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Friday, May 26, 2017

exemption from payment of electricity duty = The appellant no.1 had filed an application dated 15.03.2001 seeking exemption from payment of electricity duty under the notification dated 27.02.1992 issued under Section 3(3) of the Bombay Electricity Act, 1958 (hereinafter referred to as Act 1958). Another application dated 12.04.2001 was sent by appellant no.1 to the Commissioner of Electricity seeking exemption from electricity duty for a period of 15 years under Section 3(2)(vii)(a)(i) of 1958 Act.= Another reason given by the High Court was that no application was made within 180 days of application of the notification dated 27.02.1992 or even from the date of installation of generating sets i.e. August 1995. Even if the second reason given by the High Court is ignored, non- fulfillment of condition no.(a) of notification dated 27.02.1992 clearly entailed rejection of claim under notification dated 27.02.1992. There is no foundation or basis laid down even in this appeal to assail the finding recorded by the High Court that generating set was not purchased from 01.01.1991 to 31.12.1992.

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO. 4842 OF 2017
                (ARISING OUT OF SLP(CIVIL) NO.34384 OF 2016)

AND ANR.                                     … APPELLANT(S)



                               J U D G M E N T


1.    This appeal has been filed against  the  Division  Bench  judgment  of
Gujarat High Court dated 07.09.2016 dismissing Letters Patent Appeal of  the
appellants affirming the judgment of Learned Single Judge dated  25.02.2010.
Special Civil Application was  filed  by  appellant  challenging  the  order
dated 24.09.2099 passed by the  State  Government  as  well  as  the  demand
notice dated 06.10.2009. Learned Single Judge dismissed the Writ Petition.

2. Brief facts of the case which are necessary to be  noticed  for  deciding
this appeal are: -
      The appellant no.1 is duly incorporated company under  the  provisions
of Companies Act, 1956  engaged in business  of  manufacturing  and  selling
steel products. The appellant no.2  is  also  a  duly  incorporated  company
under the provisions of Companies Act, 1956, which is a  generating  company
selling/supplying electrical energy. The appellant no.1 company set  up  its
gas based steel plant  at  Hazira,  in  the  year  1990  or  thereabout  for
production of HBI. It also set up  a  20  MW  Open  Cycle  Power  Plant  for
captive consumption of power for its HBI plant. On the application  made  by
the appellant no. 1 Company, the State  Government  granted  exemption  from
payment of electricity duty  for  a  period  of  10  years  commencing  from
21.07.1990 with respect to the said Open Cycle  Power  Plant.  Subsequently,
the appellant no.1 Company converted the said Open Cycle Power Plant  of  20
MW into 30 MW Combined Cycle Mode  Power  Plant  by  adding  steam  turbine.
Consequent upon such conversion, the appellant no.1 company was  granted  by
the State Government exemption  from  payment  of  electricity  duty  for  a
period of 15 years  commencing  from  21.07.1990.  In  the  year  1991,  the
appellant no.1 company also desired  to  put  up  a  composite  plant  after
making  substantial  investment  for  production  of  both  HBI   and   HRC.
Therefore, in or about the year 1991-92, the appellant no.1 company  thought
of setting up another Captive Power Plant of 300 MW of capacity in  Combined
Cycle Mode at  Hazira  for  meeting  its  requirement  of  more  power.  The
appellant thought of doing so, in view of  the  benefits  available  to  the
Captive Power Plant at the relevant time. The Government of Gujarat and  the
Gujarat Electricity Board granted in principle  approval  to  the  appellant
no.1 company for setting up the said Captive Power Plant of  300  MW.  There
was, however, a change in the Power Policy of Government of  India,  in  the
year 1991-92, which allowed the participation of  private  sector  in  power
generation. Government of Gujarat also, with a view to give effect  to  that
policy, issued a Notification  dated  27.02.1992  under  Section  3  of  the
Bombay Electricity Duty Act, 1958(hereinafter referred to as 1958 Act).  The
appellant no.1 Company, therefore, abandoned its plan to  set  up  the  said
Captive Power Plant of 300 MW in  Combined  Cycle  Mode  and  in  place  and
instead thereof, promoted and incorporated  a  separate  generating  company
under the name and style of “ESSAR Power Limited”, the appellant no.2  is  a
Special Purpose Vehicle promoted by the appellant no.1  company  for  supply
of  power  to  the  appellant  no.1  company  as  well  as  to  the  Gujarat
Electricity Board.

3.    The Government of Gujarat issued an Order  dated  16.06.1995  agreeing
in principle to the demand of appellant no.2 to set  up  510  MW  generating
station at Hazira. The appellant  no.2  started  production  of  electricity
w.e.f.  08.08.1995.  The  appellant  no.1  held  equity  shares  of  42%  of
appellant no.2 company. Out of 515 MW, 300 MW capacity  has  been  allocated
to GEB (Gujarat Electricity Board) which constitute  58%  of  the  installed
capacity, remaining capacity of 215 MW which constitute  42%  to  the  ESSAR
Group of company as per the stipulation  contained  in  the  Power  Purchase
Agreement dated 30.05.1996.

