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.

No. 3103 of 1994  preferred by Hindustan Copper Limited.

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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

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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.”

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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

Jute Mfg. Co. Ltd.1.  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

Hindustan Copper Ltd. v. State of M.P. and others2 taking

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

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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

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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

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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

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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 (b) in the Table under Section 3 of the Act, gives  unguided  discretion to  authority  under

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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

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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 (iii) and (iv) formulated by the High 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.

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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

State of W.B. v. Kesoram Industries Ltd. and others3 and

Uranium Corporation of India Ltd., Bihar v. Collector of

Central Excise, Patna4.  On behalf of the State, it was urged

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

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V.P. Pithupitchai and another v. Special Secretary to the

Govt. of T.N.5  and the decision of the Division Bench of the

High Court in Stone Crusher Owners Association and other

v. M.P. Electricity   Board and others6.  On behalf  of  the

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

India Ltd. v. Union of India and others7.

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.

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placed reliance on  East India Tobacco Co. v. State of

Andhra Pradesh8.   It further  opined that  while latitude is

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

Investments Ltd. v. Union of India9 and Govt. of A.P. v. P.

Laxmi Devi10.  Thereafter it referred to subject­and­object rule

and in that regard reproduced a passage from Principles of

Statutory Interpretation11  and commended itself to the

authorities in Tarlochan Dev Sharma v. State of Punjab &

Ors.12 and Union of India v. Harjeet Singh Sandhu13.  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  Justice G.P. Singh, 12th Edn., Page 349-350 12  (2001) 6 SCC 260 13  (2001) 5 SCC 593

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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,

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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’

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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”.

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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

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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:

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“(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

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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

Mills  Ltd. v.  Collector  of  Central  Excise14].   The rule of

noscitur a sociis  has been applied and accepted in

Ahmedabad Pvt. Primary Teachers’ Association v.

Administrative Officer & Ors.15  We would prefer to construe

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

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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

Agency16, Orient Paper and Industries v. State of M.P. and

Anr.17  and  Aspinwall & Co. Ltd. v. Commissioner of

Income Tax, Ernakulam18.]

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

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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

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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.  

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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

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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

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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

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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

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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

Ltd. v. Collector of Customs, Calcutta19, 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

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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 and General Mills, AIR 1963 SC 791 at p. 795:

“‘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, (1990) 4 SCC 51 and 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

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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)

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“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

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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.

Commissioner of Central Excise20 has held as under:­

“27.(1)  Where the  goods  remain exactly the  same 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

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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.

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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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