Gujarat High Court
Bily vs Union on 19 November, 2010
Author: Akil Kureshi
Bench: Akil Kureshi
Gujarat High Court Case Information System
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SCA/12949/2000 7/ 7 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 12949 of 2000
With
SPECIAL
CIVIL APPLICATION No. 16763 of 2003
For
Approval and Signature:
HONOURABLE
MR.JUSTICE AKIL KURESHI
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
BILY
CHEMICALS LTD - Petitioner(s)
Versus
UNION
OF INDIA & 5 - Respondent(s)
=========================================================
Appearance
:
MR
AR THACKER(SCA NO,12949/2000) MR JR NANAVATI(SCA NO.16763/2003)for
Petitioner(s) : 1,
MR PS CHAMPANERI for Respondent(s) : 1 - 3.
MS
ML SHAH, AGP for Respondent(s) : 4,
NOTICE SERVED for
Respondent(s) : 5,
RULE SERVED for Respondent(s) :
6,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
Date
: 19,22/11/2010
ORAL
JUDGMENT
Petitions involve similar question of facts and law, they therefore have been heard together and are disposed of by this common order.
Facts as emerging in Special Civil Application No.12949/2000 can be noticed. The petitioner is a company involved in the activity of manufacturing salt as its operations in Jamnagar District, of State of Gujarat. Previously the factory for manufacturing salt was owned and operated by Saurashtra Cement & Chemical Industries Ltd. Premises of the factory were obtained on lease from the State Government. Such lease was transferred by M/s. Saurashtra Cement & Chemical Industries Ltd. in favour of the M/s. Ballarpur Industries ltd. in the year 1972 with permission of the State Government. Eventually M/s. Ballarpur Industries Ltd. transferred its rights with respect to the said unit including the leasehold rights on the land in question in favour of the petitioner on or around 11.7.2000. Lease agreement and license which the petitioner inherited from its previous unit both contained certain clauses to control salt manufacturing activities. License under which the petitioner operated contained an additional clause which reads as under :
"That the production from the salt works will be utilised only for captive consumption in their plants at Jagadhari, Ballarpur (Maharashtra) an Binage (Karnataka) for the manufacture of Caustic Soda and will not be made available for sale in the country or for exports without the express prior approval of the Salt Commissioner Corresponding provision was also made in the agreement of lease. Relevant clause whereof reads as follows :
"(10) The lessee shall be required to take prior permission of lessor before making any change in future and the unit of the lessee shall function according to the lawful instructions issued by the Government from time to time.(11)
The lessee shall be liable to comply with all the terms & conditions of the lease annexed as Annexure'A' and shall be liable for all liabilities of confirming party.
(12)The Salt Commissioner has informed that this unit is a captive unit for which conditions of captive units shall be binding on you as per license conditions."
Combined reading of the above provisions would reveal that as per the terms of the license as well as lease agreement between the parties, the petitioner was permitted to produce salt on the condition that same will be utilised only for captive consumption in their plant and will not be made available for sale in the Country or for exports without prior approval of the Salt Commissioner. By virtue of clauses (10) to (12) in the lease agreement and additional condition of the license, petitioner was confined to consume salt for its captive consumption and was prohibited from selling salt in the Country or outside without prior permission. It is however, not in dispute that license for manufacturing of salt was governed under Rule 102 of the Central Excise Rules, 1944. In particular, Rule 102 provide that manufacturing of salt is prohibited except under a license. Such rule therefore, requires an intending party to excavate sale to obtain necessary license for the same from the competent authority. Rule 103 pertains to license to be granted by the Collector. Subsequent rules made provisions relating to controlling such license for excavation of salt. It is not in dispute that with effect from 23.7.1996 entire Chapter VI from Rule 102 to Rule 138 of the Salt Rules has been deleted. With effect from the said date therefore, according to the petitioner, there is no further need to obtain any license for manufacturing of salt. In other words, by deletion of said chapter, manufacturing of salt has been de-licensed. Despite such a fact, respondents insisted that the petitioners continued to be governed by such conditions of license as incorporated in the lease agreement between the petitioner industries and the State Government.
