Orissa High Court
M/S. Vedanta Limited And Another vs National Aluminium Company Limited ... on 26 March, 2019
Equivalent citations: AIRONLINE 2019 ORI 248
Author: K.S. Jhaveri
Bench: K.S. Jhaveri
AFR HIGH COURT OF ORISSA: CUTTACK
W.P.(C) No.3634 of 2019
In the matter of an application under Article 226 of Constitution of India.
M/s. Vedanta Limited and Another ...Petitioners
-Versus-
National Aluminium Company Limited (NALCO) ...Opp. Party
For Petitioners : Mr. H.P. Raval, Sr. Advocate.
M/s. Prashanta Kumar Nayak,
A.K. Mohapatra, S. Mishra,
P.K. Behera & S.N. Dash
For Opp. Party : Mr. R.K. Rath, Sr. Advocate
M/s. Nihar Ranjan Rout,
P. Rath & J.P. Behera.
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P R E S E N T:
THE HONOURABLE THE CHIEF JUSTICE SHRI K.S. JHAVERI AND THE HONOURABLE SHRI JUSTICE K.R. MOHAPATRA
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Date of Judgment : 26.03.2019
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K.S. JHAVERI, CJ. By way of this writ petition, the petitioners have challenged the action of the opposite party-National Aluminum Company Ltd. (NALCO) inviting tender vide Tender 2 No.NAL/EXP/T(CA)/S/140 dated 01.02.2019 for sale of 30,000 MT Metallurgical Grade Calcined Alumina.
2. Mr. H.P. Raval, learned Senior Counsel for the petitioners has stated that the petitioner No.1 is a largest manufacturer of aluminum and is engaged in manufacturing and selling of Aluminum products. The company is having 1.6 Million Tonnes Per Annum (MTPA) Aluminum Smelter Plant which includes a Special Economic Zone (SEZ) unit having an Aluminum Smelter Plant with a capacity of 1.25 MTPA at Bhurkamunda, P.O. Siripura, Dist-Jharsuguda, Odisha. 2.1. The petitioner No.1 has also set up a 1215 MW Captive Power Generating Plant and a 2400 MW Thermal Power Plant within the said premises to supply continuous and uninterrupted power to its aluminium smelter units. In addition to the foregoing business unit, the petitioner also operates a 2 MTPA green field alumina refinery and an associated 75 MW captive power plant at Lanjigarh, Odisha.
3. It is submitted that the opposite party-NALCO a Central Public Sector Enterprises under Ministry of Mines, Government of India, is a leading producer of lowest-cost metallurgical grade alumina in the world. As per NALCO's objective, the Alumina produced is used to meet NALCO's requirements for production of primary aluminium at smelter. 3 3.1. The surplus alumina is sold to third parties in the export markets; NALCO has bulk shipments facilities at Vizag Port for undertaking the export.
4. It is respectfully submitted that the petitioner No.1 has established a SEZ Unit at Jharsuguda, Odisha for aluminum production with capacity of 12.5 lacs tone per year. A huge investment to the tune of INR 12,000/- crores was made by the petitioner with the understanding that Calcined Alumina would be supplied by Vedanta's Lanjigarh Alumina Refinery. Clacined Alumina is a Smelter grade Alumina used for production of Aluminium.
4.1. It is white powder. One of the outstanding characteristics of Calcined Alumina is its hardness which is 9 on mohs scale. Fired alumina ceramic parts can be harder than tungsten carbide or zircon, two to four times as strong as electrical porcelain, and very resistant to abrasion. Alumina is thus used in grinding media, cutting tools, high temperature bearings, and a wide variety of mechanical parts. Compared to zircon it has a higher thermal conductivity and a higher thermal expansion.
5. Learned counsel for the petitioners brought to our notice the following facts which are necessary for adjudication of the present case:
4
a) The Special Economic Zones Act, 2005 (Act 28 of 2005) is enacted on 23.06.2005. The provisions of Section 1 to 19, 25 to 30 and 40 to 52 respectively came into force only on 10.02.2006 in view of S.O. 195(E) dated 10.02.2006. Thus, though the Act was enacted but it was not brought into force till 10.02.2006.
b) On 22.07.2005 196th meeting of NALCO-opposite party, Marketing Guidelines was approved for export of Alimina and the same was brought into force with immediate effect.
c) The Marketing Guidelines was published by the opposite party-
NALCO on 30.07.2005. Para-5.0 states that out of the total production of Calcined Alumina of 15,75,000 MT around 7,00,000 MT is used for captive consumption in Aluminum Smelter and out of the balance available alumina a small quantity is sold in domestic market and rest is exported in loose bulk condition directly to overseas customers. All exports are on FOB Vizag Port. It also states that such exports are done through long term and spot contacts entered into with overseas buyers through the process of limited tendering.
d) On 25.03.2013 the opposite party-NALCO in reference to a letter vide letter dated 05.03.2013 of the SEZ Unit of the petitioner No.1 seeking registration informed that as per the policy, the limited tenders floated for export of alumina can only be issued to overseas customers registered with them. It was stated that the registration of the customers for export sale is open to overseas customers only. Hence, it was conveyed that the request of SEZ Unit cannot be acceded to. The opposite advised the petitioners to register their Holding Company i.e. 5 M/s. Vedanta Resources, PLC, London to participate in opposite party-NALCO's export tenders for purchase of alumina.
e) On 27.07.2013 the petitioners persisted with their request for registration for commercial/business for purchase of alumina which once again got rejected by the opposite party on the same day.
f) On 05.11.2013 the request of the petitioners was turned down by the opposite party. The petitioner No.1 being a business and commercial entity was inclined towards pursuing a commercial/business-like approach and avoiding any challenges to the decision of opposite party in the Court lest it may jeoparadise and estrange commercial interests of both the parties.
g) On 23.05.2017, the Ministry of Commerce and Industry, Department of Commerce (SEZ Section), Government of India granted in principal approval to the petitioners for setting up of a Specific Economic Zone for Manufacture and Export of Aluminium along with 125 MW Captive Power Plant at Jharsuguda, Odisha.
h) The Falta Special Economic Zone, Ministry of Commerce & Industry, Govt. of India through Development Commissioner on 09.04.2009 extended all facilities and entitlements admissible to the SEZ Unit subject to the provisions of the Act for undertaking authorized operations of manufacturing unit for Aluminium Ingot, Wire Rods and billets in the industrial capacity of production mentioned therein. On 01.12.2015 the date of commencement of commercial production by the SEZ Unit was declared. It is humbly submitted that non-pursuance of the matter between 2013 and 2015 cannot be viewed as 6 acquiescence or day since it is urged that the commercial production by the petitioner had not started.
i) On 13.12.2016, an investigation was conducted by the Director General (Safeguards) - Customs & Central Excise (Department of Revenue) under the Customs Tariff (Identification of Assessment of Safeguard Duty) Rules, 1997, on an application being made amongst others, by the petitioners, the Director of Investigation had held that the petitioner though a special economic zone unit was considered as an independent manufacturer and part of domestic industry for various regulations in the country. However, the Director General (Safeguards) considered the provisions of the Act and it was held that the decision of the Director (Investigation) holding Petitioners' SEZ Unit a domestic industry is not acceptable. The DG (Safeguards) therefore excluded the SEZ Unit from the scope of Domestic Industry.
