Southern Ispat LTD. vs State Of Kerala

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2004 Supreme(SC) 383

2004(6) Supreme 492
SUPREME COURT OF INDIA
(From Kerala High Court)
K.G. Balakrishnan & B.N. Srikrishna, JJ.
M/s. Southern Ispat Ltd. -Appellant
versus
State of Kerala & Ors. -Respondents
Civil Appeal No. 5343 of 2002
Decided on 25-3-2004
Counsel for the Parties :
For the Appellant : R. Venkataramani, Sr. Advocate, Ms. Lansinglo Rongmei, Ashok Panigrahi, Mrs. B. Sunita Rao, Advocates.
For the Respondents : T.L. Viswanatha Iyer, Sr. Advocate, M.T. George, Ramesh Babu, M.R., Advocates.

Headnote:Electricity (Supply) Act, 1948-Section 44-Indian Electricity Rules, 1956-Rule 65-Policy decision of State Government that new industrial units established in the State would be exempted for a period of 5 years from payment of enhanced power tariff which had come into effect on 1.1.1992-Concession was made available to units which may have started commercial production or set up captive power generating units between 23.9.1991 and 31.12.1991-Appellant Company intended to manufacture alloy steel Bars, Steel Casting and allied products set up a Unit-Application made for allocation of electric power-There was acute shortage of electricity as a result of which even domestic power connections were being refused-High tension power supply required by appellant had to be specially arranged at the appellant s cost-Power supply commenced only on 19.2.1999-Whether appellant was entitled to the concession announced-(No).
       Held : The appellant was setting up the factory for manufacturing of alloy steel M.S. Sections, C.T.D. bars, Steel ingots and so on with a planed production of 24000 tons of iron and steel ingots and 24000 tons of iron and steel bars, coils etc.. It hardly stands to reason that "commercial production" of such a factory could have commenced by using of a 125 KVA diesel generator set. There is also no material on record to show that the appellant had run the factory by using 125 KVA generator set during the period December 1996 to February 1999. It is pointed out by the High Court, and rightly in our view, that even the diesel unit could also not be used until permission was obtained under Rule 65 of the Indian Electricity Rules, 1956 from the Chief Electrical Inspector. Such permission was obtained from the Chief Electrical Inspector only on 14.12.1998. Thus, it is clear that even the order for energisation of the 125 KVA diesel generator set was accorded to the appellant only in 1998. (Para 23)
       In these circumstances, we find it difficult to accept the contention of the appellant that commercial production" had started in December 1996 by using diesel generator set as alleged. (Para 24)
       The High Court points out the fact that promoters of the appellant company had a factory at Raipur in Madhya Pradesh and the possibility of the Appellant having bought manufactured goods from there and sold them within the State of Kerala to create documents to show that the production started before 1996 could not be ruled out. Even the documents produced by the appellant do not show any continuous commercial production during the period December 1996 to February 1999. We agree with the conclusion of the High Court that it was not sufficient for showing commercial production that some small items were sold by the appellant in December 1996 and nil assessment of sales tax was made and a small excise duty payment was also made. We agree with the High Court s view that these were all self-serving documents created as evidence for commercial production prior to the cut off date of 31.12.1996. Upon an overall assessment of the facts on record, we are not satisfied that the view taken by the Division Bench of the High Court on facts is so perverse that it requires interference by this Court under Article 136 of the Constitution. (Paras 28 and 29)

JUDGMENT

Srikrishna, J.-The judgment of the Division Bench of the Kerala High Court dismissing writ appeal No. 2614/2001 of the appellant is challenged before us in this appeal. The writ appeal itself was to impugn the judgment of the single Judge dismissing O.P.No. 9007/1999 by the appellant.

2. With a view to encouraging the industrial process in the State of Kerala, and as a measure of incentive, the State Government decided as a matter of policy that new industrial units established in the State would be exempted for a period of 5 years from payment of enhanced power tariff which had come into effect on 1.1.1992. This policy was reflected in the G.O. (MS) No. 4/92/ID dated 6.2.1992 which indicated that the concession would be available:

"i. to the units from the date of commercial production which start such production between 1.1.1992 and 31.12.1996.

ii. To manufacturing units only and not to service and entertainments units;

iii. To existing units for substantial expansion/modernisation/diversification. The concession in such cases will be available only for the consumption of the new machinery and equipment which add to the capital asset, by not less than 25% of the existing fixed capital investment excluding land and building the installation of which is to be certified by the competent authority.

iv. For modernisation, to industrial units having a contract demand not exceeding 500 KVA. In such cases, new equipments alone will be eligible for the concession."

3. The Government order also indicated that the eligibility for the concessions would have to be certified by the Kerala State Industrial Development Corporation (KSIDC)/Kerala Financial Corporation (KFC) in respect of units funded by them, or by the Director of Industries and Commerce in other cases, and by the concerned General Manager, District Industries Centres in respect of Small Scale Industrial units. It was also declared in Government order that the industrial units which set up their captive power generating units for their own consumption would be exempted from payment of electricity duty to the extent to which they generate power for their own consumption. The said concession was made available to the units which may have started commercial production or set up captive power generating units between 23.9.1991 and 31.12.1991.

4. On 26/27.6.1995 the appellant company was registered with the Registrar of Companies office at Palakkad in Kerala State. The company intended to manufacture alloy steel M.S. Sections, C.T.D. Bars, Steel Castings and allied products. The company had an authorised capital of Rs. 550 lakhs out of which shares worth Rs. 205 lakhs were issued to and subscribed by the Directors and their friends and rest were issued to and subscribed by the public. The appellant company also raised loans from the Kerala State Industrial Development Corporation and the Kerala Financial Corporation for setting up the unit. According to the appellant, the total project cost was Rs. 820 lakhs. Land was purchased in Kottai village in Palakkad District of Kerala and construction of buildings and installation of machinery for steel melting and re-rolling was commenced.

5. On 17.7.1995 the appellant made an application to the Chief Engineer, Kerala State Electricity Board ( KSEB ) for allocation of 2450 KVA of power. The appellant requested for registration of its application and sought a feasibility certificate for the allocation of power at the earliest to facilitate sanction of loan from KFC/KSIDC and working capital from South Indian Bank Ltd.

6. On or about 17.6.1996 the appellant made a representation to the Ministry of Steel, Government of India to persuade the KSEB to expedite the sanction of power. The Regional Development Commissioner for Iron and Steel, Government of India, Ministry of Steel, addressed a D.O. letter dated 3.7.1996 to the Chairman KSEB, strongly recommending the urge

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