Natural gas is not a disqualifying local mineral resource under the incentive scheme, so the denial of sales tax incentive failed.

Clause 9(c) of the incentive scheme excluded projects based on local mineral resources requiring a permit or licence. The Gujarat HC held that natural gas supplied through pipeline did not fall within that disqualifying category, because under the Mines and Minerals (Development and Regulation) Act, 1957, minerals exclude mineral oils and natural gas is treated as a mineral oil/petroleum product, not a mineral requiring a mining permit or licence. The denial of sales tax incentive for Phase-II on that basis was therefore unsustainable, and the rejection was quashed. The matter was remitted for fresh consideration of eligibility under the remaining conditions of the scheme.

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Issues: Whether natural gas used in Phase-II of the industrial project could be treated as a local mineral resource requiring permit or licence so as to attract clause 9(c) of Annexure-B to the incentive scheme and deny sales tax incentive; and whether the impugned denial of incentive for Phase-II could be sustained.

Analysis: Clause 9(c) denied eligibility to a public sector unit only where the project was based on local mineral resources for which a permit or licence was required under the relevant mineral law. The raw material for Phase-II was natural gas supplied through pipeline. Reading the incentive condition as it stood, the decisive question was whether natural gas answered the description of a mineral resource requiring a permit or licence. The Court relied on the statutory definition in the Mines and Minerals (Development and Regulation) Act, 1957, under which minerals exclude mineral oils and mineral oils include natural gas and petroleum. On that basis, and following the legal position that natural gas in raw and liquefied form is a petroleum product and part of mineral oil resources, natural gas could not be treated as a mineral resource for which a mining permit or licence was required. The Court also held that the denial could not be justified by recharacterising the expression as local mineral resources in a broader sense contrary to the wording of the clause.

Conclusion: The denial of sales tax incentive for Phase-II on the footing that natural gas was a local mineral resource was unsustainable. The rejection of the claim was quashed and the matter was sent back for fresh consideration in accordance with the Court's observations.

Final Conclusion: The petitioner succeeded on the core eligibility issue, but the grant of incentive for Phase-II was left to be reconsidered by the authority after verifying compliance with the remaining conditions of the scheme.

Ratio Decidendi: For the purpose of an incentive clause excluding projects based on local mineral resources requiring a permit or licence, natural gas, being a mineral oil and not a mineral requiring such permit or licence under the mineral law, cannot be treated as a disqualifying local mineral resource.

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