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
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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,
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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(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 ::: Downloaded on - 09/06/2013 15:09:11 ::: 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
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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
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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 before the
commencement of the Maharashtra Tax Laws (Levy
and Amendment) Act, 1988 be leviable at half the
rates specified in the Schedule to this Act.
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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 int he 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;
Government
igProvided
may,
further
either
that the
prospectively
State
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 provisions of this clause shall not
apply in those areas or part thereof or in relation to
such new industrial undertaking or class of new
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industrial undertaking.
4. Payment of electricity duty :- (4) Every
person other than the licensee who generates energy
for his own use shall pay to the State Government at
the time and in the manner prescribed the proper
electricity duty payable under this Act on the units of
energy consumed by him.
5A. Power to exempt:- Subject to such conditions
as it may impose, the State Government may, if it
considers it necessary in the public interest so to do,
by notification in the Official Gazette, exempt whether
prospectively or retrospectively, the consumption of
energy in the whole or any part of the State in respect
of any class of premises or purposes or in respect of
energy consumed upto a specified limit, from
payment of the whole or any part of the electricity
duty payable under Part A, Part B, (Part F or Part G) of
the Schedule to this Act.
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SCHEDULE
(See Section 3)
Part G
In respect of
(a) every person not being a
licensee who generates energy
and supplies the same to any
other person free of charge for At such rate or rates not
consumption of energy by that exceeding 40 paise per unit as
other person, and the State Government may,
either prospectively or
(b) every person other than a retrospectively, by notification
licensee who generates energy in the Official Gazette specify.
for consumption of energy by
him.
8. While sub-section (1) of Section 3 of the Act is the
charging section which provides for levy of payment of
electricity duty at the rates specified in the Schedule to the Act
sub-section (2) provides for exemption from payment of the
electricity duty, inter alia, to various persons like the industries,
municipal corporation, municipality, municipal committee, town
committee, Cantonment Board, Zilla Parishad, statutory
universities, charitable institutions etc. Section 5A empowers
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the State Government, if it considers it necessary in the public
interest so, to exempt by notification in the official gazette, the
consumption of energy in the whole or any part of the State, in
respect of (i) any class of premises, or (ii) purposes, or (iii) in
respect of energy consumed upto a specified limit, from
payment of whole or any part of the electricity duty payable
under Parts A, B, F or G of Schedule to the Act. It is pertinent to
note that Section 5A does not use the words “exemption to any
person or class of persons” and it only speaks of (i) any class of
premises, (ii) purposes, and (iii) in respect of energy consumed
upto a specified limit, for exemption in payment of electricity
duty. Even if we consider “any class of premises” or
“purposes”, it is clear that sugar industry as such is set up for
the purpose of manufacture of sugar or the factory as such has
the premises used for manufacture of sugar. Whether such
premises for the purpose of manufacturing sugar is belonging to
the private sector or the public sector, Section 5A does not
make any distinction. The Legislature while enacting Section 5A
has not considered a further differentiation in terms of sectors,
viz. private sector, public sector and co-operative sector and
the Legislature has in its wisdom used only the words any class
of premises or purposes or in respect of energy consumed upto
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a specified limit which the State Government could grant
exemption from payment of the whole or any party of the
electricity duty payable under the Act. It is obvious that the
State Government realized this when it issued a fresh
notification dated 16th June 2005 and reintroduced the
exemption from payment of electricity duty to all the industries
who have set up power generation plants for captive
consumption.
