Raj Fusions Private Limited v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** ## **FRIDAY, THE 2ND DAY OF DECEMBER 2016/11TH AGRAHAYANA, 1938** **WP(C).No. 10832 of 2009 (Y) -------------------------------------------** **PETITIONER(S) : --------------------------** **RAJ FUSIONS PRIVATE LIMITED, KOZHINJANPARA, PALAKKAD,, FORMALLY KNOWN AS RAJ CHEMICALS, REPRESENTED BY DIRECTOR, N.RAJAGOPAL.** ## **BY ADV. SRI.P.R.VENKITESH** - **RESPONDENT(S) : ----------------------------1. STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, POWER A DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM.** - **2. KERALA STATE ELECTRICITY BOARD, REPRESENTED BY ITS SECRETARY, VYDYUTHIBHAVANAM, PATTOM PALACE P.O., THIRUVANANTHAPURAM, REPRESENTED BY ITS SECRETARY.** - **3. THE SPECIAL OFFICER (REVENUE), KERALA STATE ELECTRICITY BOARD, VYDYUTHIBHAVANAM, THIRUVANANTHAPURAM.** - **4. THE ASST. ENGINEER, ELECTRICAL SECTION, KOZHINJANPARA, PALAKKAD.** - **5. TAHSILDAR (RR), CHITTUR.** - **R1 & R5 BY GOVERNMENT PLEADER SMT. LILLY.K.T R2 TO R4 BY SRI.P.SANTHALINGAM (SENIOR ADVOCATE)** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 06-08-2016, THE COURT ON 02-12-2016 DELIVERED THE FOLLOWING:** Msd. ## **WP(C).No. 10832 of 2009 (Y)** ## **-------------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS :** - **EXHIBIT P1: TRUE COPY OF THE AGREEMENT ENTERED INTO BY RAJ FUSIONS WITH THE BOARD DATED 23.06.1999.** - **EXHIBIT P2: TRUE COPY OF THE GOVERNMENT ORDER GO(MS) 4/92 DATED 06.02.1992.** - **EXHIBIT P3: TRUE COPY OF THE ORDER OF THE BOARD ADOPTING EXHIBIT P2 ORDER DATED 27.03.1992.** - **EXHIBIT P4: TRUE COPY OF THE ELIGIBILITY CERTIFICATE ISSUED BY DISTRICT INDUSTRIES CENTRE DATED 06.05.1997.** - **EXHIBIT P5: TRUE COPY OF THE ELIGIBILITY CERTIFICATE ISSUED BY DISTRICT INDUSTRIES CENTRE.** - **EXHIBIT P6: TRUE COPY OF THE JUDGMENT IN O.P.NO. 10736 DATED 30.05.2005.** - **EXHIBIT P7: TRUE COPY OF THE ORDER PASSED BY THE BOARD DATED 30.05.2005.** - **EXHIBIT P8: TRUE COPY OF THE JUDGMENT IN O.P.NO. 14609 OF 1997 DATED 23.11.2006.** - **EXHIBIT P9: TRUE COPY OF THE REVENUE RECOVERY NOTICE ISSUED BY THE FIFTH RESPONDENT DATED 01.07.2008.** ## **EXHIBIT P10: TRUE COPY OF THE REPLY GIVEN TO EXHIBIT P9 DEMAND.** - **EXHIBIT P11: TRUE COPY OF THE JUDGMENT DATED 03.03.2005 IN O.P.NO. 30633 OF 2000.** - **EXHIBIT P12: TRUE COPY OF THE ORDER DATED 28.08.2008 IN W.P(C).NO. 24460 OF 2008.** - **EXHIBIT P13: LIST OF COMPANIES WHICH HAVE BEEN GIVEN PRE 1992 TARIFF INSPITE OF THE FACT, THAT THEY HAVE BEEN REGISTERED POST 1993.** **EXHIBIT P14: TRUE COPY OF THE GO(MS) 149/93/ID DATED 26.11.1993.** - **EXHIBIT P15: TRUE COPY OF THE JUDGMENT DATED 17.03.1998 IN O.P.NO. 7537/1997 OF THIS HON'BLE COURT.** - **EXHIBIT P16: TRUE COPY OF THE JUDGMENT DATED 04.11.2003 IN W.A.NO. 2343/1998 OF THIS HON'BLE COURT.** ## **WP(C).No. 10832 of 2009 (Y)** ## **-------------------------------------------** ## **EXHIBIT P17: TRUE COPY OF ORDER IN R.P.NO. 754/2009 IN O.P.NO. 10736/1997 OF THIS HON'BLE COURT.** **EXHIBIT P18: TRUE COPY OF COMMON JUDGMENT OF THIS HON'BLE COURT DATED 03.03.2005 IN O.P.NO. 30633/2000, W.P(C).NO. 40528/2003 & W.P(C).NO. 4124/2004 IN THE CASE OF VIGNESH CHEMICALS AND ARJUNA CARBIDES.** **EXHIBIT P19: TRUE COPY OF LIST IN RESPECT OF INDUSTRIAL UNITS SIMILARLY PLACES LIKE THE PETITIONER, WHICH HAVE BEEN GRANTED THE BENEFIT OF PRE-92 TARIFF BY RESPONDENTS 1 AND 2 THOUGH THEY WERE UNITS REGISTERED POST 1993.** ## **RESPONDENT(S)' EXHIBITS :** **EXHIBIT R2(A): TRUE COPY OF G.O.(MS)NO. 149/93/ID DATED 26.11.1993. EXHIBIT R2(B): TRUE COPY OF G.O.(MS)NO. 102/94/ID DATED 19.04.1994. EXHIBIT R2(C): TRUE COPY OF THE G.O.(MS)NO. 26/96/PD DATED 11.10.1996. EXHIBIT R2(D): G.O(MS)NO. 3028/96(PLG.COM.3100/96) DATED 17.12.1996.** **//TRUE COPY//** **P.S.TO JUDGE.** Msd. ## **A.M.SHAFFIQUE, J * * * * * * * * * * * *** W.P.C.No.10832 of 2009 ---------------------------------------- Dated this the 2[nd] day of December 2016 ## **J U D G M E N T** In this writ petition, the petitioner challenges Exts.P7 & P9 and seeks for a direction to the respondents to calculate the energy charges on the basis that the petitioner is entitled to avail power under pre-1992 tariff for the respective years as per Ext.P2 Government Order dated 06.02.1992. By Ext.P7 the Kerala State Electricity Board (for short 'the Board') while considering the claim of the petitioner formed an opinion that it is not eligible for concessional tariff at pre-1992 rate as the petitioner is a power intensive unit based on Electro Thermal/Electro chemical processors. Ext.P9 is a notice of revenue recovery by which the petitioner is called upon to pay an amount of Rs.9,58,54,727/- being electricity charges for the period from May 1997 to March 2004. 