Essar is Liable to pay Rs. 1038.27cr as Power Duty: SC dismisses Appeal [Read Judgment]

The Supreme Court of India Tuesday upheld the Gujarat High Court decision and directed Essar to pay Rs. 1038.27 crore as Electricity duty to Gujarat Government.

The Essar Steel India Ltd. And Anr. 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. Another application dated 12.04.2001 was sent by appellant 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 Essar for grant of exemption for payment of electricity duty for 215 MW power generation equivalent to 42% of the total generation.

Aggrieved by the Gujarat High Court decision Essar approached Supreme Court.

The two judge bench comprising of Justice A K Sikri and Justice Ashok Bhushan held that, “The claim raised by the appellant under the above said notification was specifically dealt by the High Court and the Government. The condition which was found lacking for applicability of the notification was that generating sets were not purchased or installed or commissioned during the period from 01.01.1991 to 31.12.1992. The High Court has recorded categorical finding that the generating sets have been commissioned in the month of August 1995”.

The bench also observed that, Section 3(2) vii (a) of the Bombay Electricity Duty Act have to be strictly construed and in event the condition of generating energy jointly with any other industrial undertaking is not fulfilled, the claim has to be rejected. “When energy being generated is used by industrial undertaking which is not jointly generating the energy the claim is not covered under Section 3(2) (vii) (b).

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 cannot be said as the industrial undertaking jointly generating the energy,” the bench said.

While dismissing the appeal, the bench also added that, “We thus do not find any error in rejection of claim of appellant under the notification dated 27.02.1992. The High Court has rightly negatived the claim of the appellant under Section 3(2) as well as under the notification dated 27.02.1992 issued under Section 3(3)”.

Read the full text of the Judgment below.

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