j) The Development Commissioner, FALTA Special Economic Zone issued a notice on 09.05.2018 stating that the date of commercial production as by the Petitioner to be 01.12.2015 was accepted, hence, the validity of the "Letter of Approval"
extended upto 30.11.2020.
k) Limited tenders issued by the opposite party inviting participation of overseas buyers only in 30,000 MT of sale of Alumina. As per the terms and conditions, the price was to be quoted and payable in US dollars per MT. The petitioner which is a Special Economic Zone Unit is entitled to participate and is willing to make payments in foreign exchange including US dollars.7
l) On 05.02.2019 the petitioner No.1 requested the opposite party for registration in the bidding process for sale of Alumina since as an SEZ Unit it is entitled to bid in the said tenders.
m) The petitioner again requested on 06.02.2019 for registration of its SEZ Unit in order to enable it for participation in the sale of 30,000 MT and made an open offer (under constrain) for purchase of $380 US PMT on Ex Vizag Port basis, or on Ex Damanjodi port basis at NALCO's option. Since the petitioner No.1 is a Special Economic Zone Unit, the transaction would be exempted from excise duty, educational cess and VAT etc. It was specifically mentioned that the buyer shall make payment in US dollars from EEFC account of SEZ unit.
6. Learned counsel for the petitioners contended that the eligibility criteria which has been stipulated in the tender condition is as follows:
"A. Eligibility:
Tender for Spot Contracts:
Only overseas prospective buyers/companies having sound financial and business credentials and experience in International Trading are eligible to be registered with us.
Overseas offices of Central Public Sector Undertakings of Govt. of India are also eligible to apply for registration.
The annual turnover of the buyers should not be less than USD 15.00 million or equivalent."
7. The above tender condition is in clear violation of the well settled principles of law.
8
8. Mr. H.P. Raval, learned Senior Counsel appearing for the petitioners has relied upon different provisions of law and submitted that for all practical purposes the petitioner No.1-company is coming under "overseas" establishment which includes Special Economic Zone (SEZ).
9. To substantiate his argument, Mr. Raval, learned Senior Counsel has taken us to the Special Economic Zones Act, 2005 (hereinafter referred to as the "Act, 2005"). Relevant provisions i.e. Sections 2(g), 2(i), 2(m), 2(o), 2(u), 2(za) and 2(zc), and Section 4(1), 5, 7, 15 and 26 of the Act 2005 are reproduced hereunder:
Sec. 2. Definitions.--In this Act, unless the context otherwise requires,--
xx xx xx
(g) "Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an authority and a Co-Developer;
xx xx xx
(i) "Domestic Tariff Area" means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones;
xx xx xx
(m) "Export" means--
(i) taking goods, or providing services, out of India from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise; or
(ii) supplying goods, or providing services, from the Domestic Tariff Area to a Unit or Developer; or
(iii) supplying goods, or providing services, from one Unit to another Unit or Developer, in the same or different Special Economic Zone;
xx xx xx
9
(o) "import" means-
(i) goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode, whether physical or otherwise; or
(ii) receiving goods, or services by a Unit or Developer from another Unit or Developer of the same Special Economic Zone or a different Special Economic Zone;
xx xx xx (u) "Offshore Banking Unit" means a branch of a bank located in a Special Economic Zone and which has obtained the permission under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949);
xx xx xx (za) "Special Economic Zone" means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-
section (1) of section 4 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone;
xx xx xx (zc) "Unit" means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre whether established before or established after the commencement of this Act;
xx xx xx Sec. 4. Establishment of Special Economic Zone and approval and authorisation to operate to, Developer.-- (1) The Developer shall, after the grant of letter of approval under sub-section (10) of section 3, submit the exact particulars of the identified area referred to in sub-sections (2) to (4) of that section, to the Central Government and thereupon that Government may, after satisfying that the requirements, under sub-section (8) of section 3 and other requirements, as may be prescribed, are fulfilled, notify the specifically identified area in the State as a Special Economic Zone :
Provided that an existing Special Economic Zone shall be deemed to have been notified and established in accordance with the provisions of this Act and the provisions of this Act shall, as far as may be, apply to such zone accordingly :
Provided further that the Central Government may, after notifying the Special Economic Zone, if it considers appropriate, notify subsequently any additional area to be included as a part of that Special Economic Zone.10
Sec. 5. Guidelines for notifying Special Economic Zone. -- (1) The Central Government, while notifying any area as a Special Economic Zone or an additional area to be included in the Special Economic Zone and discharging its functions under this Act, shall be guided by the following, namely:-
a. generation of additional economic activity; b. promotion of exports of goods and services; c. promotion of investment from domestic and foreign sources;
d. creation of employment opportunities; e. development of infrastructure facilities; and
f. maintenance of sovereignty and integrity of India, the security of the State and friendly relations with foreign States.
Sec.7. Exemption from taxes, duties or cess.-- (1) Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by,-
(i) a Unit in a Special Economic Zone; or (ii) a Developer, shall, subject to such terms, conditions and
limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule.
Sec. 15. Setting up of Unit.-- (1) Any person, who intends to set up a Unit for carrying on the authorised operations in a Special Economic Zone, may submit a proposal to the Development Commissioner concerned in such form and manner containing such particulars as may be prescribed :
Provided that an existing Unit shall be deemed to have been set up in accordance with the provisions of this Act and such Units shall not require approval under this Act.
(2) On receipt of the proposal under sub-section (1), the Development Commissioner shall submit the same to the Approval Committee for its approval.
(3) The Approval Committee may, either approve the proposal without modification, or approve the proposal with modifications subject to such terms and conditions as it may deem fit to impose, or reject the proposal in accordance with the provisions of sub-
section (8):
Provided that in case of modification or rejection of a proposal, the Approval Committee shall afford a reasonable opportunity of being heard to the person concerned and after recording the reasons, either modify for reject the proposal.
(4) Any person aggrieved by an order of the Approval Committee, made under subsection (3), may prefer an appeal to the Board within such time as may be prescribed.11
(5) No appeal shall be admitted if it is preferred after the expiry of the time prescribed therefor: Provided that an appeal may be admitted after the expiry of the period prescribed therefor if the appellant satisfies the Board that he had sufficient cause for not preferring the appeal within the prescribed time. (6) Every appeal made under sub-section (4) shall be in such form and shall be accompanied by a copy of the order appealed against and by such fees as may be prescribed. (7) The procedure for disposing of an appeal shall be such as may be prescribed : Provided that before disposing of an appeal, the appellant shall be given a reasonable opportunity of being heard.
(8) The Central Government may prescribe,-
(a) the requirements (including the period for which a Unit may be set up) subject to which the Approval Committee shall approve, modify or reject any proposal referred to in sub-section (3);
(b) the terms and conditions, subject to which the Unit shall undertake the authorised operations and its obligations and entitlements.
