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PETITIONER:

RAIASTHAN STAT EELECTRICITY BOARD

Vs.

RESPONDENT:

ASSOCIATED STONE INDUSTRIES & ANR.

DATE OF JUDGMENT: 08/05/2000

BENCH:

Syed Shah Mohammed Quadri, Shivaraj V. Patil

JUDGMENT:

'

SHIVARAJV. PATIL. J. .

In the light of the contentions raised and

submissions, made before us. the only question that arises

for consideration and decision in this appeal is whether

pumping out water from a mine comes within the meaning of

manufacture, production, processing or repair of goods so as

to claim exemption from duty under Notifications issued

under sub-section 3 of Section 3 of the Rajasthan

Electricity (Duty) -Act. 1962 (for short the 'Act')?

2. This appeal is by the Rajasthan State Electricity

Board. Jaipur, theDefendant in the.suit. . ^

3. In short and substance, the facts which are

considered relevant and necessary for disposal of this

appeal are the following.

4. The Plamfl'ff-Respondent No". I --is a registered

' public Iimited company. It is engaged in excavating

stones from the collieries and thereafter converting them

into slabs by cutting and polishing. The Rajasthan State

Government levied electricity duty under the provisions of

the Act. A Notification dated 26.3.1962 was issued by the

State under Section 3(3) of the Act granting exemption from

tax on the energy consumed by a consumer in any industry in

the manufacture, production, processing or repair of goods

and by or in respect of any mine as defined in the Indian

Mines. Act, 1923.

5. Subsequently a notification was issued on 2.3.1963

superseding the aforesaid Notification dated 23.3.1962.

remitting the electricity duty on the energy consumed in

electro-chemical industry and in electric furnaces of

elecro-thermo industries and-reducing such-duty

on the energy consumed in other industries in

themanufactnre. production: processing or repair of goods,

from 3 naya paise per unit to I naya paisc per unit.

Further one more Notification was issued on 1.11.1965

superseding the earlier two Notifications mentioned above

and fixing duly at 5 paise per unit as the rate at which

electricity duty shall be computed. However, by clause '(c)

of the said nolification, the State of Rajasthan reduced the

duty on the energy consumed in industries other than those

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mentioned in clause (a) of the Notification in the

manufacture, production, processing or repair of goods to I

paise per unit. The same was later on enhanced to 2. paise

by Notification dated 5.3.1979.

6. The Defendant issued three notices dated

30.6.1972, 2i.l2.i97^aiW 30.1 L1974 asking the Plaintiff to

pay electricity duty at tile full rate of 0.05 per unit

holding that the Plaintiff was not entitled either for

exemption of electricity duly or to a reduced rate of -

duty. Hence the Plaintiff filed the suit for injunction

.restraining the--. defendant from realising the

electricity duty as per the demands made in the said

notices. The trial court dismissed the suit. The Plaintiff

filed tile appeal in the court of the District Judge at

Kota. The learned

Distntct Judge allowed the appeal reversing the

judgment, and decree of the trial court and passed the

decree in favour of the Plaintiff.: The Defendant filed the

second appeal in the High Court of Judicature for Rajasthan

at Jaipur Bench, Jaipur. The learned Single Judge of the

High Court dismissed the appeal confirming the judgment and

decree passed in favour of the Plaintiff. Hence the

Defendant has filed, this appeal challenging the validity

and correctness of the said judgment and decree passed by

the High Court.

7. Shri Pradeep Aggarwal learned counsel for the

defendant No. I - appellant urged that (1) consumption of

energy" for pumping out water from the mine cannot be

construed as energy consumed by industry in the manufacture,

production, processing or repair of the goods: further

excavating.stones from a mine and thereafter cutting and

polishing them into slabs did not amount to any manufacture.

(2) The subsequent two notifications dated 2.3.1963 and

1.11.1965 have clearly removed exemption in relation to any

mine.. In support of his submissions, he relied on the

decision of this Court in Collector of Central Excise,

Jaipur vs. Rajasthott State Chemical Works. Deedwana,

Rajasthan (1991) 4 SCC 473.

8. Per contra., the learned counsel for the plaintiff

made submissions supporting the impugned judgment and

decree. He argued that excavation of stones thereafter

cutting and polishing them into slabs amounted to

manufacture.

9. We have considered the submissions made by the

learned counsel for the parties. The 3 Notifications to the

extent they are relevant are extracted hereunder:-

Notification dated 26.3.1962

"In pursuance of sub-clause 3 of clause 3 of the.

Rajasthan Electricity (Duty) Bill, 1962, read with the

declaration inserted therein under section 3 of the

Rajasthan Provisional Collection of Taxes Act. 1958

(Rajasthan Act 23 of 1958), the State Government being of

the opinion that it inexpedient in public interest to-do^

so, hereby exempts from tax the-energy-consumed -

(1) by a consumer in any industry in the manufacture.

production, processing or repair of goods', and (2) by or in

respect of any mine as defined in the Indian Mines Act, 1923

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(Central Act of 1923)-"

Notification dated 2.3.1963

''In exercise of the powers conferred by sub-section

(3) of section 3 of the Rajasthan Electricity (Duty Act,

1962 (Rajasthan) Act 12 of 1962) and in supersession of

Excise and Taxation Department Notification No.

