Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (11) TMI 543 - SUPREME COURT

2016 (11) TMI 543 - SUPREME COURT - TMI - Interpretation of the terms “mineral” and “processing” under the definition of “mine” as defined under Explanation (b) of Part-B of Madhya Pradesh Electricity Duty Act, 1949 - It is urged that Ferromanganese is an alloy and is not a mineral - Held that:- 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, treatin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Ferro Manganese Plant (the third stage) as it cannot be taken to be within the meaning of ‘mine’ for the aforesaid reason. - 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. - The Ferromanganese Alloy so .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oth 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 sha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

k 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 the definition of mine as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ctricity 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. 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 mines of cement industry) 40 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssed the Writ Petition by placing reliance on State of M.P. v. Birla Jute Mfg. Co. Ltd. (1995) 4 SCC 603. 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 others (2004) 12 SCC 408 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch 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 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. Afte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 (si .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Govern .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ies: (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 treatm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g 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 use .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Part-B of Section 3 of the Act will not apply. Reliance was placed on State of W.B. v. Kesoram Industries Lt .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

another v. Special Secretary to the Govt. of T.N. (2003) 9 SCC 534 and the decision of the Division Bench of the High Court in Stone Crusher Owners Association and other v. M.P. Electricity Board and others MP No. 673/1993. 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 minera .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r the said purpose placed reliance on East India Tobacco Co. v. State of Andhra Pradesh AIR 1962 SC 1733. 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 India (1989) 3 SCC 698 = .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ect 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 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 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 expressi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ited 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ter 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 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

peways 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: (jj) minerals mean all substances which can be obtained from the earth by mining, digging, drilling, dredging, hyd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, whi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Agency (2007) 6 SCC 429, Orient Paper and Industries v. State of M.P. and Anr. (2006) 12 SCC 468 and Aspinwall & Co. Ltd. v. Commissioner of Income Tax, Ernakulam (2001) 7 SCC 525.] 20. The words crushing , treating and transporting are words of narrower significance and the word processing used betwee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o 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 creati .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 changi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or 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 D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 m .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r 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 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 materia .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llant 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). 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 manufac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, processing, etc. of the manganese ore (mineral) was in the IMB Plant (second sta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s or processes would amount to manufacture. In the case of Gramophone Co. of India Ltd. v. Collector of Customs, Calcutta (2000) 1 SCC 549 , 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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Indust .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssettes 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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. SC .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uct. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ere 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 plac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version