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IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 21.07.2010
CORAM :
THE HONOURABLE Mrs.JUSTICE R.BANUMATHI
and
THE HONOURABLE Mr.JUSTICE B.RAJENDRAN
Writ Appeal Nos.522 and 857 of 2001, W.P.No.18290 of 2000, C.M.P.Nos.7638, 11438 and 12874 of 2001, W.A.M.P.No.19997 of 2001 and W.M.P.No.26495 of 2000
W.A.No.533 of 2001:
M/s.Sumangala Steels Limited
PIPDIC Industrial Estate
Mettupalayam
Pondicherry 605 009. .... Appellant in
W.A.No.533 of 2001
and Respondent in
W.A.No.857 of 2001
Vs.
1.Government of the Union Territory
of Pondicherry by its Chief Secretary
2.The Minister for Industries
Union Territory of Pondicherry
3.Secretary
Industries Department
Government of Pondicherry. .... Respondents in
W.A.No.533 of 2001
and Appellants in
W.A.No.857 of 2001
W.P.No.18290 of 2000:
Sumangala Steels Limited
PIPDIC Industrial Estate
Pondicherry, registered office
at No.45, Chamiers Road
Chennai 600 028. .... Petitioner
Vs.
1.Government of Pondicherry
represented by the Secretary
to Government, Power
Department
2.The Superintending Engineer I
Electricity Department
Pondicherry
3.Senior Accounts Officer-cum-
Sales Officer under the
Revenue Recovery Act
Electricity Department
Pondicherry. .... Respondents
Prayer: Writ Appeals in W.A.Nos.522 and 857 of 2001 are filed under Clause 15 of the Letters Patent against the Order dated 5.1.2001 in W.P.No.15702 of 1997.
Writ Petition in W.P.No.18290 of 2000 is filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of certiorarified mandamus calling for the records of the third respondent in his proceedings No.87/ED/RG/1A1/1999-2000 dated 18.10.2000 received on 21.10.2000 and quash the same and consequently restrain the respondents from initiating any coercive proceedings under the Revenue Recovery act against the Petitioner for arrears of Electricity charges so long as the Petitioner is a sick industrial undertaking under the Sick Industrial Companies (Special Provisions) Act.
For Appellant : Mr.P.S.Raman,Sr.Counsel for
in W.A.No.522/2001 Mr.V.P.Raman
Respondent in W.A.
No.857/2001 and
for Petitioner in
W.P.No.18290 of
2000.
For Appellants : Mr.D.Sreenivasan,Govt.Pleader
in W.A.No.857/2001 Pondicherry
and for Respondents
in W.A.No.522/2001
W.P.No.18290 of
2000.
JUDGMENT
R.BANUMATHI,J.
W.A.No.522 and 857 of 2001:
Aggrieved by the order of the learned single Judge in W.P.No.15702 of 1997 dated 5.1.2001 in allowing the Writ Petition holding that the Writ Petitioner M/s.Sumangala Steels Limited is entitled to the benefits of subsidy for unexpired period ending by 30.9.1992. in W.A.No.857 of 2001, the Government of Pondicherry preferred appeal.
2. Being aggrieved by the very same order in W.P.No.15702 of 1997 declining to issue writ of mandamus to sanction all the benefits conferred on new industries in Letter of Government of Pondicherry No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 and also declining to hold that the Petitioner is entitled to full five years of tariff concession within the parameters of G.O.Ms.No.9/91-Industries Development Department (dated 11.2.1991), M/s.Sumangala Steels Limited has preferred W.A.No.522 of 2001. Both the Writ Appeals arise out of the same order and since the points for determination are one and the same, both the Writ Appeals were heard together and shall stand disposed by this common judgment. For convenience, the parties are referred to in their rank in W.P.No.15702 of 1997.
3. The Petitioner is a company incorporated under the Companies Act. It has been carrying on the business of producing steel in its premises in the PIPDIC Industrial Estate at Mettupalayam in Pondicherry from September 1987 and then having a capacity of 10,000 tonnes per annum (in short, "TPA"). The Petitioner filed W.P.No.15702 of 1997 seeking for a writ of mandamus to sanction all the benefits conferred on new industries in backward areas as per the Government of Pondicherry's letter No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 to the Petitioner's new unit with an installed capacity of 1,40,000 TPA on the following averments:
There was a scheme brought into effect by Government of Pondicherry following letter No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 and as per the terms of which, the industries set up in backward areas were eligible for various benefits such as power subsidy, sales tax exemption and cash subsidy to the tune of 15 percent of capital investment. The power subsidy to Industries, both H.T. and L.T. was a period of five years from the date of commencement of production on a tapering basis i.e., 33 1/3 % for the first three years, 20% for the fourth year and 10% for the fifth year. The Petitioner was sanctioned 5 MVA power in September 1985 and commenced commercial production from September 1987 and it enjoyed the benefits under the subsidy scheme dated 9.12.1985.
4. According to the Petitioner Company, it has proposed a second unit capacity of 1,40,000 tonnes of steel billets per annum. Further case of Petitioner Company is that on 30.6.1987, with a view to instal fresh capacity on a large scale, obtained feasibility certificate from the Electricity Department, Pondicherry Government (ED) for supply of additional power of 20.05 MVA. The Government of India issued an industrial licence to the Petitioner Company. On 17.1.1990, Government of India gave approval to the Petitioner Company for installing fresh capacity of 1,40,000 TPA raising the total capacity of the Petitioner's unit to 1,50,000 TPA, which was in pursuance of minimum economic scale of operation contained in Press Note No.18(10/46/88-LP) dated 13.7.1989 issued by the Government of India. According to the Petitioner, it has obtained the necessary panchayat licence for increase of the power load to 25 MVA and placed firm orders for a substantial part of the plant and machinery for the new unit and also constructed a new factory in the additional area of 3 acres acquired for the new and larger unit. Further case of the Petitioner Company is that it had purchased a new 2x12 Metric Tonne furnaces, continuous casting machine, heavy cranes, etc., and installed them. On 11.2.1991, Government of Pondicherry (Industries) reviewed the existing power subsidy scheme dated 9.12.1985 and issued fresh notification G.O.Ms.No.9/91-IND dated 11.2.1991, whereby all industries were excluded from power subsidy scheme except small industries consuming low tension power. However, large and medium industries having power feasibility certificate issued prior to 1.3.1991 and having taken effective steps as stipulated in the said notification continued to be governed by the existing power subsidy scheme. According to Petitioner Company, it has satisfied all three requirements to be eligible for the power subsidy as per Notification dated 11.2.1991. Petitioner Company had further averred that there was a joint inspection by the Electricity department directed by the Government and the same was conducted in November 1992 and a conclusion was reached that nearly 80 percent of the setting up of the plant had been completed and therefore Petitioner Company was eligible for the power subsidy and sales tax exemption. The Petitioner Company further alleged that by 1997, though 4 = years had passed, there had been no written response, though the Petitioner had been orally told that the matter was under consideration. Further case of Petitioner Company is that it fully needs the requirement of eligibility to the concessions extended to new industries and it has acted on a reasonable expectation. According to the Petitioner Company, if for any valid reason, the new unit is regarded as expansion of the Petitioner Company's existing small scale industry, the expanded and old unit together should be eligible for the benefits given to the new industries for atleast the unexpired period of the total period of five years expiring on 29.9.1992 and in calculating such unexpired period, the delay in providing power to the new unit would have to be excluded.
5. Strongly resisting the Writ Petition, the Respondent/ Government of Pondicherry filed counter with the following averments:
According to the Respondents, the Petitioner Company has already availed power subsidy for a period of full five years from October 1987 to September 1992 amounting to Rs.1,58,26,313/-. The Petitioner Company having already availed power subsidy for a full period of five years would not be entitled to get the benefits and the Petitioner Company had made the present claim twisting facts to make wrongful gain under the pretext of the plea as if it had fulfilled the conditions stipulated in the aforesaid Government Order dated 11.2.1991. According to Respondents, the expansion programme for additional capacity of 1,40,000 tonnes of steel billets per annum is not a new unit since the Management had taken advantage of the Government of India's Scheme of "minimum economic scale of operation", whereby the ceiling capacity of existing mini steel plant was raised to 1,50,000 TPA. The Petitioner Company's application and the Government of India's order clearly reflect expansion and as such it is only an expansion and not a new unit.
6. Further case of Respondent is that the power feasibility certificate obtained by the Unit from the Electricity Department was not for a separate unit, but was merely an enhancement of power load already obtained for its existing unit and it had not obtained power feasibility certificate prior to 1.3.1991 for the additional load. The Petitioner Company had raised the loan from ICICI, which was only for expansion of the existing unit and not for starting a separate unit. Products of the original unit and the expanded unit viz., ingots and billets are almost same in nature as the basic raw material for both are iron scrap and power. There are no two units functioning physically in the Industrial Estate, Mettupalayam, Pondicherry and there is only one unit functioning in the site. G.O.Ms.No.9/91 dated 11.2.1991 is not applicable to the expanded industry. There is no equity in favour of the Petitioner Company to justify its claim for power subsidy.
