REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   6725   OF 2008 (Arising out of SLP (C) No. 2528 of 2006)

Hindustan Copper Ltd. ...Appellant

Versus

State of Madhya Pradesh and Ors. ...Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.  

2. Challenge in this appeal is to the judgment of a Division Bench of the

Madhya Pradesh High Court dismissing the writ petition and miscellaneous

petitions filed by the appellant.

3. Factual position as projected by the appellant before the High Court is

as follows:

The appellant is a Government Company. Its ‘Malanjakhand Copper

Mining & Ore Concentration Project' is situated in District Balaghat, where

it is engaged in extraction of copper ore, by open cast mining process. The

appellant has described the process thus: After 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.  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.  The  small  pieces/pebbles  are  then

carried by a conveyor to the Concentrator Plant (situated at 5.5 km from the

mine). 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.  From the Large quantity of water is required for

Concentrator Plant for being used in milling. Water is also required for the

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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).  

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,  Secondary  Crusher  and  Concentrator  Plant.  The

processing (manufacturing) part of the activities are carried 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 2.5

KM  to  10  KM  and  are  registered  separately  as  a  'Factory'  under  the

provisions of 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.  

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The M.P. Electricity Duty Act, 1949 (in short ‘the Act’) enacted by

the  State  Legislature  provides  for  levy  of  electricity  duty  (in  short  ‘the

duty’) on sale or consumption of electrical energy.  Section 3 of the Act

provides that every 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

given below the Section) 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. Part-B of the Table

prescribes the rate of electricity duty on the electrical energy sold/supplied

for  consumption  for  different  specified  purposes,  namely domestic,  non-

domestic & Commercial, industrial and non-industrial.  Industrial purpose is

further divided into four categories, one of which is ‘for mines other than

captive mines of a Cement industry’ (vide Energy 3). The term ‘mine’ is

defined in the Explanation (b) to Section 3 of the Act, as ‘a mine to which

the  Mines  Act,  1952  applies  and  includes  the  premises  or  machinery

situated in or adjacent to a mine and used for crushing, processing, treating

and transporting the mineral’.  Up to 31.12.1987, the duty was 50 paise per

unit;  from 1.1.1988  to  31.5.1988,  the  duty  was  60  paise  per  unit;  from

1.6.1988 to 30.11.1988 the duty was 61 paise per unit; and from 1.12.1988,

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the duty was 75 paise per unit.  During the pendency of the petition, the

Table has been substituted providing for electricity duty, as a percentage of

the electricity tariff.  At present,  the electricity duty for ‘mines other than

captive mines of cement industry’ is 40% of the electricity tariff.   Given

below in the form of a comparative Table,  the different rates of duty for

different types of industries, culled out from Part ‘B’ of the Table in Section

3 of the Act:                 

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The M.P. Electricity Duty Act, 1949 (for short 'the Act') enacted by the State Legislature provides for levy of electricity duty (for short 'the duty') on sale or consumption of electrical energy. Section 3 of the Act provides that every distributor of electrical energy and every producer shall pay every month to the Stale Government at the prescribed time and in the prescribed manner, a duty calculated at the rates specified (in the Table given below the Section ) 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. Part- B of the Table prescribes the rate of electricity duty on the electrical energy sold/supplied for consumption for different specified purposes, namely domestic, non-domestic & Commercial, industrial and non- industrial. Industrial purpose is further divided into four categories, one of which is 'for mines other than captive mines of a Cement industry' (vide Energy 3). The term 'mine' is defined in the Explanation (b) to Section 3 of the Act, as 'a mine to which the Mines Act, 1952 applies and includes the premises or machinery situated in or adjacent to a mine and used for crushing, processing, treating and transporting the mineral'. Up to 31.12.1987, the duty was 50 paise per unit; from 1.1.1988 to 31.5.1988, the duty was 60 paise per unit; from 1.6.1988 to 30.11.1988 the duty was 61 paise per unit; and from 1.12.1988, the duty was 75 paise per unit. During the pendency of the petition, the Table has been substituted providing for electricity duty, as a percentage of the electricity tariff. At present, the electricity duty for 'mines other than captive mines of cement industry' is 40% of the electricity tariff. We give below in the form of a comparative Table, the different rates of duty for different types of industries, called out from Part 'B' of the 'Table in Section 3 of the Act:   [Frame1]  

Appellant’s mine to which the Mines Act, 1952 applies, as well as the

processing  plant  which  have  been  registered  as  ‘factory’  have  been

subjected to a uniform duty under the entry relating to ‘mines other  than

captive mines of cement industry’ in the Table contained in Section 3 of the

Act.

