Gujarat High Court
Reliance Industries Limited & vs State Of Gujarat & on 2 March, 2017
Bench: M.R. Shah, B.N. Karia
C/SCA/7020/2008 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 7020 of 2008
For Approval and Signature:
HONOURABLE MR.JUSTICE M.R. SHAH Sd/
and
HONOURABLE MR.JUSTICE B.N. KARIA Sd/
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1 Whether Reporters of Local Papers may be allowed to see No
the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law as No
to the interpretation of the Constitution of India or any
order made thereunder ?
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RELIANCE INDUSTRIES LIMITED & 1....Petitioner(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR SN SOPARKAR, SENIOR ADVOCATE for the Petitioner(s) No. 2
MS MEGHA JANI, ADVOCATE for the Petitioner(s) No. 1
MS MANISHA LAVKUMAR, GOVERNMENT PLEADER for the Respondent(s) No. 1 2
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CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 02/03/2017
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] By way of this petition under Article 226 of the Constitution of India, the petitioners have prayed for an appropriate writ, direction and order to quash and set aside the impugned decision of the respondents, in declaring PhaseII of Gandhar Complex as ineligible for Tax Page 1 of 24 HC-NIC Page 1 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT Exemption under the scheme published by the Government Resolution dated 11.09.1995 viz. "Capital Investment Incentive to Premier / Presitigious Units Scheme, 19952000" (hereinafter referred to as "Incentive Scheme") and to direct the respondents to make available to the petitioner No.1 the benefit of the Tax Exemption under the said scheme in respect of PhaseII of Gandhar Complex. It is also prayed to declare that clause 9(c) of AnnexureB to the Incentive Scheme is not applicable to the petitioner No.1 and in the alternative as ultra vires and hence, void ab initio.
[2.0] Facts leading to the present Special Civil Application and so pleaded in the petition are as under:
[2.1] That Indian Petrochemicals Corporation Limited (hereinafter referred to as "IPCL") was a company duly constituted and registered in consonance with the provisions embodied in the Companies Act, 1956. The IPCL was a Government of India Undertaking at the time of its incorporation and, thereupon, IPCL continued as a Government of India Undertaking till in the month of June 2002 or thereabout, the Government of India decided to disinvest its shareholding as a major shareholder in IPCL and, thereupon, in furtherance thereof entered into a Share Purchase Agreement with the petitioner No.1 herein for the purpose of causing transfer of 46% of its shareholding in the setup of IPCL to a subsidiary of petitioner No.1, in the name and style of "Reliance PetroInvestments Limited". That subsequent to the aforesaid, pursuant to the order dated 12.06.2007 passed by the Bombay High Court, a scheme of amalgamation of IPCL with the petitioner No.1 herein came to be duly sanctioned in consonance with the provisions embodied in sections 391 to 394 of the Companies Act, 1956 and as a result thereof, IPCL came to be merged with the petitioner No.1 herein -Page 2 of 24
HC-NIC Page 2 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT Reliance Industries Limited (hereinafter referred to as "RIL"). Thus, the petitioner No.1 - RIL stepped into the shoe of IPCL. That the respondent No.1 - State of Gujarat through its Industries and Mines Department, promulgated a Resolution dated 11.09.1995 bearing No.INC/1095/2000/(3)/1, by virtue of which, for the purpose of implementing the new industrial policy, referred to therein as evolved by the State Government for accelerating the development of the backward areas of the State of Gujarat by creating large scale employment opportunities, Incentive Scheme, inter alia, providing incentive, in the form of Exemption from Sales Tax to industrial units for setting up industrial complex / project in the backward areas, defined therein, came to be published.
[2.2] That in response to the aforesaid Government Resolution / Incentive Scheme, with a view to avail thereunder the benefit of incentive in the form of Exemption from Sales Tax, IPCL moved an application before the respondent No.2 - Industries Commissioner, State of Gujarat on 17.11.1995, inter alia, pointing out that grassroot Mega Industrial Complex, near Gandhar (hereinafter referred to as "Gandhar Complex") proposed to be set up by IPCL at an approximate cost of 3500 Crores would qualify for the purpose of Exemption from Sales Tax in the form of an incentive pursuant to the Incentive Scheme and hence, IPCL be accordingly registered as a Premier Industrial Unit.
[2.3] Subsequent to the aforesaid, the application of the IPCL in respect of said Gandhar Complex came to be scrutinized and processed by the office of the Industries Commissioner, State of Gujarat. That a provisional eligibility certificate dated 01.01.2000, under the nomenclature of "Eligibility Certificate for Sales Tax Incentive" came to be issued by the Office of the respondent No.2, inter alia, declaring IPCL Page 3 of 24 HC-NIC Page 3 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT as eligible for Sales Tax Exemption under the said scheme for its Gandhar Complex.
