IMPORTANT POINT
Activity of excavation of stones from mine and thereafter cutting them and polishing into slabs does not amount to manufacture or production of goods.

Headnote:(i) Rajasthan Electricity (Duty) Act, 1962-Section 3(3)-Exemption/concessional duty-Manufacture or production of goods-Notification granting exemption from duty/reduced rate-Respondent engaged in excavating stones from mines and thereafter cutting and polishing into slabs-Claim for exemption/reduced rate of duty on power consumed in pumping out water from mine- Held, pumping out water from mine does not come within meaning of manufacture, producing or repair of goods-Further Excavation of stones from mine and cutting and polishing then into slab did not amount to manufacture of goods-Respondent not entitled to exemption/reduction of duty.
       Held : 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two Notifications of 2.3.1963 and 1.11.1965 the exemption given to the mines in the Notification dated 26.3.1962 was withdrawn.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 specifically, 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 from a mine and thereafter cutting them and polishing them into slabs did not amount to manufacture of goods. The word "manufacture" generally and in the ordinary parlance in the absence of its definition in the Act should be understood to mean bringing to existence 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. 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. It is also not possible to accept that excavation of stones and thereafter cutting 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 out water whenever required, the other for the workshop to which the stones excavated are carried. Therefore, the energy consumed for pumping 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 goodsso as to claim exemption or reduced rate of duty by the plaintiff. (Paras 13, 16, 17 & 18)
       (ii) Manufacture or production-Excavation of stones and polishing and cutting them into slabs-Does not amount to manufacture of goods. (Para 13)

JUDGMENT

Shivaraj V. 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 the Defendant 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 Plaintiff-Respondent No. 1 is a registered public limited 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 electro-thermo industries and reducing such duty on the energy consumed in other industries in the manufacture, production, processing or repair of goods, from 3 naya paise per unit to 1 naya paise per unit. Further one more Notification was issued on 1.11.1965 superseding the earlier two Notifications mentioned above and fixing duty at 5 paise per unit as the rate at which electricity duty shall be computed. However, by clause (c) of the said notification, 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 1 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, 21.12.1973 and 30.11.1974 asking the Plaintiff to pay electricity duty at the full rate of 0.05 per unit holding that the Plaintiff was not entitled either for exemption of electricity duty 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 the appeal in the court of the District Judge at Kota. The learned District 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. 1-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 v. Rajasthan State Chemical Works Deedwana, Rajasth

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2000 Supreme(SC) 1011

IMPORTANT POINTActivity of excavation of stones from mine and thereafter cutting them and polishing into slabs does not amount to manufacture or production of goods.

Cases Referred (1)

IMPORTANT POINT
Activity of excavation of stones from mine and thereafter cutting them and polishing into slabs does not amount to manufacture or production of goods.