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The appellant states that the Act as it originally stood, subjected all

factories whether they were independent,  or associated with mines, to the

same rate of duty. The Act was amended by Amending Act No. 21 of 1978.

After such amendment, the Table Under Section 3 prescribed the 'duty' at

the rate of 2 paise per unit in regard to factories. In regard to consumers for

trade, commerce and business purposes, the rate of duty was 12 paise per

unit.  Thus,  the  Act  No.  21  of  1978  prescribed  a  lower  rate  of  duty  for

factories when compared to commercial establishments. The Act was again

amended by Amending Act No. 21 of 1986 drastically changing the rate of

duty, as also the classification. It prescribed a lower rate of duty for non-

domestic and commercial purposes at the rate of 15 parse per unit, when

compared to  certain classes of industries.  It  classified Factories into four

kinds  of  industries,  for  levy of  different  rates  of duty,  namely, (i)  mines

other  than  captive  mines  of  cement  industries,  (ii)  Cement  industries

including its captive mines, (iii) industries receiving electricity at the low

tension tariff, and (iv) other industries. An extended definition of the word

'mine' was also added.

The appellant is aggrieved by the said extended definition of 'mine'

the  effect  of  which  is  to  make  processing  a  part  of  mining  and  the

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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. The appellant contends that the extended definition of 'mine'

in  Explanation  (b)  contained  in  the  Table  under  Section  3  results  in

dissimilar  treatment  to  similar  subjects,  by prescribing  different  rates  for

different  factories.  It  was  contended that  the  definition  has  the  effect  of

categorizing factories registered under the Factories Act 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.  It  was also

submitted that classification of factories into two categories based on their

proximity or otherwise to a mine is unreasonable and irrational having no

connection with the object sought to be achieved by the Act. The nature of

sale,  supply  and  consumption  of  electrical  energy  to  both  classes  of

factories is in all respects similar and there is no reasonable justification to

prescribe a higher rate of duty to factories adjacent to a mine by including

them under  the  extended  definition  of  'mine'  in  the  absence  of  a  further

definition of the expression 'adjacent to the mines' is vague and ambiguous

leading to discriminatory treatment by the Authorities implementing the Act

and, therefore,  invalid.  Lastly, it  was contended that  its processing plant,

that  is,  the  Primary  Crusher,  the  Secondary  Crusher,  the  Ball  Mill,  the

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Concentrator  Plant,  the  Tailing  Pumps,  the  Intake  well  and  the  water

treatment plant is not situated 'adjacent' to its mine and therefore could not

be treated as 'mine' for the purpose of levy of electricity duty.

Feeling aggrieved by the extended definition of 'mine' in Explanation

(b) to Section 3 of the Act and feeling aggrieved by the inclusion of its

'Processing factory' within the 'mine' for purposes of levy of electricity duty,

the appellant filed the writ petition on 19.7.1988 before the High Court for

the following reliefs:

(a) to declare the provisions of Section 3 of the M.P. Electricity Duty

Act, 1949, that is the entry in the Table (Part B), relating to 'mines other

than captive mines of  cement industry'  and the Explanation  (b) defining

'mine' as unconstitutional.

(b) as a consequence, to direct the respondents to treat the petitioner's

processing unit (Primary Crusher, the Secondary Crusher, the Ball Mill, the

Concentrator  Plant,  the  Tailing  Pumps,  the  Intake  Well  and  the  Water

Treatment Plant), as not included under the definition of 'mine' but included

in  the  category  of  'non-domestic  and  commercial  establishments'  for

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purposes of imposition of electricity duty at the lower rate prescribed as 12

paise/15 paise per unit based on its consumption; and

(c) to direct the refund of the excess duty collected.