(9) The Development Commissioner may, after approval of the proposal referred to in sub-section (3), grant a letter of approval to the person concerned to set up a Unit and undertake such operations which the Development Commissioner may authorise and every such operation so authorised shall be mentioned in the letter of approval.
Sec.26. Exemptions, drawbacks and concessions to every Developer and entrepreneur.-- (1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely:-
(a) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or services provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur;
(b) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India;
(c) exemption from any duty of excise, under the Central Excise Act, 1944 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur;12
(d) drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur;
(e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1944) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone;
(f) exemption from the securities transaction tax leviable under Section 98 of the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non- resident through the International Financial Services Centre;
(g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 (74 of 1956) if such goods are meant to carry on the authorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe, the manner in which, and, the terms and conditions subject to which, the exemptions, concessions, draw back or other benefits shall be granted to the Developer or entrepreneur under sub-section (1)."
10. Learned counsel for the petitioner has taken us to the letter dated 09.04.2009 (Annexure-15 series) to the additional affidavit filed on behalf of the petitioners, which reads as under:
"No.SEZ/LIC/V-10(1)/2009/189 Dated 09.4.2009 To M/s. Vedanta Aluminium Ltd. (SEZ Unit), Sipcot, Industrial Complex, Madurai Bypass Road, TV Puram, P.O., Tuticoria, Tamilnadu-628002 Sub: Your proposal for setting up an unit at Vill : Bhurkamunda, Jharsuguda-768201, Orissa.
Ref: Your application No. Nil dated 9th March, 2009.
Dear Sirs, With reference to the above mentioned application, Development Commissioner Falta Special Economic Zone is pleased to extend to you all the facilities and entitlements admissible to a unit in a 13 Special Economic Zone subject to the provisions of the Special Economic Zone Act, 2005 and rules and order made thereunder and for the establishment of an unit at Vill : Bhurkamunda, Jharsuguda
- 768201, Orissa, in the State of Orissa for undertaking authorized operations namely, manufacturing unit for Aluminium Ingot, Aluminium Wire Roads, Aluminium Billets.
ITEM(s) of Manufacture : Annual Capacity of
production
Aluminium Ingot 6,33,000 MT
Aluminium Wire Rods 3,96,000 MT
Aluminium Billets 4,00,000 MT
The approval is subject to the following terms and conditions:
(i) You shall export the goods manufactured/goods imported, as per provisions of the Special Economic Zones Act, 2005 and Rules made thereunder for a period of five years from the date of commencement of production. For this purpose, you shall execute the Bond-cum-Legal Undertaking as prescribed under the Special Economic Zones Rules, 2006.
(iii) You shall achieve positive Net Foreign Exchange (NFE) as prescribed in the Special Economic Zone Rules, 2006 for the period you operate as a Unit in the Special Economic Zone from the commencement of production, failing which you shall be liable for penal action under the Foreign Trade (Development and Regulation) Act, 1992.
(iv) You may import or procure from the Domestic Tariff Area all the items required for your authorized operations under this approval, except those prohibited under the ITC (HS) Classification of Export and Import items.
(v) You may supply/sell goods or services in the Domestic Tariff Area in terms of the provisions of the Special Economic Zones Act, 2005 and rules and order made thereunder.
(vi) This Letter of Approval is valid for a period of one year from its date of issue. Your shall implement the project and commence production within one year period or within such period as may be extended.
xx xx xx"
11. Learned counsel for the petitioners has also taken us to the certificate issued by the FALTA Special Economic Zone on 9th May, 2009 where it has been stated that as per Rule 19 (6) of the Special Economic 14 Zones Rules, 2006, the validity of the letter of approval was valid upto 30.11.2020. The said certificate is reproduced hereunder:
"TO WHOM IT MAY CONCERN This is certify that M/s. Vedanta Ltd., a unit in M/s. Vedanta Aluminum Ltd., SEZ at Jharsuguda, Odisha was issued Letter of Approval on 09.04.2009 and subsequently, the Board of Approval in its meeting dated 28.04.2016 extended the validity of Letter of Approval upto 07.04.2017. In the meantime, the SEZ unit declared date of commencement of production as on 01.12.2015, which was accepted by the Development Commissioner. Hence, the validity of the Letter of Approval of the M/s. Vedanta Ltd. is valid upto 30.11.2020 as per Rule 19(6) of SEZ Rules, 2006."
12. He has also submitted that a notification was published by the Central Government on 29th October, 2009 in which the land belonging to the petitioner has been reflected. The said notification is reproduced hereunder:
"MINISTRY OF COMMERCE AND INDUSTRY (Department of Commerce) New Delhi, the 29th October, 2009 S.O. 2725(E).-- The Central Government, in exercise of the powers conferred by sub-section (1) of Section 4 of the Special Economic Zone Act, 2005 (28 of 2005) and in pursuance of Rule 8 of the Special Economic Zone Rules, 2006, herby makes the following amendments in the notification of the Ministry of Commerce and Industry Department of Commerce, number S.O. 2394 (E) dated 16th September, 2009 for setting up a sector specific Special Economic Zone for setting up a sector specific Special Economic Zone for Manufacture and Export of Aluminium along with 1215 MW Captive Power Plant at Bhurkamunda, Brundamal and Kurebaga Villages, Tehsil and District Jharsuguda, in the State of Orissa, namely :-
In the said notification:
(i) In paragraph No.2, Date of Letter of Approval i.e. 23rd day of May, 2007 may be read as 23rd day of May, 2007 and 8th April, 2008.
(ii) In paragraph No.2, area may be read as 185.62 hectres.15
(iii) In paragraph No.4 and 5, area may be read as 18.57 hectres.
(iv) The Table may be substituted by the following Table:
TABLE Sl.No. Name of Village Khata No. Plot No. Area (in Hectres) (1) (2) (3) (4) (5)
1. Kureabaga 2 51 1.943.29 7 55/1090 0.38866 55 0.40485 52 0.73278 54 0.85019 57 0.74088 53 0.46153 51/1027 0.60728 58 3.09711 71 0.02024 72 0.23886 61 0.59918 136 1.05261 27/1102 0.47368 24 0.24291 27/1085 0.19028 24/1086 0.23077 45 0.78136 46 0.668 47 0.62752 49 1.78135 48 0.63562 22/1023 1.80969 Total: 18.57864 F.NO.F/2/127/2006-SEZ ANIL KUMIN, Jt. Secy."
and the additional land was also reflected in another notification published by the Central Government on the 3rd March, 2010, relevant portion of which reads as under:
"And whereas M/s. Vedanta Aluminium Limited has proposed to include a part of additional area of 35.088 hectares at Brundamal and Kurebaga Village, Tehsil and Dist-Jharsuguda, in the State of Orissa as part of that Special Economic Zone;16
12.1. In that view of the matter, learned counsel for the petitioners contended that the petitioner No.1-company for all practical purposes would be legally competent to participate in the tender as it is coming within SEZ Unit.
