Raj Fusions Private Ltd (formerly Raj Chemicals) v. State of Kerala & Others

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **&** **THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P.** **THURSDAY, THE 22nd DAY OF JUNE 2023 / 1ST ASHADHA, 1945** ## **WA NO. 109 OF 2018** **AGAINST THE ORDER/JUDGMENT IN WPC 10832/2009 OF HIGH COURT OF** ## **KERALA** ## **APPELLANT/PETITIONER:** RAJ FUSIONS PRIVATE LTD KOHZHINJANPARA, PALAKAKD, FORMERLY KNOWN AS RAJ CHEMICALS, REPRESENTED BY DIRECTOR, N.RAJAGOPAL. BY ADV SRI.P.R.VENKATESH ## **RESPONDENTS:** STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, 1 POWER A DEPARTMENT, SECRTARIAT, THIRUVANANTHAPURAM -695001. KERALA STATE ELECTRICITY BOARD REPRESENTED BY ITS SECRETARY, 2 VYDYUTHI BHAVANAM, PATTOM PALACE P.O., THIRUVANANTHAPURAM-695004. THE SPECIAL OFFICER (REVENUE) 3 KERALA STATE ELECTRICITY BOARD, VYDYUTHIBHAVANAM, THIRUVANANTHAPURAM-695004. 4 THE ASST. ENGINEER ELECTRICAL SECTION, KOZHINJANPARA, WA No.109 of 2018 2 PALAKKAD-678555. 5 TAHSILDAR (RR), CHITTUR, PALAKKAD-678101. BY ADVS. GOVERNMENT PLEADER SRI.C.JOSEPH ANTONY **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.06.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WA No.109 of 2018 3 ## **A.K.JAYASANKARAN NAMBIAR & MOHAMMED NIAS C.P., JJ** ## **------------------------------------------------------------------** WA No.109 of 2018 -------------------------------------------Dated this the 22[nd] day of June, 2023 ## **JUDGMENT** Mohammed Nias.C.P.J. The appellant/writ petitioner is aggrieved by the judgment dated 2.12.2016 in WP(C)No.10832 of 2009, dismissing the writ petition that challenged Exts.P7 and P9 that denied the benefit of pre-92 concessional tariff to the petitioner. 2. The facts leading to the writ appeal are as follows:- The petitioner is a Small Scale Industrial Unit engaged in the manufacture of Calcium Carbide. The Government of Kerala, by order dated 6.2.1992, granted various benefits to new industries subject to fulfilment of the conditions therein. The Kerala State Electricity Board ('the Board') also adopted the said order. The District Industries Centre, by its letter dated 6.5.1997, had issued a certificate stating that the unit started commercial production on 30.12.1996 and that the unit is eligible for electricity duty exemption WA No.109 of 2018 4 for five years. The request of the petitioner for the benefits of the pre-1992 concessional tariff was turned down on the ground that it was a power-intensive unit. Ext. P7 finally rejected a challenge to the denial of exemption. Ext. P9 quantifies the consequential demand for electricity charges from May 1997 to March 2004. Ext.P7 and Ext.P9 were challenged in the writ petition. 3. The Kerala State Electricity Board(for short, the Board) filed a statement contending that subsequent to the G.O. dated 6.2.1992, Government had issued orders dated 26.11.1993 and 19.04.1994 revising the earlier orders. The said orders were produced as Exts.R2(a) and (b), and further by orders dated 11.10.1996 and 17.12.1996 certain units were specifically classified as powerintensive industrial units, and units manufacturing Calcium Carbide were one among them. Thus, the petitioner is not entitled to the concessional tariff. Accordingly, the Board, the subsequent orders have retrospective effect, and even before the commencement of commercial production by the petitioner, the Government had issued orders clearly classifying the petitioner's unit as a power-intensive unit. The General Manager of the District Industries Centre issued the certificates without taking note of the subsequent Government Orders. 4. The learned single Judge who considered the rival WA No.109 of 2018 5 contentions found that though Ext.P7 was challenged after four years, considering the facts and the stakes involved and also that the petitioner had closed down its activity, the writ petition is to be considered on merits. The learned Single Judge found that though a Division Bench of this Court had occasion to consider almost similar facts in WA Nos. 1945 of 2011 and connected cases, wherein the subsequent Government Orders introducing a negative list of industries as power intensive were considered, the Division Bench found that in the context of pre-1992 tariff, the issue as to whether 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, defining the expression, and therefore, remitted the matter to the Board for fresh consideration. As a final decision is awaited on account of the pending litigations, the Learned Single Judge proceeded to consider the impact of the relevant orders in the writ petition. 