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SCA/373/2001 2/ 18 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 373 of 2001
With
SPECIAL
CIVIL APPLICATION No. 6220 of 2001
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
=========================================================
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 ?
=========================================================
BHARAT
PETROLEUM CORPN LTD – Petitioner(s)
Versus
STATE
OF GUJARAT & 3 – Respondent(s)
=========================================================
Appearance
:
MR
GN SHAH for
Petitioner(s) : 1,MS MINOO A SHAH for Petitioner(s) : 1,
GOVERNMENT
PLEADER for Respondent(s) : 1, 4,
RULE SERVED for Respondent(s) :
2,
MR PREMAL R JOSHI for Respondent(s) :
3,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
Date : 6/05/2010
CAV JUDGMENT
The Special Civil
Application No.373 of 2001 is filed by Bharat Petroleum Corporation
Ltd., praying for quashing and setting aside the communications
dated 16.1.1999 and 9.3.1999 as well as the order passed by the
respondent No.4 on 3.1.2001. The petitioner has also prayed for
declaration that the determination by the respondent No.2 that the
Industrial Undertaking of the petitioner at Hariyala is liable to be
assessed at 60% of the consumption charges of electricity and for
which no reason have been given and hence the said determination is
void, illegal and have no legal effect.
The brief facts of the
case are that the petitioner established (Liquid Petroleum Gas) LPG
Bottling Plant at Hariyala, Taluka : Matar, Dist. Kheda on
14.4.1994. Right from its establishment the State Government has
been treating the Industrial Undertaking of LPG Bottling Plant of
the petitioner as an Industrial Undertaking under Section-2 of the
Bombay Electricity Duty Act and collects electricity duty of 20% of
electricity consumed by the petitioner every month. The respondent
issued notice on 14.5.1999 to the petitioner to revise this
classification of the Industrial Undertaking for the purpose of
electricity duty. Thereafter, as per the instruction of State
Government, differential duty was demanded from the petitioner to
the tune of Rs.33,80,176.56 ps., failing which the power supply will
be disconnected.
The petitioner filed
Special Civil Application No.3466 of 1999 before this Court
challenging the communication dated 9.3.1999 demanding recovery of
differential amount of electricity duty from the petitioner. The
said petition was disposed of by this Court on 6.5.1999 directing
the petitioner to file Appeal before the Appellate Authority within
two weeks from the date of the said order and further directing to
deposit 50% of the duty amount claimed from the petitioner. The
petitioner filed an Appeal No.2 of 1999 before the Appellate
Authority which came to be dismissed n 3.1.2001.
Being aggrieved by the
said order, the present petition was filed.
This Court has issued
rule on 20.4.2001 and directed the petitioner to make the payment of
remaining amount within a period of six weeks from the date of the
said order and the respondents were restrained from disconnecting
the electric supply. The Court has also made it very clear that the
payments made and/or to be made by the petitioner shall be subject
to the result of the petition and in case the amount paid by the
petitioner would be ordered to be refunded to the petitioner,
appropriate order as regards payment of interest would be passed by
the Court. Pursuant to this order, the petitioner made payment of
the remaining amount.
The Special Civil
Application No.6220 of 2001 is filed by Hindustan Petroleum
Corporation Ltd., seeking declaration that the determination by the
respondent No.2 that the Industrial Undertaking of the petitioner at
Village : Piludar is liable to be assessed at 60% of the consumption
charges of electricity is void, illegal and of no legal effect and
also praying for quashing and setting aside the communication dated
23.11.1998 and directing the respondent to refund the differential
amount of electricity duty illegally collected from the petitioner.
The brief facts of the
case are that the petitioner has established its LPG Bottling Plat
at Village : Piludra, Taluka : Ankleshwar, Dist. Bharuch and the
petitioner was paying electricity charges and electricity duty at
20% of the consumption charges. The petitioner made an application
to the respondents for exemption from payment of electricity duty on
29.4.1998. The petitioner provided all necessary details on 7.5.1998
regarding various processes carried out by the petitioner at the
plant. The petitioner has also provided information on 15.5.1998
regarding manufacturing process of LPG Bottling Plant sought by the
respondents. On 10.7.1998 further details regarding the
manufacturing process carried out by the petitioner were provided.
Despite this fact, in November, 1998 the petitioner was informed by
respondent No.1 that electricity duty at 60% of the electricity
consumed would be charged as the activities undertaken at the plant
fall under the residuary clause. On 23.11.1998, the petitioner was
called upon to pay with retrospective effect from January, 1997 to
January, 1998 electricity duty at 60% amounting to Rs.8,27,278.62
ps. No opportunity was given to the petitioner and only with a view
to avoid disconnection the said payment was made under protest and,
thereafter the present petition was filed.