7. Learned single Judge held that the Petitioner Company had sought permission for expansion only and not for a new unit. Referring to the communication from the Government of Pondicherry Electricity Department dated 30.6.1987, the learned single Judge held that merely because the authorities used the expression "proposed industry" it would not mean that the Petitioner Company wanted power supply to be given for a new unit. The learned single Judge took the view that both the ingots and billets are same entities, which are used for re-rolling purpose. However, the learned single Judge held that even though it is a case of expansion the Petitioner Company is entitled to the benefit of subsidy treating the expansion as a separate unit and the subsidy will be restricted for the unexpired period of the subsidy programme and in working it out, the time taken by the Electricity Department for energising will be excluded.
8. Challenging the order of learned single Judge, both Petitioner as well as the Government of Pondicherry have filed these Appeals. At the time of admission, electricity supply was ordered to be restored on conditions, which we would refer to a little latter.
9. On behalf of the Petitioner Company, learned Senior Counsel Mr.P.S.Raman contended that the learned single Judge rightly held that 60 percent capital issued by the unit has been paid up and firm order has been placed for installation of substantial part of the plant and machinery and while so there was no justification that the subsidy should be limited only to the unexpired period of the subsidy programme. The learned Senior Counsel inter alia made the following submissions:-
The unit manufacturing billets is physically, mechanically and electrically separate and there is no integration between the two units and the unit is having separate ingress and egress and there is no expansion of the existing unit.
The Petitioner having taken effective steps before 1.3.1991 by having more than 60 percent of the capital issued for the proposed industrial unit and having more than a substantial portion of the factory building constructed with the plant and machinery also installed, the Petitioner would be governed by then existing subsidy scheme as per Para 6 of Government Order - G.O.Ms.No.9/91 dated 11.2.1991.
When the new unit established by the Petitioner produced a product "billets", which was different from the one that had been manufactured by the pre-existing unit (steel ingots), the new unit could not be termed as expansion of the existing one. Reliance was placed upon Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO,(2007) 5 SCC 447.
10. Learned Senior Counsel for the Petitioner would further contend that in any event, a large scale expansion of the existing small scale unit would be necessarily entitled to the subsidy scheme announced by the Government.
11. Taking us through the counter filed in the Writ Petition and the relevant records, the learned Government Pleader Pondicherry submitted that the Petitioner Company had availed power tariff concession for the full five years commencing from 1.8.1997 to 30.9.1992 and had benefited to the tune of Rs.1,58,26,313/-. The main contention of Respondents is that G.O.Ms.No.9/91 dated 11.2.1991 was not intended for the benefit of industries, which were already availing the benefits of the tariff concession, but it was meant for industries, which had not availed the tariff concession and completed their establishing new units by fulfilling conditions stipulated in Paragraph (6) of the Government Order. The learned Government Pleader further contended that the Government of India permitted the Petitioner Company to raise its capacity to 1,40,000 TPA and in the proceedings dated 17.1.1990 Government of India directed the Petitioner Company to obtain a formal endorsement after fulfilling the required conditions specified in paragraph 2 of the order and the said provisional sanction would get life only after the conditions are fulfilled. The further contention of Respondents is that the order dated 17.1.1990 did not confer any right on the Petitioner and it was only provisional. The main contention of the Respondent is that the Petitioner, having availed the tariff concession for full five years period, is not entitled to claim any subsidy benefit under G.O.Ms.No.9/91 dated 11.2.1991 and the claim of the Petitioner is a wrongful one.
12. Upon consideration of the submissions and the materials on record and the order of learned single Judge, the following points arise for consideration:
1. Whether the unit of Petitioner Company manufacturing billets is an expansion of the existing unit or a new unit?
2. Whether the unit of the Petitioner Company manufacturing billets has satisfied essential requisites of G.O.No.9/91 dated 11.2.1991 to claim subsidy benefit?
3. Whether the learned single Judge was right in holding that the Petitioner Company is entitled to claim benefits of subsidy for the unexpired period ending with 30.9.1992?
4. Consequently, what are the directions to be issued.
13. Points No.1 to 4:
The Ministry of Industries, Department of Industrial Development, Government of India vide their letter No.16(23)/82-SSI(II)/SSI(P) dated 9.12.1985 has granted approval for the grant of power subsidy to SSI units, both H.T and L.T. Industries for a period of five years only from the date they go in for production. The subsidy is on a tapering basis i.e., 33 1/3 % for the first three years, 20% for the fourth year and 10% for the fifth year. Petitioner Company has been carrying on business of manufacturing steel ingots in its premises in PIPDIC Industrial Estate at Mettupalayam in Pondicherry from September 1987. Its first unit has capacity of 10,000 TPA and its second unit has additional capacity of producing steel ingots and billets. For its then existing unit Petitioner Company had obtained power feasibility for 20.5 MVA on 30.6.1987. The Petitioner company commenced its production from September 1987 and they enjoyed the benefits under subsidy scheme dated 9.12.1985. Ever since they commenced the production, the Petitioner Company has availed power tariff concession for the full five years period commencing from 1.8.1987 to 30.9.1992 and had benefited to the tune of Rs.1,58,26,313/-.
14. The Petitioner had obtained industrial licence from Government of India by the proceedings dated 17.1.1990 for increasing additional capacity of 1,40,000 TPA raising total capacity to the level of 1,50,000 tonnes. The case of Petitioner Company rests on the premise that the enhancement capacity to the level of 1,40,000 tonnes is permitted to be produced by the Government of India in its Order dated 17.1.1990 and it should be viewed as being a new unit and on that basis, as per G.O.Ms.No.9/91 dated 11.2.1991, power tariff concession should be extended to the Petitioner Company on the basis of industrial policy brought into effect by the Government of Pondicherry vide proceedings dated 9.12.1985. Per contra, case of Respondents is that the Petitioner Company has already availed the power tariff concession for the full five years period commencing from 1.8.1987 to 30.9.1992 and the Petitioner Company is actually beneficiary of the power subsidy scheme commencing from 1.8.1987 to an extent of Rs.1,58,26,313/-.
15. The claim of the Petitioner Company is that the Petitioner Company having obtained industrial licence from Government of India for increasing its capacity to 1,40,000 tonnes of steel billets per annum, it is a new unit. The learned Senior Counsel for the Petitioner Company mainly contended that the new unit is physically, mechanically and electrically separated from the old unit and therefore it has to be treated as a new unit. The learned Senior Counsel contended that the new unit to be put up by the Petitioner Company is situated in a three acres plot acquired from PDIC and the said plot is next to its existing unit and new unit is physically separate from the existing unit with separate ingress and egress and mere proximity of the new unit to the existing unit will not detract the same from being a new unit. It was further submitted that the entire plant and machinery for the new unit have been purchased separately and no part of the existing factory has been used in the new unit and the very process of manufacture of steel billets is completely different from that of the manufacture of steel ingots and consequently the new unit is economically separate and distinct from the old unit. He further submitted that electrically also it is separated as a separate extra HT. 100 KV. Sub Station is set up exclusively for the new unit and separate cable connection, metres and other electrification metres have been installed, which are completely distinct from the old unit, which was enjoying 223 K.V. power supply from the general H.T.power line of the industrial estate.
16. In G.O.Ms.No.9/91 dated 11.2.1991, the Government of Pondicherry has revised the power subsidy scheme, which reads as under:
"... The power subsidy scheme was implemented by this Union Territory administration since the year 1975. In its earlier form, the scheme envisaged payment of 7 paise per unit of consumption, for all new industries for an initial period of 5 years. The scheme was subsequently revised in April 1985. It now envisages subsidy for a period of 3 years @ 33 1/3%, for the fourth year 20% and for the fifth year at 10%. Due to the upward revision of power charges in the past years, there was corresponding increase for the payment proportionate subsidy to new industries. Accordingly, the quantum of subsidy disbursed to new industries has now increased to Rs.462.00 lakhs in 1989-90 from Rs.6.9 lakhs in 1982-83. The main reason for the increase in expenditure under the scheme is not only due to the revision of tariff from 1985, but also due to the increase in the number of power based industries during the VII plan period. At the time of formulation of the scheme the intention was no doubt to encourage the proliferation of industry within the territory. In actual practice the scheme has attached many power intensive units which are using power as one of the inputs for production.
2. In view of the fact that the scheme is helping only a handful of large industries, with limited employment, a necessity was felt to modify the scheme, not only on the lines suggested by the planning commission, but also to reduce the heavy drain of plan funds. The Planning Commission in the past has been repeatedly advising not to encourage power based industries.