It is pertinent to note that for the first time the
Government of Maharashtra vide its notification dated 22nd June
1993, in exercise of its powers under Section 5-A of the Act
granted exemption in payment of electricity duty for captive
consumption in respect of any industrial purpose in the whole of
the State of Maharashtra subject to the following conditions viz.,
(a) the exemption shall be available only in respect of energy
generated in a generating station installed on or after 1st day of
July 1993 by the person carrying on industry and consumed by
himself for such industry, (b) the exemption shall not be
available in respect of any energy consumed for residential or
office purposes in any industry. However, by the subsequent
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notification dated 1st September 1995 the State Government
made the exemption of electricity available to all the industries
irrespective of the date of installation of the captive generating
station and the purpose of consumption and it was made open
as distinct from the earlier policy of denying such exemption in
respect of any energy consumed for residential or official
purpose in any industry. The notification dated 22nd June 1993,
therefore, clearly indicated that the Government of Maharashtra
wanted to encourage / motivate or invite the industries to install
the captive power generation plants so that the requirement of
power by the industries from the State Electricity Board is
reduced. The gap between the generation and distribution of
electricity in the State of Maharashtra has been widening every
year and, therefore, it was obviously the State Government’s
intention to encourage the industries to be self sufficient, to the
extent possible, in requirement of power supply. The power
position in the State of Maharashtra as per the Western Region
Power Sector Profile – January 2007 published by Government of
India, Ministry of Power is as under:
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Year Peak Demand Demand Met % Shortage
Requirement in In MW
MW
1998-1999 10665 8675 18.70
1999-2000 10665 8675 18.70
2000-2001 12535 10596 15.50
2001-2002 12265 10726 12.50
2002-2003 13697 10984 19.80
2003-2004 14503 11868 18.20
2004-2005 14986 12464 16.80
2005-2006 16069 12360 23.10
The intention of the State Government is not disputed
before us either in the affidavit-in-reply or in the oral arguments
advanced by the learned AGP. Thus the purpose for which the
powers under Section 5-A of the Act were invoked by the State
Government was to ensure that the industries become self
reliant as far as possible or to the extent possible, in the
requirement of power to run the industry and the said purpose
continues to be relevant even as of now and it remains so for
the period from 1st April 2000 to 30th April 2005. On the face of
this factual position, no reasonable ground has been explained
or set out before us by the State Government in continuing the
exemption only to the co-operative sector sugar mills and
denying the same to all other sugar mills and consequently the
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impugned notifications are vitiated as being discriminatory,
arbitrary and lack of application of mind.
9. Mr.Sonpal, the learned AGP submitted in his oral
arguments that at no point of time the State Government had
committed that the exemption will be continued for an
indefinite period. At the same time the exemption was
continued for more than five years and was withdrawn because
of the financial crunch and the Government had to resort to
augmentation of revenue so as to face the revenue deficit. In
this regard he referred to the speech of the Finance Minister on
the floor of the House where he presented the Budget for the
year 2000-2001 and more particularly the following statement:
“Duty on the electricity produced for captive use
is exempt. However, if electricity from captive power
plants is supplied to other consumers, it attracts dutyof 30 paise per unit. I propose to remove this
differentiation by withdrawing the exemption for
captive use with effect from 1st April, 2000.”
10. It is not known whether the final budget was
approved by the Assembly in terms of the above speech or
there were any amendments. The proposal made by the
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Finance Minister was to withdraw the exemption of electricity
duty applicable for captive use to all the industries but by the
impugned notifications it has been continued in the co-
operative sector captive power plants being run on non
conventional resources. If the State had withdrawn the
exemption for all the industries, it could be a different matter
but it is evident that the State Government continued the
exemption for payment of electricity duty selectively and only
to the co-operative sector. No reasons have been furnished in
the impugned notifications so as to justify the benefit being
continued to the co-operative sector which predominantly
implies, in the State of Maharashtra, the co-operative sugar
mills, co-operative textile mills and the co-operative milk dairies
which are commonly known to be the political power centers in
rural Maharashtra. In fact the revenue deficit of the State
Government has been increasing every year and the
Government on its own or may be on account of the advice it
received from the Maharashtra Electricity Regulatory
Commission, decided to withdraw the impugned notification
dated 4th April 2001 and restored the full exemption of
electricity duty to all the industries. Thus the reason of
budgetary deficit to withdraw the exemption in the payment of
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electricity duty does not justify / support the impugned
notifications.
