1 srk IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE Writ Petition No.6414 of 2000 1. Ravalgaon Sugar Farm Ltd. a company registered under the Companies Act, 1956, having its registered office at P.O. Ravalgaon 423 108, Malegaon Taluka, Nashik District, Maharashta. 2. Harshvardhan Doshi, the Chairman and Managing Director of the 1st Petitioner having his office at P.O. Ravalgaon – 423 108 Malegaon Taluka, Nasik District Maharashtra. Petitioners Versus 1. The State of Maharashtra 2. The Electrical Duty Inspector 2 having his office at the office of the Electrical Inspector, Gaika Sadan, Gole Colony, Nasik – 2, Nasik District, Maharashtra With Civil Writ Petition No.495 of 2001 1. The Saswad Mali Sugar Factory Ltd. being a company deemed to be registered under the Companies Act, 1956 and having its registered office at Malinagar, Dist. Solapur, Maharashtra – 413 108. 2. Shri Vijaykant Shankarrao Kudale Managing Director, The Saswad Mali Sugar Factory Ltd., Malinagar, Dist.Solapur, Maharashtra 413 108. 3. Shri Arvind Eknath Jadhav, Wholetime Director, 3 The Saswad mali Sugar Factory Limited, Malinagar, Dist.Solapur, Maharashtra – 413 108. Versus 1. The State of Maharashtra 2. The Secretary to the Government of Maharashtra, Industries, Energy & Labour Department, Mantralaya, Mumbai 400 032. 3. The Deputy Secretary to the Government of Maharashtra, Energy Industries, Energy & Labour Department, Mantralaya, Mumbai 400 032. 4. Shri P.L. Kulkarni, Electricity Inspector, Electricity Inspection Dept., P.M.T. Commercial Bldg.No.1, 3rd floor, Swargate, Pune 42. 4 With Writ Petition No.5207 of 2001 1. New Phaltan Sugar Works Ltd., being a company deemed to be registered under the Companies Act, 1956 and having its registered office at Sakharwadi, Taluka Phaltan Dist. Satara – 415 522, Maharashtra. 2. Shri Hambirrao Manajirao Bhosale, Chairman, New Phaltan Sugar Works Ltd., Sakharwadi, Taluka Phaltan, Dist. Satara – 415 522, Maharashtra. 3. Shri Shamrao Maruti Bhosale, Director, New Phaltan Sugar Works Ltd., Sakharwadi, Taluka Phaltan, Dist. Satara 415 522, Maharashtra. Versus 5 1. The State of Maharashtra 2. The Secretary to the Government of Maharashtra, Industries, Energy & Labour Department, Mantralaya, Mumbai 400 032. 3. The Deputy Secretary to the Government of Maharashtra, Energy Industries, Energy & Labour Department, Mantralay, Mumbai 400 032. 4. Shri P.L. Kulkarni, Electricity Inspector, Electricity Inspection Dept., P.M.T. Commercial Bldg.No.1, 3rd floor, Sargate, Pune – 42. Mr.Pashant Naik with Mr.Y.R.Naik for petitioners in W.P.No. 495/2001 and 5207/2001. Mr.V.A.Sonpal, `A’ Panel Counsel for respondent-State. 6 CORAM: B.H.MARLAPALLE & SMT.ROSHAN S. DALVI,JJ. Reserved on : September 17, 2009. Pronounced on: October 5, 2009. JUDGMENT (PER B.H.MARLAPALLE,J.) 1. All these three petitions have raised the common challenge and, therefore, they are being decided by this common judgment. All the petitions challenge the Government Notification dated 25/4/2000 as well as the subsequent Notification dated 4/4/2001 issued through the Department of Labour, Energy and Industries of the State Government under Section 5-A of the Bombay Electricity Act, 1958 (“the Act” for short). By the first Government Resolution dated 25/4/2000 the exemption of payment of electricity duty for captive generation of power, by non conventional or conventional sources, as available prior to the said date came to be withdrawn except the industries in the co-operative sector and electricity duty at 30 paise per unit on generation of power for captive consumption was levied with effect from 1/4/2000. Whereas by the second Notification dated 4th April 2001 the State Government 7 exempted with retrospective effect from 1st April 2000, the consumption of energy generated in a generating station by a person carrying on an industry and consumed by himself for such industry, in the whole of the State of Maharashtra, on payment of such part of electricity duty payable under Clause (b) of Part G of the Schedule to the Bombay Electricity Duty Act, 1958, as in excess of 15 paise per unit of energy was consumed, subject to the condition that the generating set was installed in pursuance of the Government of Maharashtra policy prior to the revised policy regarding captive generation declared vide the Government Resolution dated 25th April 2000. Thus by the Notification dated 4th April 2001 the petitioners were levied electricity duty at the rate of 15 paise per unit instead of 30 paise per unit from 1st April 2000. It is the case of the petitioners that they cannot be differentiated from the Co- operative Sugar Mills and they must continue to have full exemption in payment of electricity duty as was prevailing upto 31st March 2000, on par with the sugar factories / mills in the co- operative sector. 