[2.4] It is the case on behalf of the petitioners that thereafter the IPCL applied to the Commissioner, Sales Tax, for the necessary Exemption certificate in respect of Sales Tax for the said Gandhar Complex. The said request of IPCL was acceded to and, thereupon, on 13.01.2000, a certificate, declaring IPCL as eligible for Exemption from Sales Tax to the tune of Rs.377 Crores for the said Gandhar Complex came to be issued by the office of Commissioner of Sales Tax in favour of IPCL. It appears that thereafter and subsequent to the aforesaid, vide communication dated 10.08.2000 issued by the office of the respondent No.2, the aforesaid eligibility certificate dated 01.01.2000, declaring IPCL for PhaseI of its Gandhar Complex as eligible for Sales Tax Exemption for a sum of Rs.377 Crores for the period commencing from 24.01.1997 to 16.04.2010, came to be amended by extending the validity period thereof upto 23.01.2013.
[2.5] It is the case on behalf of the petitioners that subsequent to the aforesaid, since PhaseII of the aforesaid Gandhar Complex of IPCL was also completed, a communication dated 11.01.2001 came to be addressed for and on behalf of the IPCL to the office of respondent No.2, seeking eligibility certificate for Exemption of Sales Tax in respect of PhaseII of Gandhar Complex under the Incentive Scheme. That in response to the aforesaid, on 09.03.2001, IPCL received a communication from the office of respondent No.2, by virtue of which, the concerned officers of IPCL came to be requested to remain personally present for discussion with the concerned officials from the office of respondent No.2 in respect of the matter concerning the issuance of eligibility certificate for Exemption from Sales Tax qua PhaseII of the Page 4 of 24 HC-NIC Page 4 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT said Gandhar Complex of IPCL, for which, a communication dated 11.01.2001 was addressed by IPCL to the office of the respondent No.2. It is the case on behalf of the petitioners that thereafter and based upon the discussion the concerned office of the IPCL had with the office of respondent No.2, vide communication dated 07.06.2002, the IPCL made a request to grant time to comply with the requirement insisted upon by the office of respondent No.2 in the form of requisite details for securing eligibility certificate for Exemption from Sales Tax under the aforesaid scheme for PhaseII of Gandhar Complex. It is the case on behalf of the petitioners that while the aforesaid application moved by IPCL seeking issuance of eligibility certificate for Sales Tax Exemption in respect of PhaseII of the Gandhar Complex was under process, an order dated 27.11.2002, came to be issued by the office of the respondent No.2, by virtue of the upper limit set out in the eligibility certificate for Sales Tax Exemption granted earlier in favour of IPCL, referable to PhaseI of the Gandhar Complex came to be increased from Rs.377 Crores to Rs.938.14 Crores. That thereafter an application dated 05.12.2002 came to be submitted for and on behalf of the IPCL, to the office of the Commissioner of Sales Tax seeking amendment in the certificate of Exemption dated 13.01.2000, granted earlier by the office of the Commissioner of Sales Tax in favour of IPCL. That in response to the aforesaid, requisite amendment came to be made to the certificate of Exemption on 20.12.2002 declaring IPCL as eligible for Exemption from Sales Tax to the tune of Rs.938.14 Crores in place of original limit of Rs.377 Crores. That subsequent to the aforesaid on account of introduction of coming into force the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "VAT Act") with effect from 01.04.2006, the Gujarat Sales Tax Act, 1969 came to be repealed. With a view to see that incentive in the form of Exemption from Sales Tax granted to the industrial units pursuant to the Incentive Scheme is continued in the Page 5 of 24 HC-NIC Page 5 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT shape of Exemption from Value Added Tax in lieu thereof, a notification dated 01.04.2006 came to be issued by the State Government under Section 5(2) of the VAT Act. That thereafter even another notification dated 01.04.2006 came to be issued by the Finance Department, State Government, by virtue of which the VAT Act came to be duly amended to provide for the procedure to be followed for claiming Exemption from the Value Added Tax in lieu of the Sales Tax and accordingly, an appropriate application in the prescribed format came to be moved by the IPCL before the concerned authority in respect of the PhaseI, which was duly accepted by the concerned authority.