This Court has issued
rule on 17.8.2001 and directed to be heard alongwith Special Civil
Application No.373 of 2001 and Special Civil Application No.5400 of
2001.
Ms.Minoo A. Shah, learned
advocate appearing for the petitioners in both these petitions, has
submitted, over and above adopting the arguments canvassed by
Mr.Nanavati in Special Civil Application No.5400 of 2001, that the
petitioners have obtained the registration of Industrial
Undertaking. They have also obtained necessary licenses from the
Controller of Explosives, Baroda under the provisions of the
Explosives Act for storing compressed gas in pressure vessels. There
is no dispute about the fact that the petitioners’ undertakings are
Industrial Undertakings as defined under Section-2(bb) of the Act.
The manufacturing process is also being done at the plant of the
petitioner. Bulk LPG is stored in plant of the petitioners and
manufacturing process of refilling of LPG in cylinder is carried out
at the LPG Bottling Plant. The Government of India in exercise of
powers conferred by Sections-5 and 7 of the Indian Explosives Act,
1884 has made rules known as Gas Cylinder Rules, 1981. The Rule-2,
Sub-clause-xxv defines the expression ‘manufacturing of gas’ as
under:-
manufacturing
of gas means filling of a cylinder with any compressed gas and also
includes transfer of compressed gas from one cylinder to any other
cylinder.
She
has, therefore, submitted that filling of LPG Gas Cylinder is
evidently a process of manufacture and, therefore, the petitioners
are Industrial Undertakings consuming high tension energy as
provided by Section-3(1), Clause 5(a) of the Schedule to the Act and
as such the respondents had initially correctly levied duty at 20%
of the consumption charges.
Ms. Shah further
submitted that the Act does not authorize the Assessing Officer to
change the classification of the consumer of electricity, once such
classification has been made by the Assessing Officer. The action
of the Assessing Officer in changing the classification is
arbitrary, illegal and also opposed to principle of natural justice.
Even otherwise, the Assessing Officer cannot change the
classification with retrospective effect, once the classification
has already been made and electricity duty has been paid and
collected accordingly.
Ms. Shah has further made
an alternative submission without prejudice to her main submission
that the plant of the petitioner is an Industrial Undertaking, that
the activities carried out at the plat of the petitioners would fall
under the activities of a service undertaking’ as defined in
Section 2(bb)(a) of the Act. The plant can be deemed to be a service
undertaking as the activity of the plant includes reconditioning,
restoring, reserving or cleaning LPG received in bulk at the plant
and subsequently producing LPG filled cylinders by using carousel
type auto filling system after reconditioning, repairing, restoring
etc., for making it usable for domestic, commercial or industrial
purposes and prior to such activities the petitioner is preserving
LPG Gas in bulk at storage tanks till the aforesaid processes are
carried out. She has, therefore, submitted that the action of the
respondent authorities demanding the differential duty from the
petitioners is required to be quashed and set aside.
Ms. Shah has further
submitted that even otherwise the issue is concluded by the recent
decision of this Court rendered on 25.11.2009 in the case of Vadilal
Gases Pvt. Ltd., Vs. State of Gujarat (Special Civil Application
No.9691 of 2000)
wherein the Court after considering the nature of process undertaken
by the petitioner took the view that the petitioner unit is a
manufacturing unit within the definition of the Act and hence the
petitioner is required to pay only 10% duty charges and not 60%
charges as demanded by the respondent. The Court further held that
the finding of the authority that there is no manufacturing process
is without any basis. The Court has allowed the petition and
quashed the order passed by the respondent authorities and
respondents were directed to credit the excess payment made by the
petitioner in the future bills. She has, therefore, submitted that
since these two cases
are identical with the said case, the petitions deserve to be
allowed and the respondent authorities are directed to refund the
amount with interest.
An
affidavit-in-reply is filed on behalf of Electricity Company.
Mr.Premal Joshi, learned advocate appearing for the respondent
Electricity Company has submitted that electricity consumption of
the petitioners falls under Item No.7 of Schedule-I to the Act as
the activities of LPG refilling carried out by the petitioners does
not get covered under definition of Industrial Undertaking or
service undertaking as per Section 2(bb) or 2(ee) of the Act
respectively. As such the petitioners are not covered under the
definition of Industrial Undertaking and, therefore, question of
exemption from payment of electricity duty as per Section
3(2)(vii)(b) does not arise. He has further submitted that during
the course of inspection it was noticed that energy was consumed by
the petitioner Company through HTP connection over and above of LPG
refiling only at their plant and no manufacturing activity as
defined in Section-2(bb) of the Act was carried out by the
petitioners. The petitioners were thereafter given show cause
notices and differential duty was demanded.
