2017-TIOL-201-SC-MISC + Story
ESSAR STEEL INDIA LTD Vs STATE OF GUJARAT: SUPREME COURT OF INDIA, (Dated: May 2, 2017)
Bombay Electricity Duty Act, 1958 - Section 3(2) & 3(2)(vii)(a)(i).
Keywords - Captive consumption - Combined Cycle Mode power plant - generation - installed capacity - steam turbine - supply.
The appellant no.1 company is engaged in the business of manufacturing & selling steel products and appellant no.2 is a generating company selling/supplying electrical energy. The appellantno.1 company set up its gas based steel plant at Hazira, in the 1990 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 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. Subsequently, the appellant no.1 Company converted this plant into a 30 MW Combined Cycle Mode Power Plant by adding steam turbine. Consequent upon such conversion, the appellant no.1 company was granted 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. The Government of Gujarat and Gujarat Electricity Board granted in principle approval for the same. There was, however, a change in the Power Policy of Government of India,in 199192, 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 u/s 3 of the Bombay Electricity Duty Act, 1958. The appellant no.1 Company, therefore, abandoned its plan to set up the said Captive Power Plant of 300 MW 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. The Government of Gujarat issued an Order 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 constitutes 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. The appellant no.1 had filed an application seeking exemption from payment of electricity duty under the notification issued u/s 3(3) of the Bombay Electricity Act. Another application was sent by appellant no.1 to the Commissioner of Electricity seeking exemption from electricity duty for a period of 15 years u/s 3(2)(vii)(a)(i). The State of Gujarat rejected the request for exemption u/s 3(2). This was challenged in the High Court Wherein High Court left open to the Government to take a fresh decision. The State Government again rejected the application. The Writ Petition was again filed in which High Court directed the Government to pass a fresh Order. The State Government passed the detailed Order rejecting the claim. Thereafter, a recovery notice was issued for payment of electricity duty for the period of April 2000 to August 2009. The Order of State Government was challenged by the appellants before the High Court by means of Special Civil application. Single Judge dismissed the Writ Petition. Aggrieved against which Letters Patent Appeal was filed by the appellants. The Letters Patent Appeal ultimately came to be dismissed by Division Bench against which the present appeal has been filed.
Having heard the parties, the Supreme Court held that,
Whether exemption can be allowed to the appellant u/s 3(2)(vii)(a)(i) of the Bombay Electricity Duty Act when the basic condition of appellant, jointly generating energy for use of an industrial undertaking, is not satisfied - NO: SC
++ The exemption from payment of duty as claimed by the appellant is in two parts. Firstly, u/s 3(2)(vii)(a)(i) of 1958 Act and secondly, under the notification dated 27.02.1992. 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 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. Thus, the claim is not covered u/s 3(2)(vii)(a). 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.
Whether exemption can be allowed from payment of electricity duty under the notification dated 27.02.1992 when the mandatory requirement of purchase or installation of generating sets during the relevant period has not been fulfilled - NO: SC
++ The claim raised by the appellant under the notification dated 27.02.1992 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. 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, nonfulfillment 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.
Appellant's appeal dismissed
