Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.2464 OF 2016
(Arising out of S.L.P. (Civil) No. 9246 OF 2012)
Manganese Ore India Ltd. … Appellant(s)
Versus
State of M.P. & Ors. …Respondent(s)
With
CIVIL APPEAL NOS.24652467 OF 2016
(Arising out of S.L.P. (Civil) Nos. 1064310645 OF 2012)
J U D G M E N T
Dipak Misra, J.
In this batch of appeals, by special leave, the appellants
have assailed the legal tenability of separate orders dated
01.12.2011 passed in Writ Petition No. 9017 of 2010 which
relates to the writ petition filed by Manganese Ore India Ltd.
and M.P. No. 2821 of 1988, M.P. No. 3827 of 1993 and W.P.
Signature Not Verified
Digitally signed by
CHETAN KUMAR
Date: 2018.04.07
12:54:28 IST
Reason:
No. 3103 of 1994 preferred by Hindustan Copper Limited.
2
2. As the commonality of controversy centres around
interpretation of the terms “mineral” and “processing” under
the definition of “mine” as defined under Explanation (b) of
PartB of Madhya Pradesh Electricity Duty Act, 1949 (for
brevity, “the Act”), we shall enumerate the scheme of the Act
and the various litigations that have taken place and
thereafter advert to the facts in each case. For brevity and to
avoid repetition, we have initially referred to the litigation and
different orders passed in the case of Hindustan Copper
Limited.
3. The erstwhile Central Provinces and Berar Legislative
Assembly had enacted the CP and Berar Electricity Duty Act,
1949 which was adopted in the State of Madhya Pradesh and
has come to be known as the Madhya Pradesh Electricity
Duty Act, 1949. The Preamble to the Act as amended by the
State Legislature provides that it is an Act for the levy of duty
on sale or consumption of electrical energy. Section 3(1) of the
Act accordingly provides for levy of duty on sale or
consumption of electrical energy. It stipulates that subject to
the exceptions specified in Section 3A, every distributor of
3
electrical energy and every producer shall pay every month to
the State Government at the prescribed time and in the
prescribed manner a duty calculated at the rates specified in
the table below on the units of electrical energy sold or
supplied to a consumer or consumed by himself for his own
purposes or for purposes of his township or colony, during the
preceding month. The table to Section 3(1) prescribes different
rates of duty depending for the purpose for which the electrical
energy is sold. PartB of the table provides for different rates of
duty for the electrical energy sold, supplied or consumed for
the purposes therein. Item 3 to the said table reads as
follows:
“3. Mines (other than captive 40
mines of cement industry)”
4. The numeral 40 comes under the heading ‘rate of duty as
percentage of the electricity tariff per unit’. The Explanation
(b) to Section 3(1) defines “mine” as under:
“Explanation .(b) “Mine” means a mine to which the
Mines Act, 1952 (No. 35 of 1952) applies and
includes the premises or machinery situated in or
adjacent to mine and used for crushing, processing,
treating or transporting the mineral.”
4
5. It is necessary to state here that Hindustan Copper
Limited had filed a Writ Petition to strike down the provision of
Section 3 and the Table PartB Item 4 (which is now Item No.
3 after 1995 amendment) and Explanation (b) which contains
extended definition of mines as ultra vires the Constitution.
As the factual matrix would reveal, the High Court dismissed
the Writ Petition by placing reliance on
State of M.P. v. Birla
1
Jute Mfg. Co. Ltd. . The matter travelled to this Court which
eventually formed the subject matter of Civil Appeal Nos.
324850 of 1998. A twoJudge Bench of this Court in
2
taking
Hindustan Copper Ltd. v. State of M.P. and others
note of certain facts opined that the main controversy that was
required to be examined by the High Court was as to how the
word “mines” is to be understood as contained in clause (b) of
the Explanation under Item 4 of the Table contained in Section
3 of the Act. This Court took note of the contentions of the
appellant therein that the activities carried on by it do not fall
within the meaning of the word “adjacent” area and further the
1
(1995) 4 SCC 603
2
(2004) 12 SCC 408
5
approach of the respondents was selective and discriminatory.
As the submissions raised were not dealt with by the High
Court but it proceeded to dispose of the case without
examining the facts in greater details in regard to either the
activities carried on at different places by the appellant or as
to how in the context of the facts of the case and having due
regard to the provisions, the word “adjacent” should be
construed, the Court remitted the Writ Petition to the High
Court by stating so:
“Under the circumstances, we consider it just
and appropriate that the High Court should
examine afresh the contentions advanced on
behalf of the parties, having due regard to the
materials placed on record and in the context of
the provisions of the Act touching the
controversy. Since we are taking a view to remit
the case to the High Court, we do not wish to
express one way or the other on the merits of
the respective contentions urged by the
parties. …”
6. After the remit, the High Court heard the Writ Petition
and dismissed the same. The order passed by the High Court
was assailed in appeal, by special leave, in Civil Appeal No.
