Gujarat High Court
Air Liquide India Holding Private … vs State Of Gujarat on 10 January, 2020Bench: Bhargav D. Karia C/SCA/17182/2016 CAV JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 17182 of 2016 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE BHARGAV D. KARIA ==========================================================

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 or any order made thereunder ?

========================================================== AIR LIQUIDE INDIA HOLDING PRIVATE LIMITED Versus STATE OF GUJARAT & 3 other(s)
==========================================================
Appearance:
MR MIHIR JOSHI FOR NANAVATI ASSOCIATES(1375) for the Petitioner(s)
No. 1
MR SOAHAM, JOSHI, AGP for the Respondent(s) No. 1
MR DIPAK R DAVE(1232) for the Respondent(s) No. 4
NOTICE SERVED(4) for the Respondent(s) No. 1,2,3
========================================================== CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 10/01/2020 CAV JUDGMENT 1. The petitioner has filed this petition under Articles 14, 226 and 227 of the Constitution of India with the following Page 1 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT prayers :

“(A) This Hon’ble Court be pleased to issue a Writ of Certiorari and/or a writ in the nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the impugned order dated 21st July, 2016, passed by Collector of Electricity Duty, Gandhinagar.

(B) This Hon’ble Court be pleased to issue a Writ of Mandamus and/or a writ in the nature of Mandamus or any other appropriate writ, order or direction thereby directing the respondent no.4 to refund the amount of Electricity Duty paid by the petitioner for the period of exemption on industrial consumption of energy under the Gujarat Electricity Duty Act, 1958 with added interest thereon at prevailing bank rate, payable from the date of payment of electricity duty by the petitioner till the date of repayment/fund of the same to the petitioner by the respondents.

(C) Pending admission, hearing and final disposal of the present petition, this Hon’ble Court be pleased to stay the effect, operation and implementation of the Order dated 21st July, 2016 passed by Collector of Electricity Duty, Gandhinagar in the interest of justice.

(D) Pending admission, hearing and final disposal of the present petition, this Hon’ble Court be pleased to restrain the respondents, their officers, agents or authorized representatives from initiating and/or coercive recovery of electricity duty from the petitioner under the Gujarat Electricity Duty Act, 1958 (E) Ex­parte ad interim relief as sought in terms of prayer (C) and (D) above.

(F) Such further relief(s) as deemed fit may be granted to the petitioner.
(G) Cost of the petition be awarded to the petitioner.”
2. The petitioner has challenged the impugned order dated Page 2 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT 21st July, 2016 passed by respondent no.2­Collector of Electricity Duty, Gandhinagar whereby exemption from payment of electricity duty under the Gujarat Electricity Duty Act, 1958 (here­in­after referred to as “the Act”) to the petitioner has been denied.
3. Brief facts of the case are that the petitioner is a company incorporated under the provisions of the Companies Act 1956 and a wholly owned subsidiary of Air Liquide International, a French company and a world leader in extraction, production and supply of gases for industry, health and environment purposes with world wide presence.
3.1) The petitioner was earlier engaged in providing facilitation for manufacturing of nitrogen gas in the State of Gujarat and had been undertaking its business activities on site at the premises of Gujarat Guardian Limited at Ankleshwar and E.I. DuPont at Savli under an agreement on a build, own operate and maintain basis since 1996. As per the terms of agreement between the parties, the manufacturing plant was set up on the land acquired by the respective companies with whom the agreement is entered into and all infrastructure and other resources including supply of power was made by such companies at their costs and all dues thereof were also paid by them. Moreover, all the requisite registrations/permissions for installation of plant and machineries, including the permission for electricity connection from respondent no.4­ Dakshin Gujarat Vij Company were also taken by the said companies for their respective premises. The petitioner was Page 3 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT entitled to monthly service fees only and entire production
of nitrogen gas was consumed by such companies.
3.2) It is the case of the petitioner that as per the
contractual understanding between the parties, the
petitioner availed registration as a “manufacturer ­
supplier of the industrial gases” under the provisions of the
Central Excise Act, 1944, as the petitioner was obligated to
raise symbolic invoices for such supply of gas that is
generated and manufactured at the premises for their own
consumption. The electric duty connections were applied
by such companies in their own names and consequently
electricity duty exemptions under the provisions of the Act,
had also been availed and enjoyed by them on account of
establishment of industrial units.
3.3) In the year 2009, petitioner decided to establish its
own independent industrial undertaking for carrying out
various activities like extraction, production and supply of
liquid gases such as oxygen, nitrogen, argon etc. at
Jhagadia, District Bharuch as a medium scale industry
and due sanction was obtained from the Ministry of
Industry and Commerce, New Delhi.
3.4) The petitioner was allotted premises by the Gujarat
Industrial Development Corporation in the industrial
estate at Jhagadia, District Bharuich and the petitioner
obtained all other requisite permissions, sanctions and
registration for the functioning of its independent unit
under various Acts as under :

“a. Registration as a “factory” under the Factories Act, Page 4 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT 1948;

b. No Objection Certificate from Pollution Control Board
for setting up the factory;

c. Consent under the Air (Prevention and Control of
Pollution) Act, 1981 and The Water (Prevention and Control
of Pollution) Act, 1974;

d. Clearance of Chief Controller of Explosives­Nagpur
under Indian Explosive Act, 1884 from the explosive
department;

e. Registration under Central Excise Act, 1944 as
manufacturer of Industrial gases;

f. Registration under the Gujarat Value Added Tax Act,
2003;
g. Registration under the Central Sales Act, 1956;