2. The short facts involved in the writ petition would disclose as under: W.P.C.No.10832/2009 2 Petitioner is a small scale industrial unit engaged in the manufacture of Calcium Carbide. The Government of Kerala by Government Order dated 06.02.1992 granted various benefits to new industries. The Government Order dated 06.02.1992 was adopted by the Board. 3. Petitioner submits that they have set up the industrial unit based on the aforesaid orders. The District Industries Centre by its letter dated 06.05.1997 issued certificate stating that the unit started production on 30.12.1996 and the unit is eligible for electricity duty exemption for 5 years. Since the benefit was not extended to the petitioner, they filed O.P.No.10736/1997 before this Court seeking for a declaration that the petitioner is entitled for concessional tariff. A similar writ petition was filed by Prince Rolling Pvt. Ltd. and Prince Alloys Pvt. Ltd. as O.P.No.7537 of 1997. The Board took up a contention that concessional tariff will not apply to power intensive units. By judgment dated 17/03/1998, writ petition was allowed holding that the said company does not fall under the said category and they were entitled for concessional tariff. Though the matter was taken up W.P.C.No.10832/2009 3 in appeal before the Division Bench as W.A.No.2343/1998, the judgment of the learned Single Judge was confirmed. According to the petitioner, the contract load of the unit is 495 KVA, as evident from the agreement executed as Ext.P1. O.P.No.10736/1997 was disposed of on 17.01.2005 holding that the petitioner should be given the benefit of the judgment dated 13/11/1998 in O.P.No.9214 of 1998 on the petitioner satisfying the conditions therein. Pursuant to the said direction, the Board considered the claim and rejected as per Ext.P7 dated 30/05/2005. In the impugned order Ext.P7 it is held that the order in O.P.No.9214 of 1998 is not applicable to the petitioner in view of Government Order dated 26/11/1993. The power connection was disconnected on 17/09/2003 and the unit had been closed. Petitioner places reliance on O.P.No.14609/1997 which was decided on 23.11.2006 and it is contended that the benefit of pre-92 concessional tariff was granted in the said case. In the meantime, the petitioner was served with revenue recovery notice dated 01/07/2008 as Ext.P9. In the light of the aforesaid facts, this writ petition is filed. W.P.C.No.10832/2009 4 4. Statement has been filed by the Board supporting the stand taken by them. It is inter alia contended that subsequent to Government Order dated 06/02/1992, Government has issued orders dated 26/11/1993 and 19/04/1994 revising the earlier orders. Exts.R2(a) & (b) are the said orders. Further by another Government Order dated 11/10/1996 and 17/12/1996, units were further classified as power intensive industrial units and units manufacturing calcium carbide is also treated as power intensive units. Therefore, they are not entitled for concessional tariff. The subsequent Government Order has retrospective effect which has been upheld by the Apex Court is the contention raised. It is further stated that petitioner commenced production on 30/12/1996 and even prior to that, the Government has issued orders treating the petitioner's units as power intensive units. The General Manager, District Industries Centre issued certificates without taking note of subsequent Government Orders. 5. Heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the respondents. W.P.C.No.10832/2009 5 6. Primarily, the petitioner has challenged Ext.P7 order only after a long period of more than about 4 years, probably at a stage when proceedings were taken to recover the amount by issuance of revenue recovery notice on 01/07/2008. Though the writ petition is belatedly filed and the petitioner is guilty of delay and laches, taking into consideration the fact that the demand is huge and the petitioner had closed down its activity, it will be worthwhile to consider the claim on merits. 