IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 09.02.2011 Coram THE HON’BLE MR. JUSTICE VINOD K.SHARMA W.P.No.14696 of 2001 The Madras Aluminium Company Ltd., Mettur Dam Rs – 636 402. Rep. by its Company Secretary. .. Petitioner .. Vs .. 1. The State of Tamil Nadu, Rep. by its Secretary, Energy Department, Fort St. George, Chennai – 600 009. 2. The Tamil Nadu Electricity Board, Rep. by its Chairman, Anna Salai, Chennai – 600 002. 3. The Additional Chief Engineer, Tamil Nadu Electricity Board, Mettur. ... Respondents Prayer:- Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorarified Mandamus, calling for the records of the respondents culminating in the first respondent's letter bearing No.4522/B1-99/3, dated 22.09.1999 and quash the same and direct the first respondent to grant permanent exemption to the petitioner from the levy of electricity tax for generation and consumption of electricity through the captive power plants installed in the petitioner's factory in Mettur, in terms of Section 13 of the Tamil Nadu Electricity (Tax on Consumption) Act, 1962, and render justice. For Petitioner : Mr.S.Raghunathan For R-1 : Mr.Girish, Government Advocate For RR-2 & 3 : Mr.J.Ravindran https://hcservices.ecourts.gov.in/hcservices/ O R D E R The petitioner has challenged the order dated 22.09.1999 of the first respondent vide which the request of the petitioner for exemption from the provisions of Tamil Nadu Electricity (Taxation on Consumption) Act, 1962, stands declined. The impugned order reads as under:- ENERGY DEPARTMENT SECRETARIAT CHENNAI 600 009. LETTER NO.4522/B1/99-3 DATED 22.9.99 Thiru LAL RAWNA SAILO I.A.S. SECRETARY TO GOVERNMENT To M/s.The Madras Aluminium Company Mettur Dam SALEM DISTRICT 636 402. Sir, Sub : Electricity – Exemption from the provisions of Tamil Nadu Electricity (Taxation on Consumption Act, 1962)for Captive Generation in Aluminium Industry – Regarding Ref : Your letter dated 11.5.99 I am directed to invite your attention to your letter cited and to state that under the provision of Tamil Nadu Electricity (Taxation on Consumption) Act, 1962, the Madras Aluminium Company Limited, Mettur Dam is not eligible for exemption from payment of Electricity Tax on energy generated. Yours faithfully, Sd/- FOR SECRETARY TO GOVERNMENT Copy to: The Chief Electrical Inspector to Government Guindy, Chennai 600 032. Stock File / Spare copy" 2. The petitioner is a company registered under the Companies Act and is engaged in manufacture of Aluminium. The factory of the petitioner is situated at Mettur, Tamil Nadu. The case set up by the petitioner company is that it was amongst the https://hcservices.ecourts.gov.in/hcservices/ first five to set up an integrated Aluminium plant in India. This was done on the representations made by the State for setting up an integrated Aluminium unit in the State of Tamil Nadu. The case of the petitioner is that it was assured uninterrupted supply of electricity at concessional rate. The manufacture of Aluminium is power intensive process as power cost constitute over 50% of the cost of production of Aluminium. The petitioner company commenced production in the year 1965 and as assured was provided power at concessional rate. It functioned profitably until the production of the petitioner's plant was severely affected by frequent power cuts and increase in power tariff. 3. The other reason for losses was that Aluminium was the controlled item of the Government of India. Its distribution was controlled by the Government, because of the high demand. The petitioner company was declared, a Sick Industrial unit in terms of Section 3(1) (o) of The Sick Industrial Companies (Special Provisions) Act, 1985 and the Board for Industrial and Financial Reconstruction (BIFR) framed a scheme for its rehabilitation. 4. Though initially the BIFR had not agree with rehabilitation scheme, but subsequently, fresh scheme was submitted, taking into account the concession extended by the State of Tamil Nadu including the concession in electricity rate. The Government issued G.O.Ms.No.165, dated 28.04.1992, providing power at the concessional rate of Rs.1/- per unit including the tax on consumption to the petitioner. 5. The present management of the company successfully implemented the scheme of rehabilitation by infusing large amount of funds. 