2022 (5) TMI 308 - HC - VAT and Sales Tax

Court grants company exemption from electricity duty for multiple power plants under industrial policy

M/s. Usha Martin Limited Versus The State of Jharkhand, Joint Commissioner of Commercial Taxes (Administration), Jamshedpur, Deputy Commissioner of Commercial Taxes, Adityapur Circle,

The court ruled in favor of the petitioner, a company with multiple industrial units in Jharkhand, regarding the entitlement to a ten-year exemption from ... Doctrine of promissory estoppel and legitimate expectation - Validity of assessment order - Benefit of N/N. S.O. 70 dated 17.07.2004 - period 15.11.2000 to 31.03.2005 - Whether petitioner is entitled for the benefit of exemption from payment of electricity duty for a period of ten years from the date of commercial production of its 30 MW Captive Power Generation Plant in terms of Clause 15.2.2 of the Industrial Policy-2001? HELD THAT:- The bare reading of Clause 15.2.2 leaves no iota of doubt that State Government was keen to encourage private sectors to establish such number of CPPs as would be required by it to meet the existing and future demand of its Industrial units. Even generation of surplus energy through CPPs could have been purchased by SEB from private sectors. This clear emphasis on establishment of CPPs was to fulfill the dual objective to be achieved by the State Government, namely, to ensure that industries situated in the State are not starved of power and, further, if CPPs are encouraged and established by private sector, State resources towards supply of power can be utilized to supply power to other sectors/industrial units which could not establish CPPs. It is with the said avowed objective, it was clearly stipulated in the Policy that power generated from such CPPs would be exempted from payment of electricity duty for a period of 10 years from the date of commercial production. It is an admitted fact that Petitioner has established 25 MW and 10 MW CPPs on 26.03.2002 and 15.11.2004 respectively, and, since the said CPPs were established before 31.03.2005, Respondent-State of Jharkhand extended the benefit of exemption from payment of electricity duty to said CPPs for a period of 10 years, which has already been availed by the petitioner - Even an additional ground of production of Certificate of Commercial Production from Director of Industries was taken by the Appellate Authority for denying the benefit of exemption. The main thrust of the arguments of the Respondent-State is upon Clause 29.2 of the Policy. However, from a bare reading of Clause 29.2, it would be evident that the incentive enumerated under the said Clause 29.2 only would be admissible ‘only once’ to a unit and the said incentives are specifically enumerated in the said Clause itself. One of the incentives enumerated under Clause 29.2 is ‘Captive Power Generating Subsidy’ - In fact, Clause 29.2 read with Clause 29.4 buttresses the contention of the petitioner that exemption from payment of electricity duty was not restricted to only one CPP established during the subsistence of the Industrial Policy-2001 as the Policy itself incorporated restriction where it intended to restrict the benefit available under the Policy ‘only once’. The petitioner is entitled to the benefit of exemption from payment of electricity duty under the Bihar Electricity Duty Act, 1948 in respect of its 30MW Captive Power Generation Plant having date of commercial production on 04.05.2009 in terms of the provisions contained under Clause 15.2.2 of the Jharkhand Industrial Policy-2001 - matter remanded back to Respondent No.3-Deputy Commissioner of Commercial Taxes, Adityapur Circle, Jamshedpur to pass fresh assessment orders extending the benefit of exemption from payment of electricity duty in respect of 30 MW CPP to the petitioner and to issue consequential excess demand notices for refund of the amount of electricity duty realized, if any, from the petitioner in respect of its 30 MW CPP. Application allowed. Issues Involved:1. Entitlement to exemption from payment of electricity duty for a 30 MW Captive Power Generation Plant under Clause 15.2.2 of the Jharkhand Industrial Policy-2001.2. Validity and applicability of follow-up notifications extending the period of exemption.3. Alleged concealment of material facts by the petitioner.4. Interpretation of the terms 'Industrial Unit' and 'Captive Power Generation Plant' under the Industrial Policy.Issue-wise Detailed Analysis:1. Entitlement to Exemption from Payment of Electricity Duty:The petitioner, a company with several industrial units in Jharkhand, established a 30 MW Captive Power Generation Plant (CPP) with a commercial production date of 4th May 2009. The primary issue was whether this plant was entitled to a ten-year exemption from electricity duty under Clause 15.2.2 of the Jharkhand Industrial Policy-2001. The court noted that the Industrial Policy aimed to encourage the establishment of CPPs to meet the power demands of industrial units. Clause 15.2.2 explicitly provided for a ten-year exemption from electricity duty for CPPs. The court found that the policy did not limit the exemption to only one CPP per industrial unit, and thus, the petitioner was entitled to the exemption for its 30 MW CPP.2. Validity and Applicability of Follow-up Notifications:The court addressed the issue of whether the follow-up notification (S.O. 70 dated 17.07.2004) limited the exemption to CPPs established between 15.11.2000 and 31.03.2005. The Industrial Policy was extended until 31.03.2011, but the follow-up notification was not amended accordingly until 26.03.2015. The court held that the delay in issuing the amended notification could not deprive the petitioner of its legitimate entitlement to the exemption. The court emphasized that the State's failure to timely update the notification was an arbitrary act that violated the doctrine of promissory estoppel and legitimate expectation.3. Alleged Concealment of Material Facts:The Commercial Taxes Tribunal had dismissed the petitioner's revision applications, partly on the grounds of alleged concealment of material facts, specifically the Business Transfer Agreement with Tata Steel Limited. The court found this finding to be perverse, as the State had not raised any objections regarding the transfer, and the tax liabilities remained with the petitioner. The court held that the Tribunal had exceeded its jurisdiction by dismissing the revision applications on this basis.4. Interpretation of 'Industrial Unit' and 'Captive Power Generation Plant':The State argued that the policy's incentives were only available once to an industrial unit and contended that the 10 MW and 30 MW CPPs were expansions of the existing 25 MW CPP. The court rejected this argument, noting that the policy treated CPPs and industrial units as distinct entities. Clause 15.2.2 did not restrict the number of CPPs that could be established by an industrial unit. The court also clarified that the definition of 'Expansion/Modernization/Diversification' applied to industrial units, not CPPs.Conclusion:The court concluded that the petitioner was entitled to the benefit of exemption from electricity duty for its 30 MW CPP under Clause 15.2.2 of the Jharkhand Industrial Policy-2001. The orders of the Commercial Taxes Tribunal were quashed, and the matter was remanded to the Deputy Commissioner of Commercial Taxes to pass fresh assessment orders extending the benefit of exemption and issue consequential excess demand notices for refund of any realized electricity duty.