Another  writ  petition  i.e.  M.P.  No.3827  of  1993  was  filed.  This

petition reiterated the grounds raised in M.P. No. 2821 of 1988. It was filed

seeking  the  following  reliefs,  as  a  demand  was  issued  by  claiming

Rs.78,58,877/- towards electricity duty in respect of electricity consumed by

it:

(i) to  declare  that  the  provisions  of  M.P.  Electricity  Duty

(Amendment)Act,  1986 in so far as it  defines 'mine' so as to include the

factories in the mines is ultra vires Articles 14 and 19 of the Constitution.

(ii) to  quash  the  demand  notice  dated  30.11.1992  demanding

Rs.78,58,877/- as arrears of electricity duty  

(iii) a direction to respondents to treat the factories of the appellant

as ‘other industries’ classified under Part B of the Table under Section 3 of

the Act and accordingly charge electricity duty at the rate of 12 paise per

unit.

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As a revenue recovery notice was issued under Section 146 of the

M.P. Land Revenue Code demanding payment of Rs.78,58,877/- as arrears

of  electricity  duty,  without  considering  the  representation  given  by it  in

regard to the earlier demand dated 30.11.1992, writ petition WP 3103 of

1994 was filed seeking the following reliefs:

(i) to declare the provisions of the M.P. Electricity Duty (Amendment)

Act,  1986 in  so far  as  it  defines ‘mine’ so as  to  include factories  in  the

‘mines’ as ultra vires Articles 14 and 19 of the Constitution of India.

(ii) to  quash  the  demand  notice  issued  under  the  M.P.  Land  Revenue

Code.

(iii) to direct the respondents to treat the factory of the appellants as ‘other

industries’ as classified in the Table under Section 3 of the Act and charge

electricity duty at the rate of 12 paise per unit.

(iv) to declare that the plants of the appellants are not liable to pay

duty the rate applicable to ‘mines’.  

It is to be noted that earlier a Division Bench of the High Court by a

common order  dated  8.10.1997  dismissed  the  writ  petitions  filed  by the

appellant relying on a decision of this Court in  State of M.P. v.  Birla Jute

Manufacturing Company Ltd. (1995 (4) SCC 603). The said judgment was

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set aside by this Court in Hindustan Copper Ltd. v. State of M.P. and Ors.

(2004 (12) SCC 408) and the matter was remitted to the High Court.  

According  to  the  High  Court  following  questions  arose  for

consideration:

“(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  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 practiced discrimination.”

The  High  Court  answered  the  questions  by  holding  that  the  writ

petitions were without merit.  

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4. In support of the appeal, learned counsel for the appellant submitted

that the real issues were not considered by the High Court and the questions

formulated for determination did not  cover the actual  issues and disputes

involved.  

5. Learned counsel for the respondents on the other hand submitted that

the basic issues were formulated by the High Court for determination.

6. 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.  The Explanation defines ‘mines’ as follows:

“”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 a mine and used for crushing,  processing,  treating  or  transporting  the mineral.”  

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7. It was submitted that the entry relating to mines refers to processing,

treating or transporting the mineral. According to 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 the

points 3 and 4 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”.

8. Since this basic question has not been decided by the High Court, we

set  aside  the  impugned  judgment  and  remit  the  matter  to  it  for  fresh

consideration of the above question.  The parties shall be permitted to place

materials in support of their respective stands within a month from today.

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Since the matter is pending since long it would be appropriate for the High

Court to dispose of the matter early, preferably within four months from the

date of receipt of this order. In the meantime, the appellant is directed to pay

the current dues, but there shall be no recovery of arrears relating to interest,

if any. The appeal is allowed.

………………………….……….J. (Dr. ARIJIT PASAYAT)

………………….………………..J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, November 19, 2008    

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