With

Civil Appeal Nos.2465-2467 of 2016 (Arising out of S.L.P. (Civil) Nos. 10643-10645 of 2012).

"3. Mines (other than captive 40 mines of cement industry)"

"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."

"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. ..."

"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 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."

"(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?

(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?"

"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 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?""

[Justice G.P. Singh, 12th Edn., Page 349-350]

"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".

"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"."

"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".

"(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 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;"

"(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)".

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).

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.

"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 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 Supreme Court 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 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."

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

"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."

"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."