7. In fact, a Division Bench of this Court had occasion to consider the above issue in a similar set of facts in W.A.No.1945 of 2011 and connected cases. In the said case also, the Division Bench had taken note of the subsequent Government Orders by which the Government introduced a negative list of industries which are power intensive and the units which manufactures calcium carbide is also treated as a power intensive unit which was followed by another Government Order dated 24/11/1998. In the cases considered by the Division Bench, the appellant in W.A.Nos.1945/2011 and 94/2012 unit commenced commercial production on 29/12/1996 which was rejected by the Board and W.P.C.No.10832/2009 6 confirmed by the Government. The Division Bench considered the question whether in the context of pre-1992 tariff, the industry concerned is a power intensive or not is a matter which will have to be decided with reference to the tariff orders then in force, which define the expression. For tariff purpose it was held that for the benefit of pre-92 tariff, the eligibility depends upon the decision on certain other issues which requires to be considered. Without giving a finality of the matter the writ petition was remitted back to the Board for fresh consideration. Since there is no finality in the matter, it will be appropriate to decide as to whether Ext.R2(a) Government Order dated 26/11/1993 will apply to the facts of the case in order to deny the benefit of pre-92 tariff. In Ext.R2(a) the issue was whether the pattern of state investment subsidy should be given due to power shortage in the State. Ext.R2(a) reads as under: _“ Government of Kerala_ ## _Abstract_ _INDUSTRIES - Government assistance to certain industries - Discontinued - Negative list modified - Revised orders issued -_ W.P.C.No.10832/2009 7 ## _------------------------------------------------------------------_ ## _INDUSTRIES (B) DEPARTMENT_ _G.O.(MS)No.149/93/ID Dated,Thiruvananthapuram 26.11.1993_ _--------------------------------------------------------------------------Read:- 1. G.O.(MS) No.144/91/ID Dated 6.12.1991. 2. G.O.(MS) No.63/93/ID Dated:28.5.1993 3. G.O. Letter No.FC2/11839/93 dt.15.7.1993 from the Director of Industries & Commerce, Thiruvananthapuram._ ## _ORDER_ _In the G.O.read as 1[st] paper above, the pattern of State Investment Subsidy has been laid down. There are certain industries which would develop on their own without investment subsidy or any other kind of Governmental assistance. Due to over all power shortage in the State, power-intensive units cannot be encouraged by giving subsidy. There is also the need for protecting the existing units by ensuring that more units do not come up in sectors which are suffering from excess capacity. Hence after considering the matter, Government issued orders in the G.O read as 2[nd] paper above, making certain industries ineligible for State Investment Subsidy and certain other assistance. Representations have been received from some industries against the inclusion in the negative list._ W.P.C.No.10832/2009 8 _Government have reviewed the matter carefully and decided that certain modifications are necessary and accordingly they order that the following industries will not be eligible for State Investment Subsidy._ _1. Small Scale Service and Business Establishment (SSSBE) Units._ _2. Roller Flour Mills._ _3. Photo Studios and Colour Processing Centres._ _4. Tailoring other than manufacturing of readymade garments._ _5. Breweries and Distilleries of all types._ _6. Saw Mills._ _7. Power intensive units based on electro thermal/electro chemical processors or units where total power requirement exceeds 2500 KVA of contract load and where cost of power is more than 25% of cost of production of the items manufactured except where the units generate their power requirements in excess of 2500 KVA of contract load by own captive power._ _8. Soap grade sodium silicate._ _9. Asbestos processing excepting units in respect of which the quantum of asbestos used in the production process is less than 25% and environmental and occupational_ W.P.C.No.10832/2009 9 _health hazards have been taken care of, to the satisfaction of authorities concerned._ _All units in the above list provisionally registered on or after 31/12/1993 will not be eligible for the State Investment Subsidy. Provisional registration for the purpose of large and medium units will be taken to mean, the date of S.I.A. Registration/filing I.E.M. With Government of India/Letter of Intent/submission of application for financial assistance, as the case may be._ _3. Expansion/modernisation/diversification of existing units in the areas included in the list above shall also not be eligible for any financial assistance/loan/tax exemption from Government unless application has been made by the unit for the purpose and received on or before the cut off date viz. 31.12.1993._ _4. Government further order that the industries listed out above will not be eligible for any financial assistance/loan/tax exemption from Government, including electricity tariff concession and duty exemption. This will not, however, apply to loans by financial institutions banks. But the eligible subsidy under Rural Artisans Programme and eligible grant/loan under D.O.P/T.S.P Schemes will continue to be sanctioned as at present._ W.P.C.No.10832/2009 10 _5. All export oriented units will be exempted from the purview of this order._ _6. The G.O read as 2[nd] paper above will stand cancelled with effect from 1.6.1993.”