4.    The appellant no.1 had filed an application dated  15.03.2001  seeking
exemption from payment of electricity  duty  under  the  notification  dated
27.02.1992 issued under Section 3(3) of the  Bombay  Electricity  Act,  1958
(hereinafter referred to as Act 1958). Another application dated  12.04.2001
was sent by appellant  no.1  to  the  Commissioner  of  Electricity  seeking
exemption from electricity duty for a  period  of  15  years  under  Section
3(2)(vii)(a)(i)  of  1958  Act.  The  State  of  Gujarat  Vide  Order  dated
23.12.2002 rejected the request for exemption under Section 3(2). The  Order
dated 23.12.2002 was challenged in the High Court Wherein  High  Court  vide
Order dated  17.03.2003  left  open  to  the  Government  to  take  a  fresh
decision. The State Government again by Order dated 23.01.2006 rejected  the
application of  appellant  no.1  for  grant  of  exemption  for  payment  of
electricity duty for 215 MW power generation equivalent to 42% of the  total
generation. The Writ Petition was again filed challenging  the  Order  dated
23.01.2006 in which High Court set aside  the  Order  dated  23.01.2006  and
directed the Government to pass a fresh Order. The State  Government  passed
the detailed Order dated 24.12.2009 rejecting the claim  of  appellant  no.1
for  exemption  of  payment  of  electricity   duty   both   under   Section
3(2)(vii)(a)(i) as  well  as  under  notification  dated  27.02.1992.  After
decision dated 24.09.2009 recovery notice dated 06.10.2009  was  issued  for
payment of electricity duty  amounting  to  Rs.562/-  Crores  together  with
interest totaling Rs.1038.27/- Crores  for  the  period  of  April  2000  to
August 2009. The Order of State Government dated 24.09.2009  was  challenged
by  the  appellants  before  the  High  Court  by  means  of  Special  Civil
application no. 10946 of 2009.  Learned  Single  Judge  dismissed  the  Writ
Petition vide its judgment dated 25.02.2010 aggrieved against which  Letters
Patent Appeal was filed by the appellants.  In  Letters  Patent  Appeal,  an
interim order was granted on conditions:
The appellant shall pay a sum of Rs.50 Crores against the  outstanding  dues
of electricity by 30.04.2010 in two installments of Rs.20 Crores each.
The appellant no.1 shall further pay from 01.05.2010 a sum of  Rs.15  Crores
every month against the outstanding dues of electricity.

5.    The Letters Patent Appeal ultimately came to be dismissed by  Division
Bench on 07.09.2016 against which  judgment  the  present  appeal  has  been

6.    We have heard Shri Mihir Joshi, Senior  Advocate  for  the  appellants
and Shri C.A.Sundram, Senior Advocate appearing for the respondents.

7.  Learned Counsel for the appellants contends that the issue  is  squarely
covered in its favour by  a  decision  of  this  Court  in  A.P.  Gas  Power
Corporation Ltd. Versus AP State Regulatory Commission and  another,  (2004)
10 SCC 511, wherein it was held, inter alia, that the electricity  generated
by a Special Purpose Vehicle and consumed by  the  participating  member  to
the extent of its equity contribution would amount  to  captive  consumption
of  electricity.  The  High  Court  in  the  impugned   judgment,   however,
distinguished the aforesaid judgment of this Court on  the  ground  that  in
that case the  parties  were  governed  by  a  Memorandum  of  Understanding
(“MoU”) which was not there in the present case and secondly, on the  ground
that ESIL was purchasing 215 MW of power from EPL.

8.    It is further submitted that  rejection  of  the  application  on  the
ground that same was not made in  the  prescribed  form  under  Rule  11  of
Bombay Electricity Duty Rules, 1968  is  erroneous  and  had  the  rejection
being only on the ground of non-filing the application at  the  first  stage
same could have been done since the State had power to  condone  the  delay.
Alternatively, the appellant was entitled for exemption  under  notification
dated 27.02.1992 by reason of the fact  that  ESIL  was  jointly  generating
electricity with EPL and had also purchased the generating  sets  by  making
payments of the purchase price to the vendors during the period  prescribed.
It is further contended that in the similar circumstances the Government  of
Gujarat had extended the benefit of exemption from  payment  of  electricity
duty to GIPCL and therefore,  ESIL  who  is  similarly  situated  cannot  be
deprived of benefits of exemption.

9.    Learned Counsel appearing for the State refuting aforesaid  submission
contends that Government as well as High  Court  has  rightly  rejected  the
claim of exemption of duty. The appellant  neither  fulfills  the  statutory
requirements  under  Section  3(2)  nor  fulfill  the  conditions   of   the
notification dated 27.02.1992. ESSAR Power and ESSAR Steel are separate  and
independent legal entities. ESSAR Steel  is  not  generating  energy.  ESSAR
Steel is not generating either singly or jointly  with  either  GEB  or  its
successor entity, Gujarat Urja  Vikas  Nigam  Limited  or  even  with  ESSAR
Power. ESSAR Power is not generating energy for its  own  use.  ESSAR  Power
Limited has established 515 MW power station, out of which 300  MW  capacity
has been allocated to Gujarat Electricity  Board  (GEB).  Thus  58%  of  the
installed capacity is allocated to GEB and in  relation  to  such  capacity;
ESSAR Power Limited generates and sells electricity as a generating  station
and not as a captive Power Plant of GEB. The remaining capacity of  215  MW,
which constitutes  42%,  is  for  ESSAR  Group  of  Companies,  as  per  the
stipulation contained in  the  Power  Purchase  Agreement  dated  30.05.1996
entered into between ESSAR Power and GEB  as  well  as  the  Power  Purchase
Agreement dated 29.06.1996  entered  into  between  ESSAR  Power  and  ESSAR
Steel. The clauses in each of these agreements is clearly inconsistent  with
ESSAR Power being treated as captive generation and use within the scope  of
Section 3(2)(vii) of the 1958  Act.       The  appellant  has  rightly  been
denied the benefit of exemption as  claimed  under  the  notification  dated
27.02.1992. The condition of the notification dated 27.02.1992  specifically
states that the generating set  or  sets  shall  have  to  be  purchased  or
installed or commissioned during the period beginning  from  01.01.1991  and
ending on 31.12.1992. This does not cover order placed for the  purchase  of
generating  set.  Since  ESSAR  Steel  has  merely  placed  the  order   for
generating set but neither purchased nor installed or generated  within  the
period specified in the aforesaid notification, it is  not  fulfilling  this
condition and hence not entitled for benefits of the said  notification.  In
case of purchase, property in goods is transferred to the  owner,  here,  in
given case, property in goods cannot be considered as transferred when  same
is simply ordered.

