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SCA/12949/2000 7/ 7 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 12949 of 2000
With
SPECIAL
CIVIL APPLICATION No. 16763 of 2003
For
Approval and Signature:
HONOURABLE
MR.JUSTICE AKIL KURESHI
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
BILY
CHEMICALS LTD - Petitioner(s)
Versus
UNION
OF INDIA & 5 - Respondent(s)
=========================================================
Appearance
:
MR
AR THACKER(SCA NO,12949/2000) MR JR NANAVATI(SCA NO.16763/2003)for
Petitioner(s) : 1,
MR PS CHAMPANERI for Respondent(s) : 1 - 3.
MS
ML SHAH, AGP for Respondent(s) : 4,
NOTICE SERVED for
Respondent(s) : 5,
RULE SERVED for Respondent(s) :
6,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
Date
: 19,22/11/2010
ORAL
JUDGMENT
Petitions
involve similar question of facts and law, they therefore have been
heard together and are disposed of by this common order.
Facts
as emerging in Special Civil Application No.12949/2000 can be
noticed. The petitioner is a company involved in the activity of
manufacturing salt as its operations in Jamnagar District, of State
of Gujarat. Previously the factory for manufacturing salt was owned
and operated by Saurashtra Cement & Chemical Industries Ltd.
Premises of the factory were obtained on lease from the State
Government. Such lease was transferred by M/s. Saurashtra Cement &
Chemical Industries Ltd. in favour of the M/s. Ballarpur Industries
ltd. in the year 1972 with permission of the State Government.
Eventually M/s. Ballarpur Industries Ltd. transferred its rights
with respect to the said unit including the leasehold rights on the
land in question in favour of the petitioner on or around 11.7.2000.
Lease agreement and license which the petitioner inherited from its
previous unit both contained certain clauses to control salt
manufacturing activities. License under which the petitioner
operated contained an additional clause which reads as under :
“That
the production from the salt works will be utilised only for captive
consumption in their plants at Jagadhari, Ballarpur (Maharashtra) an
Binage (Karnataka) for the manufacture of Caustic Soda and will not
be made available for sale in the country or for exports without the
express prior approval of the Salt Commissioner
Corresponding
provision was also made in the agreement of lease. Relevant clause
whereof reads as follows :
“(10)
The lessee shall be required to take prior permission of lessor
before making any change in future and the unit of the lessee shall
function according to the lawful instructions issued by the
Government from time to time.
(11)
The lessee shall be liable to comply with all the terms &
conditions of the lease annexed as Annexure’A’ and shall be liable
for all liabilities of confirming party.
(12)
The Salt Commissioner has informed that this unit is a captive unit
for which conditions of captive units shall be binding on you as per
license conditions.”
Combined
reading of the above provisions would reveal that as per the terms
of the license as well as lease agreement between the parties, the
petitioner was permitted to produce salt on the condition that same
will be utilised only for captive consumption in their plant and
will not be made available for sale in the Country or for exports
without prior approval of the Salt Commissioner. By virtue of
clauses (10) to (12) in the lease agreement and additional condition
of the license, petitioner was confined to consume salt for its
captive consumption and was prohibited from selling salt in the
Country or outside without prior permission. It is however, not in
dispute that license for manufacturing of salt was governed under
Rule 102 of the Central Excise Rules, 1944. In particular, Rule 102
provide that manufacturing of salt is prohibited except under a
license. Such rule therefore, requires an intending party to
excavate sale to obtain necessary license for the same from the
competent authority. Rule 103 pertains to license to be granted by
the Collector. Subsequent rules made provisions relating to
controlling such license for excavation of salt. It is not in
dispute that with effect from 23.7.1996 entire Chapter VI from Rule
102 to Rule 138 of the Salt Rules has been deleted. With effect from
the said date therefore, according to the petitioner, there is no
further need to obtain any license for manufacturing of salt. In
other words, by deletion of said chapter, manufacturing of salt has
been de-licensed. Despite such a fact, respondents insisted that the
petitioners continued to be governed by such conditions of license
as incorporated in the lease agreement between the petitioner
industries and the State Government.
This
is manifested in impugned communication dated 31.8.1999 from the
Deputy Salt Commissioner, Ahmedabad to the petitioner company in
which it is stated as under :
“As
per your original application dated 27.01.1962 wherein your company
M/s Saurashtra Cement had requested for opening salt works and for
captive use. This intention of your parent company was made more
explicit in the licence granted to you. As such we feel that company
as a matter of right cannot remove salt to other industries. You
should take prior permission of Salt Commissioner, Jaipur for such
removals. These orders are only in respect of Singah Units. Separate
instructions are being issued for your Khavda(Kutch) Unit.”