6725 of 2008. In the second round, the twoJudge Bench
stated the facts in detail which are to the effect that the
6
appellant therein is engaged in extraction of copper ore, by
open cast mining process involving drilling and blasting the
ore in the open pit mine, the ore in the form of boulders are
transported to the primary crusher (situated at a distance of
2.53 km from the mine), where it is crushed into
pebbles/pieces and such crushed ore is then carried on a
conveyor to a secondary crusher (situated at about 5 km from
the mine) for further crushing into smaller pebbles. After the
said stage, small pieces/pebbles are then carried by a
conveyor to the Concentrator Plant (situated at 5.5 km from
the mine).
7. This Court further proceeded to state the facts
adumbrated as projected by the appellant before the High
Court. It was asserted that:
“4. In the Concentrator Plant, the ore is milled into
powder in the ball mills. Such powder mixed with
water is carried in the form of slurry to floatation
cells. In the floatation cells, the slurry is subjected
to froth floatation process and the copper
concentrate is removed and dried in vacuum driers
and stored in concentrate storage sheds. The tailing
pumps are at a distance of 8 km. A large quantity of
water is required for the Concentrator Plant for
being used in milling. Water is also required for the
factory township. The required water is pumped
7
from the mines through pumps located at an intake
well (situated at a distance of 10 km from the mine).
From the intake well, water is pumped to water
treatment plant (situated at a distance of 6 km from
the mine).
5. According to the appellant, its activities consist of
two distinct parts. First is mining, that is, drilling,
blasting and collecting of ore which is carried on at
mine pit. This activity is carried on in the mine area
registered under the Mines Act, 1952. The second is
processing, which is carried on at the primary
crusher, the secondary crusher and the
Concentrator Plant. The processing (manufacturing)
part of the activities are carried on in the factory
area. The primary crusher, the secondary crusher,
the ball mill, the Concentrator Plant, the tailing
pumps, the intake well and the water treatment
plant are situated away from the mine, at distances
varying from 2.5 km to 10 km and are registered
separately as a “factory” under the provisions of the
Factories Act, 1948. The open pit mine (mining
area) and the processing plants/machineries
(factory area) are all situated in a large tract of land
taken on mining lease from the State Government.”
8. The twoJudge Bench adverted to the chronology of the
case and noted that the principal grievance of the appellant
therein pertains to the definition of “mine” the effect of which
is to make processing a part of mining and the prescription of
a higher rate of duty for “mines” (that is composite activity of
mining and processing), while prescribing a lesser rate for
other categories of industries. That apart, the Court taking
8
note of the fact that classification of factories into two
categories: (a) those which are adjacent to a mine and used for
crushing, processing, treating and transporting the mineral;
and (b) other factories is permissible. It was urged on behalf of
the appellant that the expression “adjacent to the mines” is
vague and ambiguous that leads to discriminatory treatment
by the authorities. Further, its processing plant, that is, the
primary crusher, the secondary crusher, the ball mill, the
Concentrator Plant, the tailing pumps, the intake well and the
water treatment plant are not situated “adjacent” to its mine
and therefore could not be treated as “mine” for the purpose of
levy of electricity duty. The Court also took note of the issues
framed by the High Court after the order of remit on the earlier
occasion. The said issues read as follows:
“( i ) Whether prescribing different rates of tax for
processing plant and machinery adjacent to a mine
(‘factory’ falling within the extended definition of
‘mine’), and other factories is discriminatory and
arbitrary and therefore violative of Articles 14 and
19 of the Constitution of India?
( ii ) Whether definition of the word ‘mine’ in
Explanation ( ) in the Table under Section 3 of the
b
Act, gives unguided discretion to authority under
9
the Act to decide what is ‘adjacent to a mine’ and
therefore invalid.?
( iii ) Whether use of the words ‘adjacent to a mine’
would mean only the premises or machinery
abutting to or adjacent to the mine, and not
premises or the plant/machinery situated at a
distance of about 2.5 to 6 km?
( iv ) Whether the State had applied different
yardsticks in charging duty to petitioner and in
charging duty to Bhilai Steel, Balco, Manganese Ore
India Ltd. and thereby practised discrimination?”