[2.6] It is the case on behalf of the petitioners that since the application moved by the IPCL, seeking issuance of eligibility certificate for Sales Tax Exemption covering PhaseII of the Gandhar Complex of IPCL, was pending since long before the office of respondent No.2, a communication dated 13.06.2006 came to be addressed for and on behalf of the IPCL to the Principal Secretary, Industries and Mines Department, State of Gujarat, respondent No.1 herein, requesting for early issuance of the eligibility certificate covering PhaseII of Gandhar Complex of IPCL. It is the case on behalf of the petitioners that in the said communication dated 13.06.2006 it was specifically conveyed for and on behalf of the IPCL that the original application moved under the Incentive Scheme, seeking Exemption from Sales Tax as an incentive thereunder in respect of the Gandhar Complex for the entirety of the said Gandhar Complex with an estimated investment of Rs.3500 Crores and, thereafter, as the said Gandhar Complex was to be completed in two phases, from the stand point of administrative convenience, as it appears, at the request of respondent No.2, the details in respect of Gandhar Complex for Exemption under the Incentive Scheme came to be segregated in PhaseI and PhaseII and therefore, when the PhaseI is Page 6 of 24 HC-NIC Page 6 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT already completed, as a consequence thereto, based upon a decision already taken in the set up of the respondents, for registration of IPCL, under the Incentive Scheme for Exemption in respect of Sales Tax, as incentive for the said Gandhar Complex, requisite certificate, covering PhaseII of Gandhar Complex deserves to be issued in favour of the IPCL. It is the case on behalf of the petitioners that in response to the aforesaid, IPCL received a communication dated 15.09.2006 for and on behalf of the respondent No.1, by virtue of which it came to be mentioned that PhaseI of the Gandhar Complex was related to imported raw material and not mine and, therefore, the same was construed as eligible for Exemption from Sales Tax under the scheme as an incentive as opposed to PhaseII of the Gandhar Complex, which is gas related, and hence, the said PhaseII of the Gandhar Complex would not be eligible for Exemption from Sales Tax under the Incentive Scheme. Thus, a decision was taken that the IPCL for PhaseII of Gandhar Complex would not qualify for the purpose of Exemption from the Sales Tax pursuant to the Incentive Scheme on the ground that the PhaseII is a gas related and not mines.
[2.7] That thereafter the IPCL requested to reconsider the decision of denying benefit of Exemption to IPCL for PhaseII of the Gandhar Complex vide communication dated 18.11.2006. That in view of the merger of IPCL with petitioner No.1, an application dated 27.09.2007 came to be moved before the respondent No.2 seeking amendment in the certificate of eligibility for Exemption from concerned Tax granted by the office of the respondent No.2, in the form of change in the name of beneficiary therein from IPCL to petitioner No.1 (RIL). That in response to the aforesaid, requisite orders dated 03.11.2007 and 29.11.2007 came to be issued by the respondent No.2 and the office of the Commissioner of Sales Tax respectively, by virtue of which, the name of Page 7 of 24 HC-NIC Page 7 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT the IPCL came to be replaced in the concerned eligibility certificate for Exemption and the concerned certificate of Exemption. It is the case on behalf of the petitioners that thereafter endeavors were made by the petitioner No.1 to convince the respondents for issuance of eligibility certificate for Exemption from the Sales Tax / Value Added Tax covering investment made for PhaseII of the Gandhar Complex, by specifically pointing out that the reasons assigned by the respondent No.1 vide its aforesaid communication dated 15.09.2006 for denying benefit of Exemption from Tax as an incentive in respect of PhaseII of the Gandhar Complex is not germane to the incentive scheme and, therefore, appropriate steps deserve to be taken at the earliest for issuance of the concerned certificate of eligibility for Exemption from Tax in favour of the petitioner No.1 under the Incentive Scheme.
[2.8] It is the case on behalf of the petitioners that as a matter of fact, during the course of the discussion, the officials of the petitioner No.1 had with the office of the respondents during the course of their visit, it was specifically and categorically pointed out that when a decision, in principle, was taken to consider the Gandhar Complex, in its entirety, as eligible for Exemption from Tax under the said scheme as an incentive and, thereupon, subsequent thereto, when, from the stand point of administrative convenience, the requisite details, pertaining to the Gandhar Complex, were segregated into PhaseI and PhaseII and, thereupon, when the eligibility certificate, covering investment in Phase I was issued in the first place, as PhaseI was completed prior in point of time, the question of processing the details in respect of the PhaseII for deciding the same afresh on the premise as to whether the same would qualify as eligible for Exemption under the said scheme or not, pales into absolute insignificance. It is the case on behalf of the petitioners that it was also pointed out that the said PhaseII of Gandhar Complex can Page 8 of 24 HC-NIC Page 8 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT never be construed as gas related and further, even if the same is construed as gasrelated, the same would not disqualify for the purpose of Exemption from Tax within the meaning of the provisions contained in the Incentive Scheme, for the reason that clause 9(c) of AnnexureB to the Incentive Scheme sought to be relied upon by the respondents to substantiate their stand in denying benefit of Exemption under the said scheme to PhaseII of Gandhar Complex can never have application to the said Gandhar Complex which no longer belong to a public sector undertaking of either Central or State Government on account of the decision of the Government of India to disinvest its shareholding as a major shareholder in IPCL and as a Share Purchase Agreement with petitioner No.1 (RIL) for the purpose of causing of transfer of 46% of its shareholding. It is the case on behalf of the petitioner that it was also pointed out that even clause 9(c) can be said to be violative of Article 14 of the Constitution of India as it purports to create an artificial and arbitrary distinction in a discriminatory manner between public sector undertaking and a private sector undertaking. It is the case on behalf of the petitioners that despite the above, respondents have continued with their stand that the petitioner No.1 for PhaseII of Gandhar Complex shall not be eligible for Exemption of the Sales Tax under the Incentive Scheme. Hence, the petitioners have preferred the present Special Civil Application for the aforesaid reliefs.