3. In view of the above, the modified scheme was included in the annual plan 1990-91 and submitted to the Planning Commission for approval. The Planning Commission has also approved the modified scheme and earmarked funds in the annual plan 1990-91.
4. Based on the above, the Director of Industries has now submitted a proposal vide reference above and requested for approval. He has also stated that the present scheme has ended up, by encouraging only the growth of large & medium Industries which are using power as raw material for production, instead of promoting more Labour intensive industries.
5. After careful consideration and taking into account various factors mentioned above, the Lieutenant Governor has been pleased to raise the power subsidy scheme as under:
I. For Pondicherry and Yanam regions:
All small scale industries which are energised on to after 1.3.1991, consuming low tension power, alone are eligible for subsidy for the energy charges paid by them at the following rate, subject to a limit of Rs.1.00 lakh per month
i)33 =% for a period of three years.
ii)20% for the fourth year.
iii)10% for the fifth year.
No power subsidy will be paid from sixth year onwards. All other industries consuming High-tension power and those coming under the category of medium and large scale industry will not be eligible for any power subsidy.
II.For Karaikal and Mahe regions:
All the new low tension and high tension industries which are energised on or after 1.3.1991 are eligible for power subsidy at the rate, subject to a limit of Rs.1.00 lakh per month as follows:
i) 33 1/3% for a period of three years.
ii) 20% for the fourth year
iii) 10% for the fifth year.
No power subsidy will be paid from sixth year onwards.
1. All industries including large and medium, which have been issued with Power Feasibility Certificate by the Superintending Engineer (Electricity) before 1.3.1991 and have taken effective steps, viz.60% or more of the capital issued of the industrial unit, has been paid up and a substantial portion of the factory building has been constructed and a firm order has been placed for substantial part of the plant and machinery required for the industrial unit, will be governed by the existing power subsidy scheme in operation, during VII plan period. In case of any dispute on the interpretation of this para the decision of the Government shall be final...."
(emphasis supplied) In the case before us, the first two clauses are not attracted. We will have to examine whether the Petitioner Company can claim benefit of tariff concession/subsidy for its additional enhanced capacity of 1,40,000 TPA.
17. Claim of the Petitioner Company is that as a new unit, the Company is entitled to subsidy benefits under G.O.Ms.No.9/91. Per contra, the contention of Government is that Government intended to extend benefit only to the pipe line industries, which have completed the respective units substantially and fulfilled he conditions stipulated in G.O.Ms.No.9/91 dated 11.2.1991, whereas the enhanced capacity of the Petitioner Company was only an expansion of the existing unit. According to the Respondents, Petitioner Company had already availed benefit of the subsidy from 1.8.1987 to 30.9.1992 and that it was only an expansion, which aspect is clear from the available materials. Further contention of Respondents is that Petitioner Company had not fulfilled the conditions in G.O.Ms.No.9/91 either as a pipeline unit or as a new unit and only just an expansion under proposal.
18. The learned Senior Counsel for the Petitioner Company mainly argued that it was a new unit and having obtained industrial licence from Government of India on 17.1.1990 and that the Petitioner Company had purchased substantial part of the plant and machinery and installed and required share capital was also raised and therefore the petitioner Company's unit with increased capacity has fulfilled conditions of G.O.Ms.No.9/91. The learned Senior Counsel further contended that the Petitioner's factory, being physically, mechanically and electrically separated from the pre-existing unit, it has to be construed as a new unit for the purpose of subsidy scheme. It was further argued that the new unit established by the petitioner Company produces a product (steel billet) that is different from the one (steel ingots) manufactured by the pre-existing unit. Therefore, the former cannot be termed as expansion. Learned Senior Counsel also submitted that the expansion of the existing unit by way of substantial investment without using or restructuring any of the facilities of the existing unit is not incompatible for the factory to be classified as a new unit in the context of grant of subsidies for encouraging industrial investment in backward areas.
19. Main argument of the learned Senior Counsel for Petitioner Company narrows down two aspects:
The Petitioner's Company, being physically, mechanically and electrically separated from the old unit and producing a new material, has to be necessarily treated as a new unit. "Steel billets" are different from "steel ingots" and while so the term "expansion" is a misnomer.
In any event, a large expansion of the existing small unit with substantial investment will necessarily attract the advantage of the subsidies, which are mainly intended for encouraging industrial investment in backward areas.
20. Learned Senior Counsel contended that the new undertaking must be a new emergence of a physically separate industrial unit and that the end commodities must be distinct and separately identifiable and that the steel billets to be manufactured by the new unit is commercially different from the steel ingots produced by the existing unit by placing reliance upon COMMISSIONER OF CENTRAL EXCISE, JAIPUR VS. MAHAVIR ALUMINIUM LTD. (2007) 5 SCC 260. In the said case, the assessee was converting Aluminium ingots into Aluminium billets and the assesee only consuming such aluminium billets captively to manufacture Aluminium irrigation pipes but also selling the same in the open market. Having regard to the emergence of Aluminium billets as commercial commodity, having independent marketability, the Supreme Court held that the process of conversion of Aluminium ingots into Aluminium Billets amounted to manufacture and held as under:
"17. In Union of India v. J.G. Glass Industries Ltd (1998) 2 SCC 32 leading decisions came to be considered by this Court and it was held that a twofold test emerged for deciding whether the process is that of manufacture.
18. The Court after considering earlier decisions, stated: (SCC p.40, para 16) 16. On an analysis of the aforesaid rulings, a twofold test emerges for deciding whether the process is that of manufacture. First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity already in existence will be of no commercial use but for the said process.
19. In the present case, the assessee is not only captively consuming aluminium billets for the production of irrigation pipes but is also selling such commodity in open market. It is, therefore, clear that the process of manufacture results in emergence of new commercial commodity, namely, billets. The said commodity has an independent marketability and the assessee itself has sold billets in open market by paying excise duty...."
21. In order to attract excise duty, articles manufactured must be capable of sale to a consumer. In the said case, before the Supreme Court, the assessee not only consumed Aluminium billets captively to manufacture Aluminium irrigation pipes but also selling the same in the open market and in such circumstances, considering the question whether the assessee is liable to pay excise duty, the Supreme Court has held that the Aluminium billets is different from Aluminium ingots.
22. Insofar as the second limb of arguments, learned Senior Counsel Mr.P.S.Raman contended that having regard to the higher level of increase in investment and a distinct end product, even if it is an expansion, the expanded unit has to be construed as a new unit. In support of his contention, learned Senior Counsel placed reliance upon TEXTILE MACHINERY CORPORATION LIMITED, CALCUTTA VS. THE COMMISSIONER OF INCOME TAX, WEST BENGAL, CALCUTTA, (1977) 2 SCC 368). In the said case, the question arose is, whether the manufacturing division started by an existing industry for making articles to be used in existing business would amount to re-construction of business already in existence and whether the exemption granted under Section 15C(2)(i) of the Income-tax Act would be available to the newly started unit. After considering the various parameters for determining whether it is a new industrial unit, which is separate from the old one, the Supreme Court has observed as under:
"18. The assessee continues to be the same for the purpose of assessment. It has its existing business already liable to tax. It produced in the two concerned undertakings commodities different from those which he has been manufacturing or producing in its existing business. Manufacture or production of articles yielding additional profit attributable to the new outlay of capital in a separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability under Section 15-C. Sub-section (6) of the section also points to the same effect, namely, production of articles. The answer, in every particular case depends upon the peculiar facts and conditions of the new industrial undertaking on account of which the assessee claims exemption under Section 15-C. No hard and fast rule can be laid down. Trade and industry do not run in earmarked channels and particularly so in view of manifold scientific and technological developments. There is great scope for expansion of trade and industry. The fact that an assessee by establishment of a new industrial undertaking expands his existing business, which he certainly does, would not, on that score, deprive him of the benefit under Section 15-C. Every new creation in business is some kind of expansion and advancement. The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business. No particular decision in one case can lay down an inexorable test to determine whether a given case comes under Section 15-C or not. In order that the new undertaking can be said to be not formed out of the already existing business, there must be a new emergence of a physically separate industrial unit which may exist on its own as a viable unit. An undertaking is formed out of the existing business if the physical identity with the old unit is preserved. This has not happened here in the case of the two undertakings which are separate and distinct.
19. .....
20. ..... The new activity may produce the same commodities of the old business or it may produce some other distinct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. One thing is certain that the new undertaking must be an integrated unit by itself wherein articles fare produced and at least a minimum of ten persons with the aid of power and a minimum of twenty persons without the aid of power have been employed. Such a new industrially recognisable unit of an assessee cannot be said to be reconstruction of his old business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the old business. ....."