2. All the petitioners are the companies registered under the Companies Act and are running sugar mills in different parts of 8 Maharashtra. As per them, the sugar mills run by companies are less than ten and all those who had installed Bagasse based co-generation captive power plants prior to 1st April 2000 were getting the benefit of full exemption in electricity duty on such co-generation and to the extent it was used for captive purposes i.e. to run their own sugar factories. However, the State Government arbitrarily, capriciously and without any justifiable reasons withdrew the said benefit vide Notification dated 1st April 2000 but continued it to the sugar factories / mills in the Co-operative Sector. It has been pointed out that the Government of Maharashtra by the G.R. dated 1st September 1994 had granted such exemption which was continued by the revised Industrial policy as per the Notification dated 30th October 1996. The Government of Maharashtra issued the said notification in exercise of the powers conferred under Section 5A of the Act and in supercession of the Government Notification dated 1st September 1994, with effect from the billing month of October 1996 the consumption of energy generated in a generating station by a person carrying on an industry and consumed by himself for such industry in the whole of the State of Maharashtra for payment of the whole of the electricity duty payable under Clause (b) of Part G of the Schedule appended to 9 the said Act. Thus exemption was available to all the industries in the whole of the State of Maharashtra and those who were generating electricity from a generating station for their captive use. 3. It would be appropriate to reproduce the impugned GRs, as under, “NOTIFICATION dated 1st April, 2000:- Under the provisions of Sec. 5-A The Bombay Electricity Duty Act 1958 (BOM ACT XL OF 1958) and in exercise of the powers conferred thereunder and in supercession of notification No. ELD 1096/CR 2864[1]/NRG-2 dated 30th October 1996, the Government of Maharashtra hereby exempts, with effect from the billing month April, 2000 the generation of electricity by unconventional method by a person / consumer carrying on an industry in the co-operative sector and consumed by them for such industry, in the whole of Maharashtra from the payment of the whole electricity duty payable under Clause (b) of Part G of the schedule appended to the said Act. NOTIFICATION dated 4th April 2001:- No.ELD.2001/CR-1069/NRG-1. In exercise of the 10 powers conferred by Section 5A of the Bombay Electricity Duty Act, 1958 (Bom. XL of 1958) and of all other powers enabling in this behalf, the Government of Maharashtra, having considered it necessary in the public interest, so to do, hereby exempts, with effect from 1st April 2000, the consumption of energy generated in a generating station by a person carrying on an industry and consumed by himself for such industry, in whole of the State of Maharashtra, from payment of such part of electricity duty payable under clause (b) of Part `G’ of the schedule to the said Act, as in excess of fifteen paise per unit, of energy so consumed, subject to the condition that generating set is installed in pursuance of the Government of Maharashtra policy prior to the revised policy regarding captive generation declared vide Government Resolution Industries, Energy and Labour Department, No. Sankirana – 1099/CR-455/NRG-7, dated 25th April, 2000. By the notification dated 1st April 2000 the exemption from the payment of electricity duty was continued only in respect of generation of electricity by non conventional method by a person / consumer carrying on an industry in the co- operative sector and consumed by them for such industry in the whole of the State of Maharashtra, whereas all other persons 11 having engaged in generation of power for their captive purposes, the State Government decided to levy electricity duty at the rate of 30 paise per unit. This policy announced on 1st April 2000 was again modified by the G.R. dated 4th April 2001 and the levy of electricity duly at 30 paise per unit was brought down to 15 paise per unit provided such industry / person generating energy for captive purposes had installed the generating station in pursuance of the Government of Maharashtra policy prior to the revised policy regarding captive generation declared by the Government of Maharashtra vide GR dated 25th April 2000. This implied that all those captive power plants installed after 25th April 2000 were not entitled for the concession or reduced rate of electricity duty at 15 paise per unit from 30 paise per unit. 4. It is also an admitted position that while these petitions were pending, the State Government vide its Notification dated 16th June 2005 in supercession of the impugned notifications i.e. Notification dated 1st April 2000 and GR dated 4th April 