10.   Learned Counsel for  the  parties  have  placed  reliance  on  various
judgments of this Court in support  of  their  respective  submission  which
shall be referred to while considering the submissions in detail.

11.   We have considered the submissions of Learned Counsel for the  parties
and perused the records.

12.   From the facts which  have  come  on  the  record  it  is  clear  that
appellant no.1 had claimed exemption  from  duty  under  the  provisions  of
Section 3(2)(vii) as well as under the  notification  issued  under  Section
3(3) of 1958 Act for different period which exemption was  earlier  granted.
Details  of  benefit  of  exemption  availed  by  appellant  no.1  has  been
extracted by Division Bench of High Court in Para 5.4 of  the  judgment.  It
is useful to extract the table quoted in the judgment which is quoted  below
to the following effect:

|Sr.|Date of |Prescrib|Applicable  |Source of  |Date of |Exemptio|
|No.|Applicat|ed Form |provision   |electricity|Issue of|n period|
|   |ion     |No. for |for         |supply     |Certific|        |
|   |seeking |making  |exemption   |           |ate of  |        |
|   |exemptio|applicat|under GED   |           |Exemptio|        |
|   |n from  |ion     |Act, 1958   |           |n       |        |
|   |Duty    |        |            |           |        |        |
|(1)|(2)     |(3)     |(4)         |(5)        |(6)     |(7)     |
|1. |21.7.199|Form ‘E’|Sec. 3(2)   |20 MW      |1.9.1995|21.7.199|
|   |0       |        |(vii) (a)   |+  1380 KVA|        |0       |
|   |        |        |(ii)        |+  590 KVA |        |to      |
|   |        |        |            |+ 1500 KVA |        |29.9.199|
|   |        |        |            |of         |        |9       |
|   |        |        |            |Self-genera|        |        |
|   |        |        |            |ting sets  |        |        |
|   |        |        |            |of ESSAR   |        |        |
|   |        |        |            |Steel      |        |        |
|2. |30.7.199|Form 'F'|Sec. 3(2)   |GEB        |28.1.199|19.12.19|
|   |0       |        |(vii)       |connection |2       |91 to   |
|   |        |        |(b)         |No  HT 159 |        |26.3.199|
|   |        |        |            |           |        |5       |
|3. |May,    |Form 'F'|Notification|GEB        |6.9.1995|31.3.199|
|   |1995    |        |dt.         |connection |        |5       |
|   |        |        |30.6.1993   |No HT 0159/|        |to      |
|   |        |        |issued under|HT 10029   |        |30.3.200|
|   |        |        |Sec. 3(3)   |+ 215 MW   |        |0       |
|   |        |        |            |from  ESSAR|        |        |
|   |        |        |            |Power      |        |        |
|   |        |        |            |(exclusivel|        |        |
|   |        |        |            |y for HRC  |        |        |
|   |        |        |            |Project)   |        |        |
|4. |30.1.199|Form E  |Sec. 3(2)   |20 MW      |26.11.19|15.12.19|
|   |6       |        |(vii) (a)   |(existing) |98      |95      |
|   |        |        |(i)         |+ 11 MW    |        |to      |
|   |        |        |            |i.e. Co-   |        |29.9.200|
|   |        |        |            |generation |        |4       |
|   |        |        |            |plant      |        |        |

13.   In the present case, no application in  the  prescribed  form  as  per
Rule 11 of the Rules was filed by the appellant no.1 and for the first  time
the appellant had come up with an application dated  15.03.2001  seeking  an
exemption  under  notification  dated   27.02.1992   and   subsequently   on
12.04.2001 has again claimed  exemption  under  Section  3(2)(vii)(a)(i)  of
1958 Act. The exemption from payment of duty as claimed by the appellant  is
in two parts.  Firstly,  under  Section  3(2)(vii)(a)(i)  of  1958  Act  and
secondly, under the notification dated 27.02.1992.  We  proceed  to  examine
both the claim separately.

Claim under Section 3(2)(vii)(a)(i)

14.   Section 3 of 1958 Act deals with “duty on units of  energy  consumed”.
Sub-Section 2 enumerates various circumstances under which  duty  shall  not
be leviable on the units of energy  consumed.  Section  3(2)(vii)(a)(i)  and
3(3) is quoted below:

“3. Duty on units of energy consumed... ... ...