[3.0] Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of the petitioners. Ms. Manisha Lavkumar, learned Government Pleader has appeared on behalf of the respondents.
[4.0] Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioners has vehemently submitted that the decision of the respondents in holding that for PhaseII of Gandhar Complex the Page 9 of 24 HC-NIC Page 9 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT petitioner No.1 / IPCL is not entitled to the benefit of Incentive Scheme under the Government Resolution dated 11.09.1995 is absolutely arbitrary and de hors the scheme.
[4.1] It is further submitted that impugned decision while holding that for PhaseII of Gandhar Complex, the petitioner No.1 / IPCL is not eligible for Exemption from payment of Sales Tax / Incentive Scheme is based on misinterpretation of clause 9(c) of AnnexureB to the Incentive Scheme / Resolution.
[4.2] It is vehemently submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioners that in the facts and circumstances of the case clause 9(c) of AnnexureB to the Incentive Scheme shall not be applicable and/or on the same the benefit of Incentive Scheme cannot be denied to the petitioners for PhaseII of Gandhar Complex.
[4.3] It is submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioners that as such for the PhaseII of Gandhar Complex, natural gas is being used for the manufacture. It is submitted that firstly the petitioner No.1 / IPCL can be said to be the consumer of natural gas being used for manufacture of item and it can be said that the same is used as input. It is submitted that therefore for being a consumer of the natural gas, the petitioner No.1 / IPCL is not required to obtain any permit / license. It is submitted that therefore the decision to deny the benefit of Incentive Scheme is on misinterpretation of clause 9(c) of the AnnexureB to the Incentive Scheme.
[4.4] It is further submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioners that even otherwise the natural Page 10 of 24 HC-NIC Page 10 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT gas cannot be said to be the local mineral as the natural gas is procured by the petitioner No.1 / IPCL not locally.
[4.5] It is further submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioners that even otherwise the natural gas cannot be said to be minerals for which any permit or license is required under any mineral Rules or Act. In support of his above submissions, Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioners has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Association of Natural Gas & Others vs. Union of India & Others reported in (2004) 4 SCC 489. Relying upon the aforesaid decision it is submitted that as held by the Hon'ble Supreme Court in the aforesaid case, the natural gas in raw and liquefied form is petroleum product and part of Mineral Oil Resources. It is submitted that for mineral oils no license is required under any Mineral Act or Rules. It is submitted that even under the Oil Fields Act, 1948, "mineral oil is not a mineral". It is submitted that therefore when the natural gas cannot be said to be mineral resources for which any permit is required under the Mineral Act or Rules, the decision to deny the benefit of the Incentive Scheme for PhaseII of Gandhar Complex is absolutely illegal and arbitrary and on misinterpretation of clause 9(c) of AnnexureB to the Incentive Scheme and therefore, the same deserves to be quashed and set aside.
[4.6] It is further submitted by Shri Soparkar, learned Senior Advocate appearing on behalf of the petitioners that even otherwise the action on the part of the respondents in denying the benefit of Tax Exemption in respect of PhaseII of Gandhar Complex under the Incentive Scheme is de hors the doctrine of legitimate expectation and principle of promissory estopple. It is submitted that all throughout the concerned respondents Page 11 of 24 HC-NIC Page 11 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT and the High Power Committee were considering the grant of the benefit of Tax Exemption in respect of PhaseII of the Gandhar Complex also.
[4.7] It is submitted that even otherwise clause 9(c) can be said to be discriminatory and violative of Article 14 of the Constitution of India as it seeks to create an artificial classification between public sector undertaking and private sector undertaking. It is submitted that for drawing the said line of demarcation between the private sector and public sector, there is no nexus of the differentia thereof with the object sought to be achieved. It is submitted that it is not possible to comprehend as to what could be the object for excluding the public sector as opposed to the private sector from the purview of the said scheme, if the public sector was to manufacture final project based on local mineral resources requiring permit / license under any Mineral Rules or Act. It is submitted that therefore the classification sought to be made is not based on any ineligibility differentia having the nexus with the object to be achieved.
Making above submissions and relying upon the above decision it is requested to allow the present petition and grant the reliefs as prayed for.
[5.0] Present Special Civil Application is vehemently opposed by Ms. Manisha Lavkumar, learned Government Pleader appearing on behalf of the State.