23. The Supreme Court held in the above case that the business of the assessee is a heavy engineering concern and the new undertakings are independently producing articles which may be of aid to the principal business, but yet the undertakings are different and not re-construction out of the existing business of the assessee. The Supreme Court further held that the true test is that there must be emergence of a physically separate industrial unit which may exist on its own as a viable unit.
24. Since much arguments were advanced contending that the unit of the Petitioner Company has to be treated as a new unit/pipeline industry, firstly, we may proceed to deal with the first limb of contention that the Petitioner's Company producing steel billets, being a new unit, whether entitled to claim the benefits of subsidy of G.O.Ms.No.9/91 dated 11.2.1991. Secondly, we would analyse the aspect that the unit is only just an expansion of the existing one, which has already availed the subsidy benefit.
25. The power subsidy scheme was implemented by Pondicherry Union territory since the year 1975. In its earlier form, the scheme envisaged payment of 7 paise per unit of consumption to all new industries for an initial period of five years. The Scheme was subsequently revised in April 1985. The said Scheme envisages subsidy for a period of three years at 33 1/3%, for the 4h year 20% and for the 5th year at 10%. Due to the upward revision of power charges, there was a corresponding increase for the payment of proportionate subsidy to new industries. Accordingly, the quantum of subsidy disbursed to new industries has also increased. At the time of formulation of the Scheme, the intention was to encourage the proliferation of industry within Pondicherry territory. But the Government felt that in actual practice, the scheme has attached many power industries units which were using power as one of the inputs for production. Government also felt that the Scheme is helping only handful of large industries with limited employment and necessity was felt to modify the scheme on the lines suggested by the Planning Commission and to reduce the heavy drain of plan funds and the revised power subsidy scheme was passed in G.O.Ms.No.9 of 1991 dated 11.2.1991.
26. As per the said G.O., to avail subsidy benefit large and medium industries must have been issued power feasibility certificate by the Superintending Engineer, Electricity prior to 1.3.1991, taken effective Steps prior to 1.3.1991, which are as follows:
"(a) 60% or more of the issued capital of the industrial unit has been paid up;
(b) Firm orders placed for plant and machinery required for the industrial unit;
(c) Substantial portion of the factory building has been construed."
It was further clarified that in the event of any dispute on the interpretation of the paragraph relating to the continuation of the power subsidy scheme for industries fulfilling the conditions in the paragraph, the decision of the Government shall be final."
27. Claim of Petitioner Company is that its new unit satisfies requirements of Para (6) of the Notification. The main point falling for our consideration is, whether the Petitioner Company has fulfilled the conditions stipulated in G.O.Ms.No.9/91 dated 11.2.1991.
28. Power Feasibility Certificate:
According to the Petitioner Company, it has obtained power feasibility certificate on 30.6.1987 and has also obtained industrial licence from Central Government on 17.1.1990. It is the further contention of Petitioner Company that as on 11.2.1991, it has acquired 50,000 sq.ft. of new factory building in additional land of 3 acres and has also purchased plant and machinery for the new unit. Contention of the learned Senior Counsel for the Petitioner Company is that power feasibility certificate for the new unit with production capacity of 1,50,000 TPA was prior to 1.12.1991. We may recapitulate that the then existing unit of Petitioner Company had capacity of production of 10,000 TPA. for its existing unit. On various dates, the Petitioner Company has got power supply loads increased. Power Feasibility Certificate said to have been obtained by the Petitioner Company on 30.6.1987 was only in respect of then existing unit. Demonstrably, the power feasibility certificate now referred by the Petitioner Company was obtained for its then existing unit. For proper appreciation, we may usefully refer to the various dates and how the power supply load was increased in stages for the then existing unit of the Petitioner Company.
30.9.1985 : Letter of Electricity Department to Petitioner Company in respect of Power feasibility certificate for the proposed Industry (Steel ingots) 4950 KVA 11.8.1986 : Petitioner Company's letter to Electricity Dept. to enhance the H.T.
Supply of 4950 KVA to 9000 KVA (Manufacture of Steel Ingots from scrap).
30.6.1987 : Feasibility Certificate issued by Electricity Department, Government of Pondicherry extending power supply for additional load of 20.5 MVA over and above the sanctioned demand of 4.95 MVA to Petitioner Company's proposed mini-steel plant/manufacture of steel ingots.
September 1987 : Commencement of production 19.4.1988 : Application by Petitioner Company registered under SIA.No.22(88)/CC3 dated 19.04.1988 to Government of India seeking for grant of industrial licence for manufacture of steel ingots.
23.9.1988 : Industrial Licence granted by Government of India for manufacture of 10,000 TPA of steel ingots.
-----
17.1.1990 : Industrial Licence permitting to raise capacity from the level of 10,000 TPA to 1,50,000 TPA under Minimum Economic Scale of Operation Formal endorsement to be issued on fulfilment of conditions stated therein.
11.2.1991 : G.O.Ms.No.9/91 Power subsidy to large and medium scale industries on fulfilment of conditions stated therein.
13.7.1994 : Issue of NOC on temporary basis by Department of Science and Techno-
logy and Environment of Pondicherry 11.8.1994 : Temporary supply given 19.4.1995 : Consent given by Department of Science and Technology and Environment (Pondicherry) for manufacture of steel billets 1,50,000 TPA.
11.12.1995 : Permanent supply given.
29. By careful analysis of the above dates and events, it is abundantly clear that as on the crucial cut-off date i.e., 1.3.1991, the Petitioner Company did not have the power feasibility certificate for the production of increased capacity of 1,50,000 TPA of steel billets. Power Feasibility Certificate (30.6.1987) now relied upon by the Petitioner/Company was obtained prior to the obtaining of Industrial Licence (23.9.1988) i.e., for the mini steel plant with production capacity of 10,000 TPA of steel ingots. After obtaining the industrial licence for raising the capacity of the new unit, the Petitioner Company has not obtained power feasibility certificate. Prior to 1.3.1991 (crucial cut-off date in G.O.Ms.No.9/91), the power feasibility certificate (30.6.1987) was issued for the mini- steel plant having production capacity of 10,000 TPA of steel ingots. After obtaining Industrial Licence on 17.1.1990 raising the capacity to 1,50,000 TPA prior to the crucial date of 1.3.1991, the Petitioner company did not produce the necessary documents and did not get endorsement as stipulated in the industrial licence dated 17.1.1990.
30. The power feasibility certificate dated 30.6.1987 obtained for production of 10,000 TPA of steel ingots cannot be construed as the power feasibility certificate for the new unit with increased capacity of 1,50,000 TPA, more so, for claiming power subsidy under G.O.Ms.No.9/91. In fact, by its letter dated 27.8.1992, the Petitioner Company requested for re-validation of the power feasibility certificate. By the proceedings of the Electricity Department dated 18.9.1992, the power feasibility certificate issued to the Industry for additional load of 20,050 KVA was re-validated for another six months i.e., upto 30.12.1992. Later the same was re-validated by the proceedings dated 21.5.1993 of Electricity Department, Pondicherry.
31. It is seen from the records that by its letter dated 25.6.1993, the Petitioner Company requested for re-validation of the power feasibility certificate for the proposed new unit for a load of 20,050 KVA. In its communication dated 28.7.1993, Electricity Department, Pondciherry has made it clear that power feasibility certificate issued to the Petitioner's industry was absolutely for the expansion of the existing unit at Mettupalayam Industrial Estate and not for the new unit.
32. It is clear from the records that from 17.1.1990 till 1.3.1991 the Petitioner Company has not obtained the power feasibility certificate for its new unit nor it has corresponded with the Government of Pondicherry to re-validate its power feasibility certificate (30.6.1987) for the proposed new unit. While so, the Petitioner cannot contend that it has obtained the power feasibility certificate for its new unit of production capacity of 1,50,000 TPA and that it has fulfilled the conditions stipulated in G.O.Ms.No.9/91.
33. Much reliance was placed upon the Power Feasibility Certificate dated 30.6.1987, where the Electricity Department has stated that the Petitioner Company was issued with a Power Feasibility Certificate for an additional load of 20.05 MVA over and above the existing load of 4.95 MVA on 30.6.1987 stipulating that the power supply will be made available within a period of 18 to 24 months from the date of submission of Firm Application in complete shape. The learned Senior Counsel for the Petitioner Company further submitted that the work of extending 110 KV power supply was entrusted to Tamilnadu Electricity Board during March 1991 and that there was a delay in extending the High Tension line, which has caused delay in starting the new unit, which was beyond the control of the Petitioner unit and that delayed time has to be excluded for extending the benefit to the Petitioner Company. The above contention does not merit acceptance. The electricity was only one aspect of the matter. As pointed out earlier, Industrial Licence issued by the Government of India (17.1.1990) was only provisional and that it was incumbent upon the Petitioner Company to obtain necessary endorsement. On 12.2.1991 the Government of India called upon the Petitioner Company to produce the necessary documents prior to 1.3.1991. The Petitioner Company neither produced documents nor obtained the endorsement from Central Government. While so, the Petitioner Company cannot take advantage of the statement of the electricity Board in the Feasibility Certificate dated 30.6.1987 (that the normal gestation period for extending 110 KV power supply will be around 18 to 24 months) and seek for excluding the said period.