13. He has relied upon Section 51 of the Act, 2005 which has over riding effect all over the Act. He has also taken us to Section 53(1) and 53(2) as well as Section 26 of the Act, 2005, which read as under:
"Sec. 26. Exemptions, drawbacks and concessions to every Developer and entrepreneur.--(1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely :--
(a) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods imported into, or services provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or Entrepreneur;
(b) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India;
(c) exemption from any duty of excise, under the Central Excise Act, 1944 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur;
(d) drawback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur;
(e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone;17
(f) exemption from the securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre;
(g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 (74 of 1956) if such goods are meant to carry on the authorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1).
xx xx xx Sec. 51. Act to have overriding effect.-- (1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.
xx xx xx Sec.53. Special Economic Zones to be ports, airports, inland container depots, land stations, etc., in certain cases.-- (1) A Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorised operations. (2) A Special Economic Zone shall, with effect from such date as the Central Government may notify, be deemed to be a port, airport, inland container depot, land station and land customs stations, as the case may be under section 7 of the Customs Act, 1962 (52 of 1962):
Provided that for the purposes of this section, the Central Government may notify different dates for different Special Economic Zones."
14. Learned counsel for the petitioner has also taken us to the Customs Act, 1962 particularly Section 2 (18) and Section 7 which reads as under:
"Sec. 2. Definitions. -
xx xx xx (18) "export", with its grammatical variations and cognate expressions, means taking out of India to a place outside India;
xx xx xx 18 Sec. 7. Appointment of Customs Ports, Airports, etc. - (1) The Central Government may, by notification in the Official Gazette, appoint -
(a) the ports and airports which alone shall be customs ports or customs airports for the unloading of imported goods and the loading of export goods or any class of such goods;
(aa) the places which alone shall be inland container depots for the unloading of imported goods and the loading of export goods or any class of such goods;
(b) the places which alone shall be land customs stations for the clearance of goods imported or to be exported by land or inland water or any class of such goods;
(c) the routes by which alone goods or any class of goods specified in the notification may pass by land or inland water into or out of India, or to or from any land customs station from or to any land frontier;
(d) the ports which alone shall be coastal ports for the carrying on of trade in coastal goods or any class of such goods with all or any specified ports in India;
(e) the post offices which alone shall be foreign post offices for the3 clearance of imported goods or export goods or any class of such goods;
(f) the places which alone shall be international courier terminals for the clearance of imported goods or export goods or any class of such goods;
(2) Every notification issued under this section and in force immediately before the commencement of the Finance Act, 2003 shall, on such commencement, be deemed to have been issued under the provisions of this section as amended by section 98 of the Finance Act, 2003 and shall continue to have the same force and effect after such commencement until it is amended, rescinded or superseded under the provisions of this section.
15. Thereafter he has taken us to Section 3 of the Foreign Trade (Development and Regulation) Act, 1992, which reads as under:
"Sec. 3. Powers to make provisions relating to imports and exports.--(1) The Central Government may, by Order published in 19 the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports.
(2) The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the Order, the 1 [import or export of goods or services or technology]:
[Provided that the provisions of this sub-section shall be applicable, in case of import or export of services or technology, only when the service or technology provider is availing benefits under the foreign trade policy or is dealing with specified services or specified technologies.] (3) All goods to which any Order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly. (4) Without prejudice to anything contained in any other law, rule, regulation, notification or order, no permit or licence shall be necessary for import or export of any goods, nor any goods shall be prohibited for import or export except, as may be required under this Act, or rules or orders made thereunder.]
16. To further substantiate his argument, learned counsel for the petitioner has also brought to our notice the Policy declared by the Government of India, Ministry of Commerce and Industry under the Foreign Trade Policy, 2015-2020, more particularly Chapter-7 (Special Economic Zones). The relevant portion of Chapter-7 reads as under:
"CHAPTER-7 SPECIAL ECONOMIC ZONES Note: Special Economic Zones (SEZ) are growth engines that can boost manufacturing, augment exports and generate employment. The private sector has been actively associated with the development of SEZs. The SEZs require special fiscal and regulatory regime in order to impart a hassle free operational regime encompassing the state of the art infrastructure and support services. The proposed legislation on SEZs to be enacted in the 20 near future would cover the concepts of the developer and co- developer, fiscal concessions under the Income Tax and Customs Act, provide for Offshore Banking Units (OBUs) etc . A brief on the facilities available under the SEZ scheme is given as under:
Eligibility 7.1 (a) Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.
7.9 Supplies from DTA to SEZ shall be entitled for the Entitlement for Supplies following:
from the DTA
(a) DTA supplier shall be entitled for:
(i) Drawback Or DEPB in lieu of Drawback
(ii) Discharge of Export performance, if any, on the supplier.
(b) SEZ units shall be entitled for:-
(i) Exemption from Central Sales Tax.
(ii) Exemption from payment of Central Excise Duty on all goods eligible for procurement by the unit.
(iii) Deleted.
(iv) Reimbursement of Duty paid on fuels or any other goods procured from DTA as per the rate of drawback notified by the Directorate General of Foreign Trade from the date of such notification.
(c) Supplier of precious and semi-precious stones, synthetic stones and processed pearls from Domestic Tariff Area to the units situated in SEZ shall be eligible for grant of Replenishment Licenses at the rates and for the items mentioned in the Handbook (Vol. I).21
(d) The entitlements under paragraphs (a) and (b) (ii) above shall be available provided the goods supplied are manufactured in India.
17. Similarly, learned counsel for the petitioners has taken us to Chapter-4 of the Foreign Trade Policy [1st April, 2015 - 31st March, 2020] published by the Government of India, more particularly para 4.21 which reads as under:
"4.21 Currency for Realisation of Export Proceeds.
(i) Export proceeds shall be realized in freely convertible currency except otherwise specified. Provisions regarding realisation and non realisation of export proceeds are given in paragraph 2.52, 2.53 and 2.54 of FTP.
(ii) Deleted
(iii) Export to SEZ Units shall be taken into account for discharge of export obligation provided payment is realised from Foreign Currency Account of the SEZ unit.
(iv) Export to SEZ Developers / Co-developers can also be taken into account for discharge of export obligation even if payment is realised in Indian Rupees.
(v) Authorisation holder needs to file Bill of Export for export to SEZ unit / developer / co-developer in accordance with the procedures given in SEZ Rules, 2006."
18. Then he has also taken us to the Section 9-A of the Foreign Trade (Development and Regulation) Act, 1992, which reads as under:
"Sec. 9A. Power of Central Government to impose quantitative restrictions.--(1) If the Central Government, after conducting such enquiry as it deems fit, is satisfied that any goods are imported into India in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic industry, it may, by notification in the Official Gazette, 22 impose such quantitative restrictions on the import of such goods as it may deem fit:
Provided that no such quantitative restrictions shall be imposed on any goods originating from a developing country so long as the share of imports of such goods from that country does not exceed three per cent. or where such goods originate from more than one developing country, then, so long as the aggregate of the imports from all such countries taken together does not exceed nine per cent. of the total imports of such goods into India.
