1999 Supreme(SC) 927

1999(7) Supreme 533
SUPREME COURT OF INDIA
(From Orissa High Court)
S.P. Bharucha, R.C. Lahoti & N. Santosh Hegde, JJ.
Union of India & Ors. -Appellants
versus
Indian Charge Chrome & Anr. -Respondents
Civil Appeal No. 782 of 1995
Decided on 25-8-1999
Counsel for the Parties :
For the Appellant in Union of India : Anoop Choudhary, Sr. Advocate, Ms. Rekha Pandey, R.N. Verma P. Parmeshwaran, Advocates.
For the Respondents in C.A. No. 782/95 : R.F. Nariman, Sr. Advocate, Ms. Vijay Lakshmi Menon, Ms. Ekta Kapil and K. Venugopal, Advocates.
For the Appellant in C.A. No. 6878/96 : Joseph Vellapally, Sr. Advocate, Ms. Indu Malhotra, Advocate.

IMPORTANT POINTS
1. The exemption granted by the Notification No. 133/85 related to the goods falling under the Heading No. 84.66 of the First Schedule to the Customs Tariff Act, 1975 imported into India for power projects (including gas turbine power projects) the end product whereof was electricity meant for public distribution and therefore the amendment notification (No. 306/86) dated 1.5.1986 was only clarificatory in nature.
2. Power u/s 25 of the Customs Act to issue exemption notifications includes and implies power to amend or rescind any exemption granted earlier.

Headnote:(i) Customs Act, 1962-Section 25 - Customs Tariff Act, 1975-Heading No. 84.66 of First Schedule-Notification No. 71/85 dated 17.3.1985 - Amendment Notification No. 306/86 dated 1.5.1985 and Notification No. 67/87 dated 1.3.1987 - Exemption - Goods required for power project-Notification No. 306/86 and Explanation to Notification No. 67/87 to the effect that full exemption not available to captive power plant-Challenge that Notification Nos. 306/86 and 67/87 violative of Article 14 of Constitution-Not tenable-It was not intention of Government to confer full exemption from payment of duty on power plant units set up for captive consumption-Captive "power plant" cannot be considered as "power project"-Amendment notification is clarificatory-Nothing wrong in public interest to grant exemption from duty to imports meant for power projects engaged in production of power for public distribution while denying similar benefit to plants generating electricity for captive consumption-Notification not violative of Article 14.

       Held : In Industrial Policy Resolution of 1956 of the Government of India to achieve the national objective of adopting the socialist pattern of society the industries in the country were proposed to be classified into three categories of which the first category would consist of industries the future development of which will be the exclusive responsibility of the State though the division of industries into such separate categories did not imply a division into water-tight compartments; possibility of overlapping and dovetailing between industries in the private and the public sectors was not totally excluded. "Generation and distribution of electricity" was placed in Schedule "A". The resolution mentions that all new units in these industries (i.e. listed in Schedule A), save where their establishment in the private sector had already been approved would be set up only by the State Government though ordinarily there would be no bar to small privately owned units undertaking generation of power for local needs and small scale mining. In the counter-affidavit filed on behalf of the Central Government apart from referring to the said Industrial Policy Resolution, it has further been pointed out that under the Industries (Development and Regulation) Act, 1951 it was not possible for the private units like the respondent to set up a power project for generation and distribution of electricity. The Industrial Resolution made a clear distinction between "power project" which is set up for generation and distribution of electricity and a "power plant" which is set up to generate power for the own requirement or captive consumption of the industrial unit. The captive "power plant" cannot be considered as "power project " and the two cannot be equated with each other. A power project is set up by the Government to cater to the needs of public by generating and distributing the electricity generally while a captive power plant is set up by an industrial unit to feed power to its own plant or unit for manufacturing of goods other than power. Though it is true that an industrial unit installing a power plant to the extent of the electricity generated by it shares the burden of the Government power projects generating electricity for distribution and to that extent their purpose may be alike, the fact remains that a power generating unit in public sector has its own limitations and shortcomings as well. An industrial unit depending on public power generation source shall have to bear with power cuts, failures and other regulations and restrictions imposed in public interest. By installing its own power plant, the industrial unit is free to generate and avail uninterrupted power supply or the quantum and flow of electricity suited to its own requirements and thereby it can maximise its production and consequently its profits. It is therefore clear that power plant projects engaged in generation and distribution of power as its end product - the sense in which the expression has been used in the Industrial Policy Resolution constitute a class by themselves distinct from the power plants established by industrial units generating electricity for captive consumption and not for distribution. The two classes are well defined. (Para 10)

       What is prohibited by Article 14 of the Constitution is class legislation. If the Legislature takes care to reasonably classify persons for legislative purposes, so long as the classification is founded on an intelligible differentia which lays down a perceptible differentiation between the two groups and the differentiation has a rational relation with the object sought to be achieved, such a classification does not fall foul of Article 14 of the Constitution. The two classes in the case at hand have a well defined differentiation. There in nothing wrong in the Central Government forming an opinion that it was in public interest to grant exemption from payment of custom duty to the imports meant for power projects engaged in production of power as an end product meant for public distribution as such while denying a similar benefit to the imports referable to power plants generating electricity for captive consumption only. (Para 11)

       The exemption granted by the Notification No. 133/85 related to the goods falling under the Heading No. 84.66 of the First Schedule to the Customs Tariff Act, 1975 imported into India for power projects (including gas turbine power projects) the end product whereof was electricity meant for public distribution and therefore the amendment notification (No. 306/86) dated 1.5.1986 was only clarificatory in nature. It only clarified that the full exemption from payment of customs duty as granted by the Central Government by Notification No. 133/85 was not intended to apply to such power plants which were set up by units engaged in activities other than power generation and which generated power for captive consumption. The words used in the Notification No. 133/85 were-"Power Projects (including gas turbine Power Projects)". A power plant is not the same thing as a power project. Chamber s 20th Century Dictionary defines Project as "a proposal for undertaking : an undertaking." Plant in defined as "equipment, machinery, apparatus for an industrial activity." The distinction between the two terms is determinable by reference to mass, magnitude or extent of the two. `Project suggests something very much more extensive than a `plant . "Power project" could not have meant "power plant" also and the scope for confusion or doubts, if any, was done away with by inserting a clarification. Thus the amendment notification was clarificatory merely. (Para 12)

       (ii) Customs Act, 1962-Section 25-Power to issue exemption notification-Scope of-Power includes and implies power to amend or rescind any exemption granted earlier. (Para 8)

       (iii) Project Imports (Registration of Contract) Regulations, 1965-Project Imports Regulations, 1986 -Two Agreements entered into in 1984-On 28.1.1986 applications filed for registration for availing exemption under Tariff Item 84.86 of First Schedule to Customs Tariff Act read with Notification No. 71/85 dated 17.3.1985-Registration allowed in respect of one contract-Clarification sought for in respect of another-Notification No. 71/85 came to be amended denying exemption to captive power plant-Cancellation of registration already granted and rejection of application for registration in respect of another contract on ground exemption not available to captive power plant-New Regulations do not supersede or cancel any registration already granted-Cancellation of registration already granted not justified-Rejection of application for registration valid. (Paras 13 to 17)

       (iv) Words and Phrases-"Power project" and "Power plant"-Connotation of. (Para 12)