9. It is imperative to state here that a contention was
advanced by the appellant therein that the High Court had not
considered the real issues and the questions formulated for
determination did not cover the actual issues and disputes
involved. The Court proceeded to state the controversy in
following terms:
“21 . The Act was amended by the M.P. Electricity
Duty (Amendment) Act, 1986 (in short “the
Amendment Act”). Different rates of duty are
provided in Part B. In the said Part, clause (4)
relates to the mines other than the captive mines of
cement factory and the rate is 50 paise per unit of
energy. Explanation ( b ) defines “mine” as follows:
“( b ) ‘mine’ means a mine to which the Mines Act,
1952 ( 35 of 1952) applies and includes the
premises or machinery situated in or adjacent to
10
a mine and used for crushing, processing,
treating or transporting the mineral.”
22. It was submitted that the entry relating to mines
refers to processing, treating or transporting the
mineral. According to the learned Solicitor General
the stress is on the expression “mineral”. It was
pointed out that the appellant is manufacturing
“copper concentrate” which is not a mineral and it
is not doing “mining” so far as it is covered by
clause (7) for other industries not covered under the
above categories where the rate is 5 paise per unit
of energy. Essentially the submission is that the
Explanation only relates to mining or minerals.
What is excisable is “copper concentrate” because
there is a process of manufacturing involved. It is
seen that Points ( ) and ( ) formulated by the High
iii iv
Court for determination are really relevant. But the
points have not been correctly formulated to cover
the actual essence of the dispute. The correct
question would be as follows:
“Whether copper concentrate is a mineral and
whether Explanation to Part B of the Act applies
even though manufacturing process is involved to
bring it into existence?””
In view of the aforesaid, this Court set aside the
impugned judgment and remanded the matter to the High
Court for fresh consideration of the question framed
permitting the parties to place material in support of their
respective stands.
11
10. After the remand, before the High Court it was contended
that mineral is something which grows in the mine and is
capable of being won or extracted so as to be subjected to the
better or precious use. It was further contended that copper
ore is extracted at the mine pit and then it is subjected to
processing whereafter copper ore becomes copper concentrate
which is a different commodity which is an excisable product.
On that basis, it was urged that copper concentrate is not a
“mineral” and consequently, Explanation (b) to PartB of
Section 3 of the Act will not apply. Reliance was placed on
3
and
State of W.B. v. Kesoram Industries Ltd. and others
Uranium Corporation of India Ltd., Bihar v. Collector of
4
. On behalf of the State, it was urged
Central Excise, Patna
that copper concentrate is a “mineral” regard being had to the
definition contained in Section 2(jj) of the Mines Act, 1952 (for
short, “the 1952 Act”) as well as Schedules I and II appended
to the Mines and Minerals (Development and Regulation) Act,
1957. The Division Bench was commended to the authority in
3
(2004) 10 SCC 201
4
1985 (19) ELT 609
12
V.P. Pithupitchai and another v. Special Secretary to the
5
and the decision of the Division Bench of the
Govt. of T.N.
High Court in Stone Crusher Owners Association and other
6
. On behalf of the
v. M.P. Electricity Board and others
respondents, the competent authority of the M.P. Electricity
Board contended that the copper ore does not cease to be a
“mineral” merely because it is subjected to the stated
processing and therefore the copper concentrate does not lose
its identity as a mineral. It was further submitted that even
though the copper ore is subjected to processing yet its
chemical structure does not change by placing reliance on the
decision in Minerals and Metals Trading Corporation of
7
India Ltd. v. Union of India and others .
11. The High Court considering the rivalised submissions at
the Bar, came to hold that the State has the authority to pick
and choose districts, objects, persons, methods and even rates
for taxation if it does so reasonably and for the said purpose
5
(2003) 9 SCC 534
6
MP No. 673/1993
7
(1972) 2 SCC 620.
13
placed reliance on East India Tobacco Co. v. State of
8
. It further opined that while latitude is
Andhra Pradesh
available to the legislature in the matters of classification of
objects, persons and things for purposes of taxation and it has
to be so having regard to the complexities involved in the
formulation of taxation policy. To express the said opinion,
the High Court placed reliance on
Elel Hotels and
9
Investments Ltd. v. Union of India and Govt. of A.P. v. P.