2001, restored the exemptions on the payment of electricity duty as was introduced by the notification dated 30th October 1996, with effect from 1st May 2005 to all the industries. Though the 12 petitioners were required to pay electricity duty at the rate of 15 paise per unit from 1st April 2000 till 30th April, 2005, the said payment was not made or made under protest in view of the interim order passed by this Court directing the State Government not to resort to any coercive action for recovery of the electricity duty so levied. Thus the only issue which remains for our consideration as of now is as to whether the denial of exemption in the payment of electricity duty to the petitioner sugar mills from 1st April 2000 till 31st March 2005 is illegal, unjustified, unreasonable, arbitrary, discriminatory and / or in violation of the guarantee under Article 14 of the Constitution. It is pertinent to note here itself that none of the petitioners have indicated as to when they have installed the bagasse based power generating captive plants i.e. any date prior to 1st September 1994 or 30th October 1996, but it appears that installation appears to be after the notification dated 22nd June 1993. 5. The petitioners state that there is no distinction in any manner between the co-operative sugar factories and the private sugar factories, in respect of licensing policy, financial policy, taxation, levy, control and sale of sugar, payment of 13 salaries to the employees, machinery requirements, procurement of the sugarcane from the farmers and the pricing policy of the sugarcane as well as sugar. When the sugar industry as such is treated as one by the Government of India or by the State Government for all purposes, the State Government has discriminated and acted arbitrarily in denying the exemption in payment of electricity duty to the private sugar mills and continuing the said benefit only to the cooperative sugar mills. It has been pointed out that the Government of Maharashtra issued a notification dated 30th September 1995 and levied the sugarcane purchase tax at the rate of 3 per cent from all the sugar factories i.e. co-operative sugar factories as well as private sugar factories. The Central Government levies and collects excise duty at the same rate for all the sugar factories and there is no distinction made between the co- operative sugar factories and the private sugar factories. Same thing applies to other taxes like sales tax, professional tax and excise duty etc. The payment of salaries to the employees were also uniform in all the sugar factories and there is no distinction between the private sugar factories and the co-operative sugar factories. Procurement of sugarcane is from the sugarcane growers and the minimum procurement price is determined by 14 the State Government. The price for sale of sugar is also determined by the Government of India. The distribution of sugar is also as per the directions of the Government India from time to time and in all this, there is no distinction made between the co-operative sugar factory and the private sugar factory. The State Government and the Central Government have been treating all the sugar factories equally and uniformly under the Income Tax Act, Customs Act, Central Excise Act and the Central Sales Tax Act etc. Thus the action of the State Government in issuing the impugned notifications is discriminatory, arbitrary and unreasonable. There is no rational nexus to the object sought to be achieved by these notifications. The exemption for payment of electricity duty was introduced to achieve the aim of generation of electricity and more particularly for captive purposes so that the industries would become self sufficient for the need of power consumption. The impugned notifications make an irrational, unconstitutional and illegal differentiation between the co-operative sugar factories and private sugar factories. The equals are made unequals. Equals are treated unequally and the impugned notifications are ultra vires of Article 14 of the Constitution. When the State Government in its wisdom reconsidered the impugned notifications and 15 superseded it as per the notification dated 16th June 2005, the State Government is deemed to have accepted its own illegal, unreasonable and unjustified act by levying electricity duty on the private sugar factories and exempting the co-operative sugar factories for the intervening period from 1st April 2000. This is a blatant exercise of discrimination by the State Government and the impugned notifications do not set out any rationale as to why the State Government thought it fit to continue the exemption in payment of electricity duty only to the co-operative sector. On the point of law it has been pointed out that the exemption permissible under Section 5A of the Act are permissible and