The Electricity Regulatory Commissions Act, 1998
received the assent of the President of India on 2/7/1998 and it
was published in the Gazette on the same day. Maharashtra
State Electricity Commission was established on 5th August
1999. Under Section 22 of of the said Act the State Commission
is to discharge the functions stated thereunder. Clauses (b), (e),
(h), (j) and (p) of Sub-Section (2) of Section 22 read as under:
(2) Subject to the provisions of Chapter III and without
prejudice to the provisions of sub-section (1), the StateGovernment may, by notification in the Official Gazette,
confer any of the following functions upon the StateCommission, namely:-
(a) … … …
(b) to aid and advise the State Government, in
matters concerning electricity generation,transmission, distribution and supply in the State;
(c) ... ... ...
(d) ... ... ...
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(e) to regulate the working of the licensees and
other persons authorised or permitted to engage in
the electricity industry in the State and to promote
their working in an efficient, economical and
equitable manner;
(f) ... ... ...
(g) ... ... ...
(h) to promote competitiveness and make avenues
for participation of private sector in the electricity
industry in the State, and also to ensure a fair dealto the customers;
(i) … … …
(j) to aid and advise the State Government in the
formulation of the State power policy;
(k) ... ... ...
(l) ... ... ...
(m) ... ... ...
(n) ... ... ...
(o) ... ... ...
(p) to aid and advise the State Government on any
other matter referred to the State Commission by
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such Government.
Sub-section (3) of Section 22 states that the State
Commission shall exercise its functions in conformity with the
national power plan.
11. Though it appears that the State Government decided to
review its decision in the impugned notification dated 4th April
2001 on the advice received from the MERC on 8th September
2004, it is not known as to why the State Government did not
deem it appropriate to seek the advice of the State Commission
before issuing the impugned notifications. It was submitted by
Mr.Sonpal that it is not mandatory for the State Government to
seek the advice of the MERC. It is important to note that when
such a statutory body has been created by an Act of Parliament
and one of its functions is to advise the State Government on
the matters listed under Section 22 of that Act, the State
Government could have been better advised if it had sought the
opinion of such an expert body like the MERC.
Mr.Sonpal also relied upon the Budget Speech made by
the Finance Minister on the floor of the House and pointed out
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that there was Revenue Surplus in the budget estimate
2005-06. The Hon’ble Minister had announced on the floor of
the House that a revenue surplus of Rs.265 Crores was
estimated for the year 2005-06. The learned AGP tried to make
out a case that because of the revenue surplus in the budget
the Government issued the notification dated 16th June 2005
restoring the exemption in payment of electricity duty with
effect from 1st May 2005. It is not possible to draw such an
inference, more so when while rejecting the representations
made by the similarly placed / connected writ petitions, no such
reasons have been set out. In fact the rejection order
admittedly is without assigning any reasons. Even the
announcement made by the Minister in his speech, does not
state the State Government’s proposal to restore the exemption
on electricity duty payment.
The State Government vide its notification dated 22nd June
1993 issued in exercise of powers conferred under Section 5-A
of the Act for the first time introduced exemption in payment of
electricity duty with effect from 1st July 1993 on the
consumption of energy in respect of any industrial purpose in
the whole of the State of Maharashtra subject to the following
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two conditions viz. (i) the exemptions shall be available only in
respect of energy generated in a generating station installed on
or after 1st day of July 1993 by the person carrying on industry
and consumed by himself for such industry and (ii) the
exemption shall not be available in respect of any energy
consumed for residential or office purposes in any industry. It
was thus an exemption available to any person carrying on the
industry and in respect of energy generated from a captive
power plant but at the same time the exemption was not
available in respect of any energy consumed for residential or
office purposes in any such industry. No time period was set out
indicating that the exemption would be available for a particular
period or until further orders and this is so in respect of the
subsequent notifications dated 1/9/1994 and 30/10/1996.
