Mr. M.R. Shah, J. - Feeling aggrieved and dissatisfied with the impugned judgment and order dated 25.02.2010 passed by the learned Single
Judge in Special Civil Application No.10946/2009 by which the learned Single Judge has dismissed the said Special Civil Application and has
confirmed the order dated 24.09.2009 passed by the Principal Secretary to the Government, Energy and Petrochemicals Department,
Gandhinagar holding that the original petitioner is not entitled to the exemption from payment of electricity duty claimed under Section 3(2)(vii)(a)(i)
of the Bombay Electricity Duty Act, 1958 (hereinafter referred to as ""Duty Act"") and confirming the demand of electricity duty of Rs.1038.27
Crores, the original petitioner has preferred the present Letters Patent Appeal under Clause 15 of the Letters Patent.
2.0 Facts leading to the present Letters Patent Appeal and as per the case of the original petitioners � appellants herein and so pleaded in the
main petition are as under:
2.1 The original petitioner No.1 � Essar Steel Limited (hereinafter referred to as ""ESL"") setup its Gas Based Steel Plant at Hazira in the year
1990 for production of Hot Briquetted Iron (HBI) and Hot Rolled Coils (HRC), etc. It also setup 20 MW Open Cycle Power Plant for captive
consumption of power for its HBI plant. On the application made by the ESL, 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, ESL
converted the said Open Cycle Power Plant of 20 MW into 30 MW Combined Cycle Mode Power Plant by adding steam turbine. That the ESL
was granted exemption from payment of electricity duty for a period of 15 years commencing from 21.07.1990. According to the original
petitioners, in the year 1995 or thereabout, ESL also desired to put up a Composite Plant making substantial investment for production of both
HBI and HRC. Therefore, in or about in the year 1991-92, ESL 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. According to the original petitioners, in view of the benefit available
to Captive Power Plant at the relevant time, the Government of Gujarat and the Gujarat Electricity Board (hereinafter referred to as ""GEB"")
granted in-principle approval to the ESL for setting up the said Captive Power Plant of 300 MW. According to the original petitioners, 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. According to the original petitioners, Government of Gujarat also with a view to give effect to that policy issue a notification dated
27.03.1992 under Section 3 of the Duty Act. The ESL, 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 power generating company under the name and
style of ""Essar Power Limited"" (hereinafter referred to as ""EPL""). According to the original petitioners, EPL was a Special Purpose Vehicle
promoted by ESL for supply of power to ESL as well as the GEB. According to the original petitioners, ESL also decided to bring in financial
resources and make investment in the power sector of the State. According to the original petitioners, ESL, the promoter, subscribed 100% of the
paid-up capital of EPL. It also affected a total capital investment in the EPL to the tune of Rs.231.50 Crores by purchasing two gas turbine
generating sets of 110 MW each for making electricity by EPL. That ESL in the meantime approached the GEB for its consent to establish an
additional power plant of 300 MW. The GEB addressed communication dated 22.10.1992 to the Directors, Central Electricity Authority
(hereinafter referred to as ""CEA""), in which it was stated that it was agreeable to give its consent in-principle but as the consent of CEA was
required as per Section 44(2) of the Electricity (Supply) Act, 1948 (hereinafter referred to as ""Supply Act"") it would do so after the approval of
the CEA. According to the original petitioners, before GEB could formally grant the consent, ESL decided to have a separate generating station
and therefore, ESL had written to GEB for giving consent for setting up a new power generating station. According to the original petitioners, ESL
submitted a detailed project report to GEB and the CEA mentioning therein that it would like to draw power for its requirement from EPL''s
generating station. The State Government thereafter cleared the said project.
2.2 It was the case on behalf of the original petitioners that prior thereto Joint Secretary, Ministry of Power, New Delhi, vide its letter dated
28.09.1994 sought the views of the GEB on the proposal of setup of 515 MW power generation by EPL. GEB addressed a letter dated
10.11.1994 to CEA by granting NOC as per Section 44(2A) of the Supply Act. By the said letter GEB also conveyed that in the meeting held on
30.05.1994 it was resolved unanimously to setup proposed project of 515 MW power generation plant. Thereafter, CEA sought other
clarifications from GEB vide its letter dated 11.01.1995 as to whether the status of the ESL is that of a (i) generating company or a (ii) captive
power plant, (iii) licensee or (iv) non-licensee. GEB in turn sought clarification from EPL and based upon a reply dated 19.01.1995 of EPL, gave
its reply to the clarification sought for by the CEA by its letter dated 03.02.1995. According to the original petitioners, GEB once again reiterated
its stance by stating that the GEB has always treated the proposal of EPL as Captive Power Plant. However, subsequently, vide approval dated
11.06.1995 the permission for 515 MW capacity plant was granted in favour of EPL as a generating company.
2.3 According to the original petitioners, the subscription of the ESL to the paid up equity capital of the EPL become 42% instead of 100%, which
according to the original petitioners was equivalent to 42% utilisation of power by ESL out of 515 MW generated by the EPL.
2.4 That EPL started/commenced generation of electricity on 08.08.1995. According to the original petitioners, the ESL was already granted the
exemption upto 31.03.2000. In the certificate dated 06.09.1995 issued by the Commissioner of Electricity, Gandhinagar, it was disclosed that
ESL was given exemption in respect of the power drawn from GEB from ESL''s own sources.
2.5 Thereafter on or about 15.03.2000, ESL applied for exemption from payment of electricity duty for a period of 10 years from 08.08.1995
under the Notification No.GHU/92/10/JCP/1188/2594/K dated 27.02.1992 issued by the Government of Gujarat. While the said application for
exemption for 10 years under the Notification dated 27.02.1992 was pending ESL applied to the Commissioner of Electricity Duty, Gandhinagar
on 12.04.2001, for granting exemption for 15 years under Section 3(2)(vii)(a)(i) of the Duty Act. The Under Secretary to the State Government,
Energy and Petrochemicals Department, vide his letter dated 23.12.2002 addressed to the Collector of Electricity Duty stated that ESL is not
eligible for Electricity Duty exemption for a period of 15 years under Section 3(2)(vii)(a) of Duty Act. The original petitioners � appellants herein
challenged the said decision before this Court by way of filing Special Civil Application No.2836 of 2003. Vide order dated 17.03.2003, this
Court directed the concerned authority to take a fresh decision on the representation of the ESL after giving a reasonable opportunity of hearing to
them.
2.6 Thereafter, vide orders dated 24.09.2009, the Principal Secretary rejected the applications dated 15.03.2000 and 12.04.2001 filed by the
ESL claiming the exemption from the payment of electricity duty under Section 3(2)(vii)(a)(i) of the Duty Act and it was held that ESL is liable to
pay the electricity duty in accordance with the provisions of the Duty Act. Thereafter in pursuance to the order dated 24.09.2000, the Collector of
Electricity Duty, Gandhinagar had raised a demand of Rs.1038.27 Crores from the ESL towards electricity duty.
2.7 Feeling aggrieved and dissatisfied with the order passed by the Principal Secretary dated 24.09.2009 rejecting the applications submitted by
the ESL and holding that ESL is liable to pay the electricity duty in accordance with the provisions of the Duty Act and feeling aggrieved and
dissatisfied with the demand of Rs.1038.27 Crores towards the electricity duty, the original petitioners � ESL as well as EPL approached this
Court by way of Special Civil Application No.10946/2009. By the impugned judgment and order the learned Single Judge has dismissed the said
Special Civil Application confirming the order passed by the Principal Secretary holding that ESL is not entitled to the exemption as claimed under
Section 3(2)(vii)(a)(i) of the Duty Act and consequently holding ESL is liable to pay the electricity duty under the provisions of the Duty Act and
the learned Single Judge has consequently confirmed the demand of electricity duty of Rs.1038.27 Crores.
2.8 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Single Judge, the original petitioners � ESL
and EPL have preferred the present Appeal under Clause 15 of the Letters Patent.
3.0 Shri Vikram Nankani, learned Senior Advocate has appeared on behalf of the appellants and Shri Kamal Trivedi, learned Advocate General
has appeared with Ms. Sangita Vishen, learned Assistant Government Pleader on behalf of the State of Gujarat and another.
4.0 Shri Nankani, learned Counsel appearing on behalf of the appellants � original petitioners has vehemently submitted that the learned Single
Judge has materially erred in observing and confirming the orders passed by the Principal Secretary holding that the appellants are not entitled to
the benefit of sub-clause (a) of Clause (vii) to subsection (2) of Section 3 of the Duty Act.
4.1 Shri Nankani, learned Counsel appearing on behalf of the original petitioners has submitted that the learned Judge has materially erred in
confirming the order passed by the Principal Secretary holding that the ESL is not entitled to the exemption from payment of electricity duty to as
claimed under Section 3(2)(a)(vii) of the Duty Act. Shri Nankani, learned Counsel appearing on behalf of the appellants herein has vehemently
submitted that the EPL was incorporated in the year 1991 with the object and purpose of generating electricity, as a 100% subsidiary of ESL. It is
submitted that ESL proposed to setup an integrated steel plant at Hazira, for which one of the requirements was high consumption of electricity. It
is submitted that accordingly, ESL proposed to set up a power plant for its own use within the same complex. It is submitted that at that time, the
proposal was to set up a 300 MW power plant for exclusive use by ESL. It is submitted that therefore the ESL made an initial investment of
Rs.217 Crores against which, the shares were issued in EPL. It is submitted that subsequently, other Essar Group of Companies also invested in
EPL. It is submitted that on allotment to group companies, the shareholding of ESL was reduced to 41.35% (rounded off for convenience to
42%).
4.2 It is submitted that on account of agreement in 1991 for Supply and the corresponding amendment in the Indian Electricity Act, 1910 and with
the change in the Government of India''s Policy to encourage private investment in the power sector, ESL proposed to increase the generating
capacity of EPL to 515 MW with the further proposal to use and/or consume 215 MW, to its proportionate shareholding in ELP, and the balance
300 MW would be wheeled and/or supplied to Gujarat Electricity Board. Subsequently, EPL entered into two Power Purchase Agreements �
one with GEB and the another, with ESL where under, ESL also agreed to supply fuel required for generation of electricity supplied to it.
4.3 Shri Nankani, learned Counsel appearing on behalf of the original petitioners has submitted that in light of the aforesaid facts the issue involved
in the present appeal is required to be considered.
4.4 It is further submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that in the present case the benefit of
Section 3(2)(vii)(a) of the Duty Act has been denied on the ground that EPL has been licensed as a ""generating station"" of a ""Generating
Company"" under Section 44 read with Sections 15-A and 18-A of the Supply Act, and not as captive power plant.
4.5 It is submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that as such Section 44 of the Supply Act is
irrelevant and/or inapplicable to determine the eligibility under Section 3(2)(vii)(a) of the Duty Act. It is submitted that the two Acts are different in
object and purpose. It is submitted that Supply Act is regulatory in nature dealing with the establishment of generating company and other licensing
conditions. It is submitted that the Duty Act, on the other hand, is a taxing statute. It is submitted that the Supply Act is a Central Legislation and
the Duty Act is a State Legislation made under Entry 53 of List-II of Schedule VII to the Constitution of India. It is submitted that the provisions of
Supply Act, much less, the provisions of Section 44 have neither been incorporated, nor referred to in the Duty Act, more particularly, in Section
3(2)(vii)(a). It is submitted that in other words, the provisions of Section 3(2)(vii)(a) of the Duty Act are not governed by or subject to the
provisions of 1948 Act or Section 44 thereof.
4.6 It is further submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that at the same time, the definition of
Generating Company"" or ""generating station"" found in Sections 2(4- A) and 2(5) respectively of the Supply Act does not exclude a captive power
plant. It is submitted that so does, Section 44 of the Supply Act refers to a Generating Company without further classifying generating companies
into those for supply to consumers, through the State Electricity Board or directly, and those which produce electricity for self consumption
(captive consumption). It is submitted that therefore, Section 44 of the Supply Act does not distinguish between generating companies set up for
captive consumption and those set up for supply to the public at large. It is submitted that as such the classification of the generating station or the
generating companies for the purposes of licensing under Section 44 of the Supply Act is irrelevant, extraneous and non-germane for considering
the eligibility under Section 3(2)(vii) (a) of the Duty Act.
4.7 Shri Nankani, learned Counsel appearing on behalf of the original petitioners has relied upon the following decisions of the Hon''ble Supreme
Court in support of his submission that provisions of statute cannot be construed on the basis of the language in other statutes, more so, when, the
other statutes have neither been incorporated, nor referred to in the former.
1. Ram Narain v. State of U.P. AIR 1957 SC 18;
2. The Commissioner of Sales Tax, Madhya Pradesh v. M/s Jaswant Singh Charan Singh AIR 1967 SC 1454;
3. Commissioner of Sales Tax, Gujarat State v. India Cutlery Stores, Surat 1971 (27) STC 548
4.8 It is further submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that even otherwise as contended by the
State Government, EPL is a ""hybrid"" generating station/generating company inasmuch as part of an electricity generated by it is wheeled/supplied
to GEB and the balance (42%) is supplied to a shareholder and Group Company. It is submitted that there is no bar or prohibition in Section 3(2)
(vii)(a) of the Duty Act to exclude an industrial undertaking which generates electricity both for own use and for sale/supply to the State Electricity
Board with obligations under Section 15-A & Section 18-A of the Supply Act. It is submitted that section 3(2)(vii)(a) of the Duty Act does not
contain the word ''exclusive'' and therefore, the benefit thereof cannot be denied on the ground that EPL also supplies power to GEB, in addition
to ESL.
Relying upon the decision of the Hon''ble Supreme Court in the case of Union of India and Others v. Tata Iron & Steel Co. Ltd.,
Jamshedpur reported in (1976)2 SCC 123, it is submitted that as held by the Hon''ble Supreme Court denial of exemption to the manufacture
of steel ingots made out of duty paid pig iron cannot be denied merely, because along with duty paid pig iron, some other materials were also used,
because the exemption notification did not provide that the steel ingots must be made exclusively out of duty paid pig iron.