      (2) Electricity duty shall not be leviable  on  the  units  of  energy

      (vii) for motive power and lighting in respect of premises used by  an
industrial undertaking for industrial  purpose,  until  the  expiry  of  the
following period, that is to say-
In the case of an  industrial  undertaking  which  generates  energy  either
singly or jointly with any other industrial undertaking for its own  use  or
as the case may be,  for  the  use  of  industrial  undertakings  which  are
jointly generating the energy.
Fifteen years from the date of commencement of the Bombay  Electricity  Duty
(Gujarat Amendment) Act,  1983(hereinafter  in  this  sub-section  and  sub-
sections (2A) and (2AA) referred to as “the commencement date”) or the  date
of starting the generation  of  such  energy  whichever  is  later  in  such
generation of energy is by back pressure turbine or if  such  generation  of
energy is obtained by co-generation.

      (3)  The  State  Government  may,  by  notification  in  the  Official
Gazette, and subject to such  terms  and  conditions  as  may  be  specified
therein, reduce the rate of duty or remit the duty in respect of-

15.   The keywords in the statutory  scheme  are  “generates  energy  either
singly or jointly with any other industrial undertaking for its own  use  or
as the case may be, for the use of industrial undertaking which are  jointly
generating the energy.” We have to look into the facts of the  present  case
to find out as to whether the  statutory  conditions  enumerated  above  are
satisfied in the facts of the present case or not. The appellant no.1  is  a
separate registered company which holds 42% equity shares of  the  appellant
no.2. The appellant no.2 has been constituted as a Special  Purpose  Vehicle
for generating electricity. The  appellant  no.2  is  a  generating  company
within the meaning of Section 2(4A) of Electricity (Supply) Act,  1948.  The
submission which has been pressed by the counsel for the appellant  is  that
both the appellant no.1 and appellant no.2  are  generating  energy  jointly
for the use of industrial  undertaking  which  are  jointly  generating  the

16.   As noted above, there is a Power Purchase Agreement  dated  30.05.1996
and 01.06.1996 which contains various conditions for sale of electricity  by
appellant no.2. The State Government  in  its  order  dated  24.09.2009  has
extracted the recitals in Power Purchase agreement  dated  01.06.1996  which
are to the following effect: -
“...WHEREAS the Company is a Generating  Company  as  defined  under  clause
4(A) of Section 2 of the Electricity (Supply) Act, 1948

AND WHEREAS the Company has substantially  implemented  a  515  MW  combined
Cycle Generating Station at Hazira Dist. Surat,  Gujarat  of  which  it  has
already commissioned 3 x 110 MW Gas  Turbine  Generating  Set  an  aggregate
generating Capacity of 330 MW.

AND WHEREAS the Company is setting up the said Generating  Station  and  has
been permitted as a special case to supply  power  to  its  sister  concerns
viz. ESSAR Steel Ltd. and ESSAR Oil Ltd, hereinafter jointly  and  severally
referred to as ‘ESSAR Group Companies’.

AND WHEREAS ESTL which is engaged in the manufacture of  Steel  products  at
Hazira, intends to purchase electrical output generated  by  the  Generating
Station equivalent to 138 MW capacity in the Open  Cycle  mode  and  215  MW
capacity in Combined  Cycle  mode  operation  (hereinafter  collectively  or
severally referred  to  as  the  ‘Allocated  Capacity’)  on  the  terms  and
conditions set forth in this Agreement.

16. Article 3 of the PPA dated 01.06.1996 between ESSAR  Power  Limited  and
ESSAR Steel Limited reads as under:
      The allocation of capacity shall be as under:
 During Open Cycle mode operation prior to  commissioning  of  the  Combined
Cycle mode operation the Company shall allocate:
138 MW to the ESTL; and
192 MW to GEB
During Combined Cycle mode
215 MW to the ESTL; and
300 MW to GEB
 ..........   ..................”

17.    Even  assuming  appellant  no.1  and  appellant  no.2   are   jointly
generating the energy for  the  use  of  industrial  undertaking  which  are
jointly generating the energy, the Gujarat Electricity Board to whom 300  MW
has been allocated cannot be held to  be  industrial  undertaking  which  is
jointly generating the energy  with  appellant.  The  Statutory  scheme  for
grant of exemption has to be strictly construed. The appellant no.2  is  not
jointly generating energy with Gujarat Electricity Board and it  is  selling
the energy to the extent  of  300  MW  to  Gujarat  Electricity  Board.  The
conditions of the statutory  provisions  of  Section  3(2)(vii)(a)  are  not
fulfilled. The High Court has further held  that  both  ESL  and  EPL  being
distinct separate legal entities merely because ESL might  have  42%  shares
holding in EPL, it  cannot  be  said  that  ESL  is  generating  electricity
jointly with EPL and EPL is generating electricity jointly with ESL for  use
of electricity by ESL.

18.   The statutory conditions  for  grant  of  exemption  as  contained  in
Section 3(2)(vii)(a) can neither  be  tinkered  with  nor  diluted.  Learned
Counsel for the appellant contends that the  State  Government  had  granted
permission to the ESSAR Power
Plant to set up a generating station as a special case and to  supply  power
generated by it to its sister concerned i.e. ESSAR Steel and ESSAR Oil as  a
 special case. The letter of the State Government dated  05.06.1995  further
stated that if there is any excess power generated by EPL, the same  may  be
purchased by the Board at the price  decided by the Board. It is  useful  to
extract the letter of  permission  dated  05.06.1995  issued  by  the  State
Government which was to the following effect:-

"The Govt. has considered all the aspect  on  the  above  matter  and  after
careful consideration, has decided to agree in principle to  the  demand  of
ESSAR Power Limited to set up a generating station as a  special  case,  and
to supply power generated by it to its sister concern, i.e.  ESSAR  Gujarat,
ESSAR Steels and  ESSAR  Oil  again  as  a  special  case  only  subject  to
fulfillment of requirements of legal provisions as laid down  under  Section
15-A and 18-A of the Electricity Supply Act and with the  express  condition
that the power generated through this subject shall never  as  sold  outside
the State or to any other person except as  mentioned  above.  Moreover,  in
case, the power generated by EPL is to be  wheeled,  GEB  shall  decide  the
wheeling rate according to the sound commercial principles. In  addition  to
this, if there is any excess  power  generated  by  EPL,  the  each  may  be
purchased by the Board, at a price decided  by  the  Board  subject  to  the
norms laid down by GoI from to time.
      It is, therefore,  requested  that  GEB  may  take  further  necessary
action in the matter.”