F.9(2>-E&T/62/1 dated the 26th March. 1962, the State

Government being of the opinion that it is expedient in

public interest to do so. hereby remits the electricity'

duly- on the energy consurned in electro' chemical

industries and in electric furnaces of electro-thernal

industries and reduces such duty on the energy consumed in

other industries in the manufacture, production, processing

or repair of goods, from three naya paise per unit to one

paisa per unit."

Notification dated 1.11.1965

"In exercise of the powers conferred by section 3 of

the Rajasthan Electricity (Duty) Act, 1962 (Rajasthan Act 12

of 1962) and in supersession of Government Notification No.

F.9(2)/E&T/62-li dated the 26^ March, 1962 and No.

F.(6)FD/RT/63 dated the 2th March. 1963, the Stole

Government being of the opinion that it is expedient in

public interest to do so. herebv fixes, with immediate

effect, five parse per unit as the rate at which tlie

electricity duty.'shall be computed and subject to the

conditions laid down: in the third proviso to the said

section -

(a) remits, with immediate effect the electricity duty

on the energy consumed (i) in electrochemical industries,

and (ii) in electro furnaces of electro thermal industries.

(b) remits with effect on and from the 1st November,

1964. the electricity' duty on energy consumed by or in

respect of any municipal Board or Council or Panchayat or

Panchayat Samiti or other authority for the purpose of or in

respect of public street lighting; and

(c) reduces with immediate effect such duty on the

energy consumed in industries, other than those mentioned in

(a) above, in the manufacturc.. production, processing or

repair of good to (two paise per unit)".

10. There is no dispute that the controversy

reiated-to claim for exemption or reduced rate of duty in

relation lo consumption energy for pumping out water from

the mines. In the Notification dated 26.3.1962 the tax was

exempted expressly for the energy' consumed by or ill

respect of mines as defined in the Indian Mines Act. .1923.

The two subsequent Notifications of 2.3.1963 and 1.11.1965

have omitted provision of exemption in respect of mines. It

is not the case of the Plaintiff that electrical energy was

consumed in any industry in the manufacture, production,

.processing or repair of goods. The specific case of the

Plaintiff is that the electrical energy was consumed for

pumping out water 'from mines to make mines ready tor mining

activity namely, excavating stones and thereafter catting

and.. polishing them into slabs. The 1963 Notification

superseded the 1962. Notification and 1965 Notification

superseded both 1962 and 1963 - Notifications. As already

noticed above. 1963 and 1965 Notifications have not made

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any provision for exemption of duty on the electricity-

consumed by or in respect of mines, it is the ca.se of

the Plaintiff that" the electricity- was used for the

purpose of pumping out water from the mines to facilitate

mining activity', namely excavating of stones. It must be

also kept in mind that a mining activity' is distinguished

from a manufacturing activity, it appears this removal of

exemption in the said Notifications in respect of mines was

done consciously so as to bring the mining activity within

the purview of Section 3 of the Act. Hence we consider it

unnecessary to deal with the notification of 1962 in

relation to the claim for exemption by or in respect of a

mine.

11. The word "manufacture" is not defined in the Act

under which aforementioned three Notifications were issued.

The word "manufacture" used in the Notifications under

Section 3(3) of the Act, a taxing statute should be

understood in its commercial sense, in the absence of the

definition of it in the statute itself. The definitions of

"manufacture" given in other enactments such as Factories

Act, Industrial Dispute Act or the Excise Act cannot be

applied while interpreting the expression "manufacture"

inrelation totlie^rovisions of the Act.

The learned Judge in the judgment under appeal has

stated "it is also admitted that. the. electricity was

utilised for pumping out water from the mines, it cannol be

disputed that the Plaintiff could not have worked his mines

unless the water had been lumped out from themia^s and,

therefore, pumping out the water from the mines was

incidental with the excavation of stones on the mines"

Further having referred to various decisions dealing

with 'manufacturing" and "manufacturing process" has stated

thus-.-

"In my opinion, the pumping out of water from mines

was necessary and essential for carrying of the work of

excavation of stones from the mines and, therefore, it

should be held to be a part of the manufacturing process of

the whole industries and business carried out by the

plaintiff."

