materials by
applying human endeavour on some existing raw material, but the word
„produce‟ may include securing certain produce from natural elements, for
example, by growing plants on soil, or by operating mines, for example, by
milking the cow, the milkman produces milk, though he had not applied any
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process on any raw material for the purpose of bringing into existence the
thing known as milk.
40. It was further held the word „ production‟ or „ produce‟ , when used in
juxtaposition with the word „ manufacture,‟ takes in bringing into existence
new goods by the process which may or may not amount to manufacture . It
also takes in all the by-products, intermediate products and residual
products, which emerge in the course of manufacturing such goods.
41. The third terminology which needs understanding is “process” .
According to Oxford Dictionary, one of the meanings of the word „process‟
is “ a continuous and regular action or succession of actions taking place or
carried on in a definite manner and leading to the accomplishment of some
result .”
st
42. In Chambers 21 Century Dictionary , the term „process‟ has been
defined as under:
“Process: 1. a series of operations performed during
manufacture, etc. 2. a series of stages which a product,
etc. passes through, resulting in the development or
transformation of it.”
43. In Collins Cobuild English Dictionary , the term „process‟ has been
defined as under:
“A process is series of actions which are carried out in
order to achieve a particular result.
A process is a series of things which happen naturally
and result in a biological or chemical change.
When raw materials or foods are processed, they are
treated chemically or industrially before they are used
or sold.”
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44. The term „process‟ as defined in the New Webster’s Dictionary of the
English Language [Deluxe Encyclopaedia Edition] is as under:
“Process: To treat or prepare by some particular
process; to convert, as an agricultural commodity, into
marketable form by some special treatment; Produced
or treated by some artificial means; as, process sugar;
of or pertaining to photographic reproduction that
involves photo-engraving or photomechanical means;
relating to special effects obtained in motion pictures
through the use of special filming techniques.”
45. In Bay Bottle Gas Co. v. Michigan Dept. of Revenue 74 N.W. 2d 37,
39, 344 Mich. 326, while dealing with the term „process‟ , the court observed
as under:
“To „process‟ means to subject, especially raw
material, to a process of manufacturing, development,
preparation for the market, etc.; to convert into
marketable form, as livestock by slaughtering, grain
by milling, cotton by spinning, milk by pasteurizing,
fruits and vegetables by sorting and repacking. ”
46. In Tara Agencies (supra), while considering whether blending of
different qualities of tea of different brands, for export, can be termed as
„production‟ or „manufacture‟ . In that context, it was observed that blending
though does not amount to manufacturing of goods, but it clearly amounts to
processing of goods, in the sense that it brings some change in the goods.
47. „ Manufacturing‟ has been construed and interpreted by the Apex
Court, in order to properly comprehend the certain distinction between
„manufacturing‟ and „processing‟ .
48. According to the dictionary, “ manufacture” means a process which
results in an alteration or change in the goods, which are subjected to the
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process of manufacturing leading to the production of a commercially new
article. In determining what constitutes „manufacture‟ , no hard and fast rule
can be applied and each case has to be decided on its own facts.
49. The term „ manufacture‟ has been defined in Black’s Law Dictionary
(5th Edition), as under:
“Manufacture: The process or operation of making
goods or any material produced by hand, by machinery
or by other agency; anything made from raw materials
by the hand, by machinery, or by art. The production of
articles for use from raw or prepared materials by
giving such materials new forms, qualities, properties
or combinations, whether by hand labor or machine.”
50. The word „ manufacture‟ has been defined in Halsbury‟s Laws of
rd
England, 3 Ed. Vol. 29 p.23 as under:-
“Manufacture has been defined as a manner of
adapting natural materials by the hands of man or by
man-made devices or machinery and as the making of
an article or material by physical labour or applied
power; but the practice is to accept as manufacture a
wider range of industrial activities than such a
definition would suggest. It includes articles made in
situ as well as articles made in a factory.”
51. The Supreme Court of the United States of America defined the term
„ manufacture‟ in Anheuser-Busch Brewing Assn. vs. United States , (1907)
52 L Ed. 336, which was followed in subsequent American, English and
Indian cases, reads as under:
“ Manufacture implies a change, but every change is
not manufacture, and yet every change in an article is
the result of treatment, labour and manipulation. But
something more is necessary... There must be
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transformation; a new and different article must
emerge, having a distinctive name, character or use. ”
52. The term “manufacture ” was found to be not defined under the
Income Tax Act, 1961, but defined in Section 2(f) of the Central Excise Act,
1944. Para (i) and (ii) of Section 2(f), which reads as under:-
“2(f). 'Manufacture' includes any process-
(i) incidental or ancillary to the completion of a
manufactured product; and
(ii) which is specified in relation to any goods in the
Section or Chapter notes of the Schedule to the Central
Excise Tariff Act, 1985 as amounting to manufacture”.
53. Clause (f) gives an inclusive definition of the term „ manufacture‟ .
Therefore, for a process to be termed as manufacture‟, it must necessarily
result in a new and different article must emerge, having a distinctive
name, character or use .
