Holding

The Supreme Court held that the basic question on the nature of copper concentrate and the applicability of Explanation (b) had not been decided by the High Court, and therefore set aside the judgment and remitted the case for fresh determination of that issue.

Summary

Hindustan Copper Ltd., a government company engaged in open‑cast mining of copper ore and its subsequent processing into copper concentrate, challenged the levy of electricity duty under the Madhya Pradesh Electricity Duty Act, 1949. The Act’s Section 3 (Explanation (b)) defines a “mine” to include premises or machinery “situated in or adjacent to a mine and used for crushing, processing, treating or transporting the mineral”. The company argued that its processing plant should be treated as a non‑domestic/commercial establishment because copper concentrate is a manufactured product, not a mineral, and that the definition led to a higher duty rate. The Madhya Pradesh High Court dismissed the writ petitions. The Supreme Court held that the High Court had not decided the pivotal question – whether copper concentrate qualifies as a mineral and whether the Explanation applies despite the manufacturing process – and therefore set aside the impugned judgment, remitting the matter for fresh consideration of that question. The appellant was directed to pay current dues but no interest on arrears.

Issues considered

Whether copper concentrate is a mineral within the meaning of Explanation (b) to Section 3 of the Madhya Pradesh Electricity Duty Act, 1949.
Whether Explanation (b) applies when a manufacturing process is involved in producing the concentrate.
Whether the classification under the Act violates Articles 14 and 19 of the Constitution by creating discriminatory tax treatment.

Legislation cited

Madhya Pradesh Electricity Duty Act, 1949s. Section 3 (Explanation (b))
Mines Act, 1952

Subjects

electricity dutymineral definitioncopper concentratetax discriminationArticles 14 and 19Mines Actstate levyinterpretation of statute

Judgment

[2008] 16 S.C.R. 434

A HINDUSTAN COPPER LTD.
v. _.,.__ -..f

STATE OF MADHYA PRADESH AND ORS.
(Civil Appeal No.6725 of 2008)

B NOVEMBER 19, 2008

c
[DR. ARIJIT
.
PASAYAT
. AND DR. MUKUNDAKAM
~

SHARMA, JJ.]
.

Madhya Pradesh Electricity Duty Act, 1949: .
~
. --"...

s.3, Explanation (b) - 'Mine' - Levy of electricity duty as
regards manufacturing of copper concentrate - Matter
remitted to High Court to decide the question as to whether
copper concentrate is a mineral and whether the Explanation
D applies even though manufacturing process is involved to
bring it into existence - Sincf;J the basic question has not
been decided by the High Court, the impugned judgment is
set aside and the matter is remitted to it for fresh f-
consideration of the question as formulated by Supreme
E Court - In the meantime, appellant is directed to pay the
current dues, but there shall be no recovery of arrears relating
to interest, if any.

The appellant, a Government company, was engaged
F in extraction of copper ore by open cast mining process.
Appellant's Mine as well as the processing plant were
subjected to uniform electricity duty under the entry
. y-
relating to 'mines other than captive mines of a Cement
Industry' in the table contained in s.3 of the M.P.
G Electricity Duty Act, 1949. According to the appellant its
activities consisted of two distinct parts: (1), mining which
included drilling, blasting and collecting of ore and these
activities were carried on in the mining area registered }.

H 434
HINDUSTAN COPPER LTD. v. STATE OF MADHYA 435
PRADESH AND ORS.

under the Mines Act, and (2) the processing, which was A
carried on at the Primary Crnsher, Secondary Crusher
and Concentrator Plant, situated away from the mine at
distances varying -2.5 km to 10 km and separately
registered as 'factory' under the Factories Act. The stand
of the appellant that as regards the activities (2), the B
processing part, it was entitled to lesser rate of duty as
was applicable to 'non-domestic and commercial
~ -i-
establishments'. The appellant filed a writ petition before
the High Court challenging the provisions of s.3 of the
M.P. Electricity Duty Act, namely the entry in the Table c
(Part B) relating to 'mines other than captive mines of
cement industry' and Explanation (b) defining 'mine' and
extending the definition ~f 'mine' to its 'factory' activities
for the purpose of levying electricity duty thereon. The
appellant also filed other writ petitions involving similar D
issues. A Division Bench of the High Court dismissed the
writ petitions. On appeal the matter was remitted to the
High Court for disposal of the writ petitions afresh. The
<~
High Court again dism;ssed the writ petitions.
E
In the instant appeal by the Government Company,
it was contended for the appellant that the questions were
not correctly formulated by the High Court and actual
essence of the dispute could not be _covered.
F
The court formulated the question 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". G