(2) The quantitative restrictions imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of four years from the date of such imposition:
Provided that if the Central Government is of the opinion that the domestic industry has taken measures to adjust to such injury or threat thereof and it is necessary that the quantitative restrictions should continue to be imposed to prevent such injury or threat and to facilitate the adjustments, it may extend the said period beyond four years:
Provided further that in no case the quantitative restrictions shall continue to be imposed beyond a period of ten years from the date on which such restrictions were first imposed.
(3) The Central Government may, by rules provide for the manner in which goods, the import of which shall be subject to quantitative restrictions under this section, may be identified and the manner in which the causes of serious injury or causes of threat of serious injury in relation to such goods may be determined.
(4) For the purposes of this section--
(a) "developing country" means a country notified by the Central Government in the Official Gazette, in this regard;
(b) "domestic industry" means the producers of goods (including producers of agricultural goods)--
(i) as a whole of the like goods or directly competitive goods in India; or
(ii) whose collective output of the like goods or directly competitive goods in India constitutes a major share of the total production of the said goods in India;
(c) "serious injury" means an injury causing significant overall impairment in the position of a domestic industry;
(d) "threat of serious injury" means a clear and imminent danger of serious injury.] 23
19. Learned counsel for the petitioners submits that on 13.12.2016 the Directorate General of Safeguards, Customs and Central Excise vide Notification No.F.NO.22011/10/2016/Pt.VIII issued its final findings regarding Safeguard Investigation concerning Imports of "Unwrought Aluminum (Aluminum not alloyed and Aluminum alloys)". The petitioner No.1 was also a party to the said investigation. One of the contentions before the DG (Safeguards) included deciding on whether the SEZ Unit of the petitioner No.1 is solely for export purposes and therefore, cannot be included in the domestic capacity. It was held by the DG (Safeguards) that the SEZ Unit is to be excluded from the scope of Domestic Industry. 19.1. In the said notification under Annexure-13 to the additional affidavit filed on behalf of the petitioners, in paragraphs-6 to 13, the Central Government has stated as under:
"6. Some of the interested parties have contended that the SEZ plant of M/s Vedanta is only for export and hence cannot be included in the domestic capacity. However, the DI holds that SEZ unit of M/s Vedanta should be treated as domestic industry for the reasons given below:
a. The term used in the safeguard law is "producers -in India"
and the SEZ Units established in SEZs are very much producers in India.
b. The relevant criteria for standing and scope of 'domestic industry' are production and not utilization of such production.
c. Under the SEZ Act, import implies bringing goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode and export implies taking goods, or providing services, out of India, from a Special Economic 24 Zone, by land, sea or air or by any other mode. Therefore, sale by an SEZ unit into DTA is not an export and is in fact a domestic sale.
d. The sale made by a unit in SEZ are treated as domestic sale in the books of accounts; customs authorities also treat the sales to Indian buyers by SEZ units as domestic sales; civil, criminal or business laws are applicable to SEZs; SEZ is treated as an Indian manufacturer for various regulations.
e. As per Anti Dumping authorities' decisions, an EOU or a unit in SEZ is treated as a domestic industry.
f. In DG Safeguards case of saturated fatty alcohols, a 100% EOU is treated as domestic industry.
g. Exports b y Indian SEZs are treated as goods 'originating in India' by other countries. h. Various benefits given to SEZ unit should not impact the treatment of such unit as a domestic industry.
7. In this regard, I observe as under:
(i) The Special Economic Zones Act, 2005 (SEZ Act) enacted on 23rd June, 2005 states that it is:-
"An Act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto."
(ii) Section 2 (i) of SEZ Act defines Domestic Tariff Area (DTA) as:-
"Domestic Tariff Area" means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones;"
(iii) Section 2 (m) (ii) of SEZ Act, 2005 defines export to, inter alia, mean "supplying goods, or providing services, from Domestic Tariff Area to a Unit or Developer''.
(iv) Section 30 of the SEZ Act provides that:- "Subject to the conditions specified in the rules made by the Central Government in this behalf:-
(a) any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975, where applicable, as leviable on such goods when imported; and 25
(b) the rate of duty and tariff valuation, if any, applicable to goods removed from a Special Economic Zone shall be at the rate and tariff valuation in force as on the date of such removal, and where such date is not ascertainable, on the date of payment of duty."
(v) Section 53 of the SEZ Act further provides that:-
A Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. (2) A Special Economic Zone shall, with effect from such date as Central Government may notify, be deemed to be a port, inland container depot, land station and land customs stations, as the case may be, under section 7 of the Customs Act, 1962:
Provided that for the purposes of this section, the Central Government may notify different dates for different Special Economic Zones.
(vi) Rule 47 of the Special Economic Zones Rules, 2006 states as under:
"Sales in Domestic Tariff Area -- (1) A Unit may sell goods and services including rejects or wastes or scraps or remnants or broken diamonds or by-products arising during the manufacturing process or in connection therewith, in the Domestic Tariff Area on payment of customs duties under section 30, subject to the following conditions, namely:
(a) Domestic Tariff Area sale under sub-rule (1), of goods manufactured by a Unit shall be on submission of import licence, as applicable to the import of similar goods into India, under the provisions of the Foreign Trade Policy"
8. From the aforementioned provisions of the SEZ Act & Rules made thereunder it is observed that:
(i) The fundamental objective of establishing of SEZ units is promotion of exports.
(ii) The areas of the SEZs are excluded from the definition of Domestic Tariff Area (DTA) and removals therefrom are subject to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975.
(iii) Supply of goods from DTA to the SEZ constitutes export.
(iv) Under Section 53 of the SEZ Act, an SEZ is deemed to be a territory outside the customs territory of India and is also deemed to be a port, inland container depot, land station and land customs stations, as the case may be, under section 7 of the Customs Act, 1962.26
(v) Domestic Tariff Area sale of goods manufactured by a SEZ unit can be made only on submission of import licence, as applicable to the import of similar goods into India.
9. As discussed below, the contentions of the DI for treating the SEZ unit as part of domestic industry are not acceptable. a. DI's contention that the term used in the safeguard law is "producers -in India" and the SEZs Units established in SEZs are very much producers in India is not acceptable as an SEZ unit is deemed to be a territory outside the customs territory of India as described under section 53 of SEZ Act, 2005 and all produce therein is treated as if produced outside the territory of India.
b. The DI has argued that relevant criteria for standing and scope of 'domestic industry' are production and not utilization of such production. In my view, as an SEZ is deemed to be a territory outside the customs territory of India, it cannot be treated as domestic producer or domestic industry. At first, eligibility of a unit as domestic producer/industry is to be established and then only its production can be taken into account for the purpose of establishing standing as domestic industry.