Mr.Joshi further
submitted that the petitioners received bulk LPG through pipeline
directly from ONGC, Ankleshwar and ONGC, Hazira in their factory.
There are no predominant manufacturing activities. The only activity
carried out by the petitioners is simply refilling of the LPG. The
said activity is nothing else but simply refilling of the LPG which
is required to be viewed accordingly. Since no predominant
manufacturing activities are carried out by the petitioner and LPG
manufacturing activity is carried out by the petitioner and LPG
manufacturing activity is carried out by other public sector
undertaking, namely, ONGC, Ankleshwar and ONGC, Hazira ad only
refilling is done by the petitioner, they cannot claim the benefit
of being an industrial undertaking. He has, therefore, submitted
that the respondent authorities have rightly demanded the
electricity duty at the rate of 60% from the petitioners.
Mr.Joshi further
submitted that the definition of Industrial Undertaking in the
present case is required to be applied under the Bombay Electricity
Duty Act, 1958 only. The definitions of Industrial Undertaking under
other Acts i.e. Factories Act, 1948 or the Indian Explosives Act,
1948 has no relevance. The important factor for levy of electricity
duty is based on the nature of consumption defined under Part-I of
Schedule-I to the Bombay Electricity Duty Act, 1958 and hence the
rate of electricity duty is applicable to the petitioner under Item
No.7 as a residuary clause.
Having heard the learned
advocates appearing for the parties and having considered their
rival submissions in light of the statutory provisions and decided
case law on the subject and having judiciously examined the
decisions/orders under challenge, the Court is of the view that the
respondent authorities are not justified in collecting/adjusting
and/or enforcing the recovery of electricity duty at the rate of 60%
by reclassifying the electrical energy consumed by the petitioners
for their activities. The Court has at length discussed this issue
in Special Civil Application No.5400 of 2001 decided today and for
the reasons stated and findings recorded therein, the petitions
deserve to be allowed and are accordingly allowed.
Apart from the said
reasoning, one more point which is in favour of the petitioners is
that as per the definition of industrial undertaking given in
Section 2(bb) of the Act, the petitioners’ activities fall within
the ambit of this definition. The Government of India in exercise
of power conferred by Sections 5 and 7 of the Indian Explosives Act,
1884 has made Rules known as Gas Cylinder Rules, 1981. The Rule-2,
Sub-clause-xxv defines the expression ‘manufacturing of gas’ which
means filling of a cylinder with any compressed gas and also
includes transfer of compressed gas from one cylinder to any other
cylinder. Thus, filling of LPG Gas Cylinder is evidently a
process of manufacture and, therefore, the petitioners are
Industrial Undertakings consuming high tension energy as provided by
Section-3(1) and Clause 5(a) of the Schedule to the Act and as such
the respondents had initially correctly levied duty at 20% of the
consumption charges.
The petitioners’ claim is
further supported by the decision of this Court in the case of
Vadilal Gas Pvt. Ltd., Vs. State of Gujarat (Special Civil
Application No.9691 of 2000 decided on 25.11.2009)
wherein the Court after considering the nature of the process
undertaken by the petitioner took the view that the petitioner unit
is a manufacturing unit within the definition of the Act and hence
the petitioners require to pay only 10% duty charges and not 60%
charges as demanded by the respondent.
In
the above view of the matter, the communication dated 16.1.1999 and
9.3.1999 as well as the order passed by the respondent No.4 on
3.1.2001 in Special Civil Application No.373 of 2001 are hereby
quashed and set aside. Similarly the communication dated 23.11.1998
demanding the differential duty from
the petitioner of Special Civil Application No.6220 of 2001 is
hereby quashed and set aside.
In the above view of the
matter, the respondent authorities are hereby directed to grant the
refund of the amount paid by the petitioners against differential
duty, with 9% interest per annum forthwith under intimation to the
petitioners. It is, however, open for the respondent authorities to
adjust this amount of refund against future liability of the
petitioners towards electricity duty, under intimation to the
petitioners.
Subject to the above
direction and observation, these two petitions are accordingly
allowed. Rule is made absolute to the above extent without any order
as to costs.
(K. A. PUJ,
J.)
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