Labelling & Re-Labelling Product Does Not Fall Under Expression ‘Manufacture’ Under Electricity Act, 2003: Bombay High Court
The Bombay High Court observed that the work of labelling and re-labelling of a product is not an activity that falls under the expression ‘manufacture’ for the purpose of the Electricity Act.
The Court set aside the order that imposed an industrial tariff on the relabelling of products amounting to a manufacturing activity. The Bench explained that the “deeming 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 such a deeming fiction does not exist in the Electricity Act, 2003 (the Act).
A Single Bench of Justice Avinash G. Gharote observed, “It is therefore, apparent, that the work of labelling and re-labelling of a product cannot be held to be an activity, which would fall under the expression, ‘manufacture’ as is understood, as to its user for the purpose of the Electricity Act.”
Advocate Sumeet Palsudesai appeared for the petitioner, while Advocate Chetan A. Alai represented the respondents.
The Maharashtra State Electricity Distribution Company Ltd (MSEDCL) had filed an appeal to ascertain whether the relabelling of products by company should be classified as a manufacturing activity, thereby justifying a shift to an industrial tariff under Category LT-V for electricity consumption.
Jindal Drugs Limited (company) relied upon the decision by the Customs Excise and Service Tax Appellate Tribunal (CESTAT) to contend that the activity of labelling and relabelling was a manufacturing activity, which the Apex Court in Commissioner of Central Excise, Belapur v. Jindal Drugs Limited affirmed.
The Bench observed that the impugned order merely relied upon the definition of the term “manufacture” as is used in the Central Excise Manual and therefore, was incorrect.
The Court clarified that the plea in the Commissioner of Central Excise, Belapur case (supra) was made under the Central Exercise Tariff Act, 1985 in which a deeming fiction was created by virtue of the Central Excise Manual for including labelling or re-labelling of containers as a manufacturing activitiy.
“It is in the light of this deemed fiction that the activity of labelling and re-labelling has been held to be manufacturing activity…In the instant case, the deeming fiction created by Note 3 of Chapter 18 of the Central Exercise Tariff Act, cannot be made applicable, to the activity being carried out by the respondent No.1 for the purpose of categorization of the electricity tariff regime as such a deeming fiction does not exist in the Electricity Act,” the Court explained.
The Court stated that since the Electricity Act does not define the word ‘manufacture,’ it must be understood from what the expression ‘manufacture’ would be understood in the normal parlance. The Court explained that a manufacturing activity would therefore entail conversion of raw material into a fresh product by the use of machines, powered by electricity.
“An industrial tariff, in terms of the supply of electricity, would not be applicable to the activities of labelling relabelling, packaging–repackaging of goods, considering the Commercial Circular No.175 dated 05.09.2012 in terms of which Industrial Categorization is to a manufacturing activity,” the Court clarified.
Accordingly, the High Court allowed the appeal.
Cause Title: Maharashtra State Electricity Distribution Company Ltd v. Jindal Drugs Limited & Anr. (Neutral Citation: 2024:BHC-AS:29357)
Appearance:
Petitioner: Advocate Sumeet Palsudesai
Respondents: Advocates Chetan A. Alai, A. Shirsath, Rama Somani and Bhushan S. Bhadgale