[5.1] It is vehemently submitted by Ms. Manisha Lavkumar, learned Government Pleader appearing on behalf of the State that the petitioner has rightly been denied the grant of premier registration for PhaseII of the Project, as the conditions for grant of premier registration under the Scheme has not been satisfied. It is submitted that as earlier it was found Page 12 of 24 HC-NIC Page 12 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT that the petitioner is entitled to the premier registration for PhaseI of the Project only and not eligible for any incentive for PhaseII of the Project, the petitioner itself submitted the revised application for grant of premier registration for PhaseI only having a total investment of Rs.1784.70 Crores, vide letter dated 19.05.1999. It is submitted that thereafter the agenda was put up before the State Level High Power Committee held on 05.10.1999 and Committee discussed the bifurcated cost of projects consisting of PVC and caustic soda (including CPP) for which raw material are ethylene and salt. It is submitted that the Committee noted that projects of the Company were for PVC, caustic soda (including captive power for which raw materials are ethylene and salt) and therefore, the Committee decided to register the unit as a Premier unit as it fulfilled all the criteria laid down for Premier unit. It is submitted that provisional premier registration was issued on 16.10.1999 for project cost of Rs.1784 Crores with a condition that the petitioner will use imported ethylene as a raw material for its end products. It is submitted that after issuance of provisional premier registration, unit was granted the final Sales Tax incentive of Rs.938.14 Crores for PhaseI Project. It is submitted that in the minutes of the SLHPC meeting held on 23.04.2002 to grant final eligibility certificate of Rs.938.14 Crores, the Committee noted that the Company is not consuming any local mineral resources of the country in PhaseI. It is further submitted by Ms. Manisha Lavkumar, learned Government Pleader appearing on behalf of the State that as such the petitioner Company had already affirmed that the decision of the SLHPC will be binding and while the revised application was submitted for PhaseI Project and also clarified that PVC Project having capacity of 1,50,000 TPA is not based on local mineral resources for which permit or license is required under any Mineral Rules or Act or nonutilization of natural gas as per Para 6(ii) of the Government Resolution dated 11.09.1995.
Page 13 of 24HC-NIC Page 13 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT [5.2] It is further submitted by Ms. Manisha Lavkumar, learned Government Pleader appearing on behalf of the State that as such the State Level High Power Committee is to work as a body to interpret the resolution and the decision taken by the State Committee regarding interpretation / dispute or contention of the resolution shall be final and binding on the applicant unit. It is submitted that the petitioner had been given a chance of hearing before the SLHPC. That the petitioner Company presented its case before the Committee and the CMD of the petitioner Company presented its case before the Committee. It is submitted that thereafter the SLHPC after considering all the representations made by the petitioner, ultimately decided to grant provisional premier registration for PhaseI of the Project. It is submitted that therefore the petitioner is not eligible for any incentive for PhaseII of the Project. It is submitted that as such the petitioner accepted the decision of the SLHPC to grant provisional prestigious registration and infact submitted the revised application form and claimed the Sales Tax incentive for PhaseI of the Project only.
[5.3] It is further submitted by Ms. Manisha Lavkumar, learned Government Pleader appearing on behalf of the State that thereafter once again the petitioner applied for PhaseII Project on 11.01.2001 in the prescribed format for the investment of Rs.2512 Crores in 5 Projects. It is submitted that the aforesaid 5 Projects mentioned in the application were same as submitted in earlier application on 17.11.1995 for which the Committee had already decided earlier. It is submitted that the petitioner Company was granted the final eligibility certificate by SLHPC in its meeting dated 23.04.2002 on the basis that the Company is not consuming any raw material from natural resources of the country as per Para 6(ii) of the Government Resolution dated 11.09.1995. It is Page 14 of 24 HC-NIC Page 14 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT submitted that therefore the fresh application for PhaseII was not to be considered at all as the petitioner had earlier submitted the proposal for combined investment of Rs.3484.31 Crores and thereafter the petitioner submitted the application for PhaseI only and SLHPC decided and granted incentive of Rs.938 Crores.
[5.4] It is further submitted by Ms. Manisha Lavkumar, learned Government Pleader appearing on behalf of the State that thereafter the petitioner again represented to Industries and Mines Department on 13.06.2006 to consider the investment of PhaseII Project. It is submitted that to that the Industries and Mines Department vide letter dated 15.09.2006 informed that the Sales Tax incentive of Rs.938.15 Crores had been granted earlier for PhaseI and PhaseII of the Project is gas related and so it is not eligible under the Government Resolution and therefore, the demand of incentive for PhaseII cannot be accepted.