restricted to (i) any class of premises, or (ii) purposes, or (iii) in respect of energy consumed upto a specified limit. These three restrictions alone can form basis for reasonable restrictions that may be imposed by the State Government on the power to grant exemptions. The Legislature having spelt out its intent with reference to Section 5A, there is no power in the State Government to alter, add or otherwise amplify indicated legislative restrictions as have been attempted by the said impugned notifications. Amongst the sugar factories there cannot be a further distinction as private sugar factories, joint stock sugar factories or the co-operative 16 sugar factories. All of them are set up for the purpose of manufacturing sugar and when they have captive power generation units, they cannot be differentiated and treated unequally when for all the purposes they are treated as equals by the State Government as well as the Central Government. 6. The State Government has filed affidavit-in-reply and has denied that the impugned notifications are ultra vires the Constitution. It has been emphasized that under Section 5A of the Act the Government can restrict the exemptions to any sector and, therefore, it decided to restrict the benefit only to the co-operative sector. The impugned notifications have been issued in pursuance of the powers conferred on the State Government under Section 5A of the Act and the State Government has treated persons carrying on industry in the co- operative sector as a separate class of premises and as such has granted exemption in payment of electricity duty. It is further stated that the persons carrying on industry in the co- operative sector and in the private sector form a separate class by themselves, distinct and different from others and as such the persons carrying on industry in the co-operative sector cannot be compared with the persons carrying on industry in 17 any other sector. In order to enhance the Government revenue, it was thought fit that such captive consumers like the petitioners be also liable for payment of electricity duty while exempting the co-operative sector. The affidavits in reply have been filed prior to the notification dated 16th June 2005 and thereafter there is no affidavit-in-reply justifying the denial of exemption in payment of electricity duty for the period from 1st April 2000 till that date i.e. for about five years. No reasons have been set out by the State Government as to why it thought it fit to deny such exemption only for the intervening period and at the same time why it thought it fit to reintroduce the exemption to all the industrial sector so long as the power generation was for captive purposes and it did away the differentiation between the co- operative sector and private sector. In the absence of any such explanation, we will have to presume that either the State Government has no explanation or it does not deem it appropriate to place such explanation before us justifying the denial of exemption for the limited period of five years from 1st April 2000 to 1st May 2005. 18 7. The Government of India issued a circular dated 31/10/1996 modifying the national programme of bagasse based co-generation of power particularly in sugar mills. The circular did not make any distinction between the private sector sugar mills on one hand and the co-operative sector sugar mills on the other hand. The duration of the national programme of bagasse based co-generation came to be extended upto 31st Mach 2000 or until further orders whichever was earlier. M/s. Maharashtra Industrial & Technical Consultancy Organization (MITCON), an undertaking of the State Government, organized a national workshop on co-generation and the Ministry of Non- Conventional Energy Sources, Government of India was a co- organizer. It published the Investor Guide Book on Bagasse Based Co-generation Power Projects in India. MITCON is a premier concept to commissioning consultancy organization for sugar mill co-generation projects and the Lead Programme Partner (LPP) of the Ministry for Non-Conventional Energy Sources for promoting projects of captive power generation in sugar mills. The seminar dealt with almost all the issues right from installation to the functioning of captive power plants and did not make any distinction whatsoever between the private and co-operative sugar factories. In terms of investments and 19 other financial liabilities admittedly there is no distinction that can be made between the co-operative and private sugar factories. In terms of procurement of sugarcane, the minimum base price of sugarcane, the sale and distribution of sugar, pricing of sugar, levy / taxes by the State Government of the Central Government, there is no distinction between the co- operative and private sugar factories. The liabilities in terms of the