6. The case of the petitioner is that the scheme was sanctioned by BIFR mainly on the strength of concessions granted by the Government of Tamil Nadu. Based on concessions by State Government, concessions were also given by other financial institutions and banks etc., 7. The case of the petitioner is that the rehabilitation of the industry was carried out, keeping in view the social obligations and public interest, in terms of employment, optimal use of available resources in the form of plant and machinery, exploitation of natural resources etc., The case of the petitioner is that thereafter the first respondent wanted to withdraw the power tariff concession with effect from 28.04.1996 vide G.O.Ms.No.190, dated 11.12.1997. This was challenged by the petitioner by filing W.P.No.19331 of 1997, which was allowed by this Court. Against which, the Tamil Nadu Electricity Board preferred an appeal, which is pending in this Court. https://hcservices.ecourts.gov.in/hcservices/ 8. The case of the petitioner is that keeping in view the fact that the electrical power is a raw material for the Aluminium industry, and that it is impossible to run such industry without uninterrupted supply of electricity at an affordable price, and furthermore that the power tariff concession granted by the Government under the BIFR scheme also expired in February 1999, the petitioner decided to install captive power generating plant, after obtaining the necessary approvals. 9. A plant with three units of 25 MW was commissioned at the factory premises at Mettur, which made it possible for the Board to supply electricity to other consumers at a tariff rate, which was higher than the rate at which it was supplied to the petitioner. 10. The case of the petitioner is that the Tamil Nadu Electricity (Taxation on Consumption) Act, 1962 (hereinafter called as the Act), provides for a levy of electricity tax on consumption of electricity. 11. Section 13 of the Act reads as under:- "13. Power of Government to notify exemptions and reductions.- (1) The Government may, by notification, make an exemption or reduction in rate, in respect of the electricity tax payable under this Act by any specified class of persons, having regard to all or any of the following matters, namely :- (a) the nature of the business or industry carried on by such class of persons; (b) the price of energy consumed in relation to the total cost the manufacture or production of the principal product in any industrial undertaking owned or controlled by such class of persons; (c) such other matters as may be prescribed. (2) Any exemption from electricity tax or reduction in the rate of electricity tax notified under sub-section (1) may be subject to such restrictions and conditions as may be specified in the notification. (3) The Government may, by notification, cancel or vary any notification issued under sub-section (1)." https://hcservices.ecourts.gov.in/hcservices/ 12. The case of the petitioner is that in exercise of power conferred under Section 13 of the Act, the State of Tamil Nadu has granted exemption on permanent basis to Sugar, Paper, Textile and Chemical industries. The case of the petitioner is that at the time of granting exemption to these industries, Aluminium industry was not included, in the list of industries exempted from the levy even though it has been classified as power intensive industry under Section 2(3) of the Act. 13. The case of the petitioner is, that it may be due to the fact, that no representation was made for grant of exemption to the Aluminium industry, as the petitioner was the only company manufacturing Aluminium in South India, who had been granted special concessions. Therefore, after the expiry of the period of concession granted under BIFR scheme, the petitioner made a request for grant of exemption under Section 13 of the Act. The request of the petitioner has been declined vide impugned order. 14. The case of the petitioner is that the impugned order cannot be sustained, being on the face of it, arbitrary and out come of colourable exercise of power. The petitioner company has been discriminated viz., other industries. The impugned order also suffers from non-application of mind, as the first respondent failed to consider the nature of the petitioner's business, specially the fact that in cost of manufacture of Aluminimum, power constitute more than 50% of the total cost. That no reason has been given which could justify discrimination with Aluminium industry with the other industries, like Sugar, Paper, Textile and Chemical industries. 15. The plea of legitimate expectation is also raised, on the ground that the new management of the petitioner company inducted the fund. In view of the scheme framed by the BIFR granting concession for consumption of electricity, and also in view of the fact that under Section 13 of the Act, power vested with the State Government to grant exemption from imposition of tax on the captive use of electricity. That it was otherwise equitable for the State to have granted exemption to the petitioner under Section 13 of the Act, keeping view the social obligation being performed in appointing number of employees, thus being a source of livelihood to these families. Finally, it is contended that the impugned order, on the face of it, is arbitrary and amount to colourable exercise of power as non grant of exemption is likely to result in heavy losses and closure of writ. 16. The learned counsel for the respondents opposed this writ, on the ground that under Section 13 of the Act, the power is conferred with the State Government to notify exemptions or reductions of tax. The contention is that the power to be https://hcservices.ecourts.gov.in/hcservices/ exercised by the Government is in the nature of legislative power, therefore the petitioner cannot plead discrimination vis-a-vis other industries as it is absolute discretion of the State Government, to grant or not to grant exemption. 