Raiasthan State Electricity Board Vs. Associated Stone Industries & ANR
 INSC 300 (8 May
Shah Mohammed Quadri, Shivaraj V. Patil ' SHIVARAJV. PATIL. J. .
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')?
This appeal is by the Rajasthan State Electricity Board. Jaipur, theDefendant
in the.suit. . ^
short and substance, the facts which are considered relevant and necessary for
disposal of this appeal are the following.
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.
Subsequently a notification was issued on 2.3.1963 superseding the aforesaid
Notification dated 23.3.1962.
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.
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 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
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.
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
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.
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.
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
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.
processing or repair of goods', and (2) by or in respect of any mine as defined
in the Indian Mines Act, 1923 (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.
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.
dated the 26^ March, 1962 and No.
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.
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)".
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.
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 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
The word "manufacture" is not defined in the Act under which
aforementioned three Notifications were issued.
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.
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."
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.
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.
and General Mills Co. Ltd. & Ors. (1977 E.L.T.
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.
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."
the case of Collector of Central Excise, 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.
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 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."
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.
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.
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.
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