h. Approval from weights & measurement department
fro Weigh Bridge, flow meters etc.”
3.5) It is the case of the petitioner that after receipt of the
aforesaid approvals an independent “New Industrial
Undertaking” came to be established at Jhagadia, for
which fresh capital was introduced by the petitioner to
purchase new machinery and equipments and completely
new plant with advanced technology was installed. The
petitioner had invested approximately Rs. 68 crores for
setting up of the independent unit and the industrial
production in the said independent unit commenced on
25th November, 2009.
3.6) The petitioner filed an application on 28 th January,
2010 before the respondent no.2 under the prescribed
Form­E seeking a “Certificate of Eligibility for Exemption of Page 5 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT Electricity Duty” under section 3(2)(vii) of the Act read with
Rule 11(1) of the Bombay Electricity Duty (Gujarat) Rules,
1986 (“the Rules” for short) as the independent unit
established by the petitioner at Jhagadia was a “New
Industrial Undertaking” within the meaning of the Act so
as to entitle the petitioner for exemption from payment of
duty for the first five years from the date of commencement
of commercial production in the independent unit of the
petitioner.
3.7) It is the case of the petitioner that petitioner was only
engaged in production of nitrogen gas at the premises in
Ankleshwar and Savli in the industrial unit of the
respective companies, but after setting up its own new
undertaking at Jhagadia, petitioner also started to
manufacture oxygen gas and as such, it is the case of the
petitioner that petitioner not only made fresh investment in
plant and machinery but also engaged in the production of
a completely new product which was not being
manufactured at the industrial units of its clients’
companies.
3.8) The petitioner thereafter, supplied various details
with regard to the purchase of plants and machineries as
well as investment made by the petitioner in its
independent new unit at Jhagadia.
3.9) However, respondent no.2 by impugned order dated
18th November, 2010, rejected the application of the
petitioner to grant exemption from the electricity duty by
considering the independent unit of the petitioner as a new Page 6 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT industrial undertaking within the purview of the Act.
3.10) The petitioner therefore, being aggrieved by the order
dated 18th November, 2010 preferred an appeal before
respondent no.3­appellate authority under the Act.
Respondent No.3­appellate authority however, by order
dated 29th May, 2013 dismissed the appeal filed by the
petitioner. The petitioner thereafter preferred, Special Civil
Application No.16374/2013 before this Court wherein ad
interim relief restraining the respondents from initiating
coercive recovery of electricity duty from the petitioner was
granted by order dated 25th October, 2013. This Court by
judgment and order dated 31st August, 2015 ordered to set
aside the order passed by the appellate authority dated 29th
May, 2013 on the ground that said order was thoroughly
non speaking and unreasoned and remanded the matter
back to the original authority respondent no.2 to ascertain
certain limited factual aspects. The operative portion of the
order dated 31st August, 2015 reads as under :

“24. It would be necessary for the authority to ascertain as
to whether the plant and / or machinery previously used at
the sites of the clients or part of it have been installed by
the petitioner at the Jhagadia unit and/or used for and in
the production activity or not and whether, on strength of
relevant documents the petitioner has established that (a)
the unit at Jhagadia is set up by new plant and machinery;
and (b) the plant and machinery at any of the sites of its
clients i.e. the plant and machinery previously used in
India are not used in setting up the unit at Jhagadia and /
or are not used in production process and whether
sufficient and cogent and satisfactory documentary
evidence to support its said assertion is made available by
the petitioner.
Page 7 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT 24.1 Thus, for the said purpose, i.e. for ascertaining the
factual aspect, the matter is required to be remitted to the
original authority who will call for relevant documents and
material from the petitioner to ascertain the said factual
aspect (if such material is already available on record
before him) and if he is satisfied upon verifying the relevant
documents and material and after granting opportunity of
hearing to the petitioner that the unit at Jhagadia is set up
by new plant and machinery and not with the plant and
machinery or part of it previously used in India, then, the
authority will pass appropriate fresh order in light of the
discussion in this decision.
For the said purpose i.e. for remitting the matter to the
original authority for determining the aforesaid aspect
impugned orders are set aside with the direction to
consider and decide the petitioners application afresh
having regard to the aspects discussed and decided in
present decision and after verifying relevant documents
and after hearing the petitioner.”
3.11) The petitioner however, preferred Letters Patent
Appeal No.1/2016 though the matter was remanded to
respondent no.2 for de novo consideration, certain
observations were made in the judgment that were
indicative in nature and were binding on the original
authority. Division Bench in its order dated 6th January,
2016 clarified such aspects and directed that the
observations made in the judgment dated 31st August,
2015 would not prejudice the rights of either side and the
matter was remanded to respondent no.2 to take an
independent view of the matter in accordance with law.
3.12) The petitioner therefore, approached respondent
no.2 and filed detailed representation/submissions dated
15th February, 2016 along with all relevant documents in
support of its case that the unit established at Jhagadia Page 8 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT was a “New Industrial Undertaking”. It was also reiterated
by the petitioner that both the plants at the site of Gujarat
Guardian Limited and E.I. DuPont were in existence and
were operating/functioning and therefore, it was
contractually, practically and legally impossible to take out
any assets/machinery installed at such units and utilise
the same in the new unit of the petitioner at Jhagadia. The
petitioner also produced details of investments made in the
unit at Jhagadia of about Rs. 68 crores along with relevant
purchase orders/invoices for purchase of plant and
machinery and certificate of the Chartered Accountant in
support there of.
3.13) Respondent No.2 after providing opportunity of
hearing to the petitioner on 17th May, 2016 called upon the
petitioner to place on record certain other documents to
establish that no plant/machinery were transferred from
the premises of Gujarat Guardian Limited and E.I. DuPont
to the unit of petitioner at Jhagadia even after
commencement of commercial production at the unit at
Jhagadia in August 2009. The petitioner thereafter,
provided requisite details by way of additional
representation dated 7th June, 2016 to point out that the
petitioner has established its unit at Jhagadia without
transfer or utilising any plant or machinery at the aforesaid
two companies. Respondent No.2 however, again reiterated
its earlier order and rejected the application for grant of
exemption from the electricity duty to the unit of the
petitioner at Jhagadia by impugned order dated 21st July,
2016.
Page 9 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT 4. The petitioner therefore, preferred this petition which is admitted by order dated 7th October, 2006 by this Court (Coram : Hon’ble Mr. Justice Rajesh Shukla, as he was then) and granted interim relief on the condition of the petitioner furnishing the bank guarantee of 25% of the principal amount.
5. Heard learned Senior Advocate Mr. Mihir Joshi with learned advocate Mr. Kunal Vays and learned advocate Mr.Keyur Gandhi for the petitioner and learned Assistant Government Pleader Mr. Soaham Joshi for the respondents no. 1 to 3 and learned advocate Mr. Dipak Dave for respondent no.4.
6. Learned Senior Advocate Mr. Mihir Joshi for the petitioner submitted that in Special Civil Application No.16374/2013, this Court (Coram Hon’ble Mr. Justice K.M. Thaker, as he was then) remanded the matter after considering the submissions made on behalf of the petitioner and after considering the documentary evidence on record as well as the provisions of the Act, only to ascertain as to whether the plants and machinery previously used at the site of clients or part of it have been installed by the petitioner at the Jhagadia unit and/or used for and in the production activity or not and whether on the strength of relevant documents, the petitioner had established that the unit at Jhagadia is set up by purchasing new plant and machinery and the plant and machinery at any of the sites of its clients i.e. the plant and machinery previously used at the site other companies are not used in set up unit at Jhagadia and /or not used in production process and Page 10 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT whether sufficient and cogent documentary evidence to
support such assertion is made available by the petitioner
or not.
6.1) It was further submitted that in order dated 6th
January, 2016 passed by the Division Bench (Coram
Hon’ble the Acting Chief Justice Mr. Jayant Patel, as he
was then and Hon’ble Mr. Justice V.M. Pancholi) in Letters
Patent Appeal no.1/2016 has also clarified that the
observations made by the learned Single Judge on merits
of entitlement for exemption shall not prejudice the rights
of either side before the competent authority and the
competent authority shall be at liberty to take independent
view of the matter on the basis of material available before
it and in accordance with law. Learned Senior counsel
further relied upon the decision of this Court rendered in
case of Kores (India) Limited Textile Division v.
Collector of Electricity Duty and others (CAV judgment
dated 17.10.2104 in Special Civil Application No.
17038/2012) to point out that in similar facts, this Court
(Coram : Hon’ble Mr. Justice S.R. Brahmbhatt) has held as
under :