17. On consideration, this Court feels that at present, it will not be necessity to go into the merit of the controversy, to see as to whether the petitioner company is entitled to concession or not. It is also not necessary for the present to decide whether the discretion under Section 13 of the Act can be exercised by the State Government arbitrarily and discriminative manner, in view of settled law, that even discretion has to be exercised on sound principles and not at the whims and fancy of the authority, for the reason that the impugned order under challenge cannot be sustained, in view of the law laid down by this Court in the case of Dalmia Cement (Bharat) Ltd., Vs. The Accounts Officer, Electricity Distribution), wherein while dealing with the similar situation, this Court was pleased to hold as under:- 21. The Hon'ble Supreme Court in the decision in S.N. Mukherjee V. Union of India (AIR 1990 SC 1984) held that "even administrative order which has civil consequences must give reasons". In paragraph 35 of the aforesaid decision, the Suprement Court observed that 'recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision making. It is not necessary that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. However, what is necessary is that the reason should be clear and explicit so as to indicate that the authority has given due consideration to the points in controversy.' 22. Further, the Hon'ble Supreme Court in Union of India Vs. Jai Prakash Singh [(2007) 10 SCC 712], has held as follows: "Reasons are live links between the mind of the decision- taker to the controversy in question and the decision or conclusion arrived at. Reasons substitute subjectively by objectivity. The emphasis on recording reasons is that if the decision reveals the 'inscrutable face of the sphinx', it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can https://hcservices.ecourts.gov.in/hcservices/ know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out. The 'inscrutable face of a sphinx' is ordinarily incongruous with a judicial or quasi-judicial performance." 23. Therefore, the authority while considering the request was bound to assign reasons for rejecting the request. Moreso, when the appellant had been granted the benefit when they had utilised diesel or LSHS. The reason assigned by the appellant for using Furnace Oil is that, there was shortage in supply of LSHS, the Indian Oil Corporation themselves had advised them to continue to utilise the furnace oil. It is further submitted that the cost of furnace oil is higher than that of LSHS and by considering all these circumstances, the appellant would contend that there appears to be no reasonable basis on which their request could be rejected. 24. In any event, we are not inclined to go into the controversy as to whether the appellant Industry is entitled for exemption while using furnace oil for generating electricity for captive consumption or not. It is essentially a question of fact to be decided by the competent authority by taking into consideration the relevant factors and materials. We are satisfied that the impugned orders have been passed in a mechanical manner without assigning any reason whatsoever. On this ground alone, we propose to interfere with the orders impugned in the Writ Petition and accordingly set aside the same. 18. The order under challenge, also shows total application of mind. The order does gives no reason as to why the claim of the petitioner was not found eligible for exemption from payment of electricity tax on the energy generator, and as to why the contention raised in representation were not acceptable. 19. Consequently, this writ petition is allowed, the impugned order is set aside, the case is remitted back to the State of Tamil Nadu, to take a decision afresh on the representation made by the petitioner for grant of tax exemption on consumption of electricity. https://hcservices.ecourts.gov.in/hcservices/ 20. The needful be done within a period of three months of receipt of certified copy of this order. The respondents are directed to pass a detailed speaking order giving reasons for acceptance or non acceptance of the request by the petitioner. No costs. jrl Sd/- Asst.Registrar /True copy/ Sub.Asst.Registrar To 1. The Secretary, The State of Tamil Nadu, Energy Department, Fort St. George, Chennai – 600 009. 2. The Chairman, The Tamil Nadu Electricity Board, Anna Salai, Chennai – 600 002. 3. The Additional Chief Engineer, Tamil Nadu Electricity Board, Mettur. + 1 cc to Mr.S.Raghunathan, Advocate Sr.9745 + 1 cc to Mr.J.Ravindran, Advocate Sr.10270 W.P.No.14696 of 2001 PUR (CO) RRI/8.3.2011 https://hcservices.ecourts.gov.in/hcservices/