5. The learned single Judge considered Ext.R2(a) (G.O. dated 26.11.1993) and found that the said order was not passed in modification of the earlier orders but was specifically with a view to discourage the power-intensive units. On account of the power shortage in the State, it was decided by the Government that the power-intensive units need not be encouraged by giving subsidies. WA No.109 of 2018 6 The benefits were confined to those units who are provisionally registered before 31.12.1993. Though the said order only considered the denial of State Investment Subsidy, by subsequent Government Order dated 19.04.1994, Ext.R2(b), it was clarified that financial assistance/loan/tax exemption from the Government, including electricity, tariff concession, and duty exemption will continue to be available to all industries which were provisionally registered before 31.12.1993. Later by Exts.R2(c) and R2(d) order it was clarified that a unit manufacturing calcium carbide would be treated as power intensive industry. Learned single Judge found that there is no dispute that the petitioner was involved in manufacturing calcium carbide and that it had started commercial production on 30.12.1996, much after Exts.R2(a) to R2(c) Government Orders and the Board order Ext.R2(d). 6. Petitioner had relied on this Court's Bench decision in OP No.30622 of 2000 and connected cases decided on 03.3.2005 ( **Arjuna Carbide v. State of Kerala and Others** ) to contend that it was similarly situated. On going through the said judgment, the learned single Judge found that there was no material to show that the unit in question in the said case was power-intensive. Learned single also referred to the judgment in **Secretary to Government and Others. v. Peekay Re-Rolling Mills (P) Ltd.** [2007 (4) SCC 310], to hold that the Apex Court found in that case that the WA No.109 of 2018 7 Government Order dated 26.11.1993 and the subsequent Government Order dated 24.11.1998 has to be treated as a clarification and cannot be said that it has only a prospective operation. Therefore, it has to be presumed that the calcium carbide industry was also included in the negative list as early as 26.11.1993. Petitioner also relies on the order dated 26.11.1993 to argue that the said order will stand against him only if he has both the disentitlements under clause 7. This contention was also repelled on the basis of **Peekay Re-Rolling Mills (P) Ltd.** (supra). In view of the said findings, the learned single Judge found that the petitioner was not entitled to any benefit and rejected his petition. 7. Before us, learned counsel Sri. P.R. Venkatesh argues that the judgment of the learned single Judge is wrong as it did not take into account the binding judgment of the Division Bench, which the Supreme Court upheld. It is also his argument that since the appellant unit had a power allocation of only 495 KVA, it will not come within clause 7 of Ext.R2(a), and by the time Ext.R2(c) was issued, the appellant had already been granted the power allocation. The benefits that were granted on the basis of the order dated 6.2.1992 cannot be refused to the petitioner unit, is the contention. Learned counsel reiterates that the power allocation in his case was prior to Exts.R2(c) and Ext, R2(d) Board order, and therefore, the subsequent orders can only be applied prospectively and as the WA No.109 of 2018 8 appellant will not come within clause 7 of Ext.R2(a) order dated 26.11.1993, he is entitled to the benefit of pre 92 tariff. 8. We have heard Sri. Raju Joseph appearing for the Board as well. 9. Having heard the learned counsel for the appellant and the learned standing counsel for the Board, we feel that the writ appeal should fail for the following reasons. There is no contention for the appellant-writ petitioner that the Government Order dated 26.11.1993 is not applicable to the appellant. His only contention is that he will not be governed by clause 7 of the said Government Order as his contract load is only 495 KVA. Clause 7 is extracted hereunder:- “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.” 10. In the decision reported in **Peekay Re-Rolling Mills Pvt. Ltd. v. Secretary to Government and Others** [2011 (1) KHC 826 (DB] ( after the order of remand by the Apex Court) it was held as WA No.109 of 2018 9 ## follows: “the interpretation to be given to clause 7 comes up for consideration. As already noticed, clause 7 takes care of two situations. They are (1) in order to be excluded from the category of units, which are entitled to the subsidy and other benefits, the unit must be one based on electro-thermal/electro-chemical processors and (2) units where the total power requirement exceeds 2500 KVA of contract load and where the cost of power is more than 25% of the cost of production of the items manufactured. However, units which generate the power requirement in excess of 2500 KVA of contract load by own captive power, are entitled to the benefit. On a plain reading of the provision, it is clear that in the latter portion, in order to go outside the ambit of the benefits of tax exemption, the unit has to satisfy both the requirements, i.e., it has to have the power requirement which exceeds 2500 KVA of contract load, and the cost of power is more than 25% of the cost of production of the items manufactured.” 