Allowing the appeal, the Court
-~
HELD: Since the ·basic question has not been
decided by the High Court, the impugnedjudgment is set H
436 SUPREME COURT REPORTS [2008] 16 S.C.R

A aside and the matter is remitted to it for fresh
consideration of the question as formulated by this Court.
'l'n the me~ntim'e, the appellant' is directed to pay the
clltrent ·dues, but there shall be no recovery of arrears
reiating·to 'interest, if any. '[Para S] [446-BlC] .· · · ;
B . , '' , . ,·. :.;-
(State of fvT.P. v. Bir/a Jute Manufacturing Company Ltd.
1995 (4) SCC 603 and Hindustan Copper Ltd. v. State of M.P.
and Ors. 2004 (12) SCC 408, referred to.

C CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6725 of 2008.

From the final Judgment and Order dated 9.2.2005 of the
High Court of Madhya Pradesh at Jabalpur in Misc. Petition
Nos. 2821 of 1988 & 3827 of 1993 & Writ Petition No. 3103
o of 1994.' ·.
. '
,, · G.E. Vahanvati, S.G., · Nandini Sen and Deba Prasad
Mukherjee for t~e Appellant. +.
E SJ<. Dubey, Vikas Upadhyay, Yogesh Tiwari, Nandita
Dubey and 8.S. Banthia for the Respondents.

· The Judgment of the Court was delivPred by

DR. ARIJIT PASAYAT, J. 1. Leave granted.
F
2. Challenge in this appeal is to the judgmentof a Division . r
Bench of the Madhya Pradesh High Court dismissing the writ
petition and miscellaneous petitions filed by the appellant.

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

The appellant is a Government Company. Its 'Malanjakhand I
Copper Mining & Ore Concentration Project' is situated in
H District Balaghat, where it 'is engaged in. extraction of copper
HINDUSTAN COPPER LTD. v. STATE OF MADHYA 437
PRADESH AND ORS. [DR. ARIJIT PASAYAT, J.]

ore, by open cast mining process. The appellant has·de$cribed A
the. process. thus: After drilling and blasting the ore in the open
pit mine, the ore in the form of boulders are transported to t~e
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 CriJsher. B
(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 C
carried in the form of slurry to floatation cells. 1·n 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 D
required for 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 E
at a distance of6 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 F
Cc;irried 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 G
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 H
438 SUPREME COURT REPORTS [2008) 16 S.C,R.

A processing.plants/machineries (l=actory area) are all. situated~:
in .a.large .tract of l~nq tak~n-Qn mining lease fronl th~; St~te.
GQv~rnt:li~nt ~ . · · . . .. · .
' -
· Tlie M: P.. Electricity ·o·aty Act,. 1949 (in short 'the Act')
B enacte.dby-the Stafelegislatunf provides.for le\iy of electricity,
·duty·(in-'short 'the·duty'). on 'sale or consumption of electrical
energy: Section 3 6f the Act provides that every distributor of
electrical energy and every producer shall pay every month to
the State Government at th~ prescribed time_ and- in the
c presGribed manner, a duty calculated _at the rates specified .(in
the Table,. given be,low the Section) ~on the u_nits of electrical
energy_ sold or supplied to a consumer, or consumed by himself
for his own purpo.ses or for purposes of his township or colo_ny,
during_thepreceding month.Part-:B of the Table prescribes the --
D rate· of electricity duty" on the efectrical energy sold/supplied for -
consumption for. different specified purposes, namely domestic,
non-domestic & Comriie'rCial: industrial ·a.rid. non-iridustri~I:
Industrial purpose is ·further divided into four categories, one
of which is ~tor mines other than ca-ptive mines· of a cement
E ·industry'' (vide' Energy 3):' The ta.rm 'mine' is defin'ed in ·tne
Explanation (b) to Section·3:ofthe'Act, as 'a tnirie-to'Which th-e
Mines Act, 1952 applies and includes. the premises· or
mac,hinery situated in 'or adjacent to a 'mine ·and 'used for
crushing.processing, t~ating and fransporting,.the.mineral'. Up'
F to 3f 12.1.987, ·t~~ duty.was.?0 paise per un!t; fro.m _f 1.~1988
to 31.5.1988, the duty was160 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 substiiuted providing tor eiectricity
of
G duty,· as a percentage the electri_city_ tariff. At.pres-ent., 'the
electricity' duty for ,-mines other' than captive mines of cement
industry;·is 40°i~ of the~lectrlcity tariff. Given below in the form
of a comparative Table, the different rates o{duty for different
types of iridusfries, ·culled out from Part 'B' of t~e Tabl~ io
H Section 3 of the Act:
HINDUSTAN COPPER LTD. v. STATE OF MADHYA 439
PRADESH AND ORS. [DR. ARIJIT PASAYAT, J.]
/' -+ The M.P. Electricity DL1ty Act, 1949 (for short 'the Act') A
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
electtlcal ehergy and every producer shall pay every month to
the Stale Government at the prescribed time and in the B
... r prescribed manner, a duty calculated at the rates specified (in
the iable 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 c
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 D
industry' (vide Energy 3). The term 'mine' is defined in the
~ _)i.- 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
cr.ushing, processing, treating and.transporting the mineral'. Up E
to. 31.1~.. 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
1· petition, the Table has been substituted providing for electricity F
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 G
Section 3 of the Act:
~
1'