13. In the 'Notification dated 26.3.1962 the State

had exempted from duty the energy consumed in any industry-

in the manufacture,. production, processing or repair of

goods and also by or-in respect of any mine as defined in

the Indian Mines Act, 1923. As can be seen from subsequent

two Notifications of 2.3.1963 andl.ll.l965 the exemption

given to the mines .in the 'Notification,dated

26.3.;1962^was.,: withdrawn. The intention appears to be

clear that the exemption

available to mines speciticaiiy. was taken .away. it

appears the Plaintiff did not plead specifically that the

electricity was being used for pumping out water from the

mines which formed part of the manufacturing process. This

apart excavation of stones ti'oma mine- and thereafter

cutting them and polishmg them into slabs did not amount to

manufacture of goods. The word "manufacture" generally and

in the ordinal parlance in the absence of its definition in

tlie Act should be understood to mean bringing to existence

a new and different article having distinctive name.

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character or use after undergoing some transformation. When

no new product as such comes into existence, there is no

process of manufacture. The cutting and polishing stones

into slabs is not a process of manufacture for obvious and

simple reason that no new and distinct commercial product

came into existence as the end product still remained stone

and thus its original identity continued.

14. This Court in Union of India & Ors. Vs. Delhi

Cloth and General Mills Co. Ltd. & Ors. (1977 E.L.T.

(J.199) as to the meaning of "manufacture" in para 14 has

stated thus:-

"The word "manufacture" used ns a verv is generally

understood to mean as "bringing into existence a new

substence" and does not mean mereiy "to produce sonic change

in a substance", however minor in consequence the change may

be. Tills distinction is well brought about in a passage

thus quoted in-Permanent Edition of Words and Phrases. Vol.

26. from an American Judgment. The passage runs thus'

"Manufacture implies a change, but every change is not

manufacture and yet even' change of an article is the result

of treatment labour and transformation: a new and different

article must emerge having a distinctive name, character or

use."

Para 17 of the .same judgment reads thus:- -

"These definitions make it clear that to become

"goods" an article must be something which can ordinarily

come to the market to be brought and sold."

15. In the case of Collector of Central Excise,

JaqJur Vs.

Rajasthan State Chemical Works, Deedwana, Rajasthan

-((1991) 4 SCC 473) this Court was considering "process"

connected with the manufacture; for manufacturing common

salt brine pumped into salt pans by using diesel pump and

for man.ufacturing lime, coke, .and limestones lifted to the

platform at the head kiln by aid of power. It was held that

pumping of brine and lifting of raw-material constituted

processes in or in relation to the manufacture. Para .16 of

the judgment reads thus:-

"The expression "m the manufacture of goods" would

normally encompas!S the entire process earned on by the

dealer of converting raw materials into finished goods.

Where any particular process is so integrally connected with

the ultimate production of goods that but for that process

manufacture or processing of goods would be commercially

inexpedient, goods required in that process would, in our

judgment, iail within the expression "in the nianutacture of

goods."

This Court in the same judgment in para 21 has stated

thus:-

"A process is a manufacturing process when it brings

out a complete transformation 'for the whole componenis so

as to produce a commercially different article or a

commodity. But that process itself may consist of several

processes which may or may not bring about any change at

every intermediate stage. But the .activities or the

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operations may be so integrally connected that the final

result is the production of a commercially different

article. Therefore, any activity or operation which is the

e.ssential requirement and is so related to the further

operations tor the end result would also be a process in or

in relation to manufacture to attract the relevant clause in

the exemption notification. In our view, the word 'process'

in the context in which it appears in the aforesaid

notification includes an operation or activity in relation

to manufacture."

16. In conclusion, it is said that if any operation

in the course of manufacture is so integrally connected with

the further operations which result in the emergence of

manufactured goods and such operation is carried on with the

aid of powder, the .process-in or in

relation to the manufacture must be deemed to be one

carried with the aid of power. Pumping out of water,

excavation of,stones and cutting and polishing them into

slabs cannot be said to-be, integrally connected in the

manufacturing of goods.

17. Keeping in view what is stated aboye,we iindit

difficult to accept the view of the learned Judge that the

energy consumed for pumping out of water from the

mines^houldbeheld to be a part of ~. the manufacturing

process of the. whole industry and the- business carried

out by the Plaintiff. It is also not possible to accept

that excavation of stones and thereafter cuttmg and

polishing them into slabs resulted in any manufacture of

goods. On the basis of evidence,. the trial court found

that there are two separate electric meters; one for

pumping cutwater whenever requited, the other for the

workshop to which the stones excavated are carried. The

trial court also concluded that the electricity consumed for

pumping out water was not consumed in the manufacturing

business of the Plaintiff.

18. In the light of what is stated above, we are of

the considered opinion that the energy consumed for pumping

out water from a mine out water from a mine cannot be

accepted as the energy consumed by a consumer in any

industry' in the manufacture, production, processing or

repair of goods so as to claim exemption or reduced rate of

duty by the plaintiff by virtue of the aforenientioned two

notificationss dated 2.3.1963 and 1.11.1965. In the view.

we have taken, the appeal is entitled to succeed. Hence it

is allowed, the judgment and decree under appeal are set

aside and the suit of the plaintiff is dismissed. Parties

to bear their own costs, in the tacts and circumstances of

the case.