This is manifested in impugned communication dated 31.8.1999 from the Deputy Salt Commissioner, Ahmedabad to the petitioner company in which it is stated as under :
"As per your original application dated 27.01.1962 wherein your company M/s Saurashtra Cement had requested for opening salt works and for captive use. This intention of your parent company was made more explicit in the licence granted to you. As such we feel that company as a matter of right cannot remove salt to other industries. You should take prior permission of Salt Commissioner, Jaipur for such removals. These orders are only in respect of Singah Units. Separate instructions are being issued for your Khavda(Kutch) Unit."
Insofar as Special Civil Application No.16763/2003 is concerned, facts are similar except that in addition to the stand of the respondents, the petitioner company continued to be governed by such restrictions, respondents also issued a show cause notice dated 28.10.2003 stating that petitioner has been granted license on the condition that such salt is of captive consumption alone or for export outside the Country. All surplus therefore, should be sold to other industries only with permission of the Salt Commissioner. It is further stated that though the petitioner is not granted any permission in the year 2003 to sell salt in excess of its quota in the open market or any other industry, company has breached said conditions and sold the salt in open market without any permission from the Salt Commissioner. Company was therefore, called upon to explain why permanent registration granted to its refinery not be cancelled for such violation of the conditions. In effect therefore, the said petitioner challenges the stand of the respondents in enforcing the conditions which according to the petitioner has become obsolete and also challenged the show cause notice issued by the Salt Commissioner why registration of the refinery of the petitioner company not be cancelled.
Appearing for the respective petitioners Shri A.R. Thacker and Shri J.R. Nanavati contended that previously restrictions were imposed by the Salt Commissioner in view of Rules 102 to Rule 138 of the Salt Rules. In the year 1996, such rules were deleted. With deletion of the entire chapter, it was not open for the Salt Commissioner to impose any of the conditions for license since requirement of license itself was done away.
On the other hand, learned counsel Shri Champaneri appearing for the Union of India contended that loose salt is not permitted to be sold in certain States. It was therefore, necessary for respondent authorities to verify the movement of salt and therefore, certain restrictions were necessary to be imposed.
Having heard learned counsel for the parties and having perused the documents on record, it clearly emerges that prior to year 1996 for manufacture, excavation, collection or removal of salt, necessary license was prohibited except, under a license issued under the competent authority under Rule 102 of the Central Excise Rules 1944 contained in Chapter VI which pertains to salt. Other provisions of the said Chapter upto Rule 138 pertain to granting of such license, conditions thereof and other incidental powers of the authorities. Undisputedly, w.e.f. 23.7.1996 entire chapter VI of the Central Excise Rules, 1944 has been repealed. With deletion of the said Chapter, therefore, salt came to be de-licensed. There was therefore, no further requirement of obtaining license for manufacturing of salt. It is not the case of the respondents that such provisions contained in Chapter VI of the Central Excise Rules 1944 were substituted by any other statutory enactment. In absence of any control or power to regulate manufacturing of salt, and resultantly in absence of any requirement to obtain license for such manufacture, in my opinion respondents cannot, after the said date i.e. 23.7.1996, enforce any of the conditions of license. Condition that salt manufactured by the petitioners will be only for captive consumption or that same shall not be sold in the open market without permission of the Salt Commissioner, therefore, no longer would be operative. Corresponding conditions imposed by the State Government in the lease agreement between the petitioner companies and State would also lose its significance. It is not the case of the State Authority that such conditions were necessary independently of the terms of license. It is a matter of no doubt that the corresponding conditions contained in the lease agreement between the petitioner company and the State Authority were only by way of incorporation from the terms of the license granted to the petitioners by the Salt Commissioner. When license itself lost its significance and when conditions contained in license as held here-in-above, ceased to operate, it was not open for the Salt Commissioner to bring back such condition by back door by insisting on compliance of such terms contained in the agreement entered into between the petitioner companies and the State Government.
In the result, both petitions are required to be allowed. In Special Civil Application No.12949/2000, impugned communication dated 31.8.1999 is quashed. In Special Civil Application no.16763/2003, impugned show cause notice dated 28.10.2003 is quashed.
It is however, clarified that if there is any restriction of sale of salt in loose condition in any of the State, it is always open for the respondents to have such restrictions implemented. This is however, quite different from suggesting that petitioners can be bow down by previous conditions of license of using the salt for captive consumption which license has become redundant with repeal of Chapter VI of the Central Excise Rules, 1944.
With above observations and directions, the petitions are disposed of. Rule made absolute in above terms.
(Akil Kureshi,J.) (raghu) Top