“24. The expansion word occurring in the provision could
be understood in terms of increase in capacity or slight
modification in the product which may enhance the
products saleability but that in itself cannot be classified to
be diversification so as to give different colour to the
undertaking and make it eligible for exemption in
electricity duty. As against this, if the same business or
organization is venturing into production of new product
with different capacity and different machinery with
different raw material and input, then, though the
Company and organization has been producing another
product in the State of Gujarat would in itself not Page 11 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT considered as disqualifying factor for the new unit which is
based upon new technology for altogether a new product
warranting fresh investment, new machinery and plants
and technical knowhow. It is also relevant to note that if
the Unit is changing its technology for better result of the
same product than in that case such change and
investment might not be eligible for duty exemption. The
petitioner had in fact established it case for seeking
exemption before the respondent no.1 as its contention
referred to in para 16 (v) to 16(x) have not been adverted to
at all by the respondent no.1. in its order dated 8.11.2012
impugned in this petition.”
6.2) It was further submitted that the said decision was
challenged before the Division Bench of this Court in the
proceedings of Civil Application (for condonation of delay)
No. 12275/2015 with Letters Patent Appeal (Stamp) No.
1352/2015 and this Court on the merits of the appeal
found that the view taken by the learned Single Judge in
Special Civil Application No.17038/2012 calls for no
interference. It was therefore, submitted that in facts of the
case, clearly when the documentary evidence on record
establishes that the unit at Jhagadia established by the
petitioner in the year 2009 cannot be said to be an
expansion of the existing business of the petitioner as the
petitioner has started a new unit and is producing new
product in the form of gases other than nitrogen gas
produced at the site of its clients with different capacity
and different machinery with different raw material and
input and therefore, the petitioner cannot be denied the
exemption of electricity duty under the provisions of 3(2)
(vii) of the Act. It was submitted that the petitioner
produced various documents before the respondent
authority along with additional submissions and
representations dated 7th June, 2016 which are available Page 12 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT at page­374 of the petition to demonstrate that the
investment made in the plant and machinery in the unit at
Jhagadia are new investment and that none of the assets
used at the plants of Gujarat Guardian Limited and E.I.
DuPont have been used by the petitioner. Reliance was
placed on such documents by the learned Senior Counsel
for the petitioner by placing the relevant extracts on record
as under :
Sr. Particulars Page No. No. 1 Tax Invoice dated 04.06.2008 issued 1,2 by Siemens Ltd. 2 Tax Invoice dated 31.05.2008 issued 3 by Inox India Ltd. 3 Tax Invoice dated 31.05.2008 issued 4 by Inox India Ltd.
4 Invoice cum Challan dated 5 19.05.2008 issued by Air Liquide Engineering India Pvt. Ltd. 5 Invoice dated 25.11.2008 issued by 6 Air Liquide Engineering India Pvt. Ltd. 6 Bill of Entry for Home Consumption 7 dated 16.09.2008 7 Invoice dated 27.06.2008 issued by 8 Cryo Star 8 Bill of Entry for Home Consumption 9 dated 29.01.2008 9 Invoice dated 31.05.2008 issued by 10 Voltamp Transformers Ltd. 10 Tax Invoice dated 17.07.2008 issued 11 by Siemens Ltd. 11 Invoice dated 14.05.2008 issued by 12 to17 Herose 12 Invoice dated 25.09.2008 issued by 18 Air Liquide Engineering India Pvt. Ltd. Page 13 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT 13 Invoice dated 16.12.2008 issued by 19 Air Liquide Engineering India Pvt. Ltd.
14 Invoice dated 19.10.2007 issued by 20 New Cosmos Electric Co. Ltd. 15 Summary of investments towards 21 to 26 purchase of plant and machinery made in the Jhagadia Plant by the Petitioner
16 Certificate dated 23.01.2010 issued 27 by H.S.Ahuja & Co., Chartered Accountants certifying the capital investments made by the Petitioner in Jhagadia Plant (Pg.292) 17 Statement of Account from 2011 to 28,29 2012 of E.I.DuPont India Pvt. Ltd. showing that the on­site facilities were operational even after setting up of Jhagadia Plant 18 Statement of Account from 30,31 01.04.2016 to 23.05.2016 of Gujarat Guardian Ltd. showing that the on­ site facilities were operational even after setting up of Jhagadia Plant 6.3) It was therefore, submitted that respondent no.2 has
committed an error by holding that Jhagadia unit of the
petitioner although meets with the requirement of
explanation (a) and (b) given under section 3(2)(vii) of the
Act, is apparently an expansion of the existing business of
producing industrial gas in the State and hence does not
meet with the requirement of explanation (c) given under
section 3(2)(vii) of the Act. It was therefore, held that the
petitioner is not entitled to exemption from electricity duty
since the unit of petitioner at Jhagadia is an expansion of
its existing business or undertaking at the State of Gujarat
and therefore, it does not qualify as a new industrial
undertaking pursuant to explanation (c) given under Page 14 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT section 3(2)(vii) of the Act.
6.4) Learned Senior Advocate for the petitioner submitted
that the Act was amended with effect from 1st April 2013,
whereby even an additional unit of a company is eligible for
exemption from payment of electricity duty with
retrospective effect. However, respondent no.2 rejected
such submission on the ground that benefit of exemption
is available to eligible additional unit of the industrial
undertaking qualifying for the same as provided in the
Amended Act and which has commenced after the date of
the said amendment i.e. 1st April, 2013 with prospective
effect only. It was therefore, submitted that the impugned
order dated 21st July, 2016 is contrary to the settled legal
position as held by this Court in case of Kores (India)
Limited Textile Division(supra) which is also confirmed
by Division Bench of this Court.
6.5) Learned Senior Counsel for the petitioner also relied
upon the decision of the Apex Court in case of Essar Steel
India Limited and another v. State of Gujarat and
another reported in (2017) 8 Supreme Court Cases 357 to
submit that in case before the Apex Court, as the appellant
was jointly generating the energy with Gujarat Electricity
Board, the Court did not consider as a new industrial
undertaking within the provisions of section 3(2)(vii) of the
Act. He therefore, submitted that facts of the case of the
petitioners are converse to the facts which were before the
Apex Court and the Apex Court in the aforesaid decision
has after analysing the provisions of section 3(2)(vii)(a)(i) of
the Act held as under :
Page 15 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT “16. The keywords in the statutory scheme are “generates
energy either singly or jointly with any other industrial
undertaking for its own use or as the case may be, for the
use of industrial undertaking which are jointly generating
the energy.” We have to look into the facts of the present
case to find out as to whether the statutory conditions
enumerated above are satisfied in the facts of the present
case or not. The appellant no.1 is a separate registered
company which holds 42% equity shares of the appellant
no.2. The appellant no.2 has been constituted as a Special
Purpose Vehicle for generating electricity. The appellant
no.2 is a generating company within the meaning of
Section 2(4A) of Electricity (Supply) Act, 1948. The
submission which has been pressed by the counsel for the
appellant is that both the appellant no.1 and appellant
no.2 are generating energy jointly for the use of industrial
undertaking which are jointly generating the energy.”
6.6) He further relied upon the observations made by the
Apex Court in the following paragraphs :

