The Bombay High Court held that the work of labelling and relabelling of a product is not an activity which falls within the term ‘manufacture’ within the meaning of the Electricity Act.
The court quashed the order imposing industrial duty on relabelling of products amounting to manufacturing activity. The court held that the ‘fiction’ created by the Central Exercise Tariff Act was not applicable to the activities carried out by the company under the electricity tariff regime as no such fiction existed in the Electricity Act, 2003 (the Act).
A single bank of Judge Avinash G. Gharote observed, “It is therefore clear that the work of labelling and relabelling a product cannot be considered as an activity which, as regards the user, would fall within the term ‘manufacture’ within the meaning of the Electricity Act.”
Lawyer Sumeet Palsudesai appeared for the applicant, while Attorney Chetan A. Alai represented the respondents.
The Maharashtra State Electricity Distribution Company Ltd (MSEDCL) had filed an appeal seeking to determine whether the company’s relabelling of products qualifies as manufacturing activity and thus justifies a switch to an LT-V category industrial tariff for electricity consumption.
Jindal Drugs Limited (Company) relied on the decision of the Customs and Services Tax Appellate Tribunal (CESTAT) to contend that the activity of labelling and relabelling is a manufacturing activity which the Supreme Court in Commissioner of Central Customs, Belapur v. Jindal Drugs Limited confirmed.
The Court found that the contested order merely related to the definition of the term “Manufacturing’ as used in the Central Excise Manual and was therefore incorrect.
The Court clarified that in the case of Commissioner of Central Excise, Belapur (supra), the application was made under the Central Exercise Tariff Act, 1985, in which a fiction was created on the basis of the Central Excise Manual, which includes labelling or re-labelling of containers as a manufacturing activity.
“In the light of this fiction, the activity of marking and re-marking has been considered to be manufacturing activity… In the instant case, the fiction created by Note 3 to Chapter 18 of the Central Exercise Tariff Act cannot be applied to the activity carried on by the respondent No. 1 for the purpose of categorisation of electricity tariff system, since such fiction does not exist in the Electricity Act.“, the court explained.
The Court noted that the word “manufacture” is not defined in the Electricity Act and must therefore be understood in the same way as the term “manufacture” is understood in normal usage. The Court explained that a manufacturing activity therefore involves the transformation of raw material into a new product through the use of machinery powered by electricity.
“An industrial tariff for electricity supply would not be applicable to the activities of labelling, relabelling, packaging and repackaging of goods, taking into account the Commercial Circular No. 175 of 05.09.2012, according to which the industrial categorisation is a manufacturing activity,“ the court clarified.
Accordingly, the High Court allowed the appeal.
Title of cause: Maharashtra State Electricity Distribution Company Ltd v. Jindal Drugs Limited & Anr. (Neutral Citation: 2024:BHC-AS:29357)
Look:
applicant: Attorney Sumeet Palsudesai
Respondents: Advocates Chetan A. Alai, A. Shirsath, Rama Somani and Bhushan S. Bhadgale
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