10
. Thereafter it referred to subjectandobject rule
Laxmi Devi
and in that regard reproduced a passage from Principles of
11
Statutory Interpretation and commended itself to the
authorities in
Tarlochan Dev Sharma v. State of Punjab &
12 13
Ors. and Union of India v. Harjeet Singh Sandhu . After
stating the legal proposition in the aforesaid manner, the High
Court ruled that the 1949 Act is an enactment meant to
provide for levy of duty on sale or consumption of electrical
8
AIR 1962 SC 1733
9
(1989) 3 SCC 698 = AIR 1990 SC 1664
10
(2008) 4 SCC 720
11 th
Justice G.P. Singh, 12 Edn., Page 349-350
12
(2001) 6 SCC 260
13
(2001) 5 SCC 593
14
energy and the Act has been enacted in exercise of power
under item 48 (b) List II of the Government of India Act, 1953
which corresponds to Entry 53 of List II of the VIIth Schedule
of the Constitution of India, namely, tax on consumption or
sale of electricity. It referred to Section 3 of the Act and the
definition of the term ‘mine’ and deduced that electricity duty
under the Act is a tax which is levied on sale of consumption
of electricity and further proceeded to state that if the table
appended to Section 3 of the Act is seen, the classification for
the purpose of levy of electricity duty is based on the purpose
for which the electrical energy is sold or consumed and the
classification table for the purpose of levy of duty. Dealing
with the facet of classification, the High Court observed that:
“The classification made under Section 3 of the Act
has a clear nexus with the object sought to be
achieved, namely, raising revenue by grouping
different types of industries and prescribing
different rates of duty depending upon the nature of
the industry. The highest rate of electricity duty is
prescribed by the legislature in its wisdom for the
mining industry. The object of prescribing the
highest rate of electricity duty appears to tax the
person/industry exploiting the nature wealth which
is nonrenewable. The exploiter has been required
to contribute more, so that such contribution is,
15
hopefully, utilized for the welfare of the people to
whim such natural wealth belongs”.
12. After so stating, it adverted to the anatomy of the
definition of the term ‘mine’ and observed that the expression
creates a legal fiction and, therefore, the definition will
embrace only what is comprised within the ordinary meaning
of ‘mine’ part, together with what is mentioned in the inclusive
part of the definition and, therefore, as per well settled rules of
statutory interpretation has to be read with regard to subject
and object of the Act. The Court proceeded to state that the
object of the Act is to raise revenue by prescribing rate of duty
and the highest rate of duty is prescribed for mining industries
as it is exploiting the natural wealth which is nonrenewable,
therefore, it must pay higher rate of duty which can be utilized
for meeting the essential expenditures by the State
Government. Thereafter, the High Court held:
“Taking into account the fact that the expression
‘mine’ creates a legal fiction and if the word ‘mineral’
is read subject to the context and object of the Act,
it is graphically clear that wide meaning has to be
given to expression ‘mineral’. If the copper ore is
converted to copper concentrate by processing, it
only enriches content of copper in the copper
concentrate and it does not cease to be ‘mineral’
16
merely on its conversion from copper to copper
concentrate.
In view of the preceding analysis, in our considered
opinion copper concentrate is a mineral as defined
in explanation (b) to Part B of Section 3 of the Act
and, therefore, the explanation (b) to Part B of
Section 3 of the Act applies to it.
Besides “copper concentrate: is the end product.
What is ‘crushed, processed, treated or transported’
is not copper concentrate’ but the ore. The
electricity in question is being consumed for such
“crushing, processing, treating or transportation”.”
13. Dwelling upon the word “adjacent” and the argument
raised pertaining to discrimination between industries located
in close proximity of the mine and other industries carrying on
the same activity, namely, ‘crushing, processing, treating or
transportation’, which are not located in such close proximity
of the mine, the Division Bench opined that:
“The word ‘adjacent’ does not mean ‘adjoining’ or
‘abutting’, but has a wider connotation, and would
include close proximity such being in the same
locality. This proposition is not disputed, and
therefore, it is not necessary to refer to the case law
cited for the meaning of the word ‘adjacent’. In
reply the learned Additional Advocate General
submits that this differentiation is justified because
the increased overheads such as transportation
costs have been considered for not subjecting the
far away industries to higher tax”.
17
14. When the matter was listed for hearing, Mr. Mukul
Rohtagi, learned Attorney General appearing for the
Manganese Ore India Ltd. and Mr. P.P. Rao, learned senior
counsel appearing for Hindustan Copper Ltd. urged that the
High Court has fallen into grave error by imposing the
electricity duty on the basis of the definition engrafted under
Explanation (b) to Section 3(1) of the 1949 Act. It was
contended by Mr. Rohtagi that manganese ore is a mineral
under the Mines Act, 1952 but ferro manganese is not a
mineral because the said mineral is converted into “alloy” and
ceases to be a mineral. Mr. P.P. Rao, learned senior counsel
submitted that copper is a mineral but copper concentrate
does not contain any character of a mineral and, therefore, the
duty has to be charged at the rate of 8% and not at the rate of
40%.
