Supreme Court upholds contract registration cancellation, parties to bear own costs

The Supreme Court partially allowed the appeal, maintaining the High Court's decision to strike down the cancellation of the registration of the respondent's contract with M/s. Gotaverken Energy Systems. However, the rest of the High Court's judgment was set aside, and each party was ordered to bear its own costs.

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Issues Involved:
1. Nature of power exercised by the Central Government while issuing the amendment notification.
2. Whether the Central Government artificially carved out two classes of power plants.
3. Nexus with the object sought to be achieved by treating power projects generating electricity for distribution differently from power plants generating electricity for captive consumption.
4. Justification of the Assistant Collector in refusing to register the respondent's contract with M/s. Asea Stal.
5. Legality of the Assistant Collector of Customs' action in recalling/cancelling the registration of the respondent's contract with M/s. Gotaverken Energy Systems.

Detailed Analysis:

1. Nature of Power Exercised by the Central Government:
The Central Government's power to issue exemption notifications under Section 25 of the Customs Act, 1962 includes the power to amend, vary, or rescind such notifications. This is supported by the General Clauses Act, 1897, which allows the authority to modify or withdraw notifications. The Supreme Court in Kasinka Trading and Anr. v. Union of India & Anr. affirmed that the power to grant exemptions inherently includes the power to modify or withdraw them, emphasizing that such actions are in public interest.

2. Classification of Power Plants:
The amendment notification dated 1-5-1986 was argued to be clarificatory, distinguishing between power projects for public distribution and captive power plants for internal consumption. The Industrial Policy Resolution of 1956 and the Industries (Development and Regulation) Act, 1951, support this distinction. The Supreme Court found that the two classes-public power projects and captive power plants-are well-defined and distinct, with the former aimed at public distribution and the latter for internal use by industrial units.

3. Nexus with the Object Sought:
Article 14 of the Constitution prohibits class legislation but allows reasonable classification based on intelligible differentia with a rational relation to the objective. The Court held that the differentiation between public power projects and captive power plants is rational and justified. The exemption was intended for projects generating power for public distribution, not for captive consumption by industrial units.

4. Refusal to Register the Contract with M/s. Asea Stal:
The refusal to register the contract was upheld. The application for registration does not confer a vested right and must be decided based on the law at the time of consideration. The exemption notification had been clarified, and the Project Imports (Registration of Contract) Regulations, 1965, had been superseded by the 1986 Regulations. The refusal was deemed lawful, and the respondent's argument that both contracts should be treated similarly was rejected.

5. Cancellation of Registration with M/s. Gotaverken Energy Systems:
The cancellation of the registration was found unlawful. The new Project Imports Regulations, 1986, which superseded the 1965 Regulations, did not provide for cancelling existing registrations. Additionally, the respondent was not given an opportunity to be heard before the cancellation. The High Court's decision to set aside the cancellation was upheld. However, the judgment did not address the impact of registration on the dutiability or exemption of the imported goods, leaving it for future adjudication.

Conclusion:
The Supreme Court partly allowed the appeal. The High Court's decision to strike down the cancellation of the registration of the respondent's contract with M/s. Gotaverken Energy Systems was maintained. However, the rest of the High Court's judgment was set aside. Each party was ordered to bear its own costs.

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