11. It is only in the cases covered by the second category that both the requirements of 2500 KVA of contract load and where the cost of power to be not more than 25% of the cost of production of the items manufactured, which are cumulative, apply. The argument of the appellant herein is that since the contract load is only 495 KVA, clause 7 is not attracted. The said contention cannot be accepted. There is no dispute that the petitioner's unit is one employing an electro-thermal process as the same is evident from WA No.109 of 2018 10 Ext.P13, similarly situated units, which according to the writ petitioner was granted the benefit of pre-92 tariff. 12. A further argument of the petitioner is that only if the 26.11.1993 Government Order applies would the second Government Order dated 24.11.1998 apply, which is stated to be a clarificatory order. We hold that in the instant case, the petitioner incurs an ineligibility on a plain reading of clause 7 of the Government Order dated 26.11.1993 itself without anything more. With respect to Ext.R2(b) Government Order dated 19.4.1994, which is again referring to the earlier Government Order dated 26.11.1993, it has to be held that the benefit of the same is applicable only to those units who were provisionally registered before 31.12.1993 with the Government of India. There is no contention that there has been a registration prior to 31.12.1993 in the instant case. For these two reasons, it has to be found on facts that the writ petitioner is not entitled to succeed. Thus, even if the subsequent Government Orders Exts.R2(c) and R2(d) dated 11.10.1996 and 17.12.1996 are held to be not applicable to the petitioner though it was issued before the commencement of commercial production, the petitioner would still incur the ineligibility as it is an industry engaged in the electrothermal process. The finding of the learned single Judge that one has to read the Government Order dated 26.12.1993 along with Government Order dated 24.11.1998 has to be held to be correct, WA No.109 of 2018 11 and the calcium carbide industry though was specified as such in the negative list only later, by necessary implication, it must be held to be included in the list in the Government Order dated 26.11.1993. As stated above, there is no case for the petitioner that the unit was registered prior to 31.12.1993. Therefore, the benefit of the subsequent order is also not available to the writ petitioner. The essential contention of the appellant is that it is not a power-intensive unit relying on clause 7 of the Government Order dated 26.11.1993. As stated above, on facts, we are not in a position to accept the same. 13. The next argument of the learned counsel is that his case is covered by the decision in **Arjuna Carbide** (supra). We find, as rightly found by the learned single Judge, that the applicability of the Government Order dated 11.10.1996 was considered in Arjuna Carbide, wherein it was held that executive orders cannot take away a benefit granted by the Government, and there was nothing to show that the unit in issue there was a power-intensive unit. The later judgment in **Peekay Re-Rolling Mills (P) Ltd.** (supra) specifically held that the order dated 24.11.1998 is to be seen as one issued as a clarification to the earlier Government Order dated 26.11.1993, including certain industrial units in the negative list including industries manufacturing calcium carbide. The contention that the Government order dated 24.11.1998 is only prospective and not WA No.109 of 2018 12 retrospective was turned down by the Apex Court in **Peekay ReRolling Mills (P) Ltd.** (supra). On the basis of the findings in the said judgment, we find that it is the Peekay Re-Rolling judgment that specifically dealt with the Government Orders which are in question in this case that applies and not the one in Arjuna Carbide as the judgment in **Arjuna Carbide** (supra) of this Court has to be understood in the light of the subsequent judgment of the Supreme Court in **Peekay Re-Rolling Mills (P) Ltd.** (supra). 14. Accordingly, for the reasons mentioned by the learned single Judge as well as the reasons supplemented by us in this judgment, We hold that the dismissal of the writ petition was justified and calls for no interference. The Writ Appeal fails and is hereby dismissed. ## **Sd/- A.K.JAYASANKARAN NAMBIAR, JUDGE** ## **Sd/- MOHAMMED NIAS C.P.,** **JUDGE** dlk 1.7..2023