“18. Even assuming appellant no.1 and appellant no.2 are
jointly generating the energy for the use of industrial
undertaking which are jointly generating the energy, the
Gujarat Electricity Board to whom 300 MW has been
allocated cannot be held to be industrial undertaking
which is jointly generating the energy with appellant. The
Statutory scheme for grant of exemption has to be strictly
construed. The appellant no.2 is not jointly generating
energy with Gujarat Electricity Board and it is selling the
energy to the extent of 300 MW to Gujarat Electricity
Board. The conditions of the statutory provisions of Section
3(2)(vii)(a) are not fulfilled. The High Court has further held
that both ESL and EPL being distinct separate legal
entities merely because ESL might have 42% shares
holding in EPL, it cannot be said that ESL is generating
electricity jointly with EPL and EPL is generating electricity
jointly with ESL for use of electricity by ESL.
19. The statutory conditions for grant of exemption as Page 16 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT contained in Section 3(2)(vii)(a) can neither be tinkered
with nor diluted. Learned Counsel for the appellant
contends that the State Government had granted
permission to the ESSAR Power Plant to set up a
generating station as a special case and to supply power
generated by it to its sister concerned i.e. ESSAR Steel and
ESSAR Oil as a special case. The letter of the State
Government dated 05.06.1995 further stated that if there
is any excess power generated by EPL, the same may be
purchased by the Board at the price decided by the Board.
It is useful to extract the letter of permission dated
05.06.1995 issued by the State Government which was to
the following effect:­ “The Govt. has considered all the aspect on the above
matter and after careful consideration, has decided to
agree in principle to the demand of ESSAR Power Limited
to set up a generating station as a special case, and to
supply power generated by it to its sister concern, i.e.
ESSAR Gujarat, ESSAR Steels and ESSAR Oil again as a
special case only subject to fulfillment of requirements of
legal provisions as laid down under Section 15­A and 18­A
of the Electricity Supply Act and with the express condition
that the power generated through this subject shall never
as sold outside the State or to any other person except as
mentioned above. Moreover, in case, the power generated
by EPL is to be wheeled, GEB shall decide the wheeling
rate according to the sound commercial principles. In
addition to this, if there is any excess power generated by
EPL, the each may be purchased by the Board, at a price
decided by the Board subject to the norms laid down by
GoI from to time.
It is, therefore, requested that GEB may take further
necessary action in the matter.”
6.7) It was therefore, submitted that provisions of section
3(2)(vii) of the Act are required to be strictly construed as it
pertains to statutory scheme for grant of exemption and
the same can never be tinkered with nor diluted.
6.8) He also referred to the judgment and order dated 24th Page 17 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT November, 2015 in Civil Application (for condonation of delay) No. 12275/2015 with Letters Patent Appeal (Stamp) No. 1352/2015, wherein the Division Bench confirming the judgment of the learned Single Judge has observed as under :

