Case Note & Summary
The Supreme Court heard an appeal against a High Court decision concerning the levy of cess under the Limestone and Dolomite Mines Labour Welfare Fund Act, 1972. The appellant, Hindustan Steelworks Construction Limited, a company owned by the Government of India, owned mines from which limestone was extracted. The appellant used the extracted limestone in construction work for the expansion of Hindustan Steel Ltd., Bhilai Steel Plants, which was engaged in the production of iron and steel. Under Section 3 of the Act, the appellant was required to pay a duty of excise at a rate not exceeding one rupee per metric tonne of limestone extracted and used for the purposes specified. The appellant challenged this levy. The High Court had construed the expression 'for any purpose in connection with the manufacture of iron, steel...' in Section 3(ii) widely, holding that it embraced activities having a nexus with the activity of manufacture of iron and steel. The appellant contended that a narrow construction should be adopted, but this argument was rejected. The Supreme Court reproduced Section 3 of the Act, which levies and collects a cess on limestone and dolomite produced in any mine: (i) as is sold or otherwise disposed of to the occupier of any factory; or (ii) as is used by the owner of such mine for any purpose in connection with the manufacture of cement, iron, steel, ferro-alloys, alloy steel, chemicals, sugar, paper, fertilizers, refractories, iron ore pelletisation or other specified articles. The explanation provides that where the owner of a limestone or dolomite mine is also the occupier of a factory, all limestone or dolomite produced in the mine and not sold or disposed of to another factory shall be deemed, unless the contrary is proved, to have been used for any purpose in connection with manufacture of specified articles. The court noted that a number of commodities/industries are covered in sub-section (ii) and in almost all of them, except cement and chemicals, the use of limestone per se is not directly towards their manufacture. A narrow reading would render the provision otiose. The primary purpose of the Act is to build a Labour Welfare Fund, a measure for labour welfare, and the excise duty is in the nature of a cess to achieve that purpose. Therefore, the provision requires a wide construction to avoid frustrating the legislation. The court held that limestone used by an owner extracted from his mine for any purpose relatable to and in connection with the manufacture of commodities, including iron and steel, would attract payment of excise duty. This interpretation was purposive and commended by the language employed. The Supreme Court agreed with the High Court and dismissed the appeal without any order as to costs.
Headnote
A) Labour Welfare - Cess on Limestone and Dolomite - Wide Construction of 'for any purpose in connection with manufacture' - Limestone and Dolomite Mines Labour Welfare Fund Act, 1972, Section 3 - The appellant, a Government of India company owning limestone mines, used extracted limestone for construction work in expansion of Bhilai Steel Plants engaged in production of iron and steel. The court considered whether Section 3(ii) should be read narrowly or widely. The High Court held the expression wide. The Supreme Court agreed that the provision must be purposively construed to achieve the object of building a Labour Welfare Fund, and that a narrow reading would render the provision otiose because limestone is not directly used in manufacture of iron and steel but is used for activities having nexus with such manufacture. Held that limestone used by an owner extracted from his mine for any purpose relatable to and in connection with manufacture of commodities, including iron and steel, attracts excise duty under Section 3(ii). The appeal was dismissed without costs.
Issue of Consideration
Whether the expression 'for any purpose in connection with the manufacture of iron, steel...' in Section 3(ii) of the Limestone and Dolomite Mines Labour Welfare Fund Act, 1972 should be construed narrowly or widely, and whether limestone used by the appellant in construction work for expansion of Bhilai Steel Plants attracts the cess.
Final Decision
The appeal was dismissed, agreeing with the High Court's wide interpretation of Section 3(ii) of the Limestone and Dolomite Mines Labour Welfare Fund Act, 1972. The court held that limestone used by an owner extracted from his mine for any purpose relatable to and in connection with the manufacture of commodities, including iron and steel, attracts excise duty. No order as to costs.
Law Points
- Section 3 of Limestone and Dolomite Mines Labour Welfare Fund Act
- 1972 imposes cess on limestone used for any purpose in connection with manufacture of specified articles including iron and steel
- expression 'for any purpose in connection with the manufacture' must be construed widely
- purposive interpretation to achieve labour welfare fund objective
- use of limestone for construction work for expansion of steel plant has nexus with manufacture of iron and steel and attracts cess.
