2008 (9) TMI 105 - AT - Central Excise

Chhattisgarh State Electricity Board not eligible for tax exemption under Notification No. 74/93-C.E.

The Tribunal held that the Chhattisgarh State Electricity Board is not a Department of the State Government eligible for exemption under Notification No. ... Eligibility for exemption u/not. 74/93-C.E., which provides exemption on goods manufactured by a factory belonging to a State Government if such goods are intended for use by another Department of the State Government – mere ownership of 100% capital by State Govt. not makes a body on par with State Govt. – therefore it is held that Chhattisgarh State Electricity Board is not a Dept. of the State Govt. so as to be eligible for exemption in respect of goods (PCC Poles) mfd. in their factories Issues Involved:Eligibility for exemption under Notification No. 74/93-C.E. for goods manufactured by State Electricity Boards intended for use by State Government Departments.Analysis:1. Dispute and Legal Background: The case involves a dispute regarding the eligibility of Chhattisgarh State Electricity Board for exemption under Notification No. 74/93-C.E. The Tribunal referred to a previous decision where it was held that although State Electricity Boards are not 'Departments' of the Government, they may still be eligible for full exemption under the said Notification if they are State Government Undertakings or Corporations owned by the State Government.2. Divergence of Opinions: Another Division Bench had previously held that statutory corporations created under different enactments, including State Electricity Boards, cannot be equated with Departments of the State Government and are not entitled to the exemption. This creates a divergence of opinions on the matter.3. Exemption Criteria: The Notification requires goods to be manufactured by a factory belonging to a State Government and intended for use by any Department of that Government. The Tribunal emphasized strict construction of the exemption criteria and the necessity to fulfill both conditions for claiming the benefit.4. State Electricity Boards' Status: The core question is whether State Electricity Boards are equivalent to the State Government or its Departments. Previous legal precedents established that while State Electricity Boards are considered a 'State' within the meaning of Article 12 of the Constitution, not all entities falling under this definition are considered part of the Government.5. Legal Precedents: Decisions from the Supreme Court and High Courts have clarified that entities considered a 'State' under the Constitution may not necessarily be part of the Government. The case law distinguishes between entities like corporations and statutory authorities, which may be 'State' but remain separate from the Government.6. Appellant's Argument: The appellant argued that the goods manufactured by the Electricity Board are intended for use by various Government Departments and entities like Gram Panchayats, Municipalities, and Municipal Corporations. However, the Tribunal rejected this argument, emphasizing that the Electricity Board sells electricity to consumers and the goods are manufactured for the Board's own use.7. Denial of Exemption: Since the Electricity Board is not considered a Department of the State Government, it fails to meet the exemption criteria. The Tribunal concluded that the goods are not intended for use by any Department of the Government, as required by the Notification.8. Supreme Court Decision: The appellant cited a Supreme Court decision upholding the Tribunal's order in a related case, but the Tribunal clarified that the summary dismissal of the appeal does not signify affirmation of the judgment on merit.9. Final Decision: The Tribunal answered the reference in the negative, holding that Chhattisgarh State Electricity Board is not a Department of the State Government eligible for exemption under Notification No. 74/93-C.E. The appeals were to be listed before a regular Division Bench for final disposal.