Case: Essar Steel India Ltd.  Vs. State Of Gujarat

2. Brief facts of the case which are necessary to be noticed for deciding this appeal are:-The appellant no.1 is duly incorporated company under the provisions of Companies Act, 1956 engaged in business of manufacturing and selling steel products. The appellant no.2 is also a duly incorporated company under the provisions of Companies Act, 1956, which is a generating company selling/supplying electrical energy. The appellant no.1 company set up its gas based steel plant at Hazira, in the year 1990 or thereabout for production of HBI. It also set up a 20 MW Open Cycle Power Plant for captive consumption of power for its HBI plant. On the application made by the appellant no. 1 Company, the State Government granted exemption from payment of electricity duty for a period of 10 years commencing from 21.07.1990 with respect to the said Open Cycle Power Plant. Subsequently, the appellant no.1 Company converted the said Open Cycle Power Plant of 20 MW into 30 MW Combined Cycle Mode Power Plant by adding steam turbine. Consequent upon such conversion, the appellant no.1 company was granted by the State Government exemption from payment of electricity duty for a period of 15 years commencing from 21.07.1990. In the year 1991, the appellant no.1 company also desired to put up a composite plant after making substantial investment for production of both HBI and HRC. Therefore, in or about the year 1991-92, the appellant no.1 company 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. The appellant thought of doing so, in view of the benefits available to the Captive Power Plant at the relevant time. The Government of Gujarat and the Gujarat Electricity Board granted in principle approval to the appellant no.1 company for setting up the said Captive Power Plant of 300 MW. 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. Government of Gujarat also, with a view to give effect to that policy, issued a Notification dated 27.02.1992 under Section 3 of the Bombay Electricity Duty Act, 1958 (hereinafter referred to as 1958 Act). The appellant no.1 Company, 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 generating company under the name and style of "ESSAR Power Limited", the appellant no.2 is a Special Purpose Vehicle promoted by the appellant no.1 company for supply of power to the appellant no.1 company as well as to the Gujarat Electricity Board.3. The Government of Gujarat issued an Order dated 16.06.1995 agreeing in principle to the demand of appellant no.2 to set up 510 MW generating station at Hazira. The appellant no.2 started production of electricity w.e.f. 08.08.1995. The appellant no.1 held equity shares of 42% of appellant no.2 company. Out of 515 MW, 300 MW capacity has been allocated to GEB (Gujarat Electricity Board) which constitute 58% of the installed capacity, remaining capacity of 215 MW which constitute 42% to the ESSAR Group of company as per the stipulation contained in the Power Purchase Agreement dated 30.05.1996.4. The appellant no.1 had filed an application dated 15.03.2001 seeking exemption from payment of electricity duty under the notification dated 27.02.1992 issued under Section 3(3) of the Bombay Electricity Act, 1958 (hereinafter referred to as Act 1958). Another application dated 12.04.2001 was sent by appellant no.1 to the Commissioner of Electricity seeking exemption from electricity duty for a period of 15 years under Section 3(2)(vii)(a) (i) of 1958 Act. The State of Gujarat Vide Order dated 23.12.2002 rejected the request for exemption under Section 3(2). The Order dated 23.12.2002 was challenged in the High Court Wherein High Court vide Order dated 17.03.2003 left open to the Government to take a fresh decision. The State Government again by Order dated 23.01.2006 rejected the application of appellant no.1 for grant of exemption for payment of electricity duty for 215 MW power generation equivalent to 42% of the total generation. The Writ Petition was again filed challenging the Order dated 23.01.2006 in which High Court set aside the Order dated 23.01.2006 and directed the Government to pass a fresh Order. The State Government passed the detailed Order dated 24.12.2009 rejecting the claim of appellant no.1 for exemption of payment of electricity duty both under Section 3(2)(vii)(a)(i) as well as under notification dated 27.02.1992. After decision dated 24.09.2009 recovery notice dated 06.10.2009 was issued for payment of electricity duty amounting to Rs. 562/- Crores together with interest totaling Rs. 1038.27/- Crores for the period of April 2000 to August 2009. The Order of State Government dated 24.09.2009 was challenged by the appellants before the High Court by means of Special Civil application no. 10946 of 2009. Learned Single Judge dismissed the Writ Petition vide its judgment dated 25.02.2010 aggrieved against which Letters Patent Appeal was filed by the appellants. In Letters Patent Appeal, an interim order was granted onThe appellant shall pay a sum of Rs. 50 Crores against the outstanding dues of electricity by 30.04.2010 in two installments of Rs. 20 Crores each.ii) The appellant no.1 shall further pay from 01.05.2010 a sum of Rs. 15 Crores every month against the outstanding dues of electricity.The Letters Patent Appeal ultimately came to be dismissed by Division Bench on 07.09.2016 against which judgment the present appeal has been filed.