34. Before the learned single Judge, the petitioner Company tried to rely upon its application dated 17.5.1989 to Oulgaret Commune Panchayat. From the order of the said Panchayat dated 19.5.1989, it is seen that the authorised capacity of power for the proposed industry namely M/s.Sumangala Steels (P) Limited at PIPDIC Industrial Estate, Mettupalayam, Pondicherry as shown at Sl.No.(e) 1 of the permission 2nd cited is amended as 28500 H.P. instead of 5600 H.P. as authorised previously.
35. The Petitioner Company has sent a hand-written application dated 17.5.1989 in Form 21 to the said Oulgaret Commune Panchayat for enhancement of power to 28500 H.P., enclosing the necessary documents. In the said hand written application, the following last two sentences is a subsequent insertion:
"This power enhancement is required for the existing machinery only. No new machineries are proposed."
In the affidavit filed by one Mr.Sankaran, it is averred that the said hand-written letter was written by one David Manickam, who was at that time the Administrative Officer of the Petitioner Company. In his affidavit, the said Sankaran has also averred that when the said application was produced before him for his signature, the above said insertion was not there and the said insertion might have been done either by David Manickam or it might have been added by some officials in the Panchayat for completion of formality. We do not propose to go into the disputed question of fact as to whether it was an insertion and at whose instance the insertion was made. Suffice to note that Mr.Sankaran has not denied the insertion. According to him, either their employee - David Manickam or the officials in the Oulgaret Commune Panchayat must have made the insertion for completion of formalities. However, we may note it for the limited purpose that the increase in HP load to 28,500 HP was requested for the existing machineries only and that no new machineries were proposed.
36. To hold that the Petitioner Company fulfilled the first essential requisite i.e., obtaining 'power feasibility certificate' prior to 1.3.1991, the learned single Judge relied upon Note File. The learned single Judge observed that there were difference of views between bureaucracy and the Ministers. To hold that the Petitioner Company is entitled to subsidy to the unexpired period, the learned single Judge relied upon the note files, which read as under:
"The Superintending Engineer makes the following remarks:
"13. M/s.Sumangala Steels was issued with a Power Feasibility Certificate for an additional load of 20.05 MVA over and above the existing load of 4.95 MVA on 30.6.1987 stipulating the conditions that the power supply will be made available within a period of 18 to 24 months from the date of submission of HT application in complete shape with Commune Panchayat Licence, etc. The Consumer has submitted the application on 20th May, 1989.
14. The work of extending the 110 KV Power supply was entrusted to Tamil Nadu Electricity Board during March, 1991 as a Deposit Contribution work and when the work was taken up for execution by the Tamil Nadu Electricity Board, they have experienced some difficulties like objection for construction of 110 KV Line for Sumangala Steels. The route has been realigned thrice due to the objections raised by the land owners and finally now the work is in full swing.
15) The delay in execution as indicated in para-14 is beyond the control of the Electricity Department. Pondicherry and Tamil Nadu Electricity Board.
16) With the above remarks, the file is submitted to Secretary (Power)"
.....
the remarks by the Commercial Taxes Department, which is found in paragraph 29 of the note sheets. It runs as follows:
"It is noted that M/s.Sumangala Steels (P) Ltd. have started a unit for production of billets. They have installed separate machineries and equipments for this production as different from the machineries and equipments provided for the production of ingots by the small scale unit. As the new unit is physically separate and is provided with different machineries and equipments for the new product this unit may be treated as a new unit for the production of billets. As such unit producing different products is treated as different unit for the purpose of sales tax exemption and concession. Therefore this new unit for production of billets may be eligible for 5 years exemption as per G.O.Ms.No.15/74/Fin (CT) dt.25-6-1974 as applicable to industries other than small scale industries. However it will not be eligible for any concession after the initial period of 5 years as it is not a small scale industry.
37. We have gone through the entire Note files. From the Note Files, it appears that the Secretary, Industries was not in favour of granting concession, whereas the Ministers, particularly, the Industrial Minister was in favour of granting the benefit of subsidy and made note file that the exemption of sales tax and subsidy for the unit may be given. The officials of Industries Department, particularly, Secretary and Director of Industries were against grant of subsidy and opined that the estimated power subsidy would be Rs.22,45,70,028/- and C.S.T. Concession would be Rs.30,00,00,000/- and total revenue loss would be Rs.52,45,70,028/-.
38. It is fairly well settled that the entire communications and office note files cannot be construed as orders issued by the competent authority. In Union of India v. Kartick Chandra Mondal,(2010) 2 SCC 422, the Supreme Court has held as under:
"18. An order would be deemed to be a government order as and when it is issued and publicised. Internal communications while processing a matter cannot be said to be orders issued by the competent authority unless they are issued in accordance with law. In this regard, reliance may be placed on the decision of this Court in State of Bihar v. Kripalu Shankar (1987) 3 SCC 34, wherein this Court observed, in paras 16 and 17, as follows: (SCC pp.44-45) 16. Viewed in this light, can it be said that what is contained in a notes file can ever be made the basis of an action either in contempt or in defamation. The notings in a notes file do not have behind them the sanction of law as an effective order. It is only an expression of a feeling by the officer concerned on the subject under review. To examine whether contempt is committed or not, what has to be looked into is the ultimate order. A mere expression of a view in notes file cannot be the sole basis for action in contempt. Business of a State is not done by a single officer. It involves a complicated process. In a democratic set-up, it is conducted through the agency of a large number of officers. That being so, the noting by one officer, will not afford a valid ground to initiate action in contempt. We have thus no hesitation to hold that the expression of opinion in notes file at different levels by officers concerned will not constitute criminal contempt. It would not, in our view, constitute civil contempt either for the same reason as above since mere expression of a view or suggestion will not bring it within the vice of clause (b) of Section 2 of the Contempt of Courts Act, 1971, which defines civil contempt. Expression of a view is only a part of the thinking process preceding government action.
17. In Bachhittar Singh v. State of Punjab (AIR 1963 SC 395) a Constitution Bench of this Court had to consider the effect of an order passed by a Minister on a file, which order was not communicated. This Court, relying upon Article 166(1) of the Constitution, held that the order of the Revenue Minister, PEPSU could not amount to an order by the State Government unless it was expressed in the name of Rajpramukh as required by the said article and was then communicated to the party concerned. This is how this Court dealt with the effect of the noting by a Minister on the file: (AIR p. 398, para 9) 9. The question, therefore, is whether he did in fact make such an order. Merely writing something on the file does not amount to an order. Before something amounts to an order of the State Government two things are necessary. The order has to be expressed in the name of the Governor as required by clause (1) of Article 166 and then it has to be communicated. As already indicated, no formal order modifying the decision of the Revenue Secretary was ever made. Until such an order is drawn up the State Government cannot, in our opinion, be regarded as bound by what was stated in the file. As long as the matter rested with him the Revenue Minister could well score out his remarks or minutes on the file and write fresh ones.
39. In fact, Order of Lieutenant Governor has made it clear that the unit's contention that it was ready for expansion was not correct and held that the Petitioner Company has already availed the power subsidy to the tune of 1.58 Crores and it cannot be granted power subsidy. For the sake of completion, we may refer to the order of the Lieutenant Governor, which read as under:
"I have perused the file in detail. I feel that even if the unit is treated as an expansion of the original unit started in 1-10-'87 which is not disputed at all, then its subsidy period of five years was over by 30-9-92 (i.e. From 1-10-87 to 30-9-92). And whatever quantity of power was consumed by the unit during the five year period the corresponding subsidy was extended to the unit. Now, from the records it is not clear the date on which unit started enhanced production. From the available records, it appears that unit did not start production on enhanced capacity before 30-9-92 and by simple logic when no enhanced power was drawn, there cannot be any question of subsidy on hypothetical ground that had there been enhanced power, the unit could have availed the subsidy. And strangely as per 144 (v) the Electricity Department was ready to extend power supply since January '93 but the unit had not drawn power and even not made the required deposit. And as per the admission of the management in their letter at page 74, they started the production in August '94. From this, it appears that the unit's contention that it was ready for expansion prior to 30-9-92 does not seem to be correct. And I believe that, apart from sales tax benefit (which has not been quantified in the file very clearly), the unit has availed power subsidy to the tune of about Rs.1.58 Crores, which is a substantial amount as an incentive.