[5.5] Now, so far as the submission on behalf of the petitioner that provision of clause 9(c) of AnnexureB to the Incentive Scheme made for PSU is discriminatory with private sector is concerned; it is submitted that it has no substance as it is a matter of policy decision of the Government to frame an incentive policy. It is submitted that as such during the implementation of the Project, the IPCL was PSU and therefore, it was treated as a Public Sector Undertaking by the Committee and the Government. It is submitted that as one of the condition provided in Clause 9(c) of AnnexureB to the Incentive Scheme has not been satisfied and it has been found that for PhaseII Project the petitioner Company is based on natural gas i.e. local mineral resources for which permit / license is required under the relevant Mines and Mineral Rules and the final decision has been taken by the SLHPC, who is the competent Authority to interpret the policy, who opined that Page 15 of 24 HC-NIC Page 15 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT for PhaseII Project the petitioner is not entitled to the incentive benefit, the petitioner has been rightly denied the benefit of Incentive Scheme under the Government Resolution dated 11.09.1995.
[5.6] Ms. Manisha Lavkumar, learned Government Pleader appearing on behalf of the State has also relied upon the definition of "minerals" from Halsbury's Laws of England.
She has also submitted that "mineral resource" is a concentration or occurrence of material of intrinsic economic interest in or on the earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. It is submitted that natural gas can be said to be a mineral resource. She has further submitted that Engineers, Economists and Scientists describe "mineral" as a resource when used in economic context. It is submitted that these resource refers to any mineral commodity that can be removed from the ground. It is submitted that there are three categories of mineral resources i.e. fuel minerals, metallic minerals and industrial minerals. It is submitted that fuel minerals refer to petroleum and natural gas, metallic minerals refer to minerals as scientifically defined and industrial minerals may include minerals as scientifically defined but often include rocks, sands and clays. It is submitted that natural gas is classified as a mineral due to its great economic importance on the marketplace as a recoverable "mineral resource". It is submitted that therefore natural gas used by the petitioner Company in its PhaseII Project is a mineral resource and therefore, not entitled to the benefit of Incentive Scheme under the Government Resolution dated 11.09.1995, as provisions of Clause 9(c) of AnnexureB to the Incentive Scheme are not satisfied. Ms. Manisha Lavkumar, learned Government Pleader has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Union of India and Others vs. NITDIP Textile Processors Private Limited and Another Page 16 of 24 HC-NIC Page 16 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT reported in (2012) 1 SCC 226 (Para 11). It is submitted that as held by the Hon'ble Supreme Court in the said decision the beneficial scheme is a complete Code in itself and statutory in nature and therefore, although liberal interpretation may be given to it, but the same cannot be extended beyond conditions prescribed in the said Scheme. It is further submitted that in the said decision it is further observed by the Hon'ble Supreme Court that as legislature enjoys very wide latitude in classification of objects, persons and things for Taxation purpose, in view of inherent complexity of fiscal adjustment of diverse elements and therefore, such a beneficial scheme may not be said to be ultra vires the equality clause in Article 14 of the Constitution of India merely because cutoff date prescribed therein resulted in disadvantage to some individual assessees. It is further submitted that as held by the Hon'ble Supreme Court in the said decision while implementing the Scheme, liberal construction may be given, but it cannot be extended beyond conditions prescribed in the statutory scheme and there is no warrant for the Court to travel beyond the Scheme and extend the scope of the Statute on the pretext of extending the statutory benefit to those who are not covered by the Scheme.
Making above submissions and relying upon above decision, it is requested to dismiss the present petition.
[6.0] Heard learned Counsel appearing for respective parties at length.
The short question which is posed for consideration of this Court is whether for its PhaseII Project the petitioner is entitled to the benefit of Incentive Scheme under the Government Resolution dated 11.09.1995 more particularly as a premier unit or not?
[6.1] At the outset it is required to be noted that for PhaseI Project the petitioner has been granted the Incentive Scheme under the Government Page 17 of 24 HC-NIC Page 17 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT Resolution dated 11.09.1995 treating it as premier unit. However, for PhaseII Project the petitioner has been denied the Sales Tax incentive under the Government Resolution dated 11.09.1995 on the ground that for PhaseII Project the unit is based on natural gas which can be said to be local mineral resources for which permit / license is required under the Mineral Rules or Act and therefore, for the PhaseII, the petitioner is ineligible to get the incentive benefit as per Clause 9(c) of the Annexure B to the Incentive Scheme. Therefore, while considering the question posed in the present petition, it is required to be considered whether natural gas / gas used by the petitioner in its PhaseII Project can be said to be local mineral resources for which permit / license is required under any Rules or Mineral Act?
At this stage it is required to be noted that the raw material used in PhaseII of Gandhar Complex was gas and ethylene. The gas was procured from GAIL which supplied it to the petitioner through pipeline. In light of the aforesaid facts it is required to be considered whether the gas used can be said to be local mineral resource for which any license or permit under any Mineral Act or Rules is required?