c. It has been contended that under the SEZ Act, import implies bringing goods or receiving services, in a Special Economic Zone, by a Unit or Developer from a place outside India by land, sea or air or by any other mode and export implies taking goods, or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode. Therefore, sale by an SEZ unit into DTA is not an export and is in fact a domestic sale. I observe that as per Section 2 (m) (ii) of the SEZ Act, supplying goods or providing services from the Domestic Tariff Area to a Unit or Developer also comes under the definition of export. Also, any goods removed from a Special Economic Zone to the Domestic Tariff Area are chargeable to duties of customs including safeguard duty. d. The contention of DI pertaining to the treatment of sale made by a unit in SEZ as domestic sale in the books of accounts or by customs authorities; application of civil, criminal or business laws to SEZs or SEZ being treated as an Indian manufacturer for various regulations raised by the applicant are not relevant. The eligibility of a unit in SEZ as domestic industry has to be decided within the framework of existing legal provisions of Safeguard law read with SEZ Act and rules.
e. Anti Dumping authorities' decisions on treatment of an EOU or a unit in SEZ as a domestic industry are taken within the 27 framework of anti-dumping laws and the same are not applicable to safeguard investigations.
f. The applicants have pointed out that in DG Safeguards case of saturated fatty alcohols, the domestic industry is a 100% EOU. Since SEZs and EOUs are governed by different legal provisions, the same is not applicable in the current investigations.
g. It has been contended that exports by Indian SEZs are treated as goods 'originating in India' by other countries. In my view, the treatment given to the exporters in SEZ by other countries as per their domestic laws is not relevant here.
h. The DI has argued that various benefits given to SEZ unit should not impact the treatment of such unit as a domestic industry. In this regard the eligibility of SEZ as domestic industry is being decided on the basis of various relevant provisions of safeguard rules and SEZ Act & rules made thereunder and not on the basis of any benefits given to them.
10. I also find that in one of the past safeguard findings issued vide F.N0.D-22011/14/2011dated 27.09.2012 concerning imports of electrical insulators into India the issue as to whether an SEZ unit can be included in the scope of SEZ was decided by the Director General (Safeguards) as under:
"A unit operating in SEZ cannot claim market disruption due to imports. These SEZ units are deemed to be outside Indian Customs Territories and not competing with other domestic units. Accordingly, it is decided that the data in respect of the SEZ unit of WSI, situated in Vishakhapatnam, is not to be considered for the purposes of present investigation."
11. In view of the foregoing discussions, I hold that the SEZ unit of M/s Vedanta is to be excluded from the scope of Domestic Industry. Accordingly installed capacity and other data in respect of SEZ unit of M/s Vedanta have not been considered for the purpose of present investigation.
12. The application is filed by (i) M/s. Vedanta Limited -Aluminium & Power, (ii) M/s Bharat Aluminium Company Ltd. and (iii) M/s Hindalco Industries Limited and together they account for more than 50% of the Indian production and hence are major producers. It is evident from the table given below:
Table-1 YEAR Production of DI All India Share of DI (MT) Production (MT) (%) 28 2011-12 8,77,948 19,18,126 46 2012-13 9,31,324 20,72,915 45 2013-14 10,52,132 20,89,929 50 2014-15 13,61,447 25,57,548 53 2015-16 15,60,141 28,15,481 55
13. Accordingly, it is held that the applicant domestic producers constitute and represent the Domestic Industry (DI) (excluding the SEZ Unit of M/s Vedanta) within the definition of DI under Sec 8B(6)(b) of the Customs Tariff Act, 1975."
20. In that view of the matter, it is contended that the SEZ is deemed to be the territorial outside of India in view of legal fiction is created on the petitioner No.1. It is further contended that three consignments which have gone over and above the transportation from the factory to the Port, the offer which was extended by the petitioners, respondents made loss of Rs.102 crores.
20.1. Then on 1st of February, 2019, 30,000 MT price offered by the petitioner is 380 and thereafter 410, whereas the offers received by the opposite party is 372.5, 388.5 and 390. Thus, the first price was disputed by the counsel for the opposite party where he has said that the offer received was Rs.380.5 but the other two prices were not disputed, therefore, the total loss of 12,45,000 US$.
21. Learned counsel for the petitioner has also taken us to the Marketing Guidelines of NALCO in which he relied upon Chapter-05 which 29 deals with Export of Calcined Alumina. Relevant clauses of Chapter-05 i.e. clauses 5.2.1., Para (B) are reproduced hereunder:
"5.2.1 REGISTRATION OF CUSTOMERS:
Registration of customers is done by NALCO in order to enable them to participate in the limited tenders floated from time to time. Such registration continues to be an ongoing process for expansion of customer base. However, the expansion of Customer base is done keeping in view the credentials and ability of the prospective customers so that contracts if entered into with them could be executed smoothly. The eligibility to get registered with NALCO for Alumina exports is therefore, as follows.
A) (I) ELIGIBILITY CRITERIA FOR PARTICIPATION IN SPOT TENDERS:
Only overseas Customers having sound financial and business credentials and experience in International Trading may be registered with Nalco. Overseas offices of Govt. of India undertakings may also be considered for registration.
The annual turnover of the buyers should not be less than USD 15.0 million or equivalent. In case of smelters/end users, the above criteria could be relaxed.
A prospective overseas Customer seeking to source Alumina from NALCO may be requested to furnish the following details:
1. Name, Address, Telephone, Telefax, E-mail for correspondences along with names of contact persons and their capacities.
2. Description about the business activities of the company.
3. In case the overseas buyer has an agent in India, details of the agent along with due authorization.
4. Published recent Annual report. If such annual reports are not published, the same should be declared and a certified accounts statement may please be furnished.
5. Banker's certificate regarding solvency and financial capability of buyer.
6. The names of first class International Banks through whom letters of credit are intended to be opened.
7. Any other information/document which is felt to be relevant for registration.
B) PROCEDURE FOR REGISTRATION:
30
The information regarding registration of customers for Spot tenders along with other relevant details of the Company is available in NALCO's web-site (www.nalcoindia.com). Further, during interaction with various agencies the above information would be passed on by NALCO representatives either verbally or if required in writing in order to enable them to take further action in case they are interested. For soliciting customer registration NALCO would publish global notice around once in a year in major daily Newspaper, international Trade Journals and its website.
In case of separate notification for registration in long term tenders such global notices would also be made in major daily newspapers, international trade journals & Nalco's website.
The requests received from the customers against any of the above actions would be examined for the purpose of registration for which the documents/information furnished by the prospective customers should be scrutinized with reference to the criteria cited above and recommendation shall be submitted for consideration and approval of Competent Authority. In case of Long term tenders/responses to global notices such scrutiny shall be done by a designated committee.
Upon approval of Competent Authority the registered customers would be intimated and would also be automatically included in the list of customers to whom subsequent tenders shall be issued."
22. The primary challenge in the writ petition is to the corporate conditions contained in the Tender of spot sale of 30,000 MT of Metallurgical Grade Calcined Alumina floated by the Opposite Party. The eligibility condition has already reproduced hereinabove. It is also contended that stipulation of such a condition in the tender is per se and ex facie arbitrary as it has not reasonable nexus namely, augmentation of foreign exchange reserve earnings by the Opposite Party, since the Petitioner which is a Special 31 Economic Zone Unit (SEZ Unit) is entitled to make payments for the said sale in the prescribed foreign exchange.
