By TIOL News Service

NEW DELHI, MAY 03, 2017: THE appellant no.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. Subsequently, the appellant no.1 Company converted this plant into a 30 MW Combined Cycle Mode Power Plant for which it was granted exemption from payment of electricity duty for a period of 15 years commencing from 21.07.1990. Thereafter, the appellant no. 1 Company incorporated a separate generating company under the name and style of “ESSAR Power Limited” for supply of power to the appellant no.1 company as well as to the Gujarat Electricity Board. 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 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 which was again dismissed.

The Supreme Court dismissed the appeal and held that 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. 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 as it is selling the energy to Gujarat Electricity Board. It was also observed that the High Court has 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). With regard to the the claim raised by the appellant under the notification dated 27.02.1992 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. Thus, the appeal raised by the appellant was categorically dismissed

(See 2017-TIOL-201-SC-MISC)