[6.2] It is the case on behalf of the petitioners that as the petitioner is the consumer of gas supplied by GAIL, they are not required to obtain any permit or license as a consumer. The aforesaid has no substance. If for any local mineral resource used in the Project and for which license or permit is required under the Mineral Act or Rules for such Project, such a unit shall not be entitled to the Incentive Scheme as per Clause 9(c) of AnnexureB to the Incentive Scheme. It does not say whether such unit is required to obtain the license or permit as a consumer of such local mineral resource or not.
[6.3] However, what is required to be considered is whether the gas Page 18 of 24 HC-NIC Page 18 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT supplied by GAIL through pipeline from outside Gujarat is supplied by GAIL through pipeline which is being used by the petitioner herein for its PhaseII Gandhar Project can be said to be a local mineral resource for which any license or permit is required under the Mineral Act or Rules?
[6.4] In the case of Association of Natural Gas & Others (Supra), the Hon'ble Supreme Court has observed and held that "natural gas" in raw and liquefied form is 'petroleum product' and part of mineral oil resources. It is further held that for mineral oils no license is required under Mineral Act or Rules. Even under the Oil Fields (Regulation and Development) Act, 1948 (hereinafter referred to as "Oil Fields Act"), "mineral oil" is not a mineral. Therefore, when the 'natural gas' cannot be said to be 'mineral resources' for which any permit is required under the Mineral Act or Rules, the petitioner could not have been denied the benefit of the Incentive Scheme for PhaseII Project, on the ground that 'natural gas' used by the petitioner in its PhaseII Project is a 'local mineral resource' for which any permit / license is required under the Mineral Act or Rules.
[6.5] At this stage some of the provisions of the Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as "Act, 1957") are required to be referred to. As per section 3(a) of the Act, 1957 "minerals" includes all minerals except mineral oils. As per section 3(b) of the Act, 1957, "mineral oils" includes 'natural gas' and 'petroleum'. Therefore, the natural gas and petroleum which can be said to be mineral oils, but may not be included in the definition of the "minerals", for which license or permit is required under the Act, 1957. As observed hereinabove, even as per the Oil Fields Act, "mineral oils"
include natural gas and petroleum. Therefore, "natural gas and petroleum" is a "mineral oil" and therefore, considering the provisions of Page 19 of 24 HC-NIC Page 19 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT Act, 1957, "natural gas and petroleum" being 'mineral oil' cannot be included within the definition of "minerals". Under the circumstances, the natural gas used by the petitioner Company in PhaseII Project cannot be said to be "local mineral resource" for which any license or permit is required under the Mineral Act or Rules. Under the circumstances, the petitioner has been wrongly denied the benefit of Sales Tax Incentive Scheme under the Government Resolution dated 11.09.1995.
[6.6] Now, so far as the submission made by Ms. Manisha Lavkumar, learned Government Pleader that initially, composite application was made for the benefit of Tax Exemption under the Government Resolution dated 11.09.1995 in respect of PhaseI and PhaseII, however after the matter was discussed with the SLHPC, the petitioner restricted the application with respect to PhaseI Project only, which was allowed considering the facts and circumstances of the case more particularly considering the fact that the raw material used was not a local mineral resource and thereafter in the year 2001 the petitioner made another application for PhaseII Project and therefore, once earlier the SLHPC did not accept the application for PhaseII Project, subsequently the petitioner ought not to have submitted another application for PhaseII Project having been once earlier rejected is concerned, at the outset it is required to be noted that as such there is no decision on record either by the SLHPC or by the State Government, earlier rejecting the application of the petitioner for PhaseII Project. On the contrary it is the case on behalf of the petitioner that at the relevant time the petitioner was advised to restrict the application with respect to PhaseI Project as for PhaseI Project there was no dispute at all and for PhaseI Project the Tax benefit was allowable and therefore, initial application was bifurcated into application for PhaseI and PhaseII Project. Even Page 20 of 24 HC-NIC Page 20 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT otherwise it is required to be noted that on the aforesaid ground i.e. on the ground that the earlier application of the petitioner for PhaseII Project was rejected and therefore, the same cannot be considered again, the petitioner has not been denied the benefit Sales Tax Incentive Scheme. By impugned order / decision the petitioner has been denied the benefit of Sales Tax Incentive Scheme as per the Government Resolution dated 11.09.1995 solely on the ground that one of the condition of Clause 9(c) of AnnexureB to the Incentive Scheme is not satisfied, inasmuch as the natural gas used by the petitioner, used in PhaseII Project is local mineral resource for which the license / permit under the Mineral Act or Rules is required. At this stage the Minutes of Meeting of SLHPC held on 02.07.1998 more particularly Item No.8 is required to be referred to and considered. In the Minutes of Meeting, the SLHPC specifically recommended that "prima facie" the unit seemed eligible. Item No.8 reads as under:
"Item No.8 : M/s. Indian Petrochemicals Ltd., Gandhar Industrial Complex, Nr. Jageshwar, Bharuch The Committee discussed the agenda note on the eligibility of public sector industrial unit. The conditions which restricted the eligibility to public sector unit was discussed in detail and the Committee felt that out of the three conditions, the industrial unit fulfilled two conditions viz., competition with private sector or public sector units and reinvestment of amount equal to the incentive availed of. The third condition that the public sector unit should not be based on local mineral resources for which permit or licence was required was examined by the Committee. It was observed that the raw material for the project was natural gas available from GAIL/ONGC. The Committee observed that IPCL would not require any licence or permit for mining of this petroleum product. The Committee also noted that the gas cracker division of the project required natural gas whereas remaining projects were dependent on the end product of cracker division. If the project was split into cracker and down stream divisions, the investment in the down stream project would be independently Page 21 of 24 HC-NIC Page 21 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT eligible. Since the company had applied as industrial complex, the Committee decided to refer the matter to Government on the issue of interpretation of local mineral resources with a recommendation that 'prima facie' the unit seemed eligible."