“6. We may record that it is not the case of the appellant that same machinery of the earlier existing unit is used for manufacturing of a new product. Rather, it is an admitted position that new machineries are purchased for establishing the manufacturing unit of hosiery cotton. Not only that, but the unit is separate and independent. It is not the case of the appellant that any unused machinery or unused capacity of the other unit is used for manufacturing activity of the present unit. The learned Single Judge found that when for a separate product by the very company separate unit including that of the machinery are purchased and established, it cannot be said that the same would fall in the definition of expansion as sought to be canvassed. In the decision of the Apex Court (supra), the Apex Court had specifically taken note of the aspect that there was addition in the production of portland cement by establishing new kiln and further idle capacity of crushers, cranes, packing machines, coal mills and raw mills of other unit were utilised for manufacturing of the additional capacity of portland cement. Under these circumstances, the decision upon which the reliance has been placed by the learned Government Pleader can hardly be made applicable to the facts of the present case when in the present case, undisputedly new machineries are purchased and no machinery of the existing unit is utilised coupled with the aspect that the manufacturing is of altogether a different product and not the same product.”
7. Per contra, learned Assistant Government Pleader Mr. Soham Joshi submitted that if the Supply agreement dated 19th May, 1999 between the petitioner and E.I. DuPont India Limited is perused, then it becomes clear that the petitioner was the owner of the plant and machinery Page 18 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT situated at the premises of E.I. DuPont India Limited. He
relied upon Article No. (2.2.2) of the said Supply agreement
to point out that the costs, duties (Customs and Excise), all
taxes, charges (freight and insurance) etc. on the plant,
machinery and equipment required for the FLOXAL
SYSTEM will be borne and paid by the petitioner. He
further referred to Article no. (5) for payment to point out
that all payments under the agreement will become due for
payment after 30 days from the monthly
invoices/statement of account being furnished by the
petitioner to E.I. DuPont India Limited. He referred to
Article No. (6.2) of the Supply agreement to submit that
FLOXAL SYSTEM will be designed for minimum 12 years
life cycle and petitioner would be responsible for
maintenance and cost of whatever maintenance/
replacement is required to maintain the life cycle of
FLOXAL SYSTEM. He therefore, submitted that the
petitioner was already having its plant and machinery in
the form of existing units though it may be at the premises
of E.I. DuPont India Limited and other unit at the
premises of Gujarat Guardian Limited at Ankleshwar. It
was therefore, submitted that the petitioner was in the
business of manufacture and supply of industrial gases in
the State of Gujarat and therefore, the petitioner would not
be eligible for exemption from the electricity duty in view of
explanation (c) to section 3(2)(vii) of the Act as the unit of
the petitioner at Jhagadia is nothing but an expansion of
the existing business or undertaking in the State of
Gujarat. It was further submitted that in application made
on 28th January, 2010 (Annexure­F to the petition), the
petitioner has stated in column no.6 of the said application Page 19 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT in Form­E as under :
Nature of business or This is a newly set up industrial manufacturing undertaking for production of activities carried out industrial gases.
previously by the applicant (detail Earlier, we were engaged in should be given) business of trading of gases, and of equipments/ machineries / onsite plants etc for industrial gases and Providing services by setting up of on site plants, for on line supply of gases in their premises, to be used captively by the customers for production of finished goods in their factories and technical services and support for administration, maintenance and operation of such plants.

Recognizing the potential for increasing demand for industrial gases within Gujarat the Company has embarked on setting up its first independent production unit.
7.1) It was therefore, submitted that the petitioner has not
disclosed before the authority with regard to production of
industrial gases by the petitioner in the State of Gujarat.
He also invited attention to Article No. 5 of Nitrogen Supply
agreement dated 23rd July, 1996 entered into between the
petitioner and Gujarat Guardian Limited to point out that
the FLOXAL unit would be established on suitable piece of
land at the proximity of float glass tin bath and such land
to be acquired by both the parties and put at the disposal
of the petitioner free of charge for the entire duration of the Page 20 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT contract. He further relied upon Article No. 5.2 of the said
agreement to point out that the petitioner was responsible
for establishment of the unit. He also referred to Article No.
1 to submit that the contract was entered into to install,
own and operate FLOXAL plant in order to supply nitrogen
according to the specifications set forth in Article No. 2 of
the agreement between the parties. It was therefore,
submitted that the petitioner was already in the business
of manufacture/production of industrial gases in the State
of Gujarat and therefore, unit of the petitioner at Jhagadia
is only an expansion and only because the petitioner is
producing different types of gases at its unit at Jhagadia, it
cannot be said that the petitioner is engaged in different
business or is manufacturing/producing new project.
7.2) It was further submitted that on perusal of details
provided to the notes to the accounts of the petitioner for
the financial year 2009, sales details clearly show at page
no. 249 of the petition that the petitioner has
manufactured nitrogen gas. He also relied upon the annual
report for financial year 2010 to submit that the details of
the sales includes manufactured goods of nitrogen gas. It
was therefore, submitted that unit at Jhagadia established
by the petitioner is not entitled to exemption from
electricity duty and the impugned order passed by
respondent no.2 is based upon the facts of the case and,
therefore, no interference is required to be made.
7.3) He further relied upon the decision of Apex Court in
case of State of Gujarat and others v. Saurashtra
Cement & Chemical Industries Ltd. reported in (2003) 2 Page 21 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT Supreme Court Cases 394, wherein the Apex Court has
dealt with similar issue of granting exemption from levy of
electricity duty for new industrial undertaking. It was
submitted that the Apex Court after considering the
provisions of the Act has held as under :

“9. To appreciate the exception contained in Explanation 1
to clause (ii)(c) of Section 3 (2) (vii) (b),it is necessary to
understand the meaning of the word ‘expansion’. The word ‘expansion’ is a noun derived from the word ‘expand’, which
is a verb. The word ‘expand’ means ‘to become greater or
bigger in size, to spread out. As per the New Shorter Oxford
English Dictionary, the word ‘expand’ means 1.v.t. ‘spread
or stretch (a thing) out 2. Become extended; spread out,
unfold. 3.v.t. Give full expression to 4.v.t. Widen the
boundaries of, increase the area, scope etc., of; enlarge,
dilate 5.v.i. Become greater in area, bulk, capacity etc;
become larger; increase the scope of one’s activity or the
scale of operations of something; take in or go into a new
area of activity.