Court's reasoning:
12. From the facts which have come on the record it is clear that appellant no.1 had claimed exemption from duty under the provisions of Section 3(2)(vii) as well as under the notification issued under Section 3(3) of 1958 Act for different period which exemption was earlier granted. Details of benefit of exemption availed by appellant no.1 has been extracted by Division Bench of High Court in Para 5.4 of the judgment.13. In the present case, no application in the prescribed form as per Rule 11 of the Rules was filed by the appellant no.1 and for the first time the appellant had come up with an application dated 15.03.2001 seeking an exemption under notification dated 27.02.1992 and subsequently on 12.04.2001 has again claimed exemption under Section 3(2)(vii)(a) (i) of 1958 Act. The exemption from payment of duty as claimed by the appellant is in two parts. Firstly, under Section 3(2)(vii)(a)(i) of 1958 Act and secondly, under the notification dated 27.02.1992.In the present case, there is no dispute to the fact that appellant No.2 was created as a Special Purpose Vehicle by appellant No.1 itself. Had appellant No.2 would have been supplying energy to appellant No.1 only, the claim deserved consideration. But present is a case where the appellant no.2 is supplying energy to industrial undertakings with whom it is not jointly generating the energy. Judgment of this Court in State of U.P. and Renusagar Company, thus, has no application in the facts of present case.The judgment of Andhra Pradesh Gas Power Corporation Limited is clearly distinguishable and does not help the appellant in present case. In the aforesaid case the energy was utilized by the participating industries and the concerned holding shares of A.P.GPCL but supply of energy to the sister concerned was required to have license. Present is a case where Gujarat Electricity Board who has been allocated 300 MW is not a participating industry nor appellant no.2 is jointly generating the energy with Gujarat Electricity Board, even if it is held that the appellant no.1 to the extent it holds 42% equity shares of appellant no.2 is jointly generating the energy. The Gujarat Electricity Board which has been allocated 58% of electricity generated can not be said as the industrial undertaking jointly generating the energy.In the above case the question of exemption in excise duty within meaning of Section 3(2) of 1958 Act had not arisen nor the question was considered whether EPL can be held to be generating energy jointly with appellant no.1 and Gujarat Electricity Board. For the issues which have arisen in the present case, the above judgment does not render any help.30.Learned Counsel for the appellant has submitted that the High Court had rejected the claim of payment only on the ground that there is no such Memorandum of Understanding between EPL and ECL as was found in A.P. Gas Power Limited (Supra). The High Court although has noted the fact that in the present case there is no such Memorandum of Understanding between EPL and ECL but the judgment of the High Court is not based only on the above premise rather High Court has clearly found that conditions stipulating under Section 3(2)(vii)(a)(i) of 1958 Act are not satisfied, hence, appellant no.1 is not entitled for exemption.High Court has elaborately considered all the submission raised by the appellant and rightly came to the conclusion that conditions as enumerated in Section 3(2)(vii) (a) are not fulfilled. We do not find any error in the aforesaid finding of the High Court.Another reason given by the High Court was that no application was made within 180 days of application of the notification dated 27.02.1992 or even from the date of installation of generating sets i.e. August 1995. Even if the second reason given by the High Court is ignored, nonfulfillment of condition no.(a) of notification dated 27.02.1992 clearly entailed rejection of claim under notification dated 27.02.1992. There is no foundation or basis laid down even in this appeal to assail the finding recorded by the High Court that generating set was not purchased from 01.01.1991 to 31.12.1992.34. We thus do not find any error in rejection of claim of appellant under the notification dated 27.02.1992.