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PETITIONER: RAIASTHANSTATEELECTRICITY BOARD

       Vs.

RESPONDENT: ASSOCIATED STONE INDUSTRIES & ANR.  ...

DATE OF JUDGMENT:       08/05/2000

BENCH: Syed Shah Mohammed Quadri, Shivaraj V.  Patil

JUDGMENT:

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     SHIVARAJV.  PATIL.

     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

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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 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

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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. 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

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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  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

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a  new  and  different   article  having  distinctive  name. 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

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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."

     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

     Caimot  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.