H
440 SUPREME COU.RT REPORTS [200?] .16 S,.C.R.

A SI. Industry Period 1.1.88'to 1.6.88 to From· Present
No. To . 31 ..5.88. 31.11.88 11.12.88 Rate.
. .1.l,~~ .., (% of .. .
'
. . .. ?· ,;'"· •. ' . ' : ,.,.,
(
ElectrJcity
Tariff)
:~ -
- .. .,, . : < ·, '

B· (i) For mines .. 50 p.. 60p. .. . ' 61p. ·75p . ' -40%
other than· :,. ... l

captive ,.
:
. ..
mines of .........
a cement
industry
. ;

c. ,,..":',

(ii)' . For . 10p. 12p. 13p. ' . 18p. 10:5% .
cement ...
.industries
including
o. its captiy~
mines · ..
(iii) For 4p.. 3p. 4p. 4p. 4% -t- .. :---
industries (out of \
' receiving 75NP)· ..
E electricity .. 3.5% ...
at low - (excess·
tension of
tariff 75NP)
(iv) For other 5p. Sp. 9p·: 12p.. 8% ,.
F
(v) For non- 15p. 18p. 19p. '19p. 15% '
•." ,,•,
Industrial ·'

purposes
.. . ,.
' ·',.: . I . .

.. +·:
.,

• • • < • " - : • : • • • ' ' '"' • (. .... • ~

G Appellant's mine.to which the Mines Act, 1952-~PPlies, 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.
H
·HINDUSTAN COPPER LTD. v. STATE OF MADHYA 441
PRADESH AND ORS. [DR. ARIJIT PASAYAT, J.]

>~ ·The appellant states that the Act as it originally stood, A
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 B
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 c
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
differe_n,t rates ofduty, namely, (i) mines other than captive mines D
of cement industries, (ii) Cement industries including its captive
mines, (iii) industries receiving electricity at the' low tension tariff,
' I>- _).- and (iv) other industries. An eXtended definition of the word
'mine; was also added.

The appell~nt is aggrieved by the said extended definition E
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. The
appellant contends that- the extended definition of 'mine' in F
1· Explanation (b) contained in the Table under Secti0n 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 G
adjacent to a mine and l_.Jsed for crushing, processing, treating
A. 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 H
442 SUPREME COURT REPORTS [2008] 16 S.C.R.
\·· ~

A object sought to be achieved by the Act. fhe nature of sale,
supply and consumption of electrical eherg·y· fo 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
B definition of 'mine·· In .the absence of a further definition of the
expression 'adjacent to the mines' is vague and ambiguous
leading to discriminatc;>ry treatment by the Authorities
implementing the Act and, therefore, fnvalid. Lastly, it was
con.tended that its.processing plant, thatis,.thePrimary Crusher,
c the Secondary Crusher, the Ball Mill, the Coneentrator Plant, the
Tailing Pumps, ttie.lntake.w~ll and-the water"treatment;plant is
not situated 'adjacent' to its mine and th~refore could. not be
treated as 'mine' for the purpose of levy o_f electrici.ty'duty. . .