15. Mr. Saurabh, learned counsel for the State, per contra,
contended that the definition is an inclusive one and hence,
when the mineral is processed for the purpose of conversion to
alloy, duty at the rate of 40% is leviable. Learned counsel for
18
the State would submit that the view expressed by the High
Court is absolutely defensible.
16. The thrust of the matter is whether the aforesaid activity
after the mineral i.e. ore has been mined would be covered by
the word ‘processing’ used in the Explanation B to Item 3(1)
which defines the term ‘mine’. Mine as per the said
explanation means a mine as to which the Mines Act, 1952
applies. The word “mine” as defined in the Mines Act, 1952
reads as follows:
“(j) “mine” means any excavation where any operation for
the purpose of searching for or obtaining minerals has
been carried on, and includes
(iiv) …..
(v) all conveyors or aerial ropeways provided for
the bringing into or removal from a mine of minerals
or other articles or for the removal of refuse
therefrom;
(vi) all adits, levels, machinery, railways, tramways
and sidings in or adjacent to and belonging to a
mine;
(vii) all protective works being carried on in or
adjacent to the mine;”
17. The word ‘minerals’ as defined in the Mines Act, 1952
reads as follows:
19
“(jj) “minerals” mean all substances which can be
obtained from the earth by mining, digging, drilling,
dredging, hydraulicking, quarrying or by any other
operation and includes mineral oils (which in turn
include natural gas and petroleum)”.
18. Mining would comprehend every activity by which the
mineral is extracted or obtained from earth irrespective of
whether such activity is carried on at the surface or in the
bowel, but it must be an activity for winning a mineral. For
the purpose of Item 3 ‘mine’ to which electrical energy is sold,
supplied or consumed, it would include machinery or premises
situated in the adjacent to the mine, provided the electricity is
used for crushing, processing, treating or transporting the
minerals. The word ‘mineral’ used in the aforesaid
Explanation under the Act would have reference to the mineral
which is mined and is then crushed, processed, treated or
transported. The word ‘processing’ used in the Explanation
has to be interpreted in the context and for the purpose of the
said item. Process can be given either a wide or a narrow
meaning. In the context in which it is used in the
Explanation, we are disposed to think that it must be given a
20
meaning which emerges when we apply the rule of noscitur a
sociis which means that the meaning of the word is to be
judged by the company it keeps. [See :
Rohit Pulp and Paper
14
Mills Ltd. v. Collector of Central Excise ]. The rule of
noscitur a sociis has been applied and accepted in
Ahmedabad Pvt. Primary Teachers’ Association v.
15
We would prefer to construe
Administrative Officer & Ors.
the said word in the Explanation with reference to the words
before and after for the word ‘processing’ used therein. The
word ‘processing’ herein, we think, should be interpreted and
understood with the associated words ‘crushing’ and ‘treating’.
The word ‘processing’ is susceptible of the meaning keeping in
view the word ‘crushing’ and ‘treatment’ used before and
afterwards.
19. We are absolutely conscious that noscitur a sociis rule is
not applied when the language is clear and there is no
ambiguity, which according to us does exist and perceptible in
the Explanation in question. A very broad and a wide
14
(1990) 3 SCC 447
15
(2004) 1 SCC 755
21
definition of the term ‘processing’ if applied, would include
manufacture of a new or distinct product. Manufacture
normally involves a series of processes either by hand or
machine. If a restricted construction is not applied it would
create and give rise to unacceptable consequences. It is not
the intent to treat and regard manufacturing activities as
processing. Manufacturing, as is understood, means a series
of processes through different stages in which the raw material
is subjected to change by different operations. [For different
between process and manufacturing see
CIT v. Tara
16
Agency , Orient Paper and Industries v. State of M.P. and
17
and
Anr. Aspinwall & Co. Ltd. v. Commissioner of
18
Income Tax, Ernakulam .]
20. The words ‘crushing’, ‘treating’ and ‘transporting’ are
words of narrower significance and the word ‘processing’ used
between these words should not be given a very wide meaning,
for the legislative intent, according to us, is narrower. The
word ‘processing’ would take its meaning in the cognate sense.
