Coal-based electricity generation qualifies as manufacture, making coal eligible as raw material for concessional entry tax.

Generation of electricity in a thermal power plant was treated as manufacture because coal-based energy is converted into a new and distinct product with different character and use. Electricity was also regarded as goods or an article within the statutory scheme, being movable and capable of sale, transmission and use. Coal was held to be the raw material for electricity generation since it is the essential primary input in the thermal process. On that basis, the statutory conditions for concessional entry tax on coal were satisfied, and the assessment order denying the concession was held unsustainable and quashed.

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Issues: (i) Whether generation of electricity in a thermal power plant is a manufacturing activity; (ii) whether electricity is an article or good within the meaning of the statutory definition of manufacture; (iii) whether coal is a raw material for generation of electricity in a thermal power plant; and (iv) whether the petitioner is entitled to concessional rate of entry tax on coal under Rule 3(4) of the OET Rules.

Issue (i): Whether generation of electricity in a thermal power plant is a manufacturing activity.

Analysis: The expression manufacture was to be understood with reference to Rule 2(1)(c) of the Orissa Entry Tax Rules and the definition in Section 2(28) of the Orissa Value Added Tax Act, 2004 as adopted by Section 2(q) of the Orissa Entry Tax Act, 1999. Applying the settled test that manufacture results in a new and distinct article with a different name, character and use, the conversion of coal-based energy into electricity was held to amount to manufacture.

Conclusion: Generation of electricity in a thermal power plant is a manufacturing activity.

Issue (ii): Whether electricity is an article or good within the meaning of the statutory definition of manufacture.

Analysis: Electricity was treated as movable property capable of sale, purchase, transmission, transfer, delivery, storage and use, and therefore as goods for purposes of the statutory scheme. On that basis, it was capable of being an article produced in the manufacturing process.

Conclusion: Electricity is an article or good within the relevant statutory definition.

Issue (iii): Whether coal is a raw material for generation of electricity in a thermal power plant.

Analysis: The decision applied the ordinary commercial meaning of raw material and the principle that an ingredient essential to the emergence of the end product remains a raw material even if it is consumed in the process. The factual process of thermal power generation showed that coal is indispensable to the production of electricity and is used as the primary input in the manufacturing process.

Conclusion: Coal is a raw material for generation of electricity in a thermal power plant.

Issue (iv): Whether the petitioner is entitled to concessional rate of entry tax on coal under Rule 3(4) of the OET Rules.

Analysis: Once generation of electricity was held to be manufacture, electricity to be a goods/article, and coal to be a raw material for its production, the statutory conditions for concessional levy were satisfied. The Assessing Authority's refusal to follow the binding High Court decision was held to be legally untenable.

Conclusion: The petitioner is entitled to concessional rate of entry tax on coal under Rule 3(4) of the OET Rules.

Final Conclusion: The assessment order denying concessional entry tax on coal was unsustainable and was quashed, with the writ petition succeeding.

Ratio Decidendi: Where coal is the essential and primary input used in the manufacturing process that results in electricity, the activity amounts to manufacture and the coal qualifies as raw material for the purpose of concessional entry tax.

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