10. This meaning is to be applied to the facts on record.
The respondent company when it initially started had a
production capacity of 660 metric tonnes which was
subsequently increased to 1000 metric tonnes. In 1969­70
by setting up the alleged new unit, production capacity of
the company more than doubled. But as already seen this
unit is not self contained. It is not an independently viable
unit. It is dependant on various items of plant and
machinery and mills of the existing unit. Further
respondent was having two kilns and third is added. This
leads to the inevitable conclusion that the new unit is an
expansion of an existing undertaking in the State. Once it
is held to be a case of expansion, the claim for exemption
from electricity duty, set up by the respondent, completely
falls to the ground. In the facts and circumstances of the
case we are clearly of the view that the respondent is not
entitled to exemption from electricity duty. The High Court
failed to apply the real test which emerges from the
judgment of this Court in Textile Machinery Corporation
(supra) which was affirmed in a subsequent decision in Page 22 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT Bajaj Tempo Ltd, Bombay Vs. Commissioner of Income Tax,
Bombay City­III, Bombay [1992 (3) SCC 78]. Accordingly,
this appeal is allowed. The judgment of the High Court
under appeal is set aside. The respondent is held not
entitled to exemption from electricity duty. In the facts of
the case there will be no order as to costs.”
7.4) It was therefore, submitted that as facts of the case of
the petitioner is similar to that before the Apex Court, as
the petitioner is also having two plants and has added
third plant at Jhagadia, it is nothing but expansion of
existing undertaking in the State and therefore, once it is
the case of expansion, claim of exemption of electricity duty
cannot be granted.
7.5) With regard to the reliance placed on the decision in
case of Essar Steel India Limited and another (supra) on
behalf of the petitioner, it was submitted that in paragraph
no. 18 of the said decision, the Apex Court has held that
statutory scheme has to be strictly construed. It was
therefore, submitted that the said decision would be
helpful to the respondents and as it is held by respondent
no.2 by appreciation of documentary evidence on record
that unit of the petitioner at Jhagadia is nothing but an
expansion of its existing business in the State of Gujarat,
exemption from electricity duty is rightly denied.
7.6) With regard to reliance placed on the judgment of
learned Single Judge in case of Kores (India) Limited
Textile Division (supra) on behalf of the petitioner, it was
submitted that in paragraph no. 24 of the said judgment, it
is categorically held that if unit is changing its technology
for better result of the same product than in that case such Page 23 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT change and investment might not be eligible for duty
exemption. Reliance was also placed on the averments
made in the affidavit in reply filed on behalf of respondent
no.2 to submit that as far as the provision made in the
Amended Act with effect from 1st April, 2013 is concerned,
an additional unit of a company is eligible for exemption
from payment of electricity duty only when an application
under prescribed amended Form E is filed and as per the
Amended Act, such application would have to be filed
under section 3(2)(vii) of the Act, whereas the petitioner
has filed application dated 2nd February, 2010 under
prescribed Form E under section 3(2)(vii) of the Act and
therefore, the petitioner is not entitled to exemption from
levy of electricity duty retrospectively because as per the
Amended Act, additional unit may become eligible subject
to certain terms and conditions prescribed by the State
Government with prospective effect only.
7.7) It was further submitted that the unit of the
petitioner at Jhagadia cannot be termed as new industrial
undertaking as the petitioner was earlier engaged in
manufacturing of gases which was being provided to its
clients and therefore, it cannot be said that the petitioner
is engaged in the business of manufacturing of gases and
equipments for the first time in the State of Gujarat which
is a prerequisite for falling within the meaning of “new
industrial undertaking”.
7.8) With regard to the submission made on behalf of the
petitioner that the petitioner has made fresh investment in
its unit at Jhagadia, it was submitted that the fact that an Page 24 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT entity by establishment of a new industrial undertaking when expands its existing business, every creation in business requires new investment and therefore, it cannot be considered as new industrial undertaking under the provisions of the Act. It was therefore, submitted that as the petitioner was already running the business in the State of Gujarat since 1996 and when it started its unit at Jhagadia in the year 2009, it would not mean that the petitioner has set­up new industrial undertaking under the provisions of section 3(2)(vii) of the Act.
8. Having considered the submissions made by both the sides as well as perusing all the documents produced on record by the petitioner, the following facts emerge :
1) The petitioner started its business activity in the State of Gujarat since 1996 by establishing plant for manufacturing of nitrogen gas at the premises of Gujarat Guardian Limited at Ankleshwar and E.I. DuPont at Savli.
2) The petitioner was raising invoices for supply of nitrogen gas as per the terms and conditions of the Supply agreement between the petitioner and aforesaid two companies.
3) In the year 2009, the petitioner with an investment of Rs. 68 crores in the new plant and machinery established unit at Jhagadia for manufacturing different types of gases with the use of fresh capital, state of art new machineries and equipments.
Page 25 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT 9. On the basis of documentary evidence produced on record at the time of hearing, which were also part of the record with respondent no.2, along with additional representations made by the petitioner on 15th February, 2016 and 7th February, 2016, pursuant to the order dated 6th January, 2016 passed by this Court in Letters Patent Appeal No.1/2016, it clearly shows that none of the plant and machinery which was used by Gujarat Guardian Limited at Ankleshwar and E.I. DuPont at Savli. have been used by the petitioner for establishing its unit at Jhagadia.
10. On the basis of the documents produced by the petitioner on record it is established that unit at Jhagadia is set up by new plant and machinery and plant and machinery at any site of the clients of the petitioner are not used in setting up the unit at Jhagadia.
11. The petitioner has claimed exemption from the duty under the provisions of the Act and therefore, it would be germane to refer to the relevant provisions of the Act, namely definition of “industrial undertaking” as provided in section 2(bb) of the Act and section 3(2)(vii) of the Act which are reproduced here­in­below :
“(bb) industrial undertaking means an undertaking engaged predominantly in ­ (i) the manufacture or production of goods or (ii) any job work which results in the manufacture or production of goods but does not include ­ Page 26 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT (A) a service undertaking; and (B) an undertaking which manufactures or produces any kind of food or drinks or both meant ordinarily for consumption on the premises of the undertaking.

Explanation 1. ­ For the purpose of item (B) of this clause, premises of the undertaking includes all premises which are intended for being used for consumption of food or drinks or both.

Explanation 2. ­ For the purpose of this clause and clause (ee), an undertaking engaged in the manufacture or production of goods and also in any one of more of the activities specified in clause (ee) ­ (a) shall be deemed to be ­ (i) engaged predominantly in the manufacture or production of goods if the gross annual income of such undertaking from such manufacture of production for the accounting year of such undertaking preceding the period in respect of which the duty is levied in greater than the gross annual income of such undertaking for that accounting year from such activity or activities, (ii) a service undertaking engaged predominantly in any one or more of the activities specified in clause (ee) if the gross annual income of such undertaking from such activity or activities for the accounting year of such undertaking preceding the period in respect of which the duty is levied is greater than the gross annual income of such undertaking for that accounting year from such manufacture or production.