Insofar
as Special Civil Application No.16763/2003 is concerned, facts are
similar except that in addition to the stand of the respondents, the
petitioner company continued to be governed by such restrictions,
respondents also issued a show cause notice dated 28.10.2003 stating
that petitioner has been granted license on the condition that such
salt is of captive consumption alone or for export outside the
Country. All surplus therefore, should be sold to other industries
only with permission of the Salt Commissioner. It is further stated
that though the petitioner is not granted any permission in the year
2003 to sell salt in excess of its quota in the open market or any
other industry, company has breached said conditions and sold the
salt in open market without any permission from the Salt
Commissioner. Company was therefore, called upon to explain why
permanent registration granted to its refinery not be cancelled for
such violation of the conditions. In effect therefore, the said
petitioner challenges the stand of the respondents in enforcing the
conditions which according to the petitioner has become obsolete and
also challenged the show cause notice issued by the Salt
Commissioner why registration of the refinery of the petitioner
company not be cancelled.
Appearing
for the respective petitioners Shri A.R. Thacker and Shri J.R.
Nanavati contended that previously restrictions were imposed by the
Salt Commissioner in view of Rules 102 to Rule 138 of the Salt
Rules. In the year 1996, such rules were deleted. With deletion of
the entire chapter, it was not open for the Salt Commissioner to
impose any of the conditions for license since requirement of
license itself was done away.
On
the other hand, learned counsel Shri Champaneri appearing for the
Union of India contended that loose salt is not permitted to be sold
in certain States. It was therefore, necessary for respondent
authorities to verify the movement of salt and therefore, certain
restrictions were necessary to be imposed.
Having
heard learned counsel for the parties and having perused the
documents on record, it clearly emerges that prior to year 1996 for
manufacture, excavation, collection or removal of salt, necessary
license was prohibited except, under a license issued under the
competent authority under Rule 102 of the Central Excise Rules 1944
contained in Chapter VI which pertains to salt. Other provisions of
the said Chapter upto Rule 138 pertain to granting of such license,
conditions thereof and other incidental powers of the authorities.
Undisputedly, w.e.f. 23.7.1996 entire chapter VI of the Central
Excise Rules, 1944 has been repealed. With deletion of the said
Chapter, therefore, salt came to be de-licensed. There was
therefore, no further requirement of obtaining license for
manufacturing of salt. It is not the case of the respondents that
such provisions contained in Chapter VI of the Central Excise Rules
1944 were substituted by any other statutory enactment. In absence
of any control or power to regulate manufacturing of salt, and
resultantly in absence of any requirement to obtain license for such
manufacture, in my opinion respondents cannot, after the said date
i.e. 23.7.1996, enforce any of the conditions of license. Condition
that salt manufactured by the petitioners will be only for captive
consumption or that same shall not be sold in the open market
without permission of the Salt Commissioner, therefore, no longer
would be operative. Corresponding conditions imposed by the State
Government in the lease agreement between the petitioner companies
and State would also lose its significance. It is not the case of
the State Authority that such conditions were necessary
independently of the terms of license. It is a matter of no doubt
that the corresponding conditions contained in the lease agreement
between the petitioner company and the State Authority were only by
way of incorporation from the terms of the license granted to the
petitioners by the Salt Commissioner. When license itself lost its
significance and when conditions contained in license as held
here-in-above, ceased to operate, it was not open for the Salt
Commissioner to bring back such condition by back door by insisting
on compliance of such terms contained in the agreement entered into
between the petitioner companies and the State Government.
In
the result, both petitions are required to be allowed. In Special
Civil Application No.12949/2000, impugned communication dated
31.8.1999 is quashed. In Special Civil Application no.16763/2003,
impugned show cause notice dated 28.10.2003 is quashed.
It
is however, clarified that if there is any restriction of sale of
salt in loose condition in any of the State, it is always open for
the respondents to have such restrictions implemented. This is
however, quite different from suggesting that petitioners can be bow
down by previous conditions of license of using the salt for captive
consumption which license has become redundant with repeal of
Chapter VI of the Central Excise Rules, 1944.
With
above observations and directions, the petitions are disposed of.
Rule made absolute in above terms.
(Akil
Kureshi,J.)
(raghu)
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