Feeling aggrieved by the extended definition. of 'mine' in
D 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 ff led the writ .
.__

petition on 19.7.1988 before the High 'Court for the following
reliefs:
E
·(a) to declare the provisions of Section 3 of the M.P.
Electricity Duty Act, 1949, that is the entry' in theTaole (Part B),
relating to 'mines other than captive mines of cement :industry'
and the Explanation (b) defining 'mine' :as uncbnstitutional.
F (b) as a consequence, to direct the respondents to' treat
the petitioner's processing unit (Primary Crusher, th·e
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 'min.e' but included in the
G category of 'non-domestic and commercial establishmentsi for
purposes of imposition of electricity duty ·at the lower rate
prescribed as 12 paise/15 paise per 1Jnit based .on its
consumption; and

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

v
~

HINDUSTAN COPPER LTD. v. STATE OF MADHYA 443
PRADESH AND ORS. [DR. ARIJIT PASAYAT, J.]
_.. -+ Another writ petition i.e. M.P. No.3827 of 1993 was filed. A
This petition reiterated the grounds raised in M.P. No. 2821 of
1988. It was filed seeking the following reliefs, as a derhand
was issued by claiming Rs.78,58,877/- towards electricity duty
in respect of electricity consumed by it:
B
(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 c
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 D
electricity duty at the rate of 12 paise per unit.

•. t-- As a revenue recovery notice was issued under Section
146 oqhe M.P. Land Revenue Code demanding payment of
Rs.78,58,877/- as arrears of electricity d~ty, without considering
the representation given by it in regard to the earlier demand E
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
--r . include factories in the ;mines' as ultra vires Articles 14 and 19
F

of the Constitution of India.

(ii) to quash the demand notice issued under the M.P. Land
Revenue Code.
G
(iii) to direct the respondents to treat the factory of the
.+..
appellants as 'other in.dustries' as classified in the Table under
Section 3 of the Act and charge electricity duty at the rate of
12 paise per unit. ·
H
444 SUPREME COURT REPORTS [2008] .16 S.C.R.

A . (iY) 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
a:
Court by a common order dated 10.1997 dismissed the writ
petitions filed by the appellant reiying ori a decision ofthis Court
.s
in State of M.P. v. Bir/a Jute Manufacturing Company Ltd.
(1995 (4) sec 603). The said judgment was . set aside by this ~-
Court in Hindustan Copper Ltd. v. State of M.P. and Ors. (2004
(12) sec 408) and the matter was remitted.to the High Court.

C 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
D ('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 ~nguided
1 discretion to Authority· under the Act to decide what is
'adjacent to a mine' and therefqre invalid.

(iii) Whether use of the words 'adjacent to a mine' would
mean only the premises or machinery abutting to or
F ·,· adjacent the mine, and not premises or the plant/machinery
situated at a distance of about 2.5 to 6 KM. ., · 1·

(iv) Whether the State had applied different yardsticks in
charging duty to petitioner and in charging d.uty to Bhilai
Steel, Balco, Manganese Ore India Ltd. and .thereby
practiced discrimination."
, I
. .,
· The High Court answered the questions by holding that tl;le
writ petitions were without merit. . . .

4. In support of the appeal. learned. counsei .. f6r' the
·H
HINDUSTAN COPPER LTD. v. STATE OF MADHYA 445
PRADESHAND ORS. [DR. ARIJIT PASAYAT, J.]
~· -+ appellant submitted that the real issues were not considered A
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 8
submitted that the basic issues were formulated by the High
Court for determination.
. .
6. The Act was ,~m.ended by the M.P. Electricity Duty
(Amendment) Act, 198Q (in short the 'Amendment Act').
Different rat~s of duty ar~ provided in Part B. In the said Part, C
Clause (4) relates to the mines other than the captive mines of
cement factory and the rate is ~O paise per unit of energy. The
Explanation defines 'mines' as follows:

. ""Mine" means a mine to which the Mines Act, 1952 (No.35 o
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."

7. It was submitted that the entry relating to mines refers
to processing, treating or transporting the mineral. According E
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 F
paise per unit of energy. Essentially the submis$ion 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 G
~
I 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 H
446 SUPREtAE COURT REPORTS [2008) 19 S.C.R

A Explanation to· Part B of the Act applies 'even though
1 +- .
manufacturing process is involved to bring it ·into
existence".

8. Since this basic question has not been dedded by··the
. High Court, we set aside the impugned judgment and remit the
8
matter to it for fresh· consideration of the above question. The
.parties shall be permitted to place materials in support of their
respective standswithin a month from today. Since the matter
is.pending·since·long it would be appropriate for the High Court
C to disp9se of the matter early, preferably within four months
from the date of receipt of this .erder. ~In the meantime, the
appellantisdirectedto pay the current dues, but there· shall be
no '.recovery of arre~rs relating to interest, if.any. The appeal is
allowed~

D R.P. Appeal allo'wed.

'-,J _,
. l-

-.