Further, I believe just giving "feasibility" certificate by Electricity Department is not a guarantee letter for giving enhanced power.
Keeping in mind all the factors on record, I believe that there is no point in reopening this case."
40. The case of the Petitioner Company is that the above said order was not communicated to the Petitioner. It is seen from the records that after the order of Lieutenant Governor (23.9.1995), the Petitioner Company has not moved further. Therefore, the contention that Order of Lieutenant Governor was not communicated to the Petitioner is untenable.
41. As the Government of Pondicherry took a policy decision in the month of May, 1997 by which the Government of Pondicherry had withdrawn the power subsidy scheme by issuing G.O.Rt.No.30/97 Industries, dated 28.05.1997 and the same was published in the Official Gazette dated 17.06.1997 withdrawing the power subsidy scheme with effect from 1.4.1997, it was only thereafter the Petitioner has filed the Writ Petition in October 1997 seeking for a writ of mandamus to issue direction to the Respondents to sanction all the benefits conferred on new industries in backward areas for the new unit of the petitioner Company with the capacity of 1,40,000 TPA to claim the benefit of subsidy/tariff concession. To avail subsidy benefit, apart from power feasibility certificate, prior to 1.3.1991, Petitioner's Industrial unit should have also taken effective steps i.e., 60 percent or more of the capital issued of the industrial unit has been paid up, substantial portion of the factory building has been constructed and a firm order has been placed for substantial part of the plant and machinery required for the industrial unit. As we have pointed out earlier, G.O.Ms.No.9/91 Industries dated 11.2.1991 was mainly intended to extend the benefit to the pipeline industries, which have completed the respective units substantially and fulfilled the conditions stipulated in G.O.Ms.No.9/91.
42. The Petitioner Company did not make application to any regulatory agency like Director of Industries, Commune Panchayat for registration and for setting up of a new unit. As per the scheme, in G.O.Ms.No.9/91 dated 11.2.1991, subsidy is given to industrial unit only if they have taken effective steps as stipulated thereon. In our considered view, the Petitioner Company has not taken effective steps prior to 1.3.1991 and has not fulfilled the basic conditions stipulated in G.O.Ms.No.9/91 and therefore cannot claim the benefit of power subsidy.
43. The Petitioner Company was given licence by the Ministry of Industries, Government of India by its proceedings dated 23.9.1988 only for manufacturing steel ingots to the level of 10,000 TPA. Clause 7 of the conditions appended to the licence granted in the proceedings dated 23.9.1998 would show that Petitioner Company should obtain prior permission from the Government of India before effecting substantial expansion of its capacity and before establishing capacity for the manufacture of new articles. Clause 7 of the said proceedings dated 23.9.1988 reads as under:
".... 7. The industrial undertaking should obtain prior permission from the government of India effecting substantial expansion of its capacity and/or before establishing capacity for the manufacture of new articles other than these already covered by a licence....."
Evidently the Petitioner Company should necessarily obtain prior permission from Government of India before going in for the expansion of its capacity and has to obtain permission from Government of India before going in for expansion of capacity or before establishing capacity for manufacture of new articles.
44. As pointed out earlier, the Petitioner Company by its letter dated 20.12.1989 approached the Government of India for raising the present capacity. By the proceedings dated 17.1.1990 Government of India permitted the Petitioner Company to raise the capacity to the level of 1,50,000 TPA (increased capacity 1,40,000 tonnes plus existing capacity 10,000 TPA) subject to the fulfilling of conditions stipulated in paras 2 and 3 of the provisional order.
45. In the proceedings of the Central Government dated 17.1.1990, it is made clear that the Central Government is permitting the Petitioner Company to raise the capacity of its industrial undertaking covered by carry-on-business Industrial licence No.IL:37(88) dated 23.9.1988 from the present level of 10,000 TPA to 1,50,000 TPA. The proceedings of Central Government of India dated 17.1.1990 reads as under:
".... I am directed to refer to your application dated 11.12.89 registered under SIA No.156/89-IL/MES dated 20.12.89 on the subject cited above and to say that Government of India are prepared to permit you to raise the capacity of your industrial undertaking covered by carry-on-business industrial licence No.IL:37(88) dated 23.09.88 from the present level of 10,000 (ten thousand) tonnes per annum to 1,50,000 (One lakh and fifty thousand tones per annum) under the scheme of minimum economic scales of operation. The grant of MES will however, be subject to condition as stipulated in para 2 of press note no.18 (1989 Series) Dated 13.07.1989 which reads as under:-
The grant of the revised minimum economic capacity for steel making by mini steel plants would be subject to power assurance from the concerned State Govt. and installation of modern facilities as detailed in 'Guidelines for Ferrous Metallurgical Industries and General Instructions' issued by the Ministry of Steel and Mines, Department of Steel on 17th February, 1988. Such mills should also have the capability to use sponge iron to the extent of a minimum of 30%. In addition, if the proposal for achieving MES capacity involves installation of a new furnace, such a furnace should not be less than a capacity of 25 tonnes. The industrial undertaking concerned would also not be allowed to use existing furnaces, if any, which are of a capacity below 15 tonnes as in such furnaces modern technological facilities cannot be incorporated.
2. The above permission is further subject to fulfilment of the following conditions:-
i) The State Director of Industries confirms that the site of the project has been approved from the environmental angle by the competent state authority;
ii) Your Industrial Undertaking commits both to the State Government and the Central Government that you will install the appropriate equipment and implement the prescribed measure for the prevention and control of pollution;
iii) The concerned State Pollution Control certifies that the proposal meets with the environment requirements and that the equipments installed or proposed to be installed are adequate and appropriate to the requirements;
iv) Adequate steps shall be taken to the satisfaction of the Government in regard to process hazard for ensuring safety in plants.
1. After fulfilment of the conditions mentioned above, a formal endorsement for the expanded capacity will be made on your Industrial Licence you are therefore requested to take necessary steps to fulfil the aforesaid conditions and submit the documentary evidence in its support to your admn. Ministry (dept. Of Steel) with original industrial licence under intimation to Secretariat for industrial approvals (LA-II Section). Further action will be taken on receipt of comments of Dept. Of Steel after submission of the said documents by you. ..."
46. As such, the proceedings of the Government of India dated 17.1.1990 was only a provisional order and it gets life only after fulfilling the conditions specified in paragraph (2) of the order i.e., the Petitioner Company should obtain clearance from Pollution Control Board and other statutory authorities. In the proceedings dated 17.1.1990, the Central Government has made it clear that the Petitioner Company should get clearance from the Pollution Control Authority and also from various statutory authorities. Government of India in its proceedings dated 12.2.1991 sent a communication to the Petitioner, whereby Petitioner Company was called upon to produce certain documents to enable them to process their case for endorsement for the increased capacity to the level of 1,50,000 TPA. Evidently, prior to 1.3.1991, the Petitioner Company had not obtained the necessary endorsement for the expanded capacity.
47. The Industrial Licence (17.1.1990) issued by the Government of India is subject to Environmental Clearance by the competent State authority. Under Notification No.GSR 54E, dated 25.1.1988, the whole of Union Territory of Pondicherry has been declared air pollution control area under sub section (1) of Section 19 of the Air (Prevention and Control of Pollution) Act, 1981 (14 of 1981. There is nothing to show that the Petitioner Company has obtained the consent of the Pollution Control Board. As seen from the materials on record, only on 22.1.1991, the Petitioner Company has sent the letter to the Central Pollution Control Board. In response to the said Petitioner Company's letter, by its communication dated 16.4.1991, the Central Pollution Control Board has informed the Petitioner Company not to undertake any work for construction of their expanded unit without obtaining clearance. The said proceedings of Central Pollution Control Board dated 16.4.1991 reads as under:
"... With reference to the above mentioned subject (letter of the Petitioner dated 22.1.1991), the competent authority of the central board is in a opinion that the consent might not be given as such and that information related to pollution control measures adopted in similar units have to be collected and studied for effective system before taking a final decision in this regard. As this might take sometime, the industry should not undertake any work for construction of their expanded unit without obtaining a clearance from this board failing which they would be responsible for any expenditure incurred by them if the site is not cleared for the expanded unit.
The Central Board desires that the authority issuing the letter of intent shall direct the industry, not to take any civil work until and unless the project is cleared from government angle."
(emphasis supplied)
48. Insofar as No Objection Certificate for the unit, the Central Pollution Board has issued the proceeding dated 5.2.1992 calling upon the Petitioner Company to dismantle the existing unit in a time bound programme and treating the expansion as a fresh unit. The said letter dated 5.2.1992 reads as under:
"... This has reference to your application for a "No objection Certificate (NOC)" for expansion of your above unit. The application has been examined keeping in view the pollution aspects of the existing unit as well as the continued indifference on your part in regard to pollution control. The situation requires closing of your existing unit & the question of any expansion of this unit, therefore, does not arise. However, the application may be considered for fresh unit not involving the existing unit because of the obvious reason mentioned above.