19.   We have noticed above that  Power  Purchase  Agreement  allocated  the
energy to the Gujarat Electricity Board to the extent of 58% and  42%  power
supply was to be given to sisters concern i.e. ESSAR  Gujarat,  ESSAR  Steel
and ESSAR Oil as a special case. It is well settled that taxing statute  are
to be strictly construed specifically the  exemption  notification.  It  has
been held that the statutory provisions providing for exemption  has  to  be
interpreted in the light of words employed in it and  there  cannot  be  any
addition or  substraction  from  the  statutory  provision.  This  Court  in
Commissioner of Central Excise, Surat-I versus  Favourite  Industries,  2012
(7) SCC 153, while considering exemption notification issued  under  Central
Excise Tariff Act, 1985 laid down following in paragraph 35 to 40:-
"35. The notification requires to be interpreted in the light of  the  words
employed by it and not on any other basis. There cannot be any  addition  or
subtraction from the notification for the reason the exemption  notification
requires to be strictly  construed  by  the  courts.  The  wordings  of  the
exemption notification have to  be  given  its  natural  meaning,  when  the
wordings are simple, clear and unambiguous.

36. In Commr. of Customs v. Rupa & Co. Ltd., this Court  has  observed  that
the exemption notification has to be given strict interpretation  by  giving
effect to the clear and unambiguous wordings used in the notification.  This
Court has held thus: (SCC pp. 413-14, para 7)

“7. … However, if the interpretation given by the Board and the Ministry  is
clearly erroneous then this Court cannot endorse  that  view.  An  exemption
notification has to be construed strictly but that does not  mean  that  the
object and purpose of the notification is  to  be  lost  sight  of  and  the
wording used therein ignored. Where  the  wording  of  the  notification  is
clear and unambiguous, it has to be given effect  to.  Exemption  cannot  be
denied by giving  a  construction  not  justified  by  the  wording  of  the
                                                         (emphasis supplied)

37. In CCE v. Rukmani Pakkwell Traders, this Court has also  held:  (SCC  p.
804, para 5)

“5. … It is settled law that exemption notifications  have  to  be  strictly
construed. They must be interpreted on their own wording. Wordings  of  some
other  notification  are  of  no  benefit   in   construing   a   particular
                                                         (emphasis supplied)

38. In Kohinoor Elastics (P) Ltd. v. CCE this Court has held: (SCC p. 533,
para 7)
“7. … When the wordings of the notifications are clear and unambiguous they
must be given effect to. By a strained reasoning benefit cannot be given
when it is clearly not available.”
                                                         (emphasis supplied)

39. In Compack (P) Ltd. v. CCE, this Court has observed thus: (SCC p. 306,
para 20)
“20. Bhalla Enterprises laid down a proposition that notification has to  be
construed on the basis of the language used. Rukmani Pakkwell  Traders16  is
an authority for the same proposition as also  that  the  wordings  of  some
other  notification  are  of  no  benefit   in   construing   a   particular
notification. The notification does  not  state  that  exemption  cannot  be
granted in a case where all the inputs for manufacture of  containers  would
be base paper or paperboard. In manufacture of  the  containers  some  other
inputs are likely to be used for  which  MODVAT  credit  facility  has  been
availed of. Such a construction,  as  has  been  suggested  by  the  learned
counsel for the respondents, would amount to addition  of  the  words  ‘only
out of’ or ‘purely out of’ the base paper and cannot  be  countenanced.  The
notification has to be construed in terms of the language used  therein.  It
is well settled that unless literal meaning given to  a  document  leads  to
anomaly or absurdity, the golden rule of  literal  interpretation  shall  be
adhered to.”
                                                         (emphasis supplied)

40. In CCE v. Mahaan Dairies, this Court has held: (SCC p. 800, para 8)
“8. It is settled law that in order to claim benefit of  a  notification,  a
party must strictly comply  with  the  terms  of  the  notification.  If  on
wording of the notification the benefit is not available then by  stretching
the words of the  notification  or  by  adding  words  to  the  notification
benefit cannot be conferred. The  Tribunal  has  based  its  decision  on  a
decision delivered by it  in  Rukmani  Pakkwell  Traders  v.  CCE.  We  have
already overruled the decision in that case. In this case also we hold  that
the decision of  the  Tribunal  is  unsustainable.  It  is  accordingly  set
                             (emphasis supplied)”
20.   The statutory  provisions  of  Section  3(2)vii(a)  thus  have  to  be
strictly construed and in event the condition of generating  energy  jointly
with any other industrial undertaking is not fulfilled, the claim has to  be