16
(2007) 6 SCC 429
17
(2006) 12 SCC 468
18
(2001) 7 SCC 525
22
In other words, the general word ‘processing’ will be restricted
to the sense conveyed by the words ‘crushing’, ‘treating’ and
‘transporting’. The intent being that electricity tariff payable in
respect of mining activities would include the mine itself, all
machinery situated or located in the mine or in a premises
adjacent to the mine wherein crushing, processing, treatment
or transportation of the minerals as mined is undertaken. The
word ‘processing’ herein would mean those processes with the
help of hands or machineries connected and linked to mining
activity. It would not include process by which a new or
different article other than the one which has been mined, is
produced. It relates and signifies the composite activity of
mining and processing. The intent is not to include processes
which would lead to creation of a different commodity as
known in the commercial world for otherwise even
manufacturing activity would get covered, whereas
manufacturing unit is liable to pay electricity tariff at a lower
rate. The intent and purpose is certainly not to compel and
force a manufacturing unit being set up at an acceptable
distance from the mine, for the manufacturing unit adjacent to
23
the mine would have to pay electricity tariff at a higher rate.
Pertinently, a manufacturing unit set up by another entity,
whether adjacent to the mine or not, would pay a lower tariff.
Such absurdity and irrationality has to be avoided. In the
present context, we would, therefore, hold ‘processing’ would
mean activities in order to make the mineral mined
marketable, saleable and transportable, without substantially
changing the identity of the mineral, as mined. When there is
a substantial change at the mineral mined and the process
results in a different commodity being produced or
transforming and completely changing the mineral, it would
fall outside the scope of the word ‘processing’. The restricted
construction will also be acceptable in view of the use of the
word ‘mineral’ in the end of the Explanation. The word
‘mineral’ in the Explanation is the product which was mined
and is put to ‘crushing’, ‘processing’, ‘treatment’ and
‘transporting’ the mineral. In other words, mineral means
mineral which was mined and not a new product created by
using or processing the mineral mined.
24
21. Be it noted, learned counsel for the appellants would
submit that the metals and minerals available in the earth are
rarely found in the pure forms and degree of purity that the
ultimate users demand. They are intimately mixed, physically
or chemically and often both, with other substances. For use,
the good must be separated from the worthless substances.
The sum total of the treatments to which the ores are
subjected to in order to separate and discard their worthless
fractions by essentially physical means is called “Ore
Dressing”. The various modes of Ore Dressing include
handpicking, sorting, screening, washing, jigging, magnetic
separation, crushing, grinding, etc. In this process, there is
no change in the chemical composition and properties of
mined mineral, before and after processing/dressing to make
it saleable. It is important to point out that mineral/dressing
is a subject matter of Mineral processing.
22. As distinguished from the above, manufacturing of an
alloy, etc. is a subject matter of Metallurgy and is a part of
Metallurgical branch of engineering. Ore Dressing is defined
25
as the processing of raw mineral to yield a marketable mineral
by such means that do not destroy the chemical identity of the
minerals. On the other hand, an alloy like the Ferro
Manganese Alloy is a result of a manufacturing method which
involves Electro thermic smelting in case of the appellant
which ultimately changes the chemical identity of manganese
ore resulting into ferromanganese alloy. This method requires
manganese ore as one of the raw materials for the
manufacture of Ferro Manganese Alloy. Ferro Alloy is defined
as an alloy of iron with a sufficient amount of some element or
element such as manganese, silicon, chromium or vanadium
as a means of introducing these elements into iron and steel.
Customarily, Ferro alloys are identified or designated by the
principal base metals present in them. The names of Ferro
alloys are abbreviated by using chemical symbols, e.g., FeMn,
FeSi and FeCr standing for Ferro Manganese, Ferro Silicon
and Ferro Chromium, respectively. Manufacturing of Ferro
manganese alloy involves the use of manganese ore as a raw
material which is subjected along with other raw material
(Dolomite, Iron Ore, Coke, Coal and Carbon Paste), to Electro
26
thermic smelting. The manufacturing of Ferro Manganese by
Electro thermic smelting is a continuous smelting with the
electrodes submerged deep into the charge. The smelting
includes the stages as follows: preheating of the materials,
drying and removal of volatiles, reduction of oxides, and
smelting of the metal and slag. The same reasoning and
manufacturing processing is required to create copper
concentrate, a new and different commercial product. It is not
the mineral as mined.