4.9 It is further submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that the Hon''ble Supreme Court in the
case of DLF Qutab Enclave v. State of Haryana reported in (2003)5 SCC 622 has held that one cannot read a prohibition in a statutory
provision, when on a plain reading thereof, it does not, by express language or implication, contain any such restriction or prohibition.
4.10 It is further submitted that since Section 3(2)(vii)(a) of the Duty Act neither provides that the power generated must be exclusively for own
use, nor does it contain a prohibition that the industrial undertaking which generates electricity cannot also supply the surplus power to any other
person.
4.11 Shri Nankani, learned Counsel appearing on behalf of the original petitioners has drawn the attention of the Court to the following facts and
circumstances in support of his submissions that the ESL is entitled to the benefit of Section 3(2)(vii)(a) of the Duty Act.
(1) In the letter dated 10.11.1994 addressed to the CEA, GEB stated that it had approved and given its No Objection to the Appellants to set up
a captive power plant under Section 44 of the 1948 Act;
(2) Upon CEA seeking clarification from GEB vide letter dated 04.01.1995, GEB vide its letter dated 03.02.1995 once again reiterated that it had
no objection to the original petitioners setting up the power plant, which would supply 215 MW to ESL for its own use and 300 MW to GEB.
Both the letters dated 10.11.1994 and 03.02.1995 were written with the full knowledge of the fact that the total capacity of the power plant would
be 515 MW, of which 215 MW would be consumed by ESL for its own use to manufacture steel and the balance 300 MW would be supplied to
GEB;
(3) That four months after the last letter, GEB/Government of Gujarat wrote to CEA, that, as a special case, it had approved the establishment of
the power plant by EPL as a generating company under Section 44 of the Supply Act with permission to supply 215 MW to ESL.
4.12 It is therefore submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that the present case is sui generi
because the Generating Company, viz. EPL is one of its kind inasmuch as it supplies power to GEB as well as it generates electricity for supply to
GEB and for its own use. It is submitted that there being no prohibition, against such a ""hybrid"" generating company or exclusion thereof from
Section 3(2)(vii)(a), the benefit of Section 3(2)(vii)(a) of the Duty Act cannot be denied, particularly, when Section 3(2)(vii)(a) does not contain a
word ''exclusively'' for its own use.
4.13 It is further submitted by Shri Nankani, learned Counsel appearing for the original petitioners that in the present case the appellants more
particularly appellant No.1 ESL has fulfilled all the conditions and has satisfied all the ingredients of Section 3(2)(vii)(a) of the Duty Act.
4.14 It is submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that Section 3(2)(vii)(a) of the Duty Act is
applicable when (i) an industrial undertaking generates electricity; and (ii) it generates electricity on its own or jointly with any industrial undertaking
for its own use or for the use of the other industrial undertaking.
4.15 It is submitted that in the present case EPL is an industrial undertaking, which generates electricity, since ""electricity"" is held to be ""goods"".
In support of his above submission, Shri Nankani, learned Counsel appearing on behalf of the original petitioners has relied upon the decision of
the Hon''ble Supreme Court in the case of State of A.P. v. National Thermal Power Corporation Ltd. and Ors. reported in 2002(5) SCC
203. It is submitted that in the present case, electricity so generated is consumed for own use to the extent it supplies to its shareholder and
participating unit, viz., ESL, applying the test of piercing corporate veil and the second test of supply proportionate to the shareholder. It is
submitted that the twin test of shareholding in the generating company and proportionate supply to the participating shareholder laid down by the
Hon''ble Supreme Court in the case of State of U.P. and Ors. v. Renusagar Power Co. Ltd. and Ors. reported in (1988)4 SCC 59 and A.P
Gas Power Corporation Ltd v. A.P. State Regulatory Commission reported in (2004)10 SCC 511 are satisfied in the present case.
4.16 It is submitted that by the same two tests of piercing the corporate veil and proportionate supply, the alternative requirement of Section 3(2)
(vii)(a) of joint generation and use of electricity by one of the industrial undertakings is also satisfied. It is submitted that joint generation of
electricity cannot be limited or confined only to a situation of partnership or association of persons. It is submitted that joint generation also applies
to a corporate legal entity, like in the case of AP Power Corporation (Supra) or GIPCL (Supra), where the benefit was extended by the
Respondents to a separate legal entity in relation to the supply to the respective shareholders in the proportion of their shareholding. It is submitted
that this test is also therefore, satisfied in the present case.
It is submitted that therefore as all the ingredients of Section 3(2) (vii)(a) are satisfied in the present case, the benefit thereof cannot be denied
relying on Section 44 of the Supply Act.
4.17 It is further submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that the words ""own use"" appearing in
Section 3(2)(vii)(a) of the Duty Act have not been defined. It is submitted that what is defined is the expression ""industrial undertaking"" in Section
2(bb) of the Duty Act. It is therefore submitted that supply of electricity by EPL to ESL can be said to be the generating electricity for ""own use
and therefore, the ESL would be entitled to the benefit under Section 3(2)(vii)(a) of the Duty Act.
4.18 It is further submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that an ''Undertaking'' does not mean a
company as a whole or an independent company incorporated under the Companies Act, 1956 (other than in force) and the reliance on the
meaning of the word ''undertaking'' in dictionaries or under Labour Laws like the Industrial Disputes Act, 1947 cannot be pressed into service in
the instant case. It is submitted that such a narrow contention would do violence to the definition of industrial undertaking in Section 2(bb) of the
Duty Act, apart from the fact, that such a contention was not only not taken at any time prior to the hearing of the present LPA, in writing or
otherwise, but also such an interpretation is contrary to the conduct of the Respondents, who have at all times, treated the Appellants as an
industrial undertaking for the purposes of granting benefit in relation to a separate power plant of 30 MW set up by ESL or while granting the
benefit of Section 3(2)(vii)(b) of the Duty Act which also refers to an ""industrial undertaking"" was for the period 08.08.1995 to 31.03.2000.
4.19 It is further submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that since the words ""own use"" have
not been defined, the same have to be given a natural meaning. In support of his above submission, learned Counsel has relied upon the decisions
of the Hon''ble Supreme Court in the case of Renusagar Power Co. Ltd. (Supra) and A.P Gas Power Corporation Ltd (Supra).
It is submitted that in the aforesaid two decisions the Hon''ble Supreme Court has applied the test of shareholding to determine ""own use"". It is
submitted that in the case of Renusagar Power Co. Ltd. (Supra), the Hon''ble Supreme Court was dealing with a case where Hindustan Aluminum
Company Limited (""Hindalco"") set up a 100% subsidiary, i.e. Renusagar to generate power and supply the same to Hindalco. Section 3(1)(c) of
the UP Act, exempted the consumers generating electricity for own use from payment of duty. This benefit was denied to Hindalco on the ground
that Renusagar was a separate legal entity. After examining the law in relation to legal entities starting with the landmark judgment in the case of
Soloman v. Soloman, and other cases, wherein the distinctive identity between holding company and subsidiary or between company and
shareholder was maintained, the Hon''ble Supreme Court adopted the approach of piercing the corporate veil and applying the test of equity or
shareholding, held that since Hindalco own 100% shares in Renusagar, the supply of electricity by Renusagar to Hindalco was for its own
consumption.
It is submitted that following the case of Renusagar, in the case of AP Power Corporation (supra), the Hon''ble Supreme Court added one more
test to determine ""own use"", and that was the test of proportional supply corresponding to shareholding held in the generating company. It is
submitted that the facts before the Hon''ble Supreme Court were that a few independent manufacturing companies, which heavily depended on
consumption of electricity to manufacture goods, came together and formed AP Power Corporation as a separate legal entity, in which, each of
them held shares, which have been referred to as a participating unit. The question arose whether AP Power Corporation Ltd. needed the license
under the Local Electricity Act. There was no requirement of license if the power generating company was consuming the power for itself. Once
again, piercing the corporate veil, the Hon''ble Supreme Court held that to the extent AP Power Corporation was supplying electricity to the
participating units"" who were shareholders thereof, the supply was for self-consumption. In other words, the Hon''ble Supreme Court held that if
the quantity of electricity is equivalent or proportionate to the equity shareholding of the buyer of such electricity, the supply would be considered
as supply for own use or captive consumption.
4.20 It is submitted that applying the ratio of the aforesaid two judgments of the Hon''ble Supreme Court to the facts of the present case,
admittedly, EPL was set up as a 100% subsidiary of ESL only with the object and purpose of generating electricity as a part of the larger complex
for setting up an integrated steel plant at Hazira and subsequently, shares were also allotted to other Essar Group Companies, whereupon the
shareholding of ESL came down to about 42%. It is submitted that consequently, ESL agreed to purchase and EPL agreed to supply 215 MW
out of the total capacity of 515 MW, which is equal and proportionate to about 42% shareholding of ESL in EPL. It is further submitted that the
power plant by EPL was set up with an investment of Rs.217 Crores by ESL and the fuel for generating 215 MW is supplied by ESL to EPL, and
payment is made by ESL to EPL as per the formula mentioned in the relevant PPAs. It is therefore, submitted that to the extent EPL supplies
electricity equal to about 42% of its total capacity, which is proportionate to about 42% shareholding in EPL, piercing the corporate veil of EPL,
and applying the ratio of the two judgments of the Hon''ble Supreme Court, such supply to the extent of 215 MW shall be considered as ""own
use"" for the purposes of Section 3(2)(vii)(a) of the Duty Act.
4.21 Shri Nankani, learned Counsel appearing on behalf of the original petitioners has drawn the attention of the Court to the following possible
scenarios under Section 3(2)(vii)(a) of the Duty Act.
(1) Own Use
A manufactures steel + A generates power
(2) Own use 2 undertakings : corporate veil
(3) A manufactures steel + A forms/incorporates B as 100% subsidiary
(Renusagar situation)
B supplies 100% electricity to A
(4) Joint generation & use : 2 undertakings : Proportional
A Manufactures steel
B manufactures oil
A & B form/incorporate C
C generates electricity and supplies to A & B in proportion of their shareholding
(A.P. Power Corporation)
(5) Combination of Scenario 2 + 3
A Manufactures steel + A incorporates B as 100% subsidiary to generate electricity
A dilutes shareholding to 42% and receives proportionate electricity from B.
In the present case,
(1) B generates electricity and to the extent of 42% uses it for own use (piercing corporate veil of B); or
(2) A jointly generates power with 58% shareholders but uses electricity for own use proportionate to its shareholding in B (piercing corporate veil
of B)
It is submitted that scenario 2 is directly covered by the decision of the Hon''ble Supreme Court in the case of Renusagar (Supra) and scenario 3 is
directly covered by the decision of the Hon''ble Supreme Court in the case of AP Power Corporation (Supra). It is submitted that Scenario 4 is a
combination of scenarios 2 and 3, which corresponds to the factual matrix of the present case, and therefore, applying the test of equity or
shareholding and the test of proportionate supply to participating units, the supply by EPL to ESL must be considered as for ""own use"" for the
purposes of Section 3(2)(vii)(a) of the Duty Act.
4.22 Now, so far as the applicability of Rule 11 of the Bombay Electricity (Gujarat) Rules, 1968 (hereinafter referred to as ""Rules, 1968"") is
concerned, it is submitted by Shri Nankani, learned Counsel appearing on behalf of the original petitioners that Rule 11 deals with the procedure
for applying for benefit of Section 3(2)(vii)(a) & (b). It is submitted it is the case on behalf of the respondent that no application in Form-E was
made and also, no such application was made within 180 days from the date of start of generation of electricity by EPL.
4.23 It is submitted that so far as the contention that no application in the prescribed Form-E was made is concerned, it is submitted that once
again such a contention has not been raised at any time prior to the hearing of the present LPA. It is submitted that the Special Secretary, who
passed the impugned order dated 24.09.2009 has also not rejected the claim of ESL on this ground. It is submitted that having regard to the
record of the case, the respondents have waived and/or deemed to have waived the objection with regard to non-filing of the application in the
prescribed Form-E. It is submitted that such a requirement, in any case, is procedural in nature. It is also submitted that the parties can derogate
from the requirement of filing in prescribed Form-E, and that is what actually happened in the peculiar facts of the present case, when the
application made in prescribed Form-F as contemplated by Rule 11(1)(ii) and the same was allowed for the period 08.08.1995 to 31.03.2000.
4.24 It is submitted that having granted the exemption to ESL under Section 3(2)(vii)(a) of the Duty Act, as a new industrial undertaking, upon
ESL making an application in the prescribed Form-F, before the expiry of the exemption period 31.03.2000, ESL wrote a letter dated
15.03.2000 for extension of the exemption for a further period of 10 years until 08.08.2010 on the ground that it was eligible for exemption for a
total period of 15 years under Section 3(2)(vii)(a) from the date of commencement of generation of electricity, i.e., 08.08.1995. It is submitted that
Form-E is for first time and not for eligible persons, seeking extension of the exemption or transfer from Section 3(2)(vii)(b) to Section 3(2)(vii)((a)
of the Duty Act. It is submitted that besides, no prejudice whatsoever has been caused to the respondents on account of non-filing of the
prescribed Form-E as right from the beginning, the respondents were fully aware of all the facts relating to the establishment of the power plant,
supply of electricity to ESL and GEB, even before ESL made the application in Form-F for the benefit of Section 3(2)(vii)(b). It is further
submitted that additionally, ESL had also written a letter dated 12.04.2001 to the Commissioner of Electricity setting out all the facts. That all the
material information required to be disclosed in Form-E were disclosed in Form-F by ESL. On the basis of some existing facts and circumstances,
ESL is also eligible for benefit of Section 3(2)(vii)(a) over and above the benefit under Section 3(2)(vii) (b) of the Duty Act. It is submitted that
non-filing of the application in Form-E is not at all fatal and cannot be the basis for denying the benefit to Section 3(2)(vii)(a), which the original
petitioners are otherwise, eligible.
In support of his above submissions, Shri Nankani, learned Counsel has heavily relied upon the decision of the Hon''ble Supreme Court in the case
of Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner of Commercial Taxes & Ors. reported in 1992 Supp (1) SCC 21
(Paras 21, 22 and 25). It is submitted that in the aforesaid case, while dealing with the case of an assessee, who adjusted the refund amount suo
moto, without, ""prior permission"" of the Competent Authority as required under the relevant Notification, held that there are conditions and
conditions, but as long as there is substantial compliance that with the law, the benefit cannot be denied on technical or procedural grounds. It is
submitted that in the present case, the original petitioners had made full and true disclosure of all the facts at all times, starting with the
correspondence since 1992-93, including thereafter, for licensing purposes, when a series of correspondence was exchanged between the
Appellants and the Respondents between 1994 and 1995 and further thereafter, when the exemption under Section 3(2)(vii)(b) was granted for
the period 08.08.1995 to 31.03.2000. As regards the objection that the application was not filed within 180 days from the date of commencement
of supply of electricity, it is submitted by Shri Nankani, learned Counsel that since ESL had already applied within 180 days for the benefit of
Section 3(2)(vii)(b) and thereafter sought extension for the exemption period in terms of Section 3(2)(vii)(a), ESL has applied in time. It is further
submitted that the application for extension of the exemption beyond 31.03.2000 is in continuation of the application under Section 3(2)(vii)(b) on
account of the overlap in the period under the two provisions. Hence, there has been no delay on the part of ESL.
4.25 It is submitted that assuming whilst denying that there has been any delay, sub-Rule (3) of Rule 11 of the Rules, 1968 and considering the fact
that ESL vide letters dated 15.03.2000 and 12.04.2001 sought extension of the exemption period and having regard to the further fact that ESL
had already been granted the benefit of total exemption for the period prior to 31.03.2000, there can be no ground to deny the benefit
prospectively after 31.03.2000 until 08.08.2000. It is submitted that in other words, Rule 11(3) provides for extending prospective benefits, which
is what is claimed by ESL since for the period prior to 31.03.2000, the original petitioners have already availed the benefit Section 3(2)(vii)(b) of
the Duty Act.
4.26 It is submitted that without prejudice to the above and in the alternative, the original petitioners are also entitled to the benefit of Notification
dated 27.02.1993. It is submitted that it is not open to the respondents to discriminate between GIPCL and the original petitioners. It is submitted
that in the case of GIPCL, the benefit was extended to consumers of the electricity generated by GIPCL, which consumers were none other than
the shareholders of GIPCL and to the extent, these shareholders consumed power supplied by GIPCL to the extent of their respective
shareholding, exemption from electricity duty was granted. It is submitted that the original petitioners are similarly situated and therefore, different
treatment cannot be meted out to the original petitioners.
Making above submissions and relying upon above decisions of the Hon''ble Supreme Court, it is requested to allow the present Letters Patent
Appeal and quash and set aside the impugned orders passed by the learned Single Judge as well as orders passed by the Principal Secretary
denying the benefit of Section 3(2)(vii)(a) of the Duty Act and denying the exemption to the ESL from payment of electricity duty.
5.0 Shri Kamal Trivedi, learned Advocate General appearing on behalf of the State has vehemently opposed the present Letters Patent Appeal.
5.1 It is vehemently submitted by Shri Trivedi, learned Advocate General that in the present case the appellant is not entitled to the exemption from
payment of electricity duty under Section 3(2)(vii)(a) of the Duty Act, as first of all the EPL is ""generating company"" and the conditions/ingredients
of Section 3(2)(vii)(a) of the Duty Act are not at all satisfied inasmuch as supply of electricity by EPL to ESL cannot be said to be generating the
electricity by EPL for ""own use"" of ESL. It is submitted that therefore as such no error has been committed by the learned Single Judge confirming
the order passed by the learned Principal Secretary holding that the ESL is not entitled to the exemption from payment of electricity as claimed
under Section 3(2)(vii)(a) of the Duty Act.
5.2 Shri Trivedi, learned Advocate General appearing on behalf of the State has submitted that ESL is inter-alia engaged in the manufacturing
activities of steel products at Hazira, whereas EPL is a distinct company duly incorporated under the Companies Act, having the status of a
''Generating Company'', as defined under section 2(4A) of the Supply Act and is inter-alia engaged in generating electrical output through its
Generating Station of the capacity of 515 MW.
5.3 It is further submitted that in order to avail of exemption benefit from the payment of Electricity Duty under Section 3 of the Duty Act, the
applicant is obliged to make an application to the prescribed authority under prescribed form and within prescribed time limit for issuance of
Eligibility Certificate for availing of the benefit of exemption of Electricity Duty for the prescribed period. It is submitted that it is only upon having
made the application as aforesaid and while having received Eligibility Certificate, one can start availing of the exemption benefit under the Duty
Act.
5.4 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the State that in past, as and when ESL wanted to
avail of exemption benefit from payment of Electricity Duty payable under the Duty Act in respect of consumption of electricity output generated
through its own Captive Power Plants or purchased from third party, it had always made an application to the prescribed authority in prescribed
form and within the prescribed time limit by obtaining the requisite Eligibility Certificate, as demonstrated in the Chart reproduced herein below,
showing details relating to source of power consumed by ESL and the benefit of exemption availed of by ESL.
Sr. Date of Prescribed Applicable Source of Date of issue Exemption
No. application Form No. for provision for electricity supply of Certificate period
seeking making exemption of Exemption
exemption application under GED
from Duty Act, 1958
(1) (2) (3) (4) (5) (6) (7)
1. 21.7.1990 Form ''E'' Sec. 3 (2) (vii)20 MW 01.09.1995 21.7.1990 to
(a)(ii) + 1380 KVA 29.9.1999
+ 590 KVA
+ 1500 KVA
of Self-generating
sets of Essar
Steel
2. 30.7.1990 Form ''F'' Sec. 3 (2) (vii)GEB connection 28.1.1992 19.12.1991 to
(b) No. HT 159 26.3.1995
3. May, 1995 Form ''F'' Notification GEB connection 06.09.1995 31.3.1995 to
dated No.HT 0159/HT 30.3.2000
30.6.1993 10029
issued under + 215 MW from
Section 3(3) Essar Power
(exclusively for
HRC Project)
4. 30.1.1996 Form ''E'' Sec. 3 (2) (vii)20 MW (existing)26.11.1998 15.12.1995 to
(a)(i) + 11 MW i.e. 29.9.2004
Cogeneration
plant
5.4.1 It is submitted that for claiming the benefit of exemption from payment of Electricity Duty under the Duty Act in respect of consumption of
electricity supplied from different sources for different period referred to above, ESL had made requisite application in prescribed form and within
prescribed time limit and had obtained the required Eligibility Certificate for exemption.
5.4.2 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the State that information shown at Sr. No. 3 above
clearly suggests that ESL had already availed of the benefit of exemption from payment of Electricity Duty for the period of 5 years from
31.3.1995 to 30.3.2000 with reference to 215 MW of power supplied by ESL as provided under Section 3(3) of the Duty Act.
5.4.3 Shri Trivedi, learned Advocate General appearing on behalf of the State has submitted that immediately after the expiry of the aforesaid
period of 5 years (i.e. from 31.3.1995 to 30.3.2000), ESL unilaterally chose not to make payment of electricity Duty with effect from 31.3.2000
with reference to the consumption of power supplied by EPL, on the ground that it is entitled to exemption for the period of 15 years, i.e. for the
period from 8.8.1995 to 7.8.2010 under section 3(2) (vii)(a) of the Duty Act in respect of its consumption of power of 215 MW supplied by
ESL.
5.4.4 It is further submitted that for claiming the benefit of exemption for the aforesaid period of 15 years from 08.08.1995 to 07.08.2010, ESL
had never made any application in the prescribed Form and within the prescribed time limit and had never obtained any Eligibility Certificate in that
behalf, as provided under the Rules.
5.4.5 It is further submitted that even otherwise, having enjoyed the exemption benefit for the period of 5 years commencing from 31.03.1995 to
30.03.2000 as provided under section 3(3) of the Duty Act in respect of 215 MW of power from EPL, ESL could not have claimed similar
exemption benefit in the captioned proceedings either under section 3(2)(vii)(a)(i) for the period of 15 years or under Notification dated
22.02.1992 for the period of 10 years.
5.5 It is submitted that in case of a Captive Generating Plant, the power generated therefrom is essentially to be captively used and for this reason
only, it is called captive power plant. It is further submitted that prior to the enactment of the Electricity Act, 2003 effective from 10.06.2003, the
applicable law governing the Captive Generating Plant was section 44 of the Supply Act. It is submitted that the approval to the captive generating
plant was given only for captive use, namely generation of electricity for their own use as set out in different clauses of the proviso to the section 44
of the Supply Act. It is submitted that there was no provision for sale of electricity by captive generating plant to any third parties. It is submitted
that there was also no question of Captive Generating Plant being established for supply and use of electricity generated by any third parties.
5.6 It is further submitted by Shri Trivedi, learned Advocate General that section 2(4A) of the Supply Act defines the term ''Generating Company''
as inter-alia engaged in establishment, operation and maintenance of Generating Stations.
5.7 It is submitted by Shri Trivedi, learned Advocate General appearing for the respondent � State that section 15A of the Supply Act lays
down the objects, jurisdiction, etc. of the Generating Company, whereas section 18A of the Supply Act lays down the duties of Generating
Company. It is submitted that as against this, section 43A of the Supply Act requires the consent of the Competent Government/s if Generating
Company enters into contract for sale of electricity generated by it with any other person. It is further submitted that section 43A(2) of the Supply
Act provides for determination of tariff for sale of electricity by the Generating Company to the Board as may be determined by the Central
Government in consultation with the CEA.
5.8 It is submitted that sub-section (2A) of section 44 of the Supply Act enjoins the GEB to consult CEA before granting consent to any licensee
to establish or acquire new Generating Station, as a captive generating station.
5.9 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that the scheme of the Supply
Act was clear and unambiguous. It is submitted that if a generating station was to be established as captive generating station, it would not be a
generating company with the business to generate electricity, but it would be some other manufacturing company or concern with the intention to
generate electricity for its own use in the business namely as incidental to its other business and the applicable provision would be section 44 of the
Supply Act. It is submitted that if the generating station is to be established for the generation of electricity as a primary business to sell the
generated units to others, it cannot be captive and it has to be a Generating Company and the applicable provisions are sections 2(4A), 15A, 18A
and 43A of the Supply Act which deal with the sale of electricity by a Generating Company.
5.10 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that in the year 1993, EPL
approached the CEA to set up a 500/515 MW Power Generation Plant and on 10.11.1994, GEB gave its NOC under section 44(2A) of the
Supply Act for effecting sale of the entire power generated from its 515 MW Generation Plant to Essar Group of Companies.
5.11 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that CEA vide its letter dated
11.01.1995 sought clarification to the effect that since EPL has been registered under the Companies Act, 1956, with the object of generating
power, it has to be treated as a Generating Company and not as Captive Power Plant, irrespective of the fact that the power generated is for the
use of Essar Group of companies. It is submitted that in the said communication, CEA sought specific clarification as to whether EPL is (i)
Generating Company; or (ii) Captive Power Plant; or (iii) Licensee; or (iv) non-licensee sanction-holder.
It is submitted that in response to the above communication, EPL provided its clarification to GEB vide its letter dated 19.01.1995 wherein, EPL
specifically referred to the permission of the State Government granted under section 29(2) of the Supply Act, which deals with Generating
Companies.
5.12 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that thereafter, EPL wrote a
letter dated 22.05.1995 to the State Government informing inter-alia that it is a Generating Company and its main object is to allow establishment,
operation and maintenance of Generating Stations and fulfilling all the requirements of sections 15-A and 18A of the Supply Act.
5.13 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that on 05.06.1995, State
Government addressed a letter to GEB conveying that the State Government agreed in principle to the demand of EPL to set up a Generating
Station as a special case and to supply power generated by it to ESL etc., subject to the compliance of the provisions of sections 15A and 18A of
the Supply Act.
It is submitted that in view of the above, GEB addressed a letter dated 16/17.06.1995 to CEA stating inter-alia that it has no objection for setting
up a 510 MW power Project at Hazira by EPL in the capacity as a Generating Company under the provisions of sections 15A and 18A of the
Supply Act.
5.14 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that vide letter dated
15.07.1995, EPL informed GEB that the requirements of ESL (originally, Essar Gujarat) will be to the extent of 200 MW out of the total
generating capacity of 510 MW and the balance of 310 MW would be supplied to GEB as per the PPA to be entered into on the basis of Tariff
Notification dated 31.03.1992 by the Government of India.
5.15 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that thus, out of the total
generation of 515 MW of electrical output, EPL sells 300 MW to GEB, whereas 215 MW of electrical output is being sold to ESL under the
Power Purchase Agreement.
5.16 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that thus, under the said PPA
entered into between EPL and ESL on 29.06.1996, ESL agreed to purchase electricity generated in the Generating Station of EPL to the extent of
215 MW. It is submitted that the recital of the said PPA clearly suggests that EPL is a Generating Company.
5.17 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that surprisingly, ESL
unilaterally chose not to make payment of electricity duty with effect from 31.03.2000 on the ground that it is entitled to exemption therefrom for a
period of 10 years or 15 years in respect of its consumption of power of 215 MW supplied by EPL. It is submitted that this was done by ESL
without making any application in the prescribed form and within the prescribed time limit and without obtaining any Eligibility Certificate, as was
done by it on the earlier occasions referred to above.
5.18 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that pertinently, on 15.03.2000,
EPL addressed a representation to Hon''ble the Chief Minister, seeking exemption from payment of electricity duty for 10 years, i.e. from,
08.08.1995 to 07.08.2005, in respect of its consumption of power of 215 MW supplied by EPL, as per Notification dated 27.02.1992 issued
under section 3(3) of the Duty Act.
5.19 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that thereafter, on 12.04.2001,
EPL made representation to the authority, claiming the above referred exemption for a period of 15 years as per the provisions of section 3(2)(vii)
(a) of the Duty Act.
5.20 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that in view of the aforesaid
developments, respondent State informed the Collector of Electricity Duty on 23.12.2002 that ESL is not eligible for the exemption benefit and
hence steps should be taken to recover the outstanding electricity duty. It is submitted that the said communication came to be challenged by ESL
by filing a writ petition being SCA No. 2836 of 2003 which came to be admitted by this Hon''ble Court vide order dated 17.03.2003. It is further
submitted that while admitting the said writ petition and granting stay of the recovery of electricity duty, a direction was issued that it shall be open
to the respondent authorities to take a fresh decision after giving reasonable opportunity of hearing to EPL.
5.21 It is further submitted that the aforesaid litigation thereafter led to the passing of an order dated 23.01.2006 by the State Government which
was once again challenged by ESL wherein, this Hon''ble Court vide order dated 18.02.2006 while remanding the matter, directed the State
Government to consider afresh the points sought to be raised, which gave rendition of the order dated 24.02.2009 which is impugned in the
captioned proceedings. Thereafter, the Principal Secretary had passed the order dated 24.02.2009.
It is submitted that considering the aforesaid facts and circumstances , EPL is a ""generating company"" and therefore, in view of the aforesaid
undisputed fact that the EPL is a generating company, the submissions made by the learned Counsel appearing on behalf of the appellants that the
provisions of the other Act cannot be considered while interpreting the provisions of other statute would become irrelevant.
5.22 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that the claim of ESL is for
exemption from payment of electricity duty for a period of 15 years in respect of its consumption of power of 215 MW sold by EPL starting from
08.08.1995 to 07.08.2010 under section 3(2)(viii)(a)(i) of the Duty Act and alternatively, for exemption for a period of 10 years starting from
08.08.1995 to 07.08.2005 as per Notification dated 27.02.1992 issued under section 3(3) of the Duty Act.
5.22.1 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that ESL further contends that
while examining its aforesaid claim for exemption from payment of electricity duty under the Duties Act, what is to be seen is only the provisions of
the Duty Act and not of the Supply Act and that the status of EPL as a Generating Company, cannot be borrowed from the Supply Act for
denying the claim of exemption under the Duty Act, more particularly when the language used under the Duty Act is very clear and none of the
provisions of the Supply Act has been incorporated or referred to in the Duty Act and therefore, benefit of Section 3(2)(viii) (a) of the Duty Act
cannot be denied on the ground that EPL also supplies its power to GEB, in addition to ESL, more particularly when, the said Section 3(2)(viii)(a)
of the Duty Act neither provides that power generated by EPL must be exclusively for own use of ESL, not does it contain prohibition that the
industrial undertaking, which generates electricity cannot also supply its surplus power to any other person.
6.0 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that ESL is not entitled to the
exemption from payment of electricity duty with effect from 31.03.2000 as provided under section 3(2)(vii)(a) of the Duty Act, since it has failed
to comply with the followings conditions precedent laid down therein, to the availment of the said exemption benefit.
(1) A company duly incorporated and registered under the Companies Act is having a separate legal entity and that the shareholders thereof do not
have any right of whatsoever in nature, over the properties/assets of the company, save and except for being entitled to have voting rights in the
company as well as to share in the profits, earned by the company, by way of dividend. In that view of the matter, the holding of 42% of equity
share holding by ESL in EPL, as contended, does not entitle ESL to claim ownership on the proportionate quantum of electricity generated by
EPL to the extent of the shareholding of 42% referred to above.
6.1 In above connection, the Apex Court in case of Tata as Engineering and Locomotive Co. Ltd. v. State of Bihar and Ors., reported in
AIR 1965 SC 40 (Para 24), has observed as under:
24. The entity of the Corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are
separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from
the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the
members have no right to the assets of the Corporation
(2) As aforesaid, ESL and EPL are two different legal entities as duly incorporated and registered Companies under the Companies Act and are
not ""undertakings"" as per the ordinary meaning of the said term. Thus, ESL cannot be said to be an industrial undertaking, generating 215 MW of
energy either singly or jointly with EPL for its own use or for the use of EPL.
7th edition of K.J. Aiyer''s, ""Law Lexicon of India - Manual of Law Terms and Phrases"", defines the term ''undertaking'' as under:
Undertaking denotes, with reference to Company Law, all the assets of the company, past, present and future and is a mortgageable interest being
commonly charged by the debentures of the company. ""Undertaking"" means a unit, such as a factory or a granary, Re Industrial Disputes Tribunal,
(1956) 3 All E. R. 411.
Whereas in 2nd edition of Jowitt''s Dictionary of English Law defines the term ''undertaking'' as under:
......The question what is included in the ""undertaking"" of a company principally arises in cases where a company has created a mortgage or
charge on its undertaking to secure debentures, or the like.......
6.2 In case of M/s. Avon Services Production Agencies (P) Ltd. v. Industrial Tribunal, Haryana, reported in (1979) 1 SCC 1 � rel.
para 18, 22, 23, it was observed as under:
22. The expression ''undertaking'' is not defined in the Act. ...... While thus reading down the expression in the context of Section 25FFF it must
mean a separate and distinct business or commercial or trading or industrial activity.....
In case of S.M. Nilajkar v. Telecom District Manager, reported in 2003 (4) SCC 27 � rel. para 16, it was observed as under:
16. .......The term ''undertaking'' is not defined in the Act. The relevant provisions use the term ''industry''. Undertaking is a concept narrower than
industry. An undertaking may be a part of the whole, that is, the industry ..........
(3) EPL is even otherwise not an ''Industrial Undertaking'' as per section 2(bb) of the Duty Act, but is a ''Generating Company'' as defined under
section 2(4A) of the Supply Act and hence, section 3(2)(vii)(a) of the Duty Act which is meant for ''Industrial Undertakings'', cannot at all cover
Essar Power within its purview.
(4) PPA entered into between ESL and EPL, which has not been produced on record deals with sale of electricity by EPL to ESL on principal to
principal basis without indicating any arrangement of the sort referred to here in above in regard to the joint generation of electricity or the
ownership to the extent of its shareholding stated to be of 42% in EPL.
(5) Proviso to clause (vii)(a) of section 3(2) of the Duty Act makes it obligatory for Essar Steel to have made an application, seeking exemption
within the prescribed time, i.e. before 08.02.1996 (i.e. within 180 days from 8.8.1995 being the date of commencement of generation), in
prescribed form and before the prescribed authority, i.e. respondent No.2 herein. However, ESL had never done so and its two representations
dated 15.03.2000 and 12.04.2001 cannot be considered to be application in the prescribed form to the prescribed authority.
(6) ESL has also failed to obtain eligibility certificate for such an exemption in prescribed form, since the above referred proviso clearly provides
that no industrial undertaking shall be entitled to exemption from payment of electricity duty, unless such an eligibility certificate is obtained in
advance, as was done by ESL by claiming similar exemptions on earlier occasions, referred to herein above.
(7) Pertinently, no attempt is made on the part of the Respondent Authorities to borrow the provisions of the Supply Act for the purpose of
allegedly denying the exemption benefit available under the Duty Act or to read the provisions of the Supply Act into the Duty Act, as alleged or
otherwise. However, the factum of EPL of being a Generating Company under the Supply Act right from the inception coupled with express
conformant of the said status and acceptance thereof in various communications exchanged between the parties, cannot be lost sight of. Though,
the concept of ""Captive Generating Plant"" is not expressly referred under the provisions of the Duty Act, the Appellant are trying to read the same
into the Duty Act. It is submitted that EPL cannot be dubbed to be a Captive Generating Plant of ESL, more particularly when, it has been
recognised by all the concern that EPL apart from being an independent legal entity, an independent Generating Company.
6.3 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that ESL is not entitled to the
exemption from payment of electricity duty as per notification dated 27.02.1992 issued under section 3(3) of the Duty Act, since it has failed to
comply with the following conditions precedent laid down in the said notification, to the availment of the exemption benefit flowing therefrom.
(a) The generating set/s for generating electrical output of 215 MW should have been purchased, installed or commissioned during the period
beginning from 01.01.1991 to 31.12.1992 and that the said generating set/s should not have been previously used in the State. In the instant case,
admittedly, the generating set/s in question have been commissioned in the month of August, 1995 and the petitioners have failed to establish that
they were even purchased during the aforesaid period and that mere placement of order for purchase cannot amount to actual purchase of the
generating set/s.
(b) ESL has failed to make an application within 180 days from the date of publication of the said notification in the Official Gazette, i.e.
27.02.1992 or from the date of installation of generating set/s, i.e. August, 1995, whichever is later.
(c) ESL has failed to obtain requisite eligibility certificate for remission of electricity duty from the Collector of Electricity Duty.
(d) There was never a satisfaction reached by the Collector of Electricity Duty about the generating set/s in question having been purchased or
installed or commissioned between 01.01.1991 and 31.12.1992.
6.4 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that for being eligible to the
exemption from payment of electricity duty either under section 3(2) (vii)(a) of the Duty Act or as per notification issued under section 3(3) of the
Duty Act, the aforesaid statutory conditions are compulsorily required to be complied with rather than putting reliance on the following claims of
the Appellants:
(a) In principle approval dated 05.06.1995 granted by the State Government to the demand of EPL to set up a generating station and to supply
power generated by it to ESL and other sister concerns, subject to a compliance of the provisions of sections 15(A) and 18(A) of the Supply Act,
which are applicable in case of Generating Company. Thus, in fact, the said approval clearly recognised EPL as a ''Generating Company'' and not
as ''Captive Power Plant'' of ESL or as ''Industrial Undertaking'', as defined under section 2(bb) of the Duty Act.
(b) No Objection Certificate granted by the GEB vide its letter dated 10.11.1994. Even otherwise, the said NOC has no efficacy, so long as the
apex authority, i.e. CEA agrees to confer upon EPL, the status of a ''Captive Power Plant'' of ESL. However, in the instant case, CEA has never
done so and on the contrary, CEA vide its letter dated 11.01.1995, sought clarification from GEB to the effect that since EPL has been registered
under the Companies Act with the object of generating power, it has to be treated as a Generating Company and not as a Captive Power Plant,
irrespective of the fact that power generated is for the use of Essar Group of Companies. Thus, section 44(2A) of the Supply Act treats NOC of
GEB as subservient to the opinion of CEA and GEB has gone on record in stating that ''it is a fact that M/s. EPL have gone ahead its
implementation of the project, i.e. installation of GTs, etc. without obtaining prior clearance from the CEA''.
(c) The alleged hybrid status of EPL of being a generating station to the extent of supply of 300 MW to GEB and a captive power plant to the
extent of supply of 215 MW to ESL is foreign to the statutory requirements relating to exemption as laid down under section 3(2)(vii)(a) of the
Duty Act and in the notification dated 27.02.1992 issued under section 3(3) of the Duty Act.
(d) Even whilst assuming without admitting that such a hybrid status was recognised either by respondent State or by GEB, then in that case also,
the said status cannot take the matter any further, so long as the conditions precedent to the exemption benefit are complied with. Under the
circumstances, GEB''s letters dated 10.11.1994 and 03.02.1995 cannot come to the rescue of ESL in the matter of its claim for exemption from
the payment of electricity duty, more particularly when the CEA has never confirmed and approved such a hybrid status. However, the fact
remains that the confirmation of such a hybrid status, can, at the best, make the said hybrid status to function legally within the four corners of the
Supply Act, but not to confer statutory exemption from payment of electricity duty without the compliance of specified statutory conditions, under
the Duty Act.
6.5 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent states that the statutory conditions for
being eligible to the benefit of exemption from electricity duty, as laid down under Section 3(2)(vii)(a) of the Duty Act as well as notification dated
27.02.1992 issued under section 3(3) of the Duty Act read with Rule 11 of the Rules, 1968 cannot be brushed aside by branding them as
procedural in nature. It is submitted that they are not directory in nature and cannot be condoned by the authority on the facts of each case. It is
submitted that the so-called claim of exemption belatedly made by ESL vide its representation dated 12.04.2001, cannot be considered to be an
application made in prescribed form and within prescribed time and to the prescribed authority, more particularly when, in past, ESL had made
such applications in prescribed form and within prescribed time limit and to the prescribed authority for issuance of eligibility certificate, whereupon
only, the benefit of exemption was available, as discussed herein above. It is submitted that under the circumstances, even otherwise, the benefit of
proviso to Rule 11 of the aforesaid Rules as regards condonation of delay, cannot be made available to ESL. It is further submitted that the
aforesaid statutory conditions are mandatory and are not empty formalities, but are the foundation for availing of exemption benefit and hence, the
said conditions have been strictly complied with and none fulfilment thereof would deny the exemption benefit. In support of his above submissions,
Shri Trivedi has placed reliance on the following judgments:
(i) Eagle Flask Industries Ltd. v. Commissioner of Central Excise, reported in (2004) 7 SCC 377 � rel. para 6;
(ii) Bhai Jaspal Singh v. Assistant Commissioner of Commercial Taxes, reported in (2011) 1 SCC 39 � rel. paras 25 to 31;
(iii) Commissioner of Central Excise v. Hari Chand Shri Gopal, reported in (2011) 1 SCC 236.
Now, so far as the reliance placed by the appellants on the decision of the Hon''ble Supreme Court in the case of Mangalore Chemicals (Supra) is
concerned, it is vehemently submitted by Shri Trivedi, learned Advocate General that the aforesaid decision is totally misplaced inasmuch as in the
said case, admittedly, the appellant was eligible for the sales tax exemption benefit and it had made a requisite application for permission within the
prescribed time, but the same had remained undisposed of by the Revenue, and it was in that context that the Hon''ble Supreme Court observed to
the effect that there was no other disentitling circumstance which would justify the refusal of the permission, since the appellant did not have prior
permission because it was withheld by the Revenue without any justification.
6.6 Now, so far as the reliance placed upon the decision of the Hon''ble Supreme Court in the case of Renusagar Power Co. Ltd. (Supra) by the
learned Counsel appearing on behalf of the appellants is concerned, it is submitted by Shri Trivedi, learned Advocate General appearing on behalf
of the respondent State that the said decisions cannot be made applicable to the facts of the case on hand, since in the said case, the Hon''ble
Supreme Court was concerned with section 3 of the U.P. Electricity (Duty) Act, 1952, which empowered the State Government to provide
exemption from payment of electricity duty ''on the energy consumed by any other person from his own source of generation'' as provided under
section 3(1)(c) of the said Act. It is submitted that in the said case, the Hon''ble Supreme Court found that a company called ''Hindustan
Alluminum Corporation Ltd.'' commissioned its plant in 1962 for manufacture of alluminum and thereafter in 1964, incorporated its wholly owned
subsidiary called ''Renusagar Power Co. Ltd.''. This was done to set up captive power house through instrumentality of a 100% subsidiary fully
controlled by Hindalco in all respects to supply power Hindalco only, for avoiding takeover complications. It is submitted that while partly
accepting the contentions of the State Government, the Hon''ble Supreme Court held that the claim of Hindalco for the reduced rate of bill on the
basis that Renusagar Power Plant was its own source of generation under section 3(1)(c) of the said Act, should be accepted. It is submitted that
in the instant case, apart from the relevant provisions of law as well as factual aspects involved therein being totally different, EPL does not supply
power only to ESL, as was the case in the matter of Renusagar (Supra).
6.7 Now, so far as the reliance placed upon the decision of the Hon''ble Supreme Court in the case of A.P. Gas Power Corporation Ltd. (Supra)
by the learned Counsel appearing on behalf of the appellants is concerned, it is submitted by Shri Trivedi, learned Advocate General that the
aforesaid decision cannot be made applicable to the facts of the case on hand. It is submitted that this is because of the fact that the said judgment
dealt with an issue of a licence and not exemption, where a company called ''A.P. GPCL'' came to be established, wherein 26% share belonged to
A.P. State Electricity Board with the rest of the participating industries having different percentage of shares and as per the Memorandum of
Understanding arrived at between the parties, the power generated by the said A.P. GPCL was to be shared proportionately amongst the
shareholding participating industries. It is submitted that it was in this context that a question arose as to whether A.P. GPCL was required to take
out a licence under the law for sale or supply of power generated by it to the participating industries and their sister concerns. It is submitted that
according to A.P. GPCL, its generation of electricity was for captive consumption, i.e. for exclusive use of its participating industries and their
sister concerns. It is submitted that the Hon''ble Supreme Court ultimately held that as per section 43A of the Supply Act read with section 21 of
the A.P. Electricity Powers Act and MoUs, no licence would be required as regards supply of power to the participating industries, since as per
the MoU, the consumption of electricity by them within the limits of the value of share capital in A.P. GPCL would only amount to captive
consumption, whereas, for the supply of electricity by the participating industries to their sister concerns would require a licence. It is submitted that
the said facts and controversy involved in A.P. Gas (Supra) stand on altogether different footing as compared to the present case, more
particularly when, there is no such MoU in the present case.
6.8 Now, so far as various decisions relied upon on behalf of the appellants are concerned, it is submitted by Shri Trivedi, learned Advocate
General that the same are with reference to different fact situations and cannot be applied to the case on hand as the Hon''ble Supreme Court in the
case of Haryana Financial Corporation v. Jagdamba Oil Mills reported in (2002)3 SCC 496 (Paras 19 to 22) has observed that
circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases and that disposal of
cases by blindly placing reliance on a decision is not proper.
6.9 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that though ESL had already
availed of the exemption benefit in respect of its consumption of power of 215 MW supplied by EPL for the period of 5 years i.e. from
08.08.1995 to 30.03.2000, as per the provisions contained in the notification dated 30.06.1993, issued under Section 3(3) of the Duty Act, ESL
unilaterally chose not to make payment of electricity duty from 31.03.2000 on the ground that it was entitled to examine therefrom for a period of
15 years referred to above under different provisions i.e. Section 3(2)(viii)(a)(i) of the Duty Act or for a period of 10 years under notification dated
27.02.1992 issued under Section 3(3) of the Duty Ac, in respect of its consumption of power of 215 MW purchased from EPL. It is submitted
that it was nothing but an illegal and unauthorized action on the part of the ESL in not paying electricity duty which was otherwise legally payable.
6.10 It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the respondent State that the impugned judgment and
order passed by the learned Single Judge upholding the impugned order dated 24.09.2009 passed by the Principal Secretary, are absolutely legal
and proper and does not require any interference. It is submitted that under the circumstances, the present appeal is required to be dismissed.
7.0 In reply, Shri Nankani, learned Counsel appearing on behalf of the appellants has vehemently submitted that the reliance placed upon the
decision of the Hon''ble Supreme Court in the case of Eagle Flask Industries Ltd. (Supra) is misplaced inasmuch as, as held by the Hon''ble
Supreme Court in the case of Union of India and Or. v. Wood Papers Ltd. and Anr. reported in (1990)4 SCC 256, once the eligibility
condition is strictly applied, and is satisfied, the other terms and conditions must be liberally interpreted to extend the benefit of exemption.
Making above submissions, it is requested to allow the present Letters Patent Appeal.
8.0 Heard learned Counsel appearing for respective parties at length.
At the outset it is required to be noted that appellant herein � original petitioner is claiming the exemption from payment of electricity duty for a
period of 15 years as per Section 3(2)(vii) of the Duty Act. Vide order dated 24.09.2009, the Principal Secretary, Government of Gujarat, Energy
and Petrochemical Department, Gandhinagar has held that the appellant herein � original petitioner is not entitled to the exemption from payment
of electricity duty as claimed and consequently a notice dated 06.10.2009 was issued by the Collector of Electricity Duty demanding electricity
duty of Rs.1038.27 Crores from the original petitioner No.1 � ESL, which has been confirmed by the learned Single Judge by impugned
judgment and order passed in Special Civil Application No.10946/2009.
8.1 While considering the issue involved in the present appeal and while considering whether the appellant No.1 herein � original petitioner No.1
is entitled to the exemption from payment of electricity duty for a period of 15 years from 08.08.1995 under the provisions of Section 3(2)(vii)(a)
(i) of the Duty Act, the relevant provisions of the Duty Act and Rules, 1968 are required to be referred to which are as under:
Section 3 and Rule 11
3. Duty on units of energy consumed.
[(1) [Subject to the provisions of sub-sections (2) [(2A), (2AA) and (3)], there shall be levied and paid to the State Government a duty on the
consumption of electricity (hereinafter in this Act referred to as ""electricity duty"") at the rates specified below :-
(a) the electricity duty shall be payable by consumers other than those referred to in sub-clauses (i) and (ii) of clause (a) of section 2, at the rates
specified in Schedule I to this Act, and
(b) the electricity duty shall be payable by consumers referred to in sub-clauses (i) and (ii) of clause (a) of section 2, at the rates specified in
Schedule II to this Act.]
(2) Electricity duty shall not be leviable on the units of energy consumed, -
[(i) by the Government of Gujarat (save in respect of premises used for residential purposes);
(ia) by or in respect of any municipal corporation, municipality, local board, notified area committee, cantonment board or panchayat constituted
under any law for the time being in force in the State for the purpose of, or in respect of, public street lighting, public water works (including head-
works and other auxiliary water supply works and pumps used for the purpose), public gardens including zoos, public museums or system of
public sewers or drains;]
[(ii) by a consumer in respect of premises used for residential purposes in a rural area, if the total energy consumed by him for the said purpose in a
year does not exceed 250 units.]
(iii) in respect of a hospital or dispensary which is not maintained for private gain [(save in respect of premises used for residential purposes;)]
(iv) Where the energy is generated by any person for the purpose of supplying it for the use of vehicles or vessels;
(v) Where the energy is generated at a voltage not exceeding 100 volts;
[(v-a) where the energy is generated by any person by solar, wind or biomass energy;]
(vi) [save as provided in clause (vii), in respect of such industrial or agricultural purposes in such areas and subject to such terms and conditions
and for such period as the State Government may, having regard to the need and conditions of industrial and agricultural development in the areas
by general or special order specify in that behalf;
(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 -
[(a) 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 -
(i) 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.
(ii) Ten years from the commencement date or the date of starting the generation of such energy whichever is later if such generation of energy is
based on any other process;
(b) in the case of new industrial undertaking established on or after the commencement date, which does not generate energy for its own use, five
years from the commencement date or the date on which industrial undertaking commences for the first time manufacture or production of goods,
whichever is later.]
Provided that no industrial undertaking shall be entitled to exemption from payment of electricity duty under this clause, unless it has obtained a
certificate regarding eligibility for such exemption in prescribed form by making an application therefore in prescribed form and within prescribed
period to such officer as the State Government may, by notification in the Official Gazette, specify.
Explanation 1. - For the purpose of this clause (vii) of this sub-section and sub-section (2A),
(ii) ""a new industrial undertaking"" means any such industrial undertaking which -
(a) is not formed by the splitting up or the reconstruction of a business or undertaking already in existence in the State; or
(b) is not formed by transfer to a new business or undertaking of a building, machinery or plant previously used in the State for any industrial
purpose, of such value in relation to total investments, as the State Government may, by notification in the Official Gazette, specify; or
(c) is not an expansion of the existing business or undertaking in the State];
[2A) (a) Where an industrial undertaking has, by installing an additional generating set started generation of additional energy for its own use at any
time during ten years before the commencement of the Bombay Electricity Duty (Gujarat Amendment) Act, 1979 (hereinafter in this subsection
referred to as ""the Government"") electricity duty shall not be leviable on such units of the additional energy so generated as are consumed for
motive power and lighting in respect of premises used by the industrial undertaking for industrial purpose, until the expiry of such period after the
commencement as would together with the period from the date of starting the generation not exceed ten years.
[(b) Where an industrial undertaking by installing an additional generating set starts generation of additional 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 properly generating additional
energy at any time on or after the commencement date, electricity duty shall not be leviable on such units of additional energy so generated as are
consumed for motive power and lighting in respect of premises used by the industrial undertaking for industrial purpose until the expiry of -
(i) fifteen years from the commencement date or the date of starting the generation of such additional energy whichever is later if such generation of
additional energy is by back pressure turbine or if such generation of additional energy is obtained by co-generation,
(ii) ten years from the commencement date or the date of starting the generation of such energy whichever is later if such generation is based on any
other process;]
Explanation � For the purpose of this sub-section -
(a) where any generating set existing at the time of installation of the additional generating set is at any time not operated either wholly or partly, the
total units of energy which the existing generating set is capable of generating shall be excluded from the units of the additional energy generated
and consumed;
(b) where any generating set existing at the time of installation of the additional generating set is disposed of, the total units of energy which the
existing generating set so disposed of was capable of generating shall be excluded from the units of the additional energy generated and
consumed.]
[(2AA)(a) Nothing contained in this Act as amended by the Bombay Electricity Duty (Gujarat Amendment) Act, 1983 (hereinafter referred to as
the Amending Act"") shall affect any exemption granted to an existing industrial undertaking before the commencement date and such exemption
shall continue for the period provided in clause (vii) of sub-section (2), or as the case may be, sub-section (2A) before the commencement date.
(b) Notwithstanding anything contained in clause (vii) of sub-section (2) or sub-section (2A) as amended by the Amending Act, any existing
industrial undertaking which was eligible for exemption under the provisions of clause (vii) of sub-section (2) or of sub-section (2A) before the
commencement date but which did not avail of such exemption before the commencement date shall be eligible for such exemption under the said
clause (vii) or the said sub-section (2A) as if the Amending Act was not passed.
Explanation - For the purpose of this sub-section an existing industrial undertaking means an industrial undertaking which exists on the
commencement date and which manufactures or produces goods for sale or use in the manufacture or production of other goods but does not
include an undertaking which manufactures or produces any kind of food and drinks meant ordinarily for consumption on the premises of the
undertaking.
(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 -
(a) electro-chemical, electro-lytical, or electro-metallurgical process carried on by an industrial undertaking, or
(b) such class of consumers or such class of premises in such areas and for such period as the State Government may specify in the notification.]
11. Procedure for getting exemption under section 3(2) and 3(2- A). - (1) Any industrial undertaking desiring to get exemption under sub-clause
(a) of clause (vii) of sub-section (2) of section 3 or subsection 2-A of section 3, may make an application to such Officer as may be specified by
the State Government by notification in the Official Gazette.
(a) in Form ''E'' within one hundred eighty days from the date of starting the generation of energy or starting the generation of additional energy in
the case of an industrial undertaking specified in sub-clause (a) of clause (vii) of subsection (2) of section or sub-section (2-A) of section 3, as the
case may be;
(b) in Form ''F'' in the case of a new industrial undertaking specified in sub-clause (b) of clause (vii) of sub-clause (2) of section 3, within one
hundred eighty days from the date such industrial undertaking commences for the first time manufacture or production of goods.
(2) On receipt of an application under sub-rule (1), the Officer specified there under may make such inquiries and call for such further information
as he may think fit and if he is satisfied that the applicant is entitled to exemption he may grant the certificate regarding eligibility for such exemption
in Form ''G'' or Form ''H'' as the case may be.
(3) Any consumer making an application after the expiry of the period mentioned in the sub-rule (1) shall not be entitled for exemption from
payment of electricity duty for the period lapsed between the date of the application and the date of manufacture or production of goods, or
generation if energy as the case may be, and the total period of exemption shall be reduced to that extent;
Provided that where the State Government, after making such inquiry as it thinks fit, is satisfied that the applicant could not make the application
within the period specified in sub-rule (1) for reasons beyond his control, the State Government may condone the delay in making the application.
FORM ''E''
(See Rule 11(1)(a)
Application form for obtaining eligibility Certificate for Exemption from payment of Electricity Duty Sub-clause (a) of clause (vii) of sub-section (2)
of section 3 or sub-section 2-A of section 3.
1. Name and address of the applicant.
2. Date of installation of each generating set.
3. Date of starting generation of electrical energy from each generating
set.
4. Copy of documents relating to the date of establishment of each
generating set.
5. Copy of documents relating to the date of starting generation from
each generating set.
6. Description of place where the generating set is used.
7. Description of each generating set.
i. Make
ii. Rated installed capacity
iii. De-rated firm capacity
iv. Whether thermal or diesel or back pressure turbine or by co-
generation or obtained by Solar, wind or biomass energy.
8. Date of purchase of each generating set (A copy of purchase bill
should be furnished)
9. Average daily capacity of generating set to generate energy in respect
of each generating set.
10. Capacity of generating set to generate energy in terms of units per
annum.
11. Registration No.obtained from Collector or Electricity Duty
12. (a) Nature of goods Manufactured or produced and the details of the
process involved in manufacturing of such goods. (b) If eatables or
drinks are manufactured specify the product.
13. Nature of business or manufacturing activities carried out by the
applicant previously. (Details should be given).
14. First and last copy of bills for the goods manufacture
15. Copy of last balance sheet of the applicant issued so far.
16. Whether power is purchased from the licensee or partly purchased and
partly generated. If yes, give details of such connected load and
metering arrangement for different purpose.
17. Connected load in case of self generation.
(a) Purpose of which energy in used.
(b) Meters or sub-meters Nos. and date of installations for the (i) Motive power or
following.- for running
machinery used for
manufacture of
goods.
(ii) Motive power used for other purposes such as water pump air-
conditioning plant, etc.
(iii) Lights and fans used for industrial purpose
(iv) Lighting fans and domestic appliances used for office residential,
street lights, canteen etc.
18. Monthwise generation and consumption of self generated energy for
different purposes. State the above from the date of intallation of
generating set/s.
19. Whether energy is supplied to other persons. If so, give the details as
under.
(a) Date on which power is supplied.
(b) No. of separate meters installed.
(c) Purpose for which energy is consumed by such consumers.
(d) Copy of the agreement made for such consumers for sale of
power.
20. State whether existing generating set is operated or not.
21. If existing set is disposed off state the capacity of generating set so
disposed off for generating the total units of energy per month annum.
(1) Date of disposal.
(2) Name and address of the party to whom generating set is sold
out/transferred. A copy of documents relating to it should be furnished.
22. Capital investment in each generating set.
Date:
Signature of applicant
Note This application is to be furnished within 180 days from the date of starting generation of electrical energy from the generating set/s.
FORM ''F''
(See Rule 11(1)(b)
Application form for obtaining Eligibility Certificate for Exemption from payment of Electricity Duty under Sub-clause (b) clause (vii) of sub-section
(2) of section.
1. Name and address of the applicant.
2. Date of installation of each generating
set.
3. Date of starting generation of electrical
energy from each generating set.
4 Copy of documents relating to the date
of establishment of each generating set.
5. Copy of documents relating to the date
of starting generation from each
generating set.
6. Description of place where the
generating set is used.
7. Description of each generating set.
i. Make
ii. Rated installed capacity
iii. Derated firm capacity
iv. Whether thermal or diesel or back
pressure turbine or by cogeneration or
obtained by Solar, wind or biomass
energy.
8. Date of purchase of each generating set
(A copy of purchase bill should be
furnished)
9. Average daily capacity of generating set
to generate energy in respect of each
generating set.
10. Capacity of generating set to generate
energy in terms of units per annum.
11. Registration No.obtained from Collector
or Electricity Duty
12. (a) Nature of goods Manufactured or
produced and the details of the process
involved in manufacturing of such goods.
(b) If eatables or drinks are
manufactured specify the product.
13. Nature of business or manufacturing
activities carried out by the applicant
previously. (Details should be given).
14. First and last copy of bills for the goods
manufacture
15. Copy of last balance sheet of the
applicant issued so far.
16. Whether power is purchased from the
licensee or partly purchased and partly
generated. If yes, give details of such
connected load and metering
arrangement for different purpose.
17. Connected load in case of self
generation.
(a) Purpose of which energy in used.
(b) Meters or submeters Nos. and date (i) Motive power or for running
of installations for the following. machinery used for manufacture of
goods.
(ii) Motive power used for other
purposes such as water pump
airconditioning plant, etc.
(iii) Lights and fans used for industrial
purpose
(iv) Lighting fans and domestic
appliances used for office residential,
street lights, canteen etc.
18. Monthwise generation and consumption
of self generated energy for different
purposes. State the above from the date
of intallation of generating set/s.
19. Whether energy is supplied to other
persons. If so, give the details as under.
(a) Date on which power is supplied.
(b) No. of separate meters installed.
(c) Purpose for which energy is
consumed by such consumers.
(d) Copy of the agreement made for
such consumers for sale of power.
20. State whether existing generating set is
operated or not.
21. If existing set is disposed off state the
capacity of generating set so disposed
off for generating the total units of
energy per month annum.
(1) Date of disposal.
(2) Name and address of the party to
whom generating set is sold
out/transferred. A copy of documents
relating to it should be furnished.
22. Capital investment in each generating
set.
Place:
Date:
Signature of applicant
Note This application is to be furnished within 180 days from the date of production.
Number of submissions have been made by the learned Counsel appearing on behalf of the appellants herein more particularly whether the
appellants can be said to be ""generating company"" and whether the provisions of Indian Electricity Act or the Supply Act can be considered and/or
invoked while considering the provisions of the Duty Act. However, so far as the appellant No.2 � EPL is concerned, it cannot be disputed and
it is not as such disputed that the EPL is a ""generating company"" generating 515 MW electricity.
8.2 However, while considering the exemption claimed under Section 3(2)(vii)(a) of the Duty Act, claimed by the ESL to the extent of 42%, while
consuming 215 MW electricity generated by EPL and supplied to ESL, supplied under the Power Purchase Agreement dated 21.06.1996,
whether the ESL can be said to be industrial undertaking which generates energy jointly with EPL and whether the conditions stipulated under
Section 3(2)(vii)(a) of the Duty Act which fulfil and/or satisfy or not, is a question which is required to be considered.
Under the circumstances, the submissions made by the learned Counsel appearing on behalf of the respective parties whether the appellants can be
said to be generating company or not shall not have any important relevance, as for the purpose of exemption claimed under Section 3(2)(vii)(a) of
the Duty Act, the conditions mentioned therein are required to be considered. It is also required to be considered whether in a case where the
procedure which is required to be followed while claiming the exemption under Section 3(2)(vii)(a) of the Duty Act, required to be followed under
Rule 11, if not followed what shall be the consequence?
8.3 Considering the relevant provisions of the Duty Act and the Rules, 1968 more particularly Section 3(2)(vii)(a) of the Duty Act under which the
exemption is claimed by the ESL, it appears that subject to the provisions of sub-sections (2), (2A), (2AA) and (3), there shall be levied and paid
to the State Government a duty on the consumption of electricity at the rates specified under sub-section (1) of section 3 of the Duty Act. As per
sub-section (2) of section 3 of the Duty Act, electricity duty shall not be leviable on the units of energy consumed ..... in 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, for a period of 15 years from the date of commencement of Bombay Electricity
Duty (Gujarat Amendment) Act, 1983 or the date of starting the generation of such energy whichever is later if such generation of the energy is by,
back pressure turbine or if such generation of energy is obtained by cogeneration. If such generation of energy is based on any other process the
exemption shall be for a period of 10 years from the commencement date or the date of starting the generation of such energy whichever is later, as
provided under Section 3(2)(vii)(a)(ii) of the Duty Act. As per Section 3(2)(vii)(b) of the Duty Act, in case of new industrial undertaking
established on or after the commencement date, which does not generate energy for its own use, 5 years from the commencement date or the date
on which industrial undertaking commences for the first time manufacture or production of goods, whichever is later. Sub-section (3) of section 3
provides that 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 in respect of (a) electro-chemical, electro-lytical, or electro-metallurgical process carried on by an industrial
undertaking, or (b) such class of consumers or such class of premises in such areas and for such period as the State Government may specify in the
notification.
8.4 Rule 11 of the Rules, 1968 provides for procedure for getting exemption under Section 3(2) of the Duty Act. It provides that any industrial
undertaking desired to get exemption under Clause (vii) of sub-section (2) of section 3, may make an application in ""Form-P"" to such an Officer as
may be specified by the State Government, within 180 days from the date of starting the generation of energy in the case of an industrial
undertaking specified in sub-clause (a) of clause (vii) of sub-section (2) of section 3. It further provides that on receipt of an application under sub-
Rule (1), the Officer specified under sub-Rule (i) may make such an inquiry and may call for such further information as he may think fit and/or he
is satisfied that applicant is entitled to exemption, he may grant eligibility of such exemption in Form-F. It also further provides that any consumer
making the application after the expiry of the period mentioned in sub-Rule (i) shall not be entitled to exemption from payment of electricity duty for
the period of lapse between the date of application and date of manufacture or production of goods or generation of energy, as the case may be
and the total period of exemption shall be reduced to that extent. Thus, an industrial undertaking seeking exemption under Section 3(2)(vii)(a) of
the Duty Act is first of all required to make an appropriate application in Form-E to such Officer as may be specified by the State Government and
thereafter on receipt of such an application, concerned Officer is required to make inquiries and call for such further information as he may think fit
and if he is satisfied that the applicant is entitled to exemption he may grant the certificate regarding eligibility for such exemption in Form-F.
Therefore, making an application under Rule 11 cannot be said to be a formality and/or only procedural. Hence, if no application is made as
required under Rule 11 to the concerned Officer in Form-E and no opportunity is given to the concerned Officer to make inquiry as per sub-Rule
(2) of Rule 11, in that case the concerned industrial undertaking may not be entitled to the exemption claimed under Section 3(2)(vii)(a) of the Duty
Act. Whether in the present case any such application was made by the appellant No.1 � ESL, who is claiming the exemption shall be dealt with
hereinafter.
8.5 Considering the aforesaid provisions more particularly section 3(2)(vii)(a) of the Duty Act the question posed for consideration of this Court is
whether the ESL is entitled to the exemption from payment of electricity duty to the extent of 42% on consumption of 215 MW electricity supplied
by EPL, as supplied pursuant to the Power Purchase Agreement dated 21.06.1996, as claimed by the ESL?
In the present case as stated herein above it is ESL who is claiming exemption from payment of electricity duty to the extent of 42% on
consumption of 215 MW electricity generated and supplied by the EPL, supplied under Power Purchaser Agreement dated 21.06.1996. That the
ESL has claimed the exemption from payment of electricity duty for a period of 15 years, under Section 3(2)(vii)(a) of the Duty Act.
8.6 It is the case on behalf of the appellants that for the purpose of the exemption from payment of duty under Section 3(2)(vii)(a) of the Duty Act,
it is immaterial whether the person claiming the exemption is a generating company or not. It is the case on behalf of the appellants that the word
used in section 3 of the Duty Act is ""industrial undertaking"" and the industrial undertaking is defined under Section 2(bb) of the Duty Act.
Therefore, it is the case on behalf of the appellants that the appellant No.1 � ESL is an ""industrial undertaking"". It is also the case on behalf of the
appellants that appellant No.2 � EPL is also an industrial undertaking which generates the energy. However, what is required to be considered is
whether the appellant No.1 � ESL who is claiming the exemption from payment of electricity duty under Section 3(2)(vii)(a) of the Duty Act can
be said to be an ""industrial undertaking"" which generates energy and/or whether can it be said that the EPL which is a generating company and is
as such generating the energy/electricity can be said to be the generating energy/electricity jointly with ESL and/or can it be said that the ESL is
generating energy/electricity jointly with EPL?
It is the case on behalf of the appellants that as the appellant No.1 ESL is having 42% shareholding in EPL and therefore, the ESL has invested a
substantial amount in EPL having 42% shareholding, EPL can be said to be generating the electricity jointly with ESL and therefore, it can be said
that ESL is generating the electricity jointly with EPL and therefore, ESL can be said to be generating the electricity/energy jointly with EPL for its
own use (for the use of ESL). In support of the above submissions, learned Counsel appearing on behalf of the appellants has heavily relied upon
the decision of the Hon''ble Supreme Court in the case of Renusagar Power Co. Ltd. (Supra) and A.P. Gas Power Corporation (Supra).
Therefore, the further question which is posed for the consideration of this Court is whether merely because the ESL is having 42% shareholding in
EPL, can it be said that ESL is jointly generating the energy/electricity for its own use and whether the ESL is entitled to the exemption from
payment of electricity duty as claimed under Section 3(2)(vii)(a) of the Duty Act.
8.7 While considering the aforesaid questions, it is required to be noted and it is not in dispute that as such EPL is an independent company
established under the provisions of the Companies Act, 1956 and is altogether a separate entity for all purposes. It is also required to be noted that
as such EPL has been given the license for setting up of 510 MW power project at Hazira in capacity as a generating company. That out of the
aforesaid 515 MW electricity, the EPL is selling 300 MW electricity so generated to the GEB as per the Power Purchase Agreement dated
30.05.1996. The remaining 215 MW electricity generated by EPL, the EPL is supplying and selling to ESL under the Power Purchase Agreement
dated 21.06.1996. ESL is claiming the exemption from payment of electricity duty to the extent of 42% on the aforesaid 215 MW electricity sold
by EPL to ESL. Therefore, ESL is purchasing 215 MW electricity from the EPL. Therefore, as such both the companies, ESL and EPL, are
distinct separate legal entities and therefore, merely because ESL might have 42% shareholding in the EPL, it cannot be said that ESL is generating
the electricity jointly with EPL and/or the EPL is generating electricity jointly with ESL for the use of electricity by ESL. As observed herein above
EPL is a generating company having the license to generate 515 MW electricity out of which it is selling 300 MW electricity to the GEB and the
remaining 215 MW to the ESL.
9.0 Now, so far as the reliance placed upon the decision of the Hon''ble Supreme Court in the case of Renusagar Power Co. Ltd. (Supra) by the
learned Counsel appearing on behalf of the appellants in support of their submissions that ESL can be said to be an industrial undertaking
generating the energy jointly with ESL, for its own use is concerned, on considering the judgment as a whole and the facts before the Hon''ble
Supreme Court in the case of Renusagar Power Co. Ltd. (Supra), we are of the opinion that the reliance placed upon the said decision is
misplaced and/or the said decision shall not be applicable to the facts of the case on hand.
9.1 In the case before the Hon''ble Supreme Court in the case of Renusagar Power Co. Ltd. (Supra), the Hon''ble Supreme Court dealt with
section 3 of the U.P. Electricity (Duty) Act, 1952, which empowered the State Government to provide exemption from payment of electricity duty
on the energy consumed by any other person from his own source of generation"". In the aforesaid decision, on facts the Hon''ble Supreme Court
found that a company called ''Hindustan Alluminum Corporation Ltd.'' (""Hindalco"") commissioned its plant in 1962 for manufacture of alluminum.
Thereafter, in 1964, Hindalco incorporated its wholly owned subsidiary called ''Renusagar Power Co. Ltd.''. This was done to set up captive
power house through instrumentality of a 100 per cent subsidiary fully controlled by Hindalco in all respects to supply power Hindalco only, for
avoiding takeover complications. In para 2 of the judgment, the Hon''ble Supreme Court narrated the facts which are as under:
2. There are four respondents in this appeal. The first respondent is Renusagar Power Company Ltd. The second respondent is M/s. Hindustan
Aluminium Corporation Ltd. Respondent No. 3 is Shri D. M. Mimatramka who resides at Hindalco Administrative Colony, Renukut, Mirzapur.
The fourth respondent is Shri Rajendra Kumar Kasliwal who resides at Hindustan Aluminium Corporation Ltd., Renukut, District Mirzapur.
Respondents 3 and 4 mentioned above are the shareholders of the first respondent and the second respondent, that is, Renusagar Power
Company and M/s. Hindustan Aluminium Corporation Ltd. respectively. It is stated that M/s. Hindustan Aluminium Corporation Ltd., established
an aluminium factory at Renukut in Mirzapur District, U.P. in 1959. It is the case of the respondents that it was induced to do so on the assurance
that cheap electricity and power would be made available at the relevant time. In 1962, a plant of Hindustan Aluminium Corporation Ltd. for
manufacture of aluminium was commissioned. M/s. Renusagar Power Co. Ltd. a wholly owned subsidiary of M/s. Hindustan Aluminium
Corporation Ltd. was incorporated in 1964. M/s. Renusagar Power Company Ltd. was incorporated separately and had its own separate
Memorandum and Articles of Association. On 9th September, 1967, the first generating unit of 67.5 MW in Renusagar was commissioned by
M/s. Renusagar Power Company Ltd. The second generating unit of the Company was commissioned on the 5th October, 1968. The U.P.
Electricity (Duty) Act, 1952 (hereinafter called ''the Act'') came into force from 15th January, 1953 and it sought to levy a duty on the consumption
of electrical energy in the State of Uttar Pradesh.
Section 3 of the U.P. Electricity (Duty) Act, 1952 which was considered by the Hon''ble Supreme Court in the said decision is reproduced as
under:
3. Levy of electricity duty. - (1) Subject to the provisions hereinafter contained, there shall be levied for and paid to the State Government on the
energy :
(a) sold to a consumer by a licensee, the Board, the State Government or the Central Government; or
(b) consumed by a licensee or the Board in or upon premises used for commercial or residential purposes, or in or upon any other premises except
in the construction, maintenance or operation of his or its works; or
(c) consumed by any other person from his own source of generation; a duty (hereinafter referred to as ''electricity duty'') determined at such rate
or rates as may from time to time be fixed by the State Government by notification in the Gazette, and such rate may be fixed either at a specified
percentage of the rate charged or at a specified sum per unit.
Provided that such notification issued after October 1, 1984 but not later than March 31, 1985 may be made effective on or from a prior date not
earlier than October 1, 1984.
(2) In respect of clauses (a) and (b) of subsection (1), the electricity duty shall not exceed thirty-five per cent of the rate charged.
Provided that in the case of one-part tariff where the rate charged is based on units of consumption, the electricity duty shall not be less than one
paisa per unit or more than eight paise per unit.
Explanation - For the purposes of the calculation of electricity duty as aforesaid, energy consumed by a licensee or the Board or supplied free of
charge or at the concessional rates to his or its partners directors, members, officers or servants shall be deemed to be energy sold to consumers
by the licensee or the Board, as the case may be, at the rates applicable to other consumers of the same category.
(3) In respect of clause (c) of sub-section (1), the electricity duty shall not be less than one paisa or more than six paise per unit.
(4) The State Government may, in the public interest, having regard to the prevailing charges for supply of energy in any area, the generating
capacity of any plant, the need to promote industrial production generally or any specified class thereof and other relevant factors, either fix
different rates of electricity duty in relation to different classes of consumption of energy or allow any exemption from payment thereof.
(5) No electricity duty shall be levied on -
(a) energy consumed by the Central Government or sold to the Central Government for consumption by that Government; or
(b) xx xx xx xx
(c) energy consumed in the construction, maintenance or operation of any railway by the, Central Government or sold to that Government for
consumption in the construction, maintenance or operation of any railway;
(d) by a cultivator in agricultural operations carried on in or near his fields such as the pumping of water for irrigation, crushing, milling or treating of
the produce of those fields or chaff cutting.
(e) Energy consumed in light upon supplies made under the Janta Service Connection Scheme.
Explanation - For the purposes of clause (e) ""Janta Service Connection Scheme"" means a scheme approved by the State Electricity Board for
supplying Energy to Harijans, landless labourers, farmers (holding land not exceeding one acre), members of armed forces (whether serving or
retired), war widows and other weaker sections in district notified by the State Government.
9.1.2 Thereafter, the Hon''ble Supreme Court considered the question whether, ""Renusagar is ""own source of generation"" of Hindalco within the
meaning of section 3(1)(c) of the Electricity Duty Act, 1952 and the various notifications issued thereunder.
While considering the aforesaid question, the Hon''ble Supreme Court in para 23 considered the object and purpose of the Renusagar Power Plant
and it found that the only object and purpose of the power plant (Renusagar Power Plant) was to supply power and suit the requirements of
Hindalco. The Hon''ble Supreme Court considered the following factors while holding in favour of the Hindalco, which are stated in paras 23 to
26, 41 to 43, 48 as under:
23. The only object and purpose of power plant was to supply power and suit the requirements of Hindalco. Reference may be made to pages 36
and 37 of Vol. XVI of the Paper Book. According to Shri Palkhiwala and Shri B. Sen from the aforesaid background the following facts emerge:
a) 1967/1968 Unit I and 2 of Renusagar went into operation.
b) Renusagar was set up as part and parcel of Aluminium Expansion Scheme.
c) All steps to set up Renusagar including expansion were taken by Hindalco.
d) Agency of Renusagar was set up by Hindalco because of Take Over option by the State.
e) Renusagar is 100% subsidiary of Hindalco.
f) Borrowings of Renusagar arranged and guaranteed by Hindalco.
g) Renusagar supplies power to Hindalco, only.
h) There is only one transmission line from Renusagar to Hindalco.
i) Renusagar generates power only to the extent required by Hindalco.
j) Hindalco, has complete control over Renusagar. Hindalco, has undertaken various obligations for the running of Renusagar.
k) The agreement between Renusagar and Hindalco, is not a normal sale purchase agreement. This agreement shows complete control of Hindalco
over Renusagar.
24. The Conditions under the Indian Electricity Act, 1910 applicable to normal sanction holders and licensees were not applied to Renusagar
because it was Hindalco''s captive source of generation. For instance :
a) After the incorporation in 1964 Renusagar was granted sanction u/s 28 of the Electricity Supply Act, 1910 to supply power to Hindalco only.
See Vol. XVI page 64 of the Paper Book.
b) Since Renusagar was not public utility but a captive plant of Hindalco certain conditions applicable to normal sanction holders in the nature of
public utilities but inapplicable to Renusagar were deleted from the sanction. See Vol. XVI page 74 of the Paper Book.
25. For the purpose of expansion of Hindalco as well as Renusagar the Govt. of India and the State of U.P. Specifically proceeded on the footing
that Hindalco had its ""own source of generation"" in Renusagar, since Renusagar was the captive power plant of Hindalco.
a) Hence, for all practical purposes Renusagar was treated as part and parcel of the Hindalco''s expansion programme. In 1962 Hindalco decided
to expand capacity to 60,000 tons per annum. This meant need of extra power. The U.P. Government and the UPSEB expressed inability to give
the extra power. The U.P. Govt. had no objection if Hindalco set up its own power-house with an option to the U.P. Govt. to take over the power
plant later. On this important basis Hindalco was granted permission to set up captive power plant. Reliance was placed in this connection on Vol.
XVI, pages 4, 6, 7, 15 and 16 of the Paper Book. Also see sections 34, 36, 37 and 44 of the Electricity Supply Act, 1910.
b) Thus Hindalco was allowed to expand its aluminium production on the condition of its setting up its own power plant which was part and parcel
of the expansion scheme. See in this connection Vol. XVI, pages 22 and 25 of the Paper Book.
c) When Hindalco decided to expand its aluminium plant again from 60,000 to 1,20,000 tons per annum, the expansion of the powerhouse was a
condition precedent to aluminium expansion. All negotiations, requests for permission, correspondence with authorities, intimation from
Government were done and received by Hindalco. In this connection reference may be made to Vol. XVI, pages 129 to 134,151, 157 and 180 of
the Paper Book.
d) Renusagar was allowed expansion limited to power requirements of Hindalco for captive use of Hindalco. See Vol. XVI, pages 145, 159, 161,
185, 187 and 189 of the Paper Book.
e) All Government authorities including Central Govt., State of U.P. and U.P. State Electricity Board have always treated Renusagar to be
Captive Plant"" as either ""Self Generation"" or ""Own Generation"" or ""Own Plant"" or ""Own Source of generation"" or ""Generation for self-use""'' or
Own use"" etc. of Hindalco. In this connection reference may be made to Vol. XVI, pages 81,90-91, 112,135A,139-140,
146,150,152,160,163,167,169,172,183A and 184 of the Paper Book. It further appears that 100% power-cuts stoppage of electricity from the
State grid were imposed on those who had 50% or more of their ""own source of generation"". Hindalco, suffered 100% power cuts precisely on
this account. It was submitted on behalf of the respondents and in our opinion rightly that the words ""own source of generation"" could not have one
meaning for power cuts and another meaning for concessions/exemptions under the same law.
26. It further appears that the Secretary, Power, U.P. Govt. submitted a note to the Advisory Council for recommending 100% power-cuts on
Hindalco as Hindalco had more than 50% power supply from its own source of generation i.e. Renusagar. See Vol. XVI, page 163 of the Paper
Book.
41. It was emphasised on behalf of Hindalco that the power plants at Renusagar were set up as part and parcel of the aluminium expansion scheme
of Hindalco and the only object and purpose of the power plants in Renusagar was to supply power to suit the needs of Hindalco.
42. All steps to set up the power plant in Renusagar and its further expansion were taken by Hindalco. The power plant was set up by Hindalco
through the agency of Renusagar (100% subsidiary and wholly owned and controlled by Hindalco) to avoid complications in the event of take over
by the State/Board.
43. All the borrowings of Renusagar were arranged and guaranteed by Hindalco. Further, there is only one transmission line going out of
Renusagar and the same goes to Hindalco. Renusagar can supply power only to Hindalco. Renusagar generates power only to the extent required
by Hindalco. Hindalco has complete control over Renusagar including its day-to-day operations. This will be evident from the applications with
regard to running of Renusagar Power Plant Station undertaken by Hindalco to the Board. See Vol. XV, pages 104, 118, 124 of the Paper Book.
48. The word ""own"" is a generic term, embracing within itself several gradations of title, dependent on the circumstances, and it does not
necessarily mean ownership in fee simple; it means, ""to possess to have or hold as property"". See Black''s Law Dictionary, 5th Edn. p. 996. It was
further submitted that by the 1970 Amendment Act, the Legislature intended to cover a wide area under section 3(1)(c) than under the old section
9. If Renusagar is the own source of generation of Hindalco, then the consumption clearly falls within section 3(1)(c) The three clauses of section
3(1), it was submitted, had to be read together by way of harmonious construction. Section 3(1)(a) should not be so construed as to defeat the
aim of section 3(1)(c) In the case of harmonious construction what needs to be looked at, is the dominant or the primary element in the provisions.
Thus section 3(1)(c) should not be interpreted to cover all the cases of own generation notwithstanding the fact that a sale may be involved and to
that extent the transaction should be excluded from the operation of section 3(1)(a) Alternatively, it was submitted that if the three clauses were to
be treated as independent of each other then the result of construction that each provision would yield to special provisions applied should be
applied as a part and parcel of harmonious construction of this section.
9.1.3 Considering the aforesaid facts and circumstances the Hon''ble Supreme Court after lifting the corporate veil held that Hindalco and
Renusagar be treated as one concerned and Regusagar Power Plant must be treated as own source of generation of Hindalco and should be liable
to duty on that basis. Therefore, on the aforesaid facts the Hon''ble Supreme Court opined that the consumption of energy by Hindalco was clearly
consumption by Hindalco from its own source of generation. In the present case such are not the facts. In the present case EPL cannot be said to
be 100% subsidiary of ESL. It also cannot be said that the EPL has been established and generating electricity for ESL only, as was the case
before the Hon''ble Supreme Court for Hindalco.
9.1.4 Under the circumstances, the decision of the Hon''ble Supreme Court in the case of Renusagar Power Co. Ltd. (Supra) shall not be
applicable to the facts of the case on hand and/or the same shall not be of any assistance to the appellants.
10.0 Now, so far as the reliance placed upon the decision of the Hon''ble Supreme Court in the case of A.P. Gas Power Corporation (Supra) by
the learned Counsel appearing on behalf of the appellants in support of their submission that as the ESL is having 42% shareholding in the EPL and
therefore, on supply/sale of electricity by EPL to ESL to the extent of 42% [to the extent of their shareholding] they shall be entitled to the
exemption from electricity duty is concerned, on facts before the Hon''ble Supreme Court in the case of A.P. Gas Power Corporation (Supra), we
are of the opinion that the said decision shall not be applicable to the facts of the case on hand. In the case before the Hon''ble Supreme Court in
the case of A.P. Gas Power Corporation (Supra), it was found that having faced with problem of disrupting day to day life of the people because
of the shortage of power. The States or the Electricity Boards managing the power sector find it difficult to meet the ever increasing demand of
electricity. Therefore, in such circumstances, the State Government of Andhra Pradesh and Andhra Pradesh Electricity Board mooted the idea of
setting up of a 3 x 33 MW gas based combined cycle power station at Vijjeswaram for establishing a generating station which required high
amount of investment. Thus, they decided to invite private participation in the venture which attracted some of the heavy industries to the proposal
and entered into a Memorandum of Understanding, according to which, the Andhra Pradesh State Electricity Board had to have 26% share in the
new company to come up viz. APGPCL, and the rest of the participating industries were to have different percentage of shares and the power so
generated by the company was to be shared proportionately amongst the share holding participating industries and their sister concerns. The
Central Electricity Authority also acceded to the request made to treat APGPCL as collective captive power generation company. Therefore, the
new company APGPCL came into being and started power generation and distribution of the same according to the aforesaid MOUs to the
participating industries in proportion to their share holding. The question which fell for consideration before the Hon''ble Supreme Court was as to
whether APGPCL was required to take license under the law for utilization/sale or supply of power generated by it to the participating industries,
their sister concern and the companies to whom shares of APGPCL have been transferred by the participating industries.
While considering the aforesaid question, the Hon''ble Supreme Court in the aforesaid facts and circumstances and while considering the MoUs,
observed in paras 45 and 46 as under:
45. We have however, already discussed about the participating industries that consumption of electricity by them in their units to the extent of
their shareholding amounts to captive consumption for which no licence would be required as it would neither be a supply nor distribution of the
electricity produced. It is utilisation of the product by the manufacturer itself. There would be no sale, supply or distribution to the self so long as
the power produced is utilised by those who are participating in the activity of generating electricity. In a case where it is not a single owner but a
joint or collective venture for generation of electricity for their own captive consumption obviously the self-consumption of the power generated
would be amongst those who are participating in the activity of generation and it shall not be confined to any one industry. A participating industry
subject to certain conditions as agreed upon is entitled to transfer its shares to any other company who is necessarily to be a HT consumer of
APSEB. Any existing participating industry may decide to transfer all of its shares or part thereof. We are not concerned here, as discussed by the
Regulatory Commission, about the activities of APGPCL which may have been indicated in the Memorandum of Association. We are particularly
dealing with the consumption or utilisation of power generated by APGPCL by those to whom the participating industry have transferred their
shares. After transfer of shares of APGPCL the transferee company or industry would not remain an outsider but a shareholding company and it is
entitled to utilise the power generated by APGPCL and would be confined to the extent of the value of the shares transferred to it. Holding of
share capital in the APGPCL is the basis of participating in the generating activity of APGPCL and utilisation of the power produced to the extent
of the shareholding, it would only amount to captive consumption and self-supply or distribution of the power and it would not require a licence
under Section 3/28 of the Act of 1910 or under Sections 15 and 16 of the Reform Act, 1998. We may, however, clarify here that as soon as the
electricity generated by APGPCL goes to any one who has no shareholding in the company or beyond the extent of the shareholding it would
certainly amount to supply or distribution to the public entailing the liability of obtaining a licence under Section 3/28 of the Act of 1910 or for that
matter under Sections 15 and 16 of the Reforms Act, 1998.
46. It has been submitted on behalf of the respondents, including APTRANSCO that even self-consumption of power generated by APGPCL
should not be allowed to a company which has obtained shares by transfer by a participating industry and in that connection certain figures have
been placed before the Court to indicate that number of such transferee industries has substantially increased. On that basis it is submitted that
APGPCL is expanding its net which shall be detrimental to the interest of APSEB and the public at large. It is submitted that if the energy is
supplied to more and more consumers it shall attract many bulk consumers and APSEB may be left with only domestic or agricultural consumers in
respect of whom there are subsidies which are meted out from supply of energy to the industrial sector. We are not impressed by the argument. So
long the amount of power supply is confined to the extent of the shareholding, it is immaterial as to the number of such transferee companies. Once
they are in the category of those whose capital in the shape of shares is invested in the APGPCL they cannot be treated as outsiders and
selfconsumption/utilization of electricity by them within the limits of their shareholding, would not amount to sale, supply or distribution of electricity.
The prohibition under the legal provisions is as against sale, supply or distribution of electricity without a licence. Captive consumption being
outside the pale of the above expressions, there is no justification for raising such an objection that the number of shareholders is increasing so long
it is restricted within the shareholding of the participating industry. This apart, it has also been indicated on behalf of the appellant that taking the
total figures, it will make negligible difference on the subsidies provided to the agricultural sector or any other sector.
10.1 On fair reading of the aforesaid decision of the Hon''ble Supreme Court, it appears that the Hon''ble Supreme Court considered the
respective shares of the participating companies as per their MoUs and because of the MoUs and to that extent of shareholding as mentioned in
the MoUs. In para 46 the Hon''ble Supreme Court has specifically observed that so long the amount of power supply is confined to the extent of
the shareholding, it is immaterial to the number of such transferee companies. It is further submitted that once they are in the category of those
whose capital in the shape of shares is invested in the APGPCL they cannot be treated as outsiders and selfconsumption/utilization of electricity by
them within the limits of their shareholding [as per the MoU as participating companies], would not amount to sale, supply or distribution of
electricity. Therefore, the observations and the decision of the Hon''ble Supreme Court in the case of A.P. Gas Power Corporation Limited
(Supra), because of the MoUs between the Andhra Pradesh Electricity Board and the participating industries having different percentage of
shareholding for the purpose of establishing power plant. Therefore, the observations made by the Hon''ble Supreme Court are required to be
considered vis-a-vis the concerned MoUs and that the Andhra Pradesh State Electricity Board and the participating industries jointly established
the electricity plant which after generation was required to be shared amongst the parties to the MoUs as per their shareholding/percentage and/or
their sister concerns as per the MoUs. In the present case there is no such MoU between EPL and ESL. On the contrary the EPL is selling 215
MW of electricity generated by it to ESL under the Power Purchase Agreement dated 21.06.1996 and consequently ESL is purchasing 215 MW
electricity generated by EPL from EPL. Under the circumstances, on facts the decision of the Hon''ble Supreme Court in the case of A.P. Gas
Power Corporation (Supra) shall not be applicable to the facts of the case on hand and/or the same shall not be of any assistance to the appellants,
in support of their submission that to the extent of 42% shareholding in the EPL, they will be entitled to the exemption from payment of electricity
duty.
10.2 Considering the aforesaid facts and circumstances it cannot be said that ESL is an industrial undertaking which generates energy jointly with
EPL for its own use or for the use of industrial undertaking which are jointly generating the energy and therefore, the conditions stipulated in
Section 3(2)(vii)(a) of the Duty Act are not satisfied and hence, ESL is not entitled to the exemption from payment of electricity duty as claimed
under Section 3(2)(vii)(a) of the Duty Act.
11.0 Now, so far as the contention on behalf of the respondents that no such application in Form-E, claiming the exemption from electricity under
Section 3(2) of the Duty Act was ever made by the appellants, as required under Rule 11, it is the case on behalf of the appellants that as such no
such contention was raised before the Special Secretary and it is raised for the first time before this Court. It is the case on behalf of the appellants
that it cannot be said that the respondents have waived or deemed to have waived such objection with regard to the non-filing of the application in
the prescribed Form-E. It is the case on behalf of the appellants that in any case, such a requirement is procedural in nature. It is also the case on
behalf of the appellants that earlier the appellants were allowed the exemption for the period from 08.08.1995 to 31.03.2000 under Section 3(3)
of the Duty Act and prior thereto the ESL by letter dated 15.03.2000 requested for extention of exemption period for a further period of 10 years
until 08.08.2010 on the ground that it was eligible for exemption for a total period of 15 years under Section 3(2)(vii)(a) of the Duty Act from the
date of commencement of generation of electricity i.e. 08.08.1995, non-filing of the application in the prescribed Form-E as required under Rule
11 would not be fatal. It is the case on behalf of the appellants that no prejudice shall be caused to the respondents on account of non-filing of the
application in the prescribed Form-E as right from the beginning, the respondents were fully aware of all the facts relating to the establishment of
the power plant, supply of electricity to ESL and GEB, even before ESL made the application in Form-F for the benefit of Section 3(2)(vii)(b) of
the Duty Act.
11.1 Relying upon the decision of the Hon''ble Supreme Court in the case of Mangalore Chemicals & Fertilizers Ltd. (Supra), it is the case on
behalf of the appellants that if otherwise the appellants are entitled to the exemption under Section 3(2)(vii)(a) of the Duty Act, the same should not
be denied to them solely on the ground of nonfulfilment of the procedural aspect. It is also the case on behalf of the appellants that assuming that
even in a case where the application is not preferred within 180 days, in that case also considering sub-Rule (3) of Rule 11, the exemption can be
granted except the period lapsed between the date of application and/or manufacturing/generation of energy and the total period of exemption shall
be reduced to that extent.
11.2 On considering the provisions of Rule 11 of the Rules, 1968, first of all it cannot be said that it is only a procedural one and/or it will be an
ample formality. The application is required to be made in the prescribed Form-E between the stipulated time. The said application is required to
be made in the prescribed Form-E to the appropriate authority. On receipt of such application, appropriate authority/concerned Officer is required
to hold inquiry with respect to the exemption claimed under Section 3(2)(vii)(a) of the Duty Act and the officer may call for the further information
from the concerned applicant seeking exemption, and thereafter having satisfied with respect to the eligibility of the exemption, a certificate is
required to be issued by the concerned Officer that the concerned applicant is entitled to the exemption from payment of electricity duty. In the
present case it appears that no such application has been made at all in the prescribed form and as such at the relevant time no opportunity was
given to the concerned officer to hold necessary inquiry and to consider the claim of the appellants claimed under Section 3(2)(vii)(a) of the Duty
Act.
Therefore, the proviso to Rule 11 is required to be considered only in a case where any application in Form-E is made. Thus, on facts the decision
of the Hon''ble Supreme Court in the case of Mangalore Chemicals & Fertilizers Ltd. (Supra) shall not be applicable to the facts of the case on
hand and/or the same shall not be of any assistance to the appellants. It is also required to be noted that in the present case while considering the
claim of the ESL claiming the exemption from payment of electricity duty under Section 3(2)(vii)(a) of the Duty Act, its conduct is also required to
be considered. ESL had already availed the benefit of exemption from payment of electricity duty under the Duty Act in respect of consumption of
electricity supplied from different sources for different period, for which ESL made requisite applications in the prescribed form and within
prescribed time limit and had obtained the required eligibility certificate for exemption, the particulars of which are as under:
Sr. Date of Prescribed Applicable Source of Date of issue of Exemption
No. application Form No. for provision for electricity Certificate of period
seeking making exemption supply Exemption
exemption application under GED
from Duty Act, 1958
(1) (2) (3) (4) (5) (6) (7)
1. 21.7.1990 Form ''E'' Sec. 3 (2) (vii) 20 MW 01.09.1995 21.7.1990 to
(a) (ii) + 1380 KVA 29.9.1999
+ 590 KVA
+ 1500 KVA
of Self-
generating sets
of Essar Steel
2. 30.7.1990 Form ''F'' Sec. 3 (2) (vii) GEB 28.1.1992 19.12.1991 to
(b) connection No. 26.3.1995
HT 159
3. May, 1995 Form ''F'' Notification GEB 06.09.1995 31.3.1995 to
dated connection No. 30.3.2000
30.6.1993 HT 0159/HT
issued under 10029
Section 3(3) + 215 MW
from Essar
Power
(exclusively for
HRC Project)
4. 30.1.1996 Form ''E'' Sec. 3 (2) (vii) 20 MW 26.11.1998 15.12.1995 to
(a) (i) (existing) + 11 29.9.2004
MW i.e. Co-
generation plant
From the aforesaid it appears that ESL had already availed all the benefits of exemption from payment of electricity duty for the period of 5 years
from 31.03.1995 to 30.03.2000 with reference to 215 MW of power supplied by EPL as provided under Section 3(3) of the Duty Act.
Subsequently, after the completion of the aforesaid period the ESL was required to pay the electricity duty with reference to 215 MW of power
supplied and sold by EPL, ESL uniquely chose not to make the payment of electricity duty with effect from 31.03.2000 on the ground that it is
entitled to exemption for a period of 15 years, i.e. for the period from 08.08.1995 to 07.08.2010 under Section 3(2)(vii)(a) of the Duty Act in
respect of its consumption of power of 215 MW supplied and sold by EPL. Thus, prior to claiming the exemption under Section 3(3) of the Duty
Act and while even continuing to get the exemption from payment of duty under Section 3(3) of the Duty Act prior to 15.03.2000, ESL did not
claim the exemption from payment of electricity duty under Section 3(2)(vii)(a) of the Duty Act. Not only that they also even did not claim the
exemption for a period of 10 years under the notification dated 27.02.1992.
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 complied 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 complied 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. Mere placement of order for purchase cannot amount to actual purchase of the generating sets.
12.1 Even otherwise nothing is on record that any application was made within 180 days from the date of publication of the said notification in the
official gazette dated 27.02.1992 or even from the date of installation of generating sets i.e. August 1995. Therefore, the ESL has failed to obtain
requisite eligibility certificate from Commissioner of Electricity Duty. Under the circumstances, when the statutory conditions for availing the
benefits of notification under Section 3(3) of the Duty Act dated 27.02.1992 are not satisfied, the appellants are not entitled to the benefit of the
said notification dated 27.02.1992 under Section 3(3) of the Duty Act.
12.2 Considering the aforesaid facts and circumstances and for the reasons stated above, we are of the opinion that the appellants more
particularly appellant No.1 � ESL is rightly held to be not entitled to exemption from payment of electricity duty for a period of 15 years as
claimed under Section 3(3) of the Duty Act or even under the Notification dated 27.02.1992 as claimed.
13.0 Under the circumstances, we are in complete agreement with the ultimate view taken by the learned Single Judge dismissing the petition and
confirming the order dated 24.09.2009 passed by the Principal Secretary to the Government, Energy and Petrochemicals Department,
Gandhinagar and the demand notice dated 06.10.2009 for a recovery of Rs.1038.27 Crores towards the electricity duty. Under the
circumstances, present Letters Patent Appeal fails and the same deserves to be dismissed and is, accordingly, dismissed. No costs. Ad-interim
relief, if any granted earlier stands vacated forthwith.