Case: Manganese Ore India Ltd Vs. State of M.P. &amp; Others

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 Sectionevery distributor of electrical energy and every producer shall pay every month to the State Government at the prescribed time and in the prescribed manner a duty calculated at the rates specified in the table below on the units of electrical energy sold or supplied to a consumer or consumed by himself for his own purposes or for purposes of his township or colony, during the preceding month. The table to Section 3(1) prescribes different rates of duty depending for the purpose for which the electrical energy is sold.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 asMines (other than captive 40 mines of cementThe 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) "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.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 TableItem 4 (which is now Item No. 3 after 1995 amendment) and Explanation (b) which contains extended definition of mines as ultra vires the Constitution. As the factual matrix would reveal, the High Court dismissed the Writ Petition by placing reliance on State of M.P. v. Birla Jute Mfg. Co. Ltd., (1995) 4 SCC 603.   The matter travelled to this Court which eventually formed the subject matter of Civil Appeal Nos.of 1998. ABench 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 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 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 statingthe 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. ...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, theBench 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 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 assertedIn 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.ge 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 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 asWhether 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 practisedIt 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 followingThe 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 intoview 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. On that basis, it was urged that copper concentrate is not a "mineral" and consequently, Explanation (b) toof Section 3 of the Act will not apply. Reliance was placed on State of W.B. v. Kesoram Industries Ltd. and others, (2004) 10 SCC 201     and Uranium Corporation of India Ltd., Bihar v. Collector of Central Excise, Patna, 1985 (19) ELT 609. 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., (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 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 others, (1972) 2 SCC 620.  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 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   = AIR 1990 SC 1664   and Govt. of A.P. v. P. Laxmi Devi, 2008(2) R.C.R.(Civil) 561 : 2008(2) Recent Apex Judgments (R.A.J.) 475 : (2008) 4 SCC 720.   Thereafter it referred torule and in that regard reproduced a passage from Principles of Statutory Interpretation [11*], and commended itself to the authorities in Tarlochan Dev Sharma v. State of Punjab & Ors., 2001(3) R.C.R.(Civil) 809 : (2001) 6 SCC 260     and Union of India v. Harjeet Singh Sandhu, 2001(2) S.C.T 1018 : (2001) 5 SCC 593.   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 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 observedG.P. Singh, 12th Edn., Pageclassification 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 isThe 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".After so stating, it adverted to the anatomy of the definition of the term `mine and observed that the expression creates a legal fiction and, therefore, the definition will embrace only what is comprised within the ordinary meaning of `mine part, together with what is mentioned in the inclusive part of the definition and, therefore, as per well settled rules of statutory interpretation has to be read with regard to subject and object of the Act. The Court proceeded to state that the object of the Act is to raise revenue by prescribing rate of duty and the highest rate of duty is prescribed for mining industries as it is exploiting the natural wealth which istherefore, it must pay higher rate of duty which can be utilized for meeting the essential expenditures by the State Government. Thereafter, the High Courtinto 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".Dwelling upon the word "adjacent" and the argument raised pertaining to discrimination between industries located in close proximity of the mine and other industries carrying on the same activity, namely, `crushing, processing, treating or transportation, which are not located in such close proximity of the mine, the Division Bench opinedword `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".

Court's reasoning:
18. Mining would comprehend every activity by which the mineral is extracted or obtained from earth irrespective of whether such activity is carried on at the surface or in the bowel, but it must be an activity for winning a mineral. For the purpose of Item 3 `mine to which electrical energy is sold, supplied or consumed, it would include machinery or premises situated in the adjacent to the mine, provided the electricity is used for crushing, processing, treating or transporting the minerals. The word `mineral used in the aforesaid Explanation under the Act would have reference to the mineral which is mined and is then crushed, processed, treated or transported. The word `processing used in the Explanation has to be interpreted in the context and for the purpose of the said item. Process can be given either a wide or a narrow meaning. In the context in which it is used in the Explanation, we are disposed to think that it must be given a 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 Excise, (1990) 3 SCC 447 ]. The rule of noscitur a sociis has been applied and accepted in Ahmedabad Pvt. Primary Teachers Association v. Administrative Officer & Ors., 2004(1) S.C.T. 667 : (2004) 1 SCC 755. We would prefer to construe the said word in the Explanation with reference to the words before and after for the word `processing used therein. The word `processing herein, we think, should be interpreted and understood with the associated words `crushing and `treating. The word `processing is susceptible of the meaning keeping in view the word `crushing and `treatment used before and afterwards.19. We are absolutely conscious that noscitur a sociis rule is not applied when the language is clear and there is no ambiguity, which according to us does exist and perceptible in the Explanation in question. A very broad and a wide 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 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. 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 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.