22.1. Non-registration of the Petitioner No.1, which qualifies the eligibility criteria and is entitled to be registered, as such apart from being ex facie arbitrary, is contrary to public interest in as much as the Opposite Party is denying the right of petitioner No.1 to even participate in the tender process. The said amount offered by the petitioner in the aforesaid tender contracts dated 01.02.2019, 14.02.2019, 27.02.2019 and 06.03.2019 as tabulated below would show that except in the first tender, the prices offered in the open bid are much higher than the price at which the merchandise in question is sold by the Opposite Party.
22.2. Thus, the decision of opposite Party has adversely affected the public interest of fetching maximum revenue by sale of a Alumina produced from Bauxite (which is readily available to the Opposite Party through mining on account of it being a public sector undertaking).
S.No. Tender No. Date Bid Price Award Price (in $
by based)
Petitioner on third party
market
Sources)
1 NAL/EXP/T(CA)/S/140 01.02.2019 380.00 380.50
2 NAL/EXP/T(CA)/S/142 14.02.2019 410.00 388.50
3 NAL/EXP/T(CA)/S/143 21.02.2019 410.00 391.00
4 NAL/EXP/T(CA)/S/144 27.02.2019 410.00 390.50
5 NAL/EXP/T(CA)/S/145 06.03.2019 411.00 406.00
32
22.3. Apart from the above price difference, the Petitioners' quoted prices are ex-works which will save between $17-$20/MT on which no rebate has been asked for by the Petitioners.
22.4. It is submitted that Opposite Party's tender involves sale of a natural resource and therefore the policy decision contained in its Marketing Guidelines are required to be just, reasonable and rational and are expected to meet a higher threshold of justness, non-discrimination and non- arbitrariness.
22.5. It is trite to say that the Opposite Party acts as a trustee of natural resources and therefore is bound by the Public Trust Doctrine (PTD) principles. The Court, is thus well within its jurisdiction to examine the policy decision as contained in NALCO's Marketing Guidelines on the tough stone of Article 14 as well as on the PTD.
22.6. There being no definition of overseas buyer, the submission of the Opposite Party that even though the Petitioner is an SEZ Unit it is not entitled to be reckoned as an overseas buyer, should be rejected inasmuch as the said interpretation by the Opposite Party is not based on a comprehensive consideration of the Act, 2005 and its objectives. 22.7. In arguendo, it is stated that at the time when the Marketing Guidelines of NALCO were adopted, the SEZ Act, 2005 was not even enacted 33 as most of the concerned sections (dealing with the present dispute) were brought into effect only on 10.02.2006. Therefore, by no stretch of imagination the Policy can be held to be valid and be held to have taken into account the objective of setting up of an SEZ Unit covered by the Act of 2005- which was only brought into force in the year 2006. 22.8. It is also trite that any policy decision or even an administrative act of State/statutory authority or a public undertaking falling within the ambit of Article 12 of the Constitution of India would be overridden by the statutory provision. Section 51 of the Act has an express overriding effect and therefore the policy decision cannot stand as an impediment in the registration of the Petitioner which deserves to be treated as eligible. 22.9. The submission of the Opposite Party that permitting the Petitioner No.1 to register and participate in the sale of alumina would lead to a monopolistic market situation apart from being ex-facie illegal is wholly untenable and deserves to be rejected at the very threshold since:
(a) The act to restrict the Petitioner from participating in the tender sale is in itself anticompetitive in nature as the Petitioner is being denied to right to participate in a competitive bidding process;
(b) The participation of the Petitioner would lead to augmentation of the revenue and if the allegations of the Opposite Party are to be believed that the Petitioner is facing shortage of raw material, it would thus require the Petitioner to offer more competitive bids which will augment further revenues.34
(c) The submission of the Opposite Party that the decision is non-
arbitrary on the face of it deserves to be rejected for the simple reason that it is absolutely unconceivable to persuade this Court that even though it is in the public interest, the present situation entails a scenario wherein by augmenting more revenue on the ground of the petitioner having larger productive capacity, a public authority such as the Opposite Party is choosing to sell a natural resource at a lesser price to an outsider/foreign entity rather than permit the petitioner to even make a bid. The same smacks of arbitrariness. While making such a submission, the Opposite Party over looks its own dominating position; being involved in the production of a monopolistic product by virtue of it being a public sector undertaking, it has been granted the sole right to produce alumina calcine from oxide, making it virtually a monopolistic market player in terms of sale of the product.
23. That the policy of the Opposite Party which has been framed in the year 2005 and continues to be enforce apart from being, on the face of it arbitrary and discriminatory, is also violative of statutory provisions on the Competition Act, 2002. The said policy is anti-competitive in nature restricting a party to bid.
24. The reliance on a 14 year old policy on the reasoning that it is time-tested holds no bearing and cannot be justified on the principle of reasonableness.
25. That the contention that provisions of the Act are intended 'solely' for the purpose of an SEZ and SEZ Units, is wholly untenable, since if 35 it were so, there was no reason of the Act which has an overriding effect over all other inconsistent and contemporaneous enactment(s).
26. The decision by Gujarat High Court rendered in Essar Steel vs. Union of India is writ large for adjudication before the Hon'ble Supreme Court of India which is apparent from the pendency of Review petition No. 1848/2010 in SLP (C) No. 19498/2010. It may be stated that SLP No. 19498/2010 was rejected, presumably, on an erroneous ground of an earlier Special Leave Petition between the same parties having been dismissed, which was an SLP filed against an interim order. The Review petition is therefore entertained.
27. The SLP (Civil) (CC) No. 1303-1307 of 2011 arising from the judgment of the Andhra Pradesh High Court dated 30.07.2010 in Maruti Udyog v. Union of India (quoted in Counter Affidavit @ Para 11), which relies upon decision of the Gujarat High Court in Essar Steel, cannot act as confirmation of the judgment of the Andhra Pradesh High Court, which has placed reliance on Division Bench judgment of the Gujarat High Court in Essar Steel v. Union of India, which itself is open for judicial scrutiny pending decision of the Hon'ble Supreme Court.
28. In any view of the matter the factual scenario in both the decision relied upon is wholly different.
36
29. The petitioners are not invoking the principles of Promissory Estoppel & thereafter the submission that the opposite party did not assure the supply of Calcined Alumina is wholly untenable. The petitioner is only legitimately expecting an opportunity for fair participation in the competitive Tenders. The reason for denial thus cannot be fathomed. Participation of the petitioner will promote competition and even encourage Foreign Buyers to match the Petitioner's Bid as is seen from the price of the last tender. After all it is market forces i.e. Supply and demand that determines optimum Sale Price. Further maximization of revenue is ensued by maximum participation By enabling the petitioner to participate twin objectives are subserved. One for the Respondent to augment Foreign Reserves & the second for the petitioner to augment domestic production of aluminum which is again exported and thus once again generating Foreign Exchange coupled with supporting Indian citizens in the employment generation in the process. These reasons far outweigh considerations as alleged by a near monopolistic market situation.
