Page 1

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.2465-2467  OF 2016 (Arising out of S.L.P. (Civil) Nos. 10643-10645 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.

2. As  the  commonality  of  controversy  centres  around

interpretation of the terms “mineral” and “processing” under

Page 2

2

the definition of  “mine” as defined under Explanation (b)  of

Part-B  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  3-A,  every  distributor  of

electrical energy and every producer shall pay every month to

the  State  Government  at  the  prescribed  time  and  in  the

Page 3

3

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. Part-B 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.”

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 Part-B Item 4 (which is now Item No.

Page 4

4

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.

3248-50  of  1998.  A  two-Judge  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

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

1 (1995) 4 SCC 603 2 (2004) 12 SCC 408

Page 5

5

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 two-Judge Bench

stated  the  facts  in  detail  which  are  to  the  effect  that  the

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

Page 6

6

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 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

Page 7

7

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 two-Judge 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

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

Page 8

8

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 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?

Page 9

9

(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 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

Page 10

10

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.  

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.

Page 11

11

On that basis, it was urged that copper concentrate is not a

“mineral”  and  consequently,  Explanation  (b)  to  Part-B  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

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

3 (2004) 10 SCC 201 4 1985 (19) ELT 609 5 (2003) 9 SCC 534 6 MP No. 673/1993  

Page 12

12

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

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.

7 (1972) 2 SCC 620. 8  AIR 1962 SC 1733 9  (1989) 3 SCC 698 = AIR 1990 SC 1664

Page 13

13

Laxmi Devi10.  Thereafter it referred to subject-and-object 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

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

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

Page 14

14

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 non-renewable.  The exploiter has been required to  contribute  more,  so  that  such  contribution  is, 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

Page 15

15

as it is exploiting the natural wealth which is non-renewable,

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’ 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

Page 16

16

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”.

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 order 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

Page 17

17

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

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  

(i-iv) …..

(v) all  conveyors or aerial  ropeways provided for the bringing into or removal from a mine of minerals

Page 18

18

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:  

“(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

Page 19

19

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

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

14  (1990) 3 SCC 447 15  (2004) 1 SCC 755

Page 20

20

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

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.] 16  (2007)  6 SCC 429 17  (2006)  12 SCC 468 18  (2001)  7 SCC 525

Page 21

21

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.

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

Page 22

22

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

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

Page 23

23

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.   

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.

Page 24

24

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

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

Page 25

25

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

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:  pre-heating 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)

Page 26

26

as  also  a  Ferro  Manganese  Plant  (FMP).  Following  is  the

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).

Page 27

27

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

ferromanganese  alloy.  The  state  of  crushing,  treating,

Page 28

28

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 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

19 (2000) 1 SCC 549

Page 29

29

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.  Pre-recorded  audio cassettes are certainly goods known in the market as distinct and different from blank audio cassettes. The two have different uses. A pre-recorded 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 in  a  mass production of  such pre-recorded 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

Page 30

30

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)

“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

Page 31

31

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 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

Page 32

32

commercially  different  commodity.  Conversion  of the  raw  berry  into  coffee  beans  would  be  a manufacturing activity.”

27. This  Court  in  Servo-Med  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’

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

20 2015 (6) SCALE 137

Page 33

33

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.

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

Page 34

34

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