However, at that time the SLHPC thought it fit to refer the matter to the Government on the issue of local mineral resources with a recommendation that "prima facie" the unit seemed eligible. Under the circumstances, it cannot be said that the earlier application of the petitioner for PhaseII was rejected by the SLHPC. That as at that stage as there was no dispute with respect to PhaseI Project, the petitioner requested to consider the claim of Sales Tax incentive under the Government Resolution dated 11.09.1995 with respect to PhaseI and PhaseII separately and thereafter in the meeting held on 23.04.2002, the SLHPC allowed the claim of the petitioner for Sales Tax incentive of Rs.938.14 Crores at the rate of 100% of eligible investment for the period from 24.01.1997 to 23.01.2013. That thereafter again the petitioner requested to consider the claim / grant of Sales Tax incentive with respect to PhaseII Project which has been rejected by the impugned decision on the ground that as the petitioner is using natural gas in PhaseII which can be said to be local mineral resource for which the license / permit under the Mineral Act or Rules is required. As observed hereinabove, such a decision is on misinterpretation of Clause 9(c) of AnnexureB to the Incentive Scheme. As observed hereinabove natural gas cannot be said to be a local mineral resource for which permit / license is required under the provisions of Mineral Act or Rules. As observed hereinabove, natural gas is not a local mineral resource for which license or permit is required under the Mineral Act or Rules.
[6.7] It is next contended on behalf of the State that the word used "local mineral resources" is required to be construed as local mineral and Page 22 of 24 HC-NIC Page 22 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT local resources and therefore, natural gas can be said to be local resources and therefore, for the natural gas being local resources the petitioner is not entitled to the Sales Tax incentive benefit under the Government Resolution dated 11.09.1995. The aforesaid has no substance. Clause 9(c) is required to be read as it is. In the word "local mineral resources", neither there is any coma nor the word "and" is mentioned. In Clause 9(c) what is stated is "local mineral resources".
[6.8] In view of the above and for the reasons stated above and as observed hereinabove, natural gas cannot be said to be mineral / local mineral resource for which any permit / license is required under any of the provisions of the Mines and Mineral Act or Rules, the impugned decision to deny the benefit of the Sales Tax incentive under the Government Resolution dated 11.09.1995 to the petitioner for PhaseII Project cannot be sustained and the same deserves to be quashed and set aside and the matter is required to be remanded to the State Government for its fresh decision in light of the observations made hereinabove and to grant the benefit of the Incentive Scheme to the petitioner for PhaseII Project of Gandhar Complex if all other conditions of the Government Resolution dated 11.09.1995 are satisfied.
[7.0] In view of the above and for the reasons stated above, petition succeeds. The impugned decision of the respondents in rejecting the claim of the petitioner for Sales Tax incentive under the Government Resolution dated 11.09.1995 for PhaseII Project of Gandhar Complex is hereby quashed and set aside. Respondents are directed to reconsider the case of the petitioner for grant of Sales Tax incentive for PhaseII Project in light of the observations made hereinabove and if it is found that all other conditions of the Government Resolution dated 11.09.1995 are satisfied, such benefit be granted to the petitioner. The aforesaid Page 23 of 24 HC-NIC Page 23 of 24 Created On Sat Aug 12 06:32:45 IST 2017 C/SCA/7020/2008 CAV JUDGMENT decision shall be taken within a period of 3 months from the date of receipt of the writ of the present order. Rule is made absolute to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs.
Sd/ (M.R. SHAH, J.) Sd/ (B.N. KARIA, J.) Ajay Page 24 of 24 HC-NIC Page 24 of 24 Created On Sat Aug 12 06:32:45 IST 2017