Power of granting concession is coupled with the power of
withdrawal but such withdrawal cannot be selective and
arbitrary. There can be no doubt that the power of the
Government to withdraw such concession after a specific period
cannot be doubted but at the same time such withdrawal must
be in case of overwhelming public interest and if there was
overwhelming public interest in issuing the notifications
withdrawing the exemption, the action of the State Government
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to restore the exemption in its entirety on 1st May 2005 itself
goes to show that the impugned notification was not issued on
the State Government’s satisfaction of overwhelming public
interest. As per the learned AGP augmentation of public
revenue is public interest. However, it is well settled that
imposition of levies or additional levies to augment revenue
collection is not public interest. It was also submitted by the
learned AGP that amongst the industries also, the Government
while exercising the powers under Section 5-A of the Act can
resort to further sub classification. We are afraid, this argument
is not tenable in law though under Article 14 of the Constitution
a reasonable classification is permissible. However, Section 5-A
of the Act specifically uses the terms “purpose” and “premises”
and these words cannot be further stretched to include
“sector”. When electricity is generated it could be for the grid
power supply, board power supply, commercial power supply or
captive power supply. When the Government granted
exemption and in its wisdom decided to restore it after a gap of
about five years in respect of captive power supply generated,
the purpose for exemption was clear and unambiguous in as
much as it exhibited its commitment to encourage captive
power plants so that the industries could be self reliant to the
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extent possible. It is well settled that classification must be
based on legal and relevant considerations. In the instant case,
there cannot be any further classification beyond the scope of
Section 5-A of the Act. The power to withdraw the concession
granted does not mean the power to withdraw intermittently
and even while exercising such a power of withdrawal in public
interest, it is imperative that the State Government sets out just
and proper reasons. In the instant case no reasons have been
put forward except to say that the withdrawal was done in
public interest and at the same time no reason has been set out
as to why the Government thought it necessary to restore the
exemption with effect from 1st May 2005. We called upon the
learned AGP to place before us the concerned files so as to see
at least from the record whether the Government had before it
any justifiable reasons before the impugned notifications were
issued. However, we are informed that the files concerned are
not traceable. In the absence of reasons in support of the
withdrawal of exemption or refusal to restore the exemption
from payment of electricity duty for the intervening period from
1/4/2000 to 30/4/2005, the impugned notifications would suffer
from arbitrariness. At the same time, the exercise of power by
the State Government must be in conformity with the scheme of
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Section 5A of the Act. If the exemption granted was withdrawn
for all the industries, it could be a different matter. But by the
impugned notifications, it created a sub classification of co-
operative sector to continue the exemption and after a gap of
about five years, it decided to bring in uniformity amongst all
the industries, on receipt of the advice of the MERC. The
exercise of power under Section 5-A of the Act, in such manner
does violence to the scheme of the said section and it smacks of
arbitrariness. Captive use of the power generated by a
generating station, in respect of all the industries must be
treated on par while granting exemption in payment of
electricity duty under Section 5-A of the Act. We are, therefore,
satisfied that the impugned notifications on the face of the
Government’s own decision to restore the exemption from
payment of electricity duty by invoking powers under Section 5-
A of the Act are unsustainable.
12. Hence the petitions are partly allowed and the impugned
notifications dated 1/4/2000 and 4/4/2001 are hereby quashed
and set aside and it is held that the petitioners are entitled for
exemption in payment of electricity duty in terms of notification
dated 30/10/1996 for the period from 1/4/2000 to 30/4/2005.
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Consequently the demand notices are quashed and set side. In
Writ Petition No. 5207 of 2001 the amount of electricity duty, if
paid under protest, be refunded for the above stated period
within two months.
13. Rule is made absolute accordingly with no order as to
costs.
(SMT.ROSHAN S. DALVI,J.) (B.H.MARLAPALLE,J.)
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