30. Mr. Raval, learned Senior Counsel for the petitioners submitted that the bidding conditions stipulated by the opposite party are arbitrary and discriminatory. It is permitting even overseas branches of entities based in India to buy the alumina. Since the petitioner No.1 is located in an SEZ any sale to it would constitute as export as well. This export is by way of a 37 deeming fiction and it is well settled law that deeming fiction should be given full effect to. Therefore, the case of the petitioners could be considered as an overseas buyer by way of the deeming fiction.
30.1 The petitioner No.1 being a SEZ unit, is deemed to be foreign buyer located outside the territory of India, hence, it ought to be treated at par with the overseas entities. The provisions of SEZ Act, 2005 is to ensure that the SEZs are categorized as a territory outside of India and supplies from Domestic Tariff Area (DTA) to SEZ is considered as export. All the benefits under Foreign Trade Policy (FTP) including Export Promotion Capital Goods (EPCG) Scheme, export obligation are available to supplies made to SEZ units. A level playing field to SEZ units vis-à-vis the overseas entitles ought to be given to the petitioner No.1.
30.2. The denial of right to participate in tender/bid for procurement of surplus Alumina to the petitioner No.1 will have adverse effect on various other social and revenue parameters. The petitioner No.1 as an SEZ unit has a substantial contribution in Employment generation, Growth of Domestic sector in India, Export Competitiveness and Earning Foreign Exchange. Import dependence would impact global competitiveness and cause slowdown in the business operations.
30.3. The policy of Opposite Party debarring the Petitioner No.1 from procuring Alumina, if not corrected, will in the long run set a bad example 38 and will adversely impact the potential of Indian Aluminum industry. The Indian Aluminum industry has in the previous decade expanded substantially and is on a high trajectory growth path and demand of aluminum is increasing rapidly.
30.4. The decision of the Opposite Party not to permit the Petitioner No.1 to participate in the Tender No.NAL/EXP/T(CA)/S/140 dated 01.02.2019 for sale of 30,000MT Metallurgical Grade Calcined Alumina is arbitrary, illegal, malafide and discriminatory.
30.5. The conduct of Opposite Party in not considering the Petitioner No.1 to participate in the bid is not fair and is discriminatory, arbitrary and is not in consonance with Article 14 of the Constitution of India. Hence, the decisions/action proposed to be taken by the Opposite Party is unreasonable. 30.6. Ultimately the overseas traders would be selling the Alumina to consumers like the Petitioner No.1 who would be consuming the calcined alumina and, therefore, restricting the tender only to overseas traders would be discriminatory. Thus, the action of the Opposite Party in not permitting the Petitioner No.1 to participate in the tender is contrary to the principles laid down by the Hon'ble Supreme Court in Rashbihari Panda vs. State of Orissa (1969) 1 SCC 414, wherein it was held as under:
"In the present case, the right to make offers being open to a limited class of persons it effectively shut out all other persons carrying on trade in kendu leaves as well as new 39 entrants into the trade. Both teh schemes, evolved by the Government, namely: the one of offering to enter into contracts with certain named licences, and the other of inviting tenders from licencees who had in the previous year carried out their contracts satisfactorily gave rise to a monopoly in the trade in the leaves to certain traders and singled out other traders for discriminating treatment. Therefore, they were violative of the fundamental right of the petitioners under Arts. 14 and 19(1)(g)......"
31. In support of his submission, Mr. Raval, learned Senor counsel for the petitioners has also relied upon the following decisions:
(i) M/s. Dwarkadas Marfatia and Sons vs. Board of Trustees of the Port of Bombay, reported in (1989) 3 SCC 293 [Paras-10, 25, 26 and 27]
(ii) CRRC Corporation Limited vs. Metro Link Express for Gandhinagar and Ahmedabad (Mega) Company Limited, reported in (2017) 8 SCC 282 [Paras-1, 8, 11, 20, 29, 30, 34 and 40]
(iii) Reliance Airport Developers (P) Ltd. Vs. Airports Authority of India and others, reported in (2006) 10 SCC 1 [Paras-
56, 62, and 63]
(iv) Reliance Energy Ltd. and another vs. Maharashtra State Road Development Corpn. Ltd. and another, (2007) 8 SCC 1 [Para-36]
(v) M/s. Ajar Enterprises Private Limited vs. Satyanarayan Somani and others decided on 24th August, 2017 by the Supreme Court in Civil Appeal No.10582 of 2017 (Para-
49).
(vi) Nokia India Sales Pvt. Ltd. vs. The Assistant Commissioner (CT) Sriperumbudur Assessment Circle Varadarajapuram and Ors., reported in (2016) 56 GST 229 (Madras) (Para-38 and 39).
4031.1 The Hon'ble Supreme Court in the case of M/s. Dwarkadas Marfatia (supra), in paragraphs 10, 25, 26 and 27, has held as under:
10. The question that survived after the finding of the appellate court and which was urged mainly before the High Court and also in this appeal, was whether the action of the respondent in evicting the appellant and granting the prem- ises in question to M/s Dhanji Mavji was proper and right. It was contended on behalf of the appellant that the action of the respondent in terminating the appellant's contractual tenancy had a public law character attached to it and was accordingly subject to judicial review. It was asserted that every action of the respondent which was 'State' within Article 12 of the Constitution, whether it be in the field of contract, or any other field, was subject to Article 14 of the Constitution and must be reasonable and taken only upon lawful and relevant grounds of public interest. In that light, it was urged that if the eviction of the appellant was not necessary in the public interest and if it had been taken pursuant to any norm or policy which does not permit eviction of the appellant, then the action is arbitrary and discriminatory and not in accordance with any policy which the respondent was enjoined to follow..
25. Therefore, Mr Chinai was right in contending that every action activity of the Bombay Port Trust which constituted "State"
within Art. 12 of the Constitution in respect of any right conferred or privilege granted by any Statute is subject to Art. 14 and must be reasonable and taken only upon lawful and relevant grounds of public interest. Reli- ance may be placed on the observations of this Court in E.P. Royappa v. State of Tamil Nadu, [1974] 2 SCR 348; Maneka Gandhi v. Union .of India, [1978] 2 SCR 621; R.D. Shetty v. The International Airport Authority of India & Ors., [1979] 3 SCR 1014; Kasturi Lal Lakshmi Reddy v. State of J & K & Anr., [1980] 3 SCR 1338 and Ajay Hasia v. Khalid Mujib Sehravardi & Ors. etc., [1981] 2 SCR 79. Where there is arbitrariness in State action, Art. 14 springs in and judi- cial review strikes such an action down. Every action of the Executive Authority must be subject to rule of law and must be informed by reason. So,, whatever be the Dwarkadas Marfatia & Sons vs Board Of Trustees Of The Port Of ... on 27 April, 1989 activity of the public authority, it should meet the test of Art.
14. The observations in paras 101 & 102 of the Escorts' case (supra) read properly do not detract from the aforesaid principles.
26. The High Court had relied on the observations of this Court in Kasturi Lal Lakshrni Reddy v. State of Jammu & Kashmir & Anr., (supra) that