_ 8. Perusal of the above Government order indicates that the said order is not passed in modification of Exts.P1, P2 and P3, whereas the whole concept of the said Government order was to discourage power intensive unit. Government had a policy to provide state investment subsidy to industries. On account of the power shortage in the State, it is decided that the power intensive units need not be encouraged by giving subsidy. Further, it is mentioned in paragraph 2 that all units in the list provisionally registered after 31/12/1993 will not be eligible for State investment subsidy. Apparently, the Government order was issued only for the purpose of either grant or denial of State Investment Subsidy by treating various types of units as power intensive or otherwise. By Ext.R2(b) Government Order dated 19/04/1994, it was clarified that the financial assistance/loan/tax exemption from the Government including electricity, tariff concession and duty exemption will continue to be available to all W.P.C.No.10832/2009 11 industries which were provisionally registered before 31/12/1993. Similarly, by Ext.R2(c) Government order dated 11/10/1996, the unit manufacturing calcium carbide is treated as power intensive industry. This was again clarified in Ext.R2(d) Board order dated 17/12/1996. 9. In fact, in W.A.No.1945 of 2011 and connected cases, the Division Bench had occasion to consider the scope of the Government Order dated 26/11/1993, a clarificatory order dated 24/11/1998 referred to in **Secretary to Government and Others v. Peekay Re-Rolling Mills (P) Ltd.** [2007(4) SCC 310] and without taking a final decision on merits remitted the matter back to the Board to take a final decision in the matter. 10. There is no dispute about the fact that the petitioner is involved in manufacture of calcium carbide. Petitioner started commercial production on 30/12/1996, much after the Government orders Exts.R2(a) to R2(c) and Board order Ext.R2 (d). As already indicated, Ext.R2(a) was with reference to a different issue, which does not apply to the facts of this case. But in Ext.R2(b) it was made clear that the tariff concession will W.P.C.No.10832/2009 12 continue to be available to all industries which were provisionally registered before 31/12/1993. It was further clarified by Government order dated 11/10/1996 that units engaged in the manufacture of calcium carbide is a power intensive unit. These orders have been issued even before commencement of commercial production by the petitioner. The benefit of pre-92 tariff was available to the units which started commercial production between 01/01/1992 and 31/12/1996. A Division Bench of this Court in O.P.No.30622/2000 and connected case decided on 03.03.2005, [ **Arjuna Carbide v. State of Kerala and Others]** , held at paragraph 5 as under: _“5. Counsel appearing for the Electricity Board on the other hand contended that the Government of Kerala has issued the order on 11.10.1996, before starting commercial production by the petitioners and therefore they are bound by the Government order dated 11/10/1996. We find it difficult to accept the submission made by the counsel for the Board. There is nothing to show that Government order dated 11/10/1996 would operate retrospectively. Further the said order refers to allocation of power and not with_ W.P.C.No.10832/2009 13 _regard to the question of exemption. Further we are also of the view that the petitioners have set up their industrial units on the basis of the concession offered on the consumption of electricity by the Electricity Board. On the basis of an executive order benefits granted to_ _the petitioners cannot be taken away. Learned Single Judge in O.P.No.7537 of 1997 has also taken the same view. Matter was taken up in appeal W.A.No.2343 of 1998 which was also dismissed on 4.11.2003. In the absence of any material to show that the petitioners' units are also power intensive units, we are of the view that they are entitled to get the benefit of pre 1992 tariff. It is so declared. Consequential orders would be passed by the Board in view of our declaration. Writ petitions are allowed as above. No further orders as to costs.”