You are, therefore, informed that in case the above NOC is still of interest, you are required to submit an undertaking (on non judicial stamp paper) to the Central Board, that:
1) 'The existing unit will be dismantled, and a time bound programme in this regard is provided.
2) Your application, though made for expansion, may be treated by the central Board as for a fresh unit and processed accordingly.
The item no.2 above will also require the detailed description by the pollution control equipment proposed to be installed."
(emphasis supplied)
49. It is pertinent to note that even without obtaining clearance from the Central Pollution Control Board and insptie of direction from the Government of Pondicherry for not using any existing furnaces of capacity below 15 Tonnes, the Petitioner Company carried on its expansion activities during 1992. By its proceedings dated 16.3.1992, the Pollution Control Board informed the Petitioner Company that it has failed to instal pollution control system with the existing unit and thereby causing air pollution. The said letter reads as under:
"... Whereas you have expanded your furnace capacity from 12 T to 15 T in May, 1990, without any clearance from the Central Pollution Control Board, and inspite of clear directions to you dated 17.01.90 from Industries Department, Govt. of Pondicherry for not using any existing furnaces of capacity below 15 T.
Whereas you are at present engaged in expansion of existing unit capacity to 1,50,000 TPA without obtaining consent for expansion/No objection certificate from central pollution.
Whereas you have failed to install pollution control systems with the existing unit.
And whereas you are emitting pollutants into the atmosphere from your industry causing thereby air pollution.
Now, therefore, Central Pollution Control Board in exercise of the power conferred upon it, under section 31-A of the Air (Prevention and Control of Pollution) Act, 1981 as amended, propose to direct as follows:
i) That you shall close your unit forthwith.
ii) That the concerned authorities shall disconnect water supply and the supply of electricity to the unit with immediate effect, and
iii) That you shall not restart your unit unless you take all the pollution control measures to ensure that the emission discharged meet the standard after obtain prior approval of the Central Pollution Control Board."
50. On 5.2.1992, the CPCB directed the Petitioner Company that the situation requires closing of the existing unit and therefore the expansion of the unit does not arise. In its proceedings dated 16.3.1992, the CPCB informed the Petitioner Company that the Petitioner Company has been engaged in expansion of its existing unit without obtaining consent and 'no objection certificate' from CPCB for expansion.
51. Thus, it is seen from the above that even as on 16.3.1992, the Petitioner Company has failed to instal the Pollution Control system and was engaged in expanding the furnace capacity. As on 16.3.1992, it was mandated upon the Petitioner Company to close the unit and also disconnect the water supply and electricity connection. It is abundantly made clear that the Petitioner Company was engaged in the expansion of the unit only in 1992. The contention of the Petitioner that it has made substantial investment prior to 1.3.1991 is unsupported by any material and unsustainable.
52. To get the benefit of subsidy in G.O.Ms.No.9/91, the industry should have taken effective steps viz., 60 percent or more of the capital issued of the industrial unit has been paid up a substantial portion of the factory building has been constructed and a firm order has been placed for substantial part of the plant and machinery required for the industrial unit. Excepting the provisional order of the Central Government dated 17.1.1990, there is nothing to show that the Petitioner Company had satisfied the conditions stipulated in G.O.Ms.No.9/91.
53. It is fairly well settled that to invoke promissory estoppel, (a) party must make an unequivocal promise or representation by word or conduct; (b) the representation must be intended to create legal relations or effect legal relationship to arise in the future; (c) a clear communication has to be made in the petition before the Court by the authority invoking the doctrine of promissory estoppel. There is no material to show that the Petitioner Company has altered its position by substantial investment and also by placing firm orders. In our considered view, the Petitioner Company has not fulfilled the basic conditions of G.O.Ms.No.9/91 dated 11.2.1991 and therefore not entitled to Writ of mandamus as prayed for.
54. Unit only an expansion of existing unit:- Though elaborate arguments were advanced to the effect that the Petitioner Company is a new unit, as rightly submitted by the learned Government Pleader, Pondicherry, the unit with increased capacity was only an expansion of the existing unit. As contended by the Government Pleader, the Petitioner Company never claimed before any authorities that it was going to start a new industry and obtained a new licence for manufacture of steel billets. In fact, the claim of the Petitioner before all the statutory authorities was that it was going to expand its present level of production of steel products and thus claimed additional load of power supply.
55. In the industrial licence granted by the Central Government for the increased capacity of 1,50,000 TPA (vide Para 44), it was made clear that the Petitioner Company himself sought to raise the capacity by expanding its existing steel plant. The Petitioner Company had taken advantage of Government of India's Minimum Economic Scale of Operation in terms of Government of India Press Note No.18(10/46/88-LP) dated 13.7.1989, whereby the ceiling capacity of existing mini steel plants was raised to 1,50,000 TPA. The proceedings of Government of India makes it clear that it was only an expansion and not a separate new unit. In fact, the unit also did not obtain any of the requisite statutory clearance from Government and various other agencies like Directorate of Industries, Inspector of Factories, commune Panchayat etc., for starting new unit. What ever approvals they have obtained were all for expansion of the existing unit and not for a new unit.
56. The Petitioner Company never claimed before the statutory authorities that it is going to start a new industry. The claim of the Petitioner Company before the statutory authorities was that the Petitioner Company was going to expand the existing unit i.e., from its present level of capacity of 10,000 TPA to 1,40,000 TPA totalling 1,50,000 TPA. Claim of the Petitioner Company before all the statutory authorities was that it was going to expand its present level of production of steel plant and claimed additional load of power supply. In the same lines, the Petitioner Company has claimed assistance from ICICI for increasing its present level of production and expansion of the unit.
57. Before the Electricity Department also, the Petitioner Company never claimed that it was going to start a new industry. All that the Petitioner Company claimed before the Electricity Department was that the Petitioner Company wanted additional load of 20.05 MVA besides the existing load of 4.95 M.V.A. The Petitioner Company continued to revalidate the power feasibility certificate for the additional load of power supply till 30.12.1992. The power feasibility certificate issued by the Electricity Department dated 30.6.1987 was having validity for one year. The power feasibility certificate issued by the Electricity Department having its validity of one year was only for additional power for expansion of the industry and not for a new unit or industry proposed to be commissioned or established.
58. In the said Power Feasibility Certificate dated 30.6.1987, the Electricity Department, Pondicherry informed the Petitioner Company that it is feasible to extend the power supply for an additional load of 20.05 MVA to the Petitioner Company's proposed industry. The relevant portion of the said communication dated 30.6.1987 reads as under:
".... With reference to the above, I would like to inform you that it is feasible to extend power supply for an additional load of 20.05 MVA over and above the sanctioned demand of 4.95 MVA to your proposed industry at Mettupalayam village in Pondicherry region for the manufacture of steel ingots subject to the following conditions.
1. Power supply will be extended by the department at 110KV for your load of 20.05 MVA in addition to the sanctioned demand of 4.95 MVA....."
Merely because the authorities have used the expression "proposed industry" it does not mean that the Petitioner intended to put up a new unit and the same was accepted by the Electricity Department.
59. It is seen from the communication of Electricity Department dated 28.7.1993 that the Petitioner company had sent a letter dated 25.6.1993 requesting for revalidation of the power feasibility certificate of "proposed new unit" for a load of 20,050 KVA. In their communication dated 28.7.1993, the Electricity Department, Pondicherry has made it clear that already power feasibility certificate for a load of 20,050 KVA was issued to Petitioner Company for the expansion of the existing unit and not for the new unit. The said communication dated 28.7.1993 reads as under:
".... 2. But, in your letter dated 25.6.93, cited under reference 3rd above, it is noticed that you have requested for revalidation of the power feasibility certificate for your proposed New Unit for a load of 20,050 KVA.
3. In this connection, it is to be informed that power feasibility certificate issued to your industry mentioned in the reference 1st cited above is absolutely for the expansion of the existing unit at Mettupalayam Industrial Estate and not for the new unit.
4. In this connection, you are requested to clarify about Status of the existing unit and proposed unit with a layout of the both the industries...."
It is thus clear that in various communications between the Petitioner Company and Electricity Department the Petitioner had made it clear that the power feasibility certificate was only for the expansion of the existing unit at Mettupalayam Industrial Estate and not for the new unit.
60. In the proceedings of CPCB, it has been abundantly made clear that the increase in capacity was only an expansion of the existing unit and that the Petitioner Company had been engaged in expansion of existing unit. When the Petitioner Company had corresponded with all statutory authorities that it is going to expand its existing unit, now the Petitioner Company cannot turn round and contend that the increased capacity is a new industry.