54. In Union of India & Others vs. J.G. Glass Industries Ltd. &
Others , (1998) 2 SCC 32, the Supreme Court has laid down a two-fold test
for determining whether the process is „manufacturing‟ ; first , whether by
the said process, a different commercial commodity comes into existence or
whether the identity of the original commodity ceases to exist. Secondly ,
whether the commodity which was already in existence will serve no
purpose but for the said process. Applying the two- fold test, it was held that
printing on bottles does not amount to manufacture.
55. The Constitution Bench of the Supreme Court in M/s Devi Das Gopal
Krishnan etc. v. State of Punjab & Others , AIR 1967 SC 1895 observed that
if by a process a different identity comes into existence, then it can be said
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to be „manufacture‟ . When oil is produced out of the seeds, the process
certainly transforms raw material into different article for use.
56. In Empire Industries Limited & Others vs. Union of India & Others ,
(1985) 3 SCC 314, it was observed that manufacture is complete as soon as
the application of one or more processes, the raw material undergoes some
change and a new article is brought into existence, having a distinct name
and character would amount to manufacture.
57. A Constitution Bench of the Supreme Court in M/s Ujagar Prints &
Others (II) vs. Union of India & Others , (1989) 3 SCC 488 and
M/s Saraswati Sugar Mills & Others vs. Haryana State Board & Others ,
(1992) 1 SCC 418 took the same view.
58. In Gramophone Co. of India Ltd. vs. Collector of Customs,
Calcutta (2000) 1 SCC 549, the Supreme Court examined earlier cases and
held that „manufacture‟ implies a change, but every change is not
manufacture and yet, every change of an article is the result of treatment,
labour and manipulation, but something more is necessary and there must be
transformation; a new and different article must emerge having a distinctive
name, character and use. In this case, the word „manufacture‟ has various
shades of meanings, but unless defined under the Act, it is to be interpreted
in the context of the object and the language used in the section. It would not
be applicable in cases where only processing activity is carried out. Further,
such production activity, must be met by an industrial undertaking.
59. In Collector of Central Excise, Jaipur etc. vs. Rajasthan State
Chemical Works, Deedwana, Rajasthan etc. , (1991) 4 SCC 473, the
Supreme Court had defined the word „manufacture‟ as under:
“Manufacture implies a change but every change is not
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manufacture, yet every change of an article is the result
of treatment, labour and manipulation. Naturally,
manufacture is the end result of one or more processes
through which the original commodities are made to
pass. The nature and extent of processing may vary from
one class to another. There may be several stages of
processing, a different kind of processing at each stage.
With each process suffered the original commodity
experiences a change. Whenever a commodity undergoes
a change as a result of some operation performed on it or
in regard to it, such operation would amount to
processing of the commodity. But it is only when the
change or a series of changes take the commodity to the
point where commercially it can no longer be regarded
as the original commodity but instead is recognised as a
new and distinct article that a manufacture can be said to
take place. Manufacture thus involves series of processes.
Process in manufacture or in relation to manufacture
implies not only the production but the various stages
through which the raw material is subjected to change by
different operations. It is the cumulative effect of the
various processes to which the raw material is subjected
to, manufactured product emerges. Therefore, each step
towards such production would be a process in relation
to the manufacture. Where any particular process is so
integrally connected with the ultimate production of
goods that but for that process manufacture of processing
of goods would be impossible or commercially
inexpedient, that process is one in relation to the
manufacture.”
60. In the case of Global Coal and Mining Pvt. Ltd. vs. Commissioner of
Service Tax, Delhi 2019 SCC OnLine CessTax 4600 the Supreme Court
while considering the Beneficiation activity undertaken by the Petitioner,
held that while considering the scope of services in relation of mining, the
services of Beneficiation of coal would be apart from mining activity
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ARORA
Signing Date:02.06.2026
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brought under the ambit of service tax.
61. The aforesaid discussion, therefore, shows that the Beneficiation of
Coal falls in the category of „manufacture‟ . Rules 3 and 4 of the Companies
(Cost Records and Audit) Rules, 2014 provides for the requirement of Cost
Records and Cost Audit, to be applicable to such a product or service.
62. It is a mixed question of fact and law, to comprehend the exact steps
being followed by the Petitioner, and whether the product that emerges after
washing, retains its original characteristics. The evidence may be led by the
Petitioner, to establish that no manufacturing was indeed done, in the
process of beneficiation, by the Petitioner.
63. It is hereby clarified that the observations made herein are confined
to adjudication of the present Petition, and does not tantamount to
expression on the merits of the case.
64. In light of the aforesaid discussion, it cannot be said that per se
Beneficiation of Coal is not a manufacturing process, thereby, entitling the
Petitioner Company to quashing of the Criminal Complaint filed under
Section 148 of the Companies Act, 2013.
65. There is no merit in the present Petition, which is hereby, dismissed .
Pending Application(s), if any, also stands disposed of.
(NEENA BANSAL KRISHNA)
JUDGE
JUNE 01, 2026/ va/RS/N
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Signed By:VIKAS
ARORA
Signing Date:02.06.2026
13:16:53