21.   Learned Counsel  for  the  appellant  submits  appellant  is  claiming
exemption from excise duty only to the  extent  of  its  shareholdings  i.e.
42%. The object for grant of exemption to the industrial  undertaking  which
generates energy either singly or jointly  is  for  the  use  of  industrial
undertaking which are jointly generating the energy.  When  in  the  present
case, 58% of the energy generated has been allocated to Gujarat  Electricity
Board with whom appellant No. 2 is not jointly generating  the  energy,  the
Statutory provisions has to be strictly  construed  and  when  energy  being
generated is used by industrial undertaking which is not jointly  generating
the energy the claim is not covered under Section 3(2)(vii)(a).
22.   Learned Counsel for the appellant has also referred  to  the  judgment
of this Court in State of U.P. and Ors. versus  Renusagar  Power  Company  &
Ors., 1988(4) SCC 59. In the above case, M/s Renusagar Company had  obtained
a sanction to engage in  the  business  of  supply  of  electricity  to  M/s
Hindustan Aluminium Corporation Ltd. In the above case, this Court took  the
view that corporate Veil should be lifted and Hindalco and Renusagar may  be
treated as one concern and the Renusagar Powers Plant  must  be  treated  as
the owned source of generation of Hindalco. Following was held in  paragraph
"67. In the aforesaid view of the matter we are  of  the  opinion  that  the
corporate veil should be lifted and Hindalco and  Renusagar  be  treated  as
one concern and Renusagar’s power plant must be treated as  the  own  source
of generation of Hindalco and should be liable to duty  on  that  basis.  In
the premises the consumption of such energy  by  Hindalco  will  fall  under
Section 3(1)(c) of the Act. The learned Additional Advocate-General for  the
State relied on several decisions, some of which have been noted.”

23.   In the present case, there is no dispute to the  fact  that  appellant
No.2 was created as a Special Purpose Vehicle by appellant No.1 itself.  Had
appellant No.2 would have been supplying energy to appellant No.1 only,  the
claim deserved consideration.  But present is a  case  where  the  appellant
no.2 is supplying energy to industrial undertakings  with  whom  it  is  not
jointly generating the energy. Judgment of this Court in State of  U.P.  and
Renusagar Company, thus, has no application in the facts of present case.

24.   Learned Counsel for the appellant has placed reliance on  judgment  of
this Court in A.P. Gas Power Corporation Ltd. Versus A.P.  State  Regulatory
Commission & Another, 2004 (10) SCC  511.  In  the  above  case,  the  State
Government of Andhra  Pradesh  and  Andhra  Pradesh  Electricity  Board  had
mooted the idea of setting up of 3 X 33 MW gas-based  Combined  Cycle  Power
Station for establishing a generating station.  It  was  decided  to  invite
private participation in the venture. A Memorandum  of  Understanding  dated
17.10.1988 and on 19.04.1997 was entered according to which  Andhra  Pradesh
State Electricity Board had to have 26% shares in the new  company  to  come
up as A.P.GPCL and  rest  of  the  participating  industries  were  to  have
different percentage of shares and the power so generated by company was  to
share proportionately among the  shareholding  participating  companies  and
their sister concerns. The question  which  fell  for  consideration  before
this Court was as to whether A.P.GPCL was required to take a  license  under
the  law  for  utilization/sale  and  supply  of  power  generated  by   the
participating industries, their sister concerns and the  companies  to  whom
shares of APGPCL were transferred by the participating industries.

25.    This  Court  after  noticing  the  contents  of  various  clauses  of
Memorandum of Understanding and the provisions of  Indian  Electricity  Act,
1910 and Andhra Pradesh Electricity Reform Act, 1998,  laid  down  following
in paragraph 36 and 37:
“36.  From the perusal of para 4 of the Memorandum of  Understanding  it  is
clear that a participating industry has been given a right to  transfer  its
share of energy and power to its sister concern. The term  “sister  concern”
has been explained as “a concern under the same group.” There is no  further
clarification  or  clue  as  to  which  are  those  concerns  which  may  be
considered under the same group. The expression  “sister  concern”  used  in
para 4 of the Memorandum of Understanding certainly does not mean a  concern
which is owned or is a subsidiary of the participating  industry.  It  would
be a concern or unit different from the participating  industry  and  not  a
part of it. Maybe,that the same group may manage two  different  independent
units carrying on the same nature of activities. They may  be  addressed  as
sister concerns but would definitely have separate entity  and  identity  of
their own. Consumption of power, generated by a  generating  company,  by  a
concern which may be under the  same  group  as  any  of  the  participating
industry cannot be said to be  consumption  or  use  of  the  power  by  the
participating  industry  itself.  In  absence  of  the  element   of   self-
consumption by the generating company, it would not fall in the category  of
“captive consumption”. It would surely be a supply  to  a  non-participating
industry and in that event it would be necessary to  have  a  licence  under
the relevant provisions of law.  If  there  is  such  a  legal  requirement,
merely  an  agreement  amongst  certain  parties  would  not   exclude   the
application of  law.  Provisions  of  law  regulating  the  situation  would
prevail over any kind of agreement amongst some individuals as  a  group  or
otherwise. We are, therefore,  of  the  view  that  such  a  clause  in  the
Memorandum of Understanding would  not  do  away  with  the  requirement  of
having a licence for supply of electricity generated  by  A.P.GPCL  to  such
concerns which may be under the same group as the  participating  industries
but not the participating industries themselves.