61. From the Note File, it is seen that the Commercial Taxes Department treated the unit as a different unit for the purpose of sales tax exemption and concession. The relevant Para (29) in the Note File of the Commercial Taxes Department was extracted at Para No.36 of this judgment.
62. The Petitioner Company is said to have got sales tax exemption and concession and it cannot be a ground for holding that the Petitioner Company would be entitled to get the power subsidy benefits under G.O.Ms.No.9/91. The Petitioner Company is stated to be the single largest consumer of Electricity in the Union territory of Pondicherry. As pointed out earlier, the estimated power subsidy is stated to be Rs.22,45,70,028/-. When the Petitioner Unit has not satisfied the essential requisites of G.O.Ms.No.9/91 dated 11.2.1991, the petitioner cannot claim the benefit of power subsidy.
63. The contention of the Petitioner Company is that the end product (steel billets) is different from the product that is manufactured in the existing unit and therefore the expansion is to be treated as new unit. The Petitioner Company is urging to treat the expansion as a new unit for claiming subsidy benefit. The grant of subsidy is an economic policy of the Government intended to promote industries. While claiming benefit of subsidy, we cannot adopt judicial interpretation of holding expansion of the unit as a new unit. Such a course would heavily drain the public funds. In fact, in G.O.Ms.No.9/91 dated 11.2.1991, the Government of Pondicherry felt that the power subsidy scheme is only helping handful of large industries. If we are to treat the expansion of the unit as a new unit, the Petitioner Company, who has already availed the benefit of subsidy for the whole five years will continue to enjoy the benefit heavily draining the public funds.
64. While holding that the increased capacity was only an expansion of the existing one, and not a new unit, in Para (21) of the Judgment, the learned single Judge observed as under:
"... I am clearly of the view that the petitioner would be entitled to the benefits of subsidy for the period ending with 30.9.1992, by which date the petitioner would complete five years from the commencement of the industry."
In our considered view, the learned single Judge did not keep in view that by proceedings dated 17.1.1990 the Government of India granted permission to increase the capacity, subject to the approval from Environmental angle, the Pollution Control Board and other statutory authorities. As pointed out earlier, as per the decision of Supreme Court, note files cannot be construed as the Government Orders or promise given. The learned single Judge was not right in referring to the entries in the Note files and granting benefit of power subsidy to the unexpired period and the above findings of learned single Judge cannot be sustained.
65. The learned single Judge also did not keep in view that the Petitioner Company itself submitted papers for enhancement of production capacity only on 14.8.1994 and the temporary supply was given subject to Pollution Clearance on 11.8.1994 and the unit with increased capacity started production only on 11.8.1994. Till the earlier subsidy period ended on 30.9.1992, the expanded unit was not at all in operation. While so, while holding that the increased capacity is only an expansion of the existing unit, the learned single Judge was not right in holding that the Petitioner Company would be entitled to the benefits of subsidy for the unexpired period of subsidy ending with 30.9.1992.
66. The principal relief claimed by the Petitioner Company is for issuance of writ of mandamus to the Respondents to sanction all the benefits conferred on new industries in backward areas brought into effect by Government of Pondicherry by their letter No.16(23)/82-SSI(II)/SSI(P) dated 19.12.1985 to the petitioner's new unit with an installed capacity of 1,40,000 TPA.
67. The principles on which the writ of mandamus can be issued is fairly well settled by catena of decisions. In BIHAR EASTERN GANGETIC FISHERMEN COOP.SOCIETY LTD. VS. SIPAHI SINGH, (1977) 4 SCC 145, the Supreme Court has held under:
"writ of mandamus can be grated only in a case where there is a statutory duty imposed upon the officer concerned and there is a failure on the part of that officer to discharge the statutory obligation. The chief function of a writ is to compel performance of public duties prescribed by statute and to keep subordinate tribunals and officers exercising public functions within the limit of their jurisdiction. It follows, therefore, that in order that mandamus may issue to compel the authorities to do something, it must be shown that there is a statute which imposes a legal duty and the aggrieved party has a legal right under the statute to enforce its performance."
68. The Petitioner Company, having not fulfilled the basic conditions of G.O.Ms.No.9/91 dated 11.2.1991, the Petitioner Company has absolutely no legal right to claim power subsidy for its unit. While so, the Respondents cannot be directed to grant power subsidy. The Petitioner Company is not entitled to the relief of Writ of Mandamus.
69. As pointed out earlier, the Petitioner Company is stated to be the single largest consumer of electricity in the Union Territory of Pondicherry. We have asked the respondents to inform us as to whether Petitioner Company had paid the electricity consumption charges between 1994-1999. It was stated before us that the Petitioner Company had paid the electricity consumption charges at normal tariff rate for the period from 1994 to 1999. After filing of the Writ Petition, in October, 1997 also, the Petitioner Company had paid the current consumption charges at normal tariff rate. Petitioner Company is said to have committed default in payment of the current consumption charges from March 1999 to October 1999 (8 months). For the said 8 months, current consumption charges is stated to be Rs.5,55,70,094/-. Power supply was disconnected from November 1999 till February 2002. During the said period, Petitioner Company has to pay the minimum charges, which is stated to be Rs.3,29,04,913/-.
70. When the Writ Appeal was admitted, the First Bench has passed the order directing the Electricity Board to restore power supply on payment of Rs.50 lakhs immediately by the Petitioner - consumer and also a further sum of Rs.50 lakhs within two months, which was complied with by the Petitioner Company and service connection was restored.
71. It is submitted by the Government Pleader and also as per the calculation given by Government in its written submission that as on 30.6.2010, a total sum of Rs.5,22,50,561/- is said to be due from the Petitioner Company apart from security deposit of Rs.2,65,85,050/- and meter security deposit of Rs.15,000/- and other charges apart from penalty and interest.
72. According to the Petitioner, the amount payable to the Electricity Department is Rs.1,76,82,310/- only and the Petitioner Company disputes the claim made by the Electricity Department.
73. Since the issue before us is only in respect of grant of benefit of subsidy to the Petitioner Company, which we have held against the Petitioner Company, we do not propose to go into the disputed claim on the charges due and payable by the Petitioner Company. Suffice to note that it is open to the Respondents and the Electricity Department, Pondicherry to take appropriate action against Petitioner Company in accordance with law against the Petitioner Company for recovery of the amount.
74. W.A.No.857 of 2001:- For the foregoing reasons, the order of the learned single Judge dated 5.1.2001 made in W.P.No.15702 of 1997 is set aside and W.A.No.857 of 2001 filed by the Government is allowed with costs. It is open to the Respondents and the Electricity Department, Pondicherry to take appropriate action against Petitioner Company in accordance with law for recovery of the amount due and payable by the Petitioner Company.
W.A.No.522 of 2001 filed by the Petitioner Company is dismissed with costs. Consequently, the connected miscellaneous petitions are closed.
75. W.P.No.18290 of 2000:
This Writ Petition is filed seeking for Writ of Certiorarified mandamus calling for the records of 3rd Respondent in his proceedings No.87/ED/RG/IA1/1999-2000 dated 18.10.2000 received on 21.10.2000 and quash the same and consequently restrain the respondents from initiating any coercive proceedings under the revenue recovery act against the Petitioner for arrears of electricity charges so long as the Petitioner is a sick industrial undertaking under the sick industrial companies (Spl.provisions) Act.
76. From the prayer of the Writ Petition, it is very clear that the Petitioner wanted the collection being stopped so as long as the Petitioner is a sick industrial undertaking under the Sick Industries Company (Special Provision) Act. It is admitted in the Court that the Petitioner Company is no more a sick industry and it is doing very good business and in fact in the written statements they have stated that till date they have paid electricity charges to the tune of Rs.132 Crores towards consumption of electricity from the date of reconnection of electricity in the year 2002. When that being the case, the prayer in the Writ Petition has automatically become infructuous the moment the Industry is not a sick industry. It is also admitted that the BIFR proceedings has long back ended. As the only prayer sought for in the Writ Petition is under the umbrage of Sick Industrial Companies (Special Provisions) Act, the prayer sought for in the Writ Petition is not maintainable as it has become infructous and as such the Writ petition is dismissed and it is open to the Electricity Department to take recourse as contemplated under law to recover the amount from the Petitioner. No costs.
usk Copy to:
1.The Chief Secretary, Government of the Union Territory of Pondicherry
2.The Minister for Industries Union Territory of Pondicherry
3.Secretary Industries Department Government of Pondicherry.
4.The Secretary to Government, Power Department Government of Pondicherry
5. The Superintending Engineer I Electricity Department Pondicherry
6. Senior Accounts Officer-cum-
Sales Officer under the Revenue Recovery Act Electricity Department Pondicherry