Section 3. (1) Subject to the provisions of sub­section (2)(2AA), (2AAA), (2B) and (3), there shall be levied and paid to the State Government a duty on the consumption of electricity (hereinafter in this Act referred to as electricity duty) at the rates specified below:­ Page 27 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT (a) the electricity duty shall be payable by consumers other than those referred to in sub­clauses (i) and (ii) of clause (a) of section 2, at the rates specified in Schedule I to this Act, and (b) the electricity duty shall be payable by consumers referred to in sub clauses (I) and (ii) of clause (a) of section 2, at the rates specified in Schedule II to this Act.] (2) Electricity duty shall not be leviable on the units of energy consumed, ­ (vii) for motive power and lighting in respect of premises used by a new industrial undertaking for industrial purpose, subject to such terms and conditions as may be prescribed, for a period of five years from the date on which such industrial undertaking begins to manufacture or produce goods for the first time:

Provided that no new industrial undertaking shall be entitled for exemption from payment of electricity duty under this clause, unless it has obtained a certificate regarding eligibility for such exemption in prescribed form by making an application therefore in such form, within such period and to such officer as may be prescribed.

Explanation. ­ For the purpose of this clause a new industrial undertaking means any industrial undertaking which ­ (a) is not formed by the splitting up or the reconstruction of a business or undertaking already in existence in the State; or (b) is not formed by transfer to a new business or undertaking of a building, machinery or plant previously used in India for any industrial purpose, of such value in relation to total value of the aforesaid investments, as the State Government may, by notification in the Official Page 28 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT Gazette, specify; or (c) is not an expansion of the existing business or undertaking in the State.”
12. The short question therefore, which arises for consideration of this Court is that whether after remand of the case by this Court in the year 2015, the petitioner has been able to demonstrate that whether the plant and machineries at the unit at Jhagadia have been utilised or used in the production activity previously or not and whether such plant and machinery is new machinery, as the remand was made by this Court to ascertain this fact. If the answer to such inquiry is in the affirmative, then the question of consideration as to whether unit at Jhagadia is expansion of the existing unit or it is a new industrial unit would be a futile exercise.
13. However, respondent no. 2 has not disputed the fact that the unit of the petitioner at Jhagadia is not formed by the splitting up or the reconstruction of a business or undertaking already in existence in the State or is not formed by transfer to a new business or undertaking of a building, machinery or plant previously used in India for any industrial purpose, of such value in relation to total value of the aforesaid investments, as the State Government may, by notification in the Official Gazette specify, meaning thereby, that clauses (a) and (b) given under section 3(2)(vii) of the Act are fulfilled by the petitioner.
14. Respondent no.2 is not however supposed to examine Page 29 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT the case of the petitioner vis­a­vis as to whether there is expansion of the existing business or undertaking in the State of Gujarat but unfortunately respondent no.2 has applied clause (c) to explanation of section 3(2)(vii) of the Act and rejected the claim of the petitioner for exemption from electricity duty applying clause (c) of the explanation holding that the unit of the petitioner at Jhagadia is nothing but an expansion of the existing unit or undertaking in the State of Gujarat.
15. Thus from the facts emerging on record, it is clear that the petitioner has not used any of the plant and machinery at the unit at Jhagadia which was previously used by the petitioner either at the unit in the premises of Gujarat Guardian Limited at Ankleshwar or E.I. DuPont at Savli. Therefore, the only question which is required to be considered is as to whether establishing unit at Jhagadia would amount to expansion of the business or undertaking of the petitioner or not?
16. So far as issue of expansion is concerned, the same is no more res integra in view of decision of this Court in case of Kores (India) Limited Textile Division(supra), wherein it is held as under :

“20. The close reading of provisions and explanation in question, reproduced hereinabove, would clearly indicate that for claiming the benefits of exemption in electricity duty, new industrial undertaking should not have been formed by splitting up or the reconstruction of a business or undertaking already in existence in the State or should not have been formed by transfer to a new business or undertaking of a building, machinery or plant previously used in India for any industrial purpose, of such value in Page 30 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT relation to total value of the aforesaid investments, as the State Government may, by notification in the Official Gazette, specify or should not be an expansion of the existing business or undertaking in the State.”
17. The facts of the case are therefore, required to be considered so as to ascertain that whether the establishment of unit by the petitioner at Jhagadia would amount to expansion of existing business or undertaking in the State or not. For this purpose it is necessary to refer to the observations made by the Apex Court in case of Saurashtra Cement & Chemical Industries Ltd. (supra) as under :

“7. Crucial question for consideration before us is whether it is a case of expansion of an existing unit? The case of expansion of an industrial undertaking would qualify for exemption under Section 15C of the Income Tax Act while in view of clause (ii)( c) of Explanation 1 contained in the Bombay Electricity Duty Act, 1958, an expansion of existing business undertaking would not qualify for exemption from electricity duty. Para 18 of the judgment in Textile Machinery Corporation (supra) throws considerable light on the controversy before us. Para 18 reads as below:

“18. The assessee continues to be the same for the purpose of assessment. It has its existing business already liable to tax. It produced in the two concerned undertakings commodities different from those which he has been manufacturing or producing in its existing business. Manufacture or production of articles yielding additional profit attributable to the new outlay of capital in a separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability under Section 15C. Sub­ section (6) of the section also points to the same effect, namely, production of articles. The answer, in every particular case depends upon the peculiar facts and conditions of the new industrial undertaking on account of which the assessee claims exemption under Section 15C. No hard and fast rule can be laid down. Trade and Page 31 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT industry do not run in earmarked channels and particularly so in view of manifold scientific and technological developments. There is great scope for expansion of trade and industry. The fact that an assessee by establishment of a new industrial undertaking expands his existing business, which he certainly does, would not, on that score, deprive him of the benefit under Section 15C. Every new creation in business is some kind of expansion and advancement. The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business. No particular decision in one case can lay down an inexorable test to determine whether a given case comes under Section 15C or not. In order that the new undertaking can be said to be not formed out of the already existing business, there must be a new emergence of a physically separate industrial unit which may exist on its own as a viable unit. An undertaking is formed out of the existing business if the physical identity with the old unit is preserved. This has not happened here in the case of the two undertakings which are separate and distinct.”