37. To support the view taken by us, a decision of this  Court  referred  to
by the respondents may be cited as in State of U.P. Vs. Renusagar Power  Co.
This case, however, was decided in a slightly different fact situation.  M/s
Hindustan Aluminium Corporation Ltd. was established in  1959  on  assurance
of providing cheap electricity  to  it.  In  the  year  1964,  however,  M/s
Renusagar Power Co. Ltd. was established as a wholly  owned  and  subsidiary
of M/s Hindustan Aluminium Corporation Ltd. It was  generating  electricity,
but  incorporated  separately  and  had  its  own  separate  Memorandum   of
Understanding and Articles of Association. To  raise  the  revenue  for  the
State, the U.P. Electricity (Duty) Act, 1952 was enforced to levy a duty  on
the  consumption  of  electricity.   Several   amendments   were,   however,
incorporated from time to time  and  ultimately  a  provision  was  inserted
providing that there would be levied and paid  to  the  State  Government  a
duty called electricity  duty  on  the  energy  sold  to  a  consumer  by  a
licensee/Board/the  Central  Government.  The   duty   on   consumption   of
electricity was leviable even though it  may  be  from  his  own  source  of
generation. Renusagar Power Co. Ltd.  had  also  obtained  a  licence  under
Section 28 of the Act of 1910. In such circumstances, it was held that  even
though Renusagar Power Co. Ltd.  was  a  subsidiary  company  owned  by  M/s
Hindustan Aluminium Co. Ltd., yet it would amount to supply  of  electricity
by a licensee to a consumer in view of the provisions of  the  U.P.  Act  of
1952 which levied duty on consumption of electricity. The situation  in  the
case  in  hand  is  similar  only  to  the  extent  that  the  participating
industries and the sister concerns are  different  entities  and  separately
incorporated. Distinction may be there in view of the  statutory  provisions
intervening under the U.P. Act of 1952 but that is  not  material  for  this

26.   Ultimately, the appeal was partly allowed and  judgment  of  the  High
Court was modified vide paragraph  57  of  the  judgment  which  is  to  the
following effect: -

“57.  We, therefore, hold that no licence is necessary  for  utilization  of
energy generated by A.P.GPCL and utilized by  the  participating  industries
and the concerns holding shares of  A.P.GPCL  transferred  to  them  by  the
participating  industries  to  the  extent  of  value  of  the   shares   so
transferred. It would, however, be necessary to have a  licence  for  supply
of energy to the sister concerns. In the  result,  the  appeals  are  partly
allowed and the judgment and order passed by the High Court stands  modified
in the manner indicated above. Parties to bear their own costs.”

27.   The judgment of  Andhra  Pradesh  Gas  Power  Corporation  Limited  is
clearly distinguishable and does not help the appellant in present case.  In
the aforesaid case the energy was utilized by the  participating  industries
and the concerned holding shares of A.P.GPCL but supply  of  energy  to  the
sister concerned was required to have  license.  Present  is  a  case  where
Gujarat  Electricity  Board  who  has  been  allocated  300  MW  is  not   a
participating industry nor appellant no.2 is jointly generating  the  energy
with Gujarat Electricity Board, even if it is held that the  appellant  no.1
to the extent it holds 42%  equity  shares  of  appellant  no.2  is  jointly
generating  the  energy.  The  Gujarat  Electricity  Board  which  has  been
allocated 58% of electricity generated can not be  said  as  the  industrial
undertaking jointly generating the energy.

28.   The judgment of this Court in Gujarat Urja  Vikas  Nigam  Ltd.  Versus
ESSAR Power Limited, 2016(9) SCC 103, has also been referred to.  The  above
case was a case where parties to  the  present  appeal  were  at  issue  and
appeal  was  filed  by  Gujarat  Urja  Vikas  Nigam,  successor  of  Gujarat
Electricity Board under Section 125  of  the  Electricity  Act  against  the
Order of Appellate Tribunal of electricity.  The  appellant  had  filed  the
petition  before  the  Gujarat   Electricity   Regulatory   Commission   for
adjudication of the dispute arising out of  Power  Purchase  agreement.  The
appellant had sought compensation for wrongful allocation of electricity  by
EPL to the sister concerned i.e. ESSAR Steel Limited in  preference  to  the
appellant. The Commission had occasion to examine various clauses  of  Power
Purchase  Agreement  dated  30.05.1996  between  the  parties.  This   Court
rejected the contention of the EPL that it could sell power  to  ESL  beyond
its allocated capacity. In the paragraph 22 of the  judgment  following  was
held: -

“22. The agreement clearly contemplates the proportion of  allocation  of  a
capacity. EPL has to fuel and operate the generating  station  to  meet  the
requirement of electric output that can be generated  corresponding  to  the
allocated  capacity.  The  appellant  has  to  pay  annual  fixed  cost   as
determined in terms of Clause 7.1.1 of Schedule VII of  the  agreement.  The
Commission is thus, right in observing that once  the  entire  capacity  has
been allocated in two parts in a particular proportion,  the  contention  of
EPL that it could sell power to ESL beyond the allocated capacity could  not
be accepted. EPL was under obligation as per Schedule VI to  declare  weekly
schedule of the capacity available and the dispatch instructions were to  be
issued on the basis of the said declaration. It could not thus be said  that
EPL had no obligation to declare the capacity and the  obligation  of  GUVNL
to issue dispatch instructions was  not  dependent  on  declaration  of  the
available capacity  by  EPL.  Contrary  view  of  the  Tribunal  is  clearly
erroneous. In para 45 and 46 and elsewhere in  its  judgment,  the  Tribunal
erred in holding that there was no obligation to declare available  capacity
on proportionate basis. The finding of the Commission in paras 9.5  to  9.12
of its order quoted above is the correct interpretation  of  the  agreement.
We hold accordingly.”