23. It is urged that Ferromanganese is an alloy and is not a
mineral. The same is an alloy of manganese and iron and is
not available in natural form. It is manufactured in the
ferromanganese plant of the appellant – Manganese Ore India
Ltd. by using raw materials LIKE manganese ore, iron, coal,
coke, dolomite, etc. It is further contended that the appellant,
Manganese Ore India Ltd. has, within its manganese ore mine
area, an Integrated Manganese Beneficiation Plant (IMB Plant)
as also a Ferro Manganese Plant (FMP). Following is the
27
seriatim in which the mining/processing/manufacturing takes
place:
a. First Stage : The appellant mines manganese ore from its
mines. There is a levy of electricity duty on the appellant’s
consumption of electricity during mining at 40%, which the
appellant is not disputing.
b. Second State: Such mines manganese ore is processed by
removal of impurities in the appellant’s Integrated Manganese
Beneficiation Plant (IMB Plant). During this process the
cleaning of mineral takes place by various methods to remove
impurities and foreign contents for the enrichment of the
manganese content and during this process, the manganese
mineral remains a mineral. There is a levy of electricity duty
on the appellant’s consumption of electricity of IMB Plant at
40%, which the appellant is not disputing. It is relevant to
note that 95% to 98% of such processed manganese ore is sold
in open market. Remaining is then sent as a raw material to
the appellant’s Ferro Manganese Plant (FMP).
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c. Third State: At the Ferro Manganese Plant, raw materials
like, processed manganese ore (for which 40% electricity duty
is already paid by IMB Plant), iron ore, coke, dolomite, coal,
carbon, etc., are by way of a manufacturing process through a
furnace, blended into a completely new product commercially
known and sold in the market as ferromanganese alloy which
is a different product with different chemistry and, through
smelting in furnace. This is nothing but a manufacturing
activity, where raw materials like manganese ore, iron ore,
coke, dolomite, coal, carbon, etc are completely
consumed/exhausted.
24. To bring to the Ferro Manganese Plant of the appellant
within the meaning of ‘mine’, the State has argued before this
Court that the Ferro Manganese Plant is being “used for
crushing, processing, treating or transporting” the mineral,
that is, manganese ore. This is clearly unsustainable as the
appellant is neither crushing or processing or treating or
transporting manganese ore but rather using it as one of the
raw materials and consuming the same while manufacturing
29
ferromanganese alloy. The state of crushing, treating,
processing, etc. of the manganese ore (mineral) was in the IMB
Plant (second stage), where the appellant is paying electricity
duty at 40%. The same rate cannot be applied in the Ferro
Manganese Plant (the third stage) as it cannot be taken to be
within the meaning of ‘mine’ for the aforesaid reason.
25. Learned counsel for the appellants would contend that in
numerous decisions, this Court has reiterated that if a new
substance is brought into existence or if a new or different
article having a distinctive name, character or use results from
particular processes, such process or processes would amount
to manufacture. In the case of Gramophone Co. of India
19
Ltd. v. Collector of Customs, Calcutta , this Court held:
“11. The term “manufacture” is not defined in the
Customs Act. In the allied Act, namely the Central
Excise Act, 1944 also, the term “manufacture” is
not to be found defined though vide clause ( f ) of
Section 2 an inclusive definition is given of the term
“manufacture” so as to include certain processes
also therein.
12. “Manufacture” came up for the consideration of
the Constitution Bench in Ujagar Prints v. Union of
19
(2000) 1 SCC 549
30
India (1989) 3 SCC 488 . It was held that if there
should come into existence a new article with a
distinctive character and use, as a result of the
processing, the essential condition justifying
manufacture of goods is satisfied. The following
passage in the Permanent Edition of Words and
Phrases was referred to with approval in Delhi Cloth
at p. 795:
and General Mills, AIR 1963 SC 791
“‘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 or use.”
13. In a series of decisions [to wit, Decorative
Laminates (India) (P) Ltd v. CCE, (1996) 10 SCC 46 ,
Union of India v. Parle Products (P) Ltd. 1994 Supp.
(3) SCC 662, Laminated Packings (P) Ltd v. CCE,
and
(1990) 4 SCC 51 Empire Industries Ltd. v. CCE,
(1985) 3 SCC 314] the view taken consistently by
this Court is that the moment there is
transformation into a new commodity commercially
known as a distinct and separate commodity having
its own character, use and name whether it be the
result of one process or several processes,
manufacture takes place; the transformation of the
goods into a new and different article should be
such that in the commercial world it is known as
another and different article. Prerecorded audio
cassettes are certainly goods known in the market
as distinct and different from blank audio cassettes.
The two have different uses. A prerecorded audio
cassette is generally sold by reference to its name or
title which is suggestive of the contents of the audio
recording on the cassette. The appellant is indulging
31
in a mass production of such prerecorded audio
cassettes. It is a manufacturing activity. The
appellant’s activity cannot be compared with a
person sitting in the market extending the facility of
recording any demanded music or sounds on a
blank audio cassette brought by or made available
to the customer, which activity may be called a
service. The Tribunal was not right in equating the
appellant’s activity with photoprocessing and
holding the appellant a service industry.”