8. It will be seen from the facts on record in the present case that the so called new unit/undertaking is not totally independent of the assets of the existing unit. Admittedly certain assets, to which reference has already been made, are being utilized in the manufacturing activity carried on by the new unit. It cannot be said that the new unit is completely independent or that the new unit could do without the assets of the existing unit. If use of the old plant and machinery etc. was necessary to complete the manufacturing process in the new unit, the new unit is not totally independent nor it is able to complete the process of manufacture of cement on its own as a viable unit. The new unit is dependent on the existing assets. A physical identity with the old unit is preserved. In view of the exception carved out in the definition of a new industrial unit contained in the Act, it cannot be said that the respondent is entitled to exemption from electricity duty.

18. In facts of the case, it is established on record that Page 32 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT the unit of the petitioner at Jhagadia is totally independent of the assets of other units at the premises of Gujarat Guardian Limited at Ankleshwar or E.I. DuPont at Savli and none of the assets of the units situated in Gujarat Guardian Limited or E.I. DuPont are being utilised in manufacturing the product being carried on by the unit of the petitioner at Jhagadia. Therefore, it can be said that the unit of the petitioner at Jhagadia is completely independent unit and same is established without use of assets of the unit either at Gujarat Guardian Limited or E.I. DuPont. It is also not the case of the respondents that any of the old plant and machinery was used by the petitioner to complete the manufacturing process in the unit at Jhagadia, but on the contrary the unit at Jhagadia is totally independent and is able to complete the process of manufacturing of industrial gases on its own as a viable unit. It is also a matter of fact that the unit at Jhagadia established by the petitioner is not dependent on any of the assets used by the units at Gujarat Guardian Limited or E.I. DuPont and physical identity of the unit at Jhagadia is independent than that of other two units. It can therefore, be said that the petitioner is entitled to exemption from electricity duty in view of exception carved out in the definition of new industrial unit.
19. The word “expansion” therefore, occurring in explanation (c) to section 3(2)(vii) of the Act is required to be understood in relation to the facts of the case to the effect that the manufacturing activity of the petitioner at the unit at Jhagadia is not an expansion of its earlier product or business as the manufacturing activity at the Page 33 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT unit at Jhagadia for production of industrial gases with
new technology, new plant and machinery, new set up and
therefore, it meets with the criteria of new industrial
undertaking. It would therefore, be germane to refer to the
observations made by this Court in case of Kores (India)
Limited Textile Division(supra) as under :

23. Thus, even the Supreme Court has elaborately
discussed the meaning of word ‘expansion’ and its all
derivatives. The observation of the Supreme Court in para­
10 would indicate those were the reasons for not treating
the respondent to be eligible for benefits. As it was in that
case capacity was increased, whereas, in the instant case
on hand, it is absolutely uncontroverted that company had
started altogether new product and when there is a new
product, which is requiring the new machinery and which
is requiring new premises, and old machinery is not put to
use nor is the raw material is put to use. It cannot be said
that it is the expansion of earlier product or business. The
diversification in production activities requiring new
technology, new method and new plant and machinery,
new set up cannot denied benefit of exemption in duty only
on the ground that the same is merely expansion of the
original company. In fact what is to be looked into is
whether the new unit meets with the criteria for ” new
industrial under taking” and if its meet than the certificate
of exemption is to be granted to such unit irrespective of
the fact that the owner had been producing some other
product in State of Gujarat.

24. The ‘expansion’ word occurring in the provision could
be understood in terms of increase in capacity or slight
modification in the product which may enhance the
product’s saleability but that in itself cannot be classified
to be diversification so as to give different colour to the
undertaking and make it eligible for exemption in
electricity duty. As against this, if the same business or
organization is venturing into production of new product
with different capacity and different machinery with
different raw material and input, then, though the
Company and organization has been producing another Page 34 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT product in the State of Gujarat would in itself not considered as disqualifying factor for the new unit which is based upon new technology for altogether a new product warranting fresh investment, new machinery and plants and technical knowhow. It is also relevant to note that if the Unit is changing its technology for better result of the same product than in that case such change and investment might not be eligible for duty exemption. The petitioner had in fact established it case for seeking exemption before the respondent no.1 as its contention referred to in para 16 (v) to 16(x) have not been adverted to at all by the respondent no.1. in its order dated 8.11.2012 impugned in this petition.”
20. In view of the aforesaid fact situation and legal proposition, reliance placed by the learned Assistant Government Pleader on the various clauses of the Supply agreement between the petitioner and Gujarat Guardian Limited and E.I. DuPont so as to canvas that establishment of the unit at Jhagadia is nothing but an expansion of the unit at Jhagadia, is to be rejected as it is established on record that the unit of the petitioner at Jhagadia is an independent unit with new plant and machinery for manufacturing of new product and therefore, it cannot be said that unit at Jhagadia established by the petitioner is an expansion of its existing business or undertaking in the State of Gujarat. The petitioner is therefore, entitled to exemption from the electricity duty for five years as envisaged in section 3(2)
(vii) of the Act from 2009 to 2014.
21. With regard to the alternative submission on behalf of the petitioner as to the petitioner is also entitled to exemption as per the the Amended Act with effect from 1 st April, 2013 for additional unit with retrospective effect is Page 35 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020
C/SCA/17182/2016 CAV JUDGMENT concerned, as it is held that the petitioner is entitled to exemption for the electricity duty, as per the provisions of the Act, prior to its amendment, it would not be necessary to analyse the provisions of the Amended Act and to decide as to whether the same are applicable prospectively or retrospectively. Therefore, such academic exercise is not undertaken in the present case.
22. In view of the foregoing reasons, the petition succeeds. Impugned order dated 21st July, 2016 passed by respondent no.2 Collector of Electricity Duty, Gandhinagar is hereby quashed and set aside. The petitioner is entitled to exemption from payment/levy of electricity duty for five years from 2009 to 2014 and the respondents are hereby directed to refund the amount of electricity duty paid by the petitioner for period of exemption for industrial consumption of energy under the Act within a period of three months from the date of receipt of a copy of this judgment.
23. Petition is disposed of. Rule is made absolute to the aforesaid extent. No order as to costs (BHARGAV D. KARIA, J)
RAGHUNATH R NAIR Page 36 of 36 Downloaded on : Sat Jan 11 01:57:27 IST 2020

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