29.   In the above case the question of  exemption  in  excise  duty  within
meaning of Section 3(2) of 1958 Act had not  arisen  nor  the  question  was
considered whether EPL can be held to  be  generating  energy  jointly  with
appellant no.1 and Gujarat Electricity Board.  For  the  issues  which  have
arisen in the present case, the above judgment does not render any help.

30.   Learned Counsel for the appellant has submitted that  the  High  Court
had rejected the claim of payment only on the ground that there is  no  such
Memorandum of Understanding between EPL and ECL as was  found  in  A.P.  Gas
Power Limited (Supra). The High Court although has noted the  fact  that  in
the present case there is no such Memorandum of  Understanding  between  EPL
and ECL but the judgment of the High Court is not based only  on  the  above
premise rather High Court has  clearly  found  that  conditions  stipulating
under  Section  3(2)(vii)(a)(i)  of  1958  Act  are  not  satisfied,  hence,
appellant no.1 is not entitled for exemption.  High  Court  has  elaborately
considered all the submission raised by the appellant and  rightly  came  to
the conclusion that conditions as enumerated  in  Section  3(2)(vii)(a)  are
not fulfilled. We do not find any error in  the  aforesaid  finding  of  the
High Court.

Claim under notification dated 27.02.1992

31.   The notification dated 27.02.1992 was  issued  in  exercise  of  power
conferred by Section 3(3) of Bombay  Electricity  Act,  1958.  The  relevant
part of the notification dated 27.02.1992, is as follows: -

                           Sachivalaya Gandhinagar
                             27th February, 1992


No. GHC/92/10/JCP/1188/2594/K

In exercise of the powers conferred by Sub Section (3) of the Section  3  of
the Bombay Electricity Duty Act,1958(Bom. XL of  1958),  the  Government  of
Gujarat hereby remitted with effect on and from the date of  publication  of
this notification in the Official Gazette. In the  whole  of  the  State  of
Gujarat, the Electricity Duty payable under item (6) of Part I  of  Schedule
II to the said Act, on the energy consumed for  motive  power  and  lighting
for Industrial purposes by industrial under takings  which  generate  energy
jointly for their own  use  either  by  establishing  an  independent  joint
company solely for this purpose or on pro-rata cost  sharing  basis,  for  a
period of ten years from the date of commissioning of  the  generating  sets
subject to the following terms and conditions namely:-

The generating set or sets  shall  have  been  purchased  and  installed  or
commissioned during the period beginning from 1st January, 1991  and  ending
on 31st December, 1992. Providing that such generating  act  or  sets  shall
not have been previously used in the State.

******      ******”

32.   The claim raised by the appellant under the  above  said  notification
was specifically dealt by the High Court and the Government.  The  condition
which was found lacking for  applicability  of  the  notification  was  that
generating sets were not purchased or installed or commissioned  during  the
period  from  01.01.1991  to  31.12.1992.  The  High  Court   has   recorded
categorical finding that the generating sets have been commissioned  in  the
month of August 1995. It is  useful  to  refer  to  paragraph  12.0  of  the
judgment of Division Bench which is to the following effect: -
“12.0.      Now, so far as the alternative claim of the appellants to  grant
the exemption for  a  period  of  10  years  under  the  Notification  dated
27.02.1992 is concerned, on considering Notification  dated  27.02.1992,  it
appears that the conditions precedent laid down  in  the  said  notification
cannot be said to have been compiled by  the  appellants  more  particularly
appellant No.1 –  ESL.  For  claiming  the  benefit  of  notification  dated
27.02.1992 it is to be established that the  generating  set  or  sets  have
been purchased/installed or commissioned during the  period  beginning  from
01.01.1991 and ending on 31.12.1992. From the record  it  appears  that  the
generating sets have been commissioned in the  month  of  August  1995,  the
appellants have failed to establish  that  the  generating  sets  were  even
purchased during the aforesaid period. It  cannot  be  disputed  that  in  a
taxing statute more particularly with respect to the exemption from  payment
of duty, all the conditions which can be said to be statutory  are  required
to be fulfilled and unless and until all the conditions  stipulated  in  the
exemption notification are satisfied and/or compiled with, there  shall  not
be any exemption under the notification. In the  present  case,  admittedly,
the generating sets in question have  been  commissioned  in  the  month  of
August 1995.  The  appellants  have  failed  to  establish  that  they  even
purchased the generating sets during the period  beginning  from  01.01.1991
to 31.12.1992. More placement of order for purchase cannot amount to  actual
purchase of the generating sets.”

33.   Another reason given by the High Court was  that  no  application  was
made within 180 days of application of the notification dated 27.02.1992  or
even from the date of installation of  generating  sets  i.e.  August  1995.
Even if the  second  reason  given  by  the  High  Court  is  ignored,  non-
fulfillment of condition no.(a) of  notification  dated  27.02.1992  clearly
entailed rejection of claim under notification dated  27.02.1992.  There  is
no foundation or basis laid down even in this appeal to assail  the  finding
recorded by the High Court  that  generating  set  was  not  purchased  from
01.01.1991 to 31.12.1992.

34.   We thus do not find any error  in  rejection  of  claim  of  appellant
under the notification dated 27.02.1992.

35. The High Court has rightly negatived the claim of  the  appellant  under
Section 3(2) as well as  under  the  notification  dated  27.02.1992  issued
under Section 3(3). We do not find any merit in this appeal, the  appeal  is
accordingly dismissed.

                                     (A. K. SIKRI)

                                    (ASHOK BHUSHAN)

MAY 02, 2017

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