26. In Aspinwall & Co. Ltd. (supra)
this Court has held as follows:
“13. The word “manufacture” has not been defined
in the Act. In the absence of a definition of the word
“manufacture” it has to be given a meaning as is
understood in common parlance. It is to be
understood as meaning the production of articles
for use from raw or prepared materials by giving
such materials new forms, qualities or combinations
whether by hand labour or machines. If the change
made in the article results in a new and different
article then it would amount to a manufacturing
activity.
14. This Court while determining as to what would
amount to a manufacturing activity, held in
CST v.
Pio Food Packers, 1980 Supp. SCC 174 : that the
test for determination whether manufacture can be
said to have taken place is whether the commodity
which is subjected to the process of manufacture
can no longer be regarded as the original
commodity, but is recognized in the trade as a new
and distinct commodity. It was observed: (SCC p.
176, para 5)
32
“Commonly manufacture is the end result of
one or more processes through which the
original commodity is made to pass. The
nature and extent of processing may vary from
one case to another, and indeed there may be
several stages of processing and perhaps a
different kind of processing at each stage. With
each process suffered, the original commodity
experiences a change. 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 recognized as a new
and distinct article that a manufacture can be
said to take place.”
15. Adverting to facts of the present case, the
assessee after plucking or receiving the raw coffee
berries makes it undergo nine processes to give it
the shape of coffee beans. The net product is
absolutely different and separate from the input.
The change made in the article results in a new and
different article which is recognized in the trade as a
new and distinct commodity. The coffee beans have
an independent identity distinct from the raw
material from which it was manufactured. A distinct
change comes about in the finished product.
16. Submission of the learned counsel for the
Revenue that the assessee was doing only the
processing work and was not involved in the
manufacture and production of a new article cannot
be accepted. The process is a manufacturing
process when it brings out a complete
transformation in the original article so as to
produce a commercially different article or
commodity. That process itself may consist of
several processes. The different processes are
33
integrally connected which results in the production
of a commercially different article. If a commercially
different article or commodity results after
processing then it would be a manufacturing
activity. The assessee after processing the raw
berries converts them into coffee beans which is a
commercially different commodity. Conversion of
the raw berry into coffee beans would be a
manufacturing activity.”
27. This Court in ServoMed Industries Pvt. Ltd. v.
20
has held as under:
Commissioner of Central Excise
“27.( ) Where the goods remain exactly the same
1
even after a particular process, there is obviously no
manufacture involved. Processes which remove
foreign matter from goods complete in themselves
and/or processes which clean goods that are
complete in themselves fall within this category.”
“27.( 4 ) Where the goods are transformed into goods
which are different and/or new after a particular
process, such goods being marketable as such. It is
in this category that manufacture of goods can be
said to take place.”
28. Thus, the Ferro Manganese Plant, being a unit involved
in manufacturing of ferromanganese alloy as opposed to a unit
involved in crushing, treating, processing, etc. of manganese
ore, cannot be treated within the extended definition of ‘mine’
20
2015 (6) SCALE 137
34
within the Explanation (b) of Part B of Table of Rates of Duty
to Section 3(1) of the Act.
29. The Executive Engineer and Chief Electrical Inspector,
Government of Madhya Pradesh, vide its letter dated
06.02.2005 to the Superintendent Engineer and Deputy
Electrical Inspector, Government of Madhya Pradesh, had
confirmed as under:
“On spot inspection it is confirmed that, Ferro
Manganese Plant does not come in the Mining Area
and Electricity Duty @ 8% being charged at present
by the M.P. State Electricity Board is proper.”
30. The Ferromanganese Alloy so manufactured by the
appellant using the mineral Manganese at its Ferromanganese
plant is an entirely different product from its mineral raw
material both physically and even chemically. Moreover,
unlike Manganese ore a ferromanganese alloy can never be
found in the natural state and it has to be manufactured from
the manganese ore and other minerals only. The same logic
applies to copper concentrate as a different and distinct
product comes into existence.
35
31. Thus analyzed, we find that in both the cases, the
different products in commercial parlance have emerged.
Hence, we are inclined to think that the principle of noscitur a
sociis has to be applied. As a logical corollary, tariff has to be
levied as meant for manufacturing unit.
Therefore, the analysis made by the High Court is not correct
and, accordingly, the judgments rendered by it deserve to be
set aside and we so direct. However, during this period if any
amount has been paid by the appellants to the revenue, the
same shall be adjusted towards future demands.
32. Consequently, appeals are allowed. In the facts and
circumstances of the case, there shall be no order as to costs.
.............................J.
[Dipak Misra]
............................ J.
[Shiva Kirti Singh]
New Delhi;
November 10, 2016
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