_ 10. In the said judgment, the Division Bench considered the veracity of Government Order dated 11/10/1996 and when the petitioner has set up an industrial unit on the basis of a concession offered on the consumption of electricity by the Board, the said benefit cannot be taken away by executive orders. In the said case there is a finding that there is no W.P.C.No.10832/2009 14 material to show that the unit of the petitioner was power intensive unit. In Ext.P7, it is held that the consumer being a power intensive unit based on electro thermal project and the fact that the firm was registered after 31/12/1993, the benefit cannot be extended to the petitioner. In fact, in **Peekay ReRolling Mills (P) Ltd** (supra), the Apex Court had occasion to take note of a Government Order dated 24/11/1998 and held that it is issued in clarification to the Government Order dated 26/11/1993 by which the Government had included certain industries in the negative list which included industries manufacturing Calcium Carbide. A contention was raised that the Government Order dated 24/11/1998 is only a prospective and not retrospective. This contention was negatived by the Apex Court. Therefore, one has to read the Government Order dated 26/11/1993 along with the subsequent Government Order dated 24/11/1998. It has to be assumed that the Government Order has included Calcium Carbide industry in the negative list as early as on 26/11/1993. In the light of the aforesaid factual situation, when the petitioner does not have a case that the unit W.P.C.No.10832/2009 15 was set up prior to 31/12/1993, the petitioner is not entitled for any relief in the writ petition. 11. Of course, the petitioner has a case that it is not a power intensive unit as defined in the Government Order dated 26/11/1993. But, this issue had been further clarified by the Government Order dated 24/11/1998 which is held to be retrospective in **Peekay Re-Rolling Mills (P) Ltd.** (supra). Paragraphs 15 to 17 of the said judgment is relevant which reads as under: _**“15.** One of the points which arises for determination in the present case is whether Premium Ferro Alloys Ltd. is entitled to claim tax exemption on additional investments made after 24-11-1998. It is urged on behalf of the said Company (the respondent herein) that G.O. No. 169/98/ID dated 24-11-1998 by which the State Government modified the negative list by including all types of steel re-rolling mills, units manufacturing iron ingots, operated prospectively. In this connection reliance was placed on clause 3 of the said G.O._ _**16.** We do not find any merit in the above contention. We quote hereinbelow clause 2 and clause 3 of the said G.O. dated 24-11-_ W.P.C.No.10832/2009 16 _1998:_ _“2. The Director of Industries & Commerce has in his letter read above proposed some modifications to the negative list. The Government have examined the proposal of the Director of Industries & Commerce and decided to amend the G.O. read above by including the following industries also in the negative list:_ _1. Metal crushers including granite manufacturing units;_ _2. All types of steel re-rolling mills, units manufacturing iron ingots;_ _3. Ferro Silicon;_ _4. Calcium Carbide;_ _5. Cement manufacturing; and_ _6. Potassium Chlorate._ _3. This order will be effective from the date of order and will be applicable to all units taking provisional registration or IEM/SIA as the case may be from the date of this order. All the conditions stipulated in the G.O. read above and subsequent amendments/clarifications issued thereon will be applicable to this order also.”_ _**17.** Reading the above two clauses, it is clear that the G.O. dated 26-11-1993/27-11-1993 got modified by G.O. dated 24-11-1998. Therefore, if the said G.O. dated 26-11-_ W.P.C.No.10832/2009 17 _1993/27-11-1993 is found to be applicable then the G.O. dated 24-11-1998 which is modification of the earlier G.O. dated 26-111993/27-11-1993 would apply as a clarificatory G.O. We may reiterate that in our judgment in Peekay Re-Rolling Mills (P) Ltd. the question of interpretation of clause 7 of G.O. dated 26-111993/27-11-1993 has been remitted to the High Court. However, as far as retrospectivity of G.O. dated 24-11-1998 is concerned, we are of the view that the said G.O. is clarificatory. Therefore, there is no merit in the contention raised on behalf of Premium Ferro Alloys Ltd. that the said G.O. dated 24-11-1998 is prospective and not retrospective.”_ 12. In the light of the aforesaid factual situation, I do not think that the petitioner is entitled for any relief in the writ petition. Hence this writ petition is dismissed. (sd/-) ## **(A.M.SHAFFIQUE, JUDGE)** jsr