employees are also not in any way different between the two. The basic aim of the State Government in granting exemption in payment of electricity duty by invoking the powers under Section 5A of the Act is to encourage the sugar industry to be on its own, to the extent possible, in its requirement of power generation and when such is the “purpose” which words find place in Section 5A, it is not permissible for the State Government to make a further distinction between the co- operative sugar factory and private sugar factory while granting exemption in payment of electricity duty. It would be appropriate to reproduce the scheme of Sections 3, 4 and 5 of the Act as under “3. Duty on units of energy consumed (1) Subject to the provisions of sub-section 20 (2) there shall be levied and paid to the State Government on the consumption charges or the units of energy consumed (excluding losses of energy sustained in transmission and transformation by a licensee before supply to a consumer) a duty (hereinafter referred to as “electricity duty”) at the rates specified in the Schedule to this Act. (2) (a)Electricity duty shall not be leviable on the consumption charges or the units of energy consumed (i) by the Government of Maharashtra (save in respect of premises used for residential purposes); (ia) by or in respect of any municipal corporation, municipality, municipal committee, town committee, notified area committee, Cantonment Board, Zilla parishad or Village Panchayat constituted under any law for the time being in force in the State, for the purpose of, or in respect of a school or college imparting education or training in academic or technical subjects, a hospital, nursing home, dispensary, clinic, public street lighting, public water works and system of public sewers or drains (save in respect of premises used for residential purposes). (ib) by any licensee for purposes 21 directly connected with the construction, maintenance or operation of any generating, transmitting and distributing system of the licensee; (ii) by a tramway company, save in respect of premises used for residential and office purposes. (iii) by or in respect of any statutory University and institution run by the statutory University for the purpose of or in respect of education, research and training (save in respect of premises used for residential purposes. (iiia) by or in respect of charitable institution registered under the Bombay Public Trusts Act, 1950, for the purpose of, or in respect of, a school or college imparting education or training in academic or technical subjects (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; (vi) in respect of such industrial or agricultural purposes (other than residential or office purposes) in 22 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 any industrial purpose or process, in the Vidarbha region, Marathwada region, in the Raigad, Sindhudurg and Ratnagiri Districts and in the Thane District (but excluding therefrom the part adjoining Greater Bombay, which is encircled by the Thane – Bassein creek) in respect of any new industrial undertaking during a period of five years from the date on which such undertaking has begun to manufacture or produce articles for the first time before the commencement of the Maharashtra Tax Laws (Levy and Amendment) Act, 1988; Provided that, a new industrial undertaking which begins to manufacture or produce articles for the first time on any date after the commencement of the Bombay Electricity Duty (Amendment) Act, 1986 (hereinafter referred to in this sub-clause as “the said date”), shall make an application in the prescribed manner and form within two years from the said date, and thereupon the provisions of this sub-clause shall apply to such undertaking from the said date; Provided further that, the State Government 23 may, either prospectively or retrospectively by notification in the Official Gazette, exclude,- (a) any area aforesaid or any part thereof (regard being had to the price of energy prevailing therein and to the state of industrial development thereof) or (b) any new industrial undertaking or class of new industrial undertaking subject to such conditions and restrictions as may be specified in this behalf by the State Government in such notification. and thereupon the the provisions of this sub-clause shall not apply in those areas as part thereof or in relation to such new industrial undertaking or class of new industrial undertaking. (b) In those parts of the State not mentioned in sub-clause (vii) of clause (a) (but excluding Greater Bombay) electricity duty on the units of energy consumed by any new industrial undertaking for any industrial purpose or process shall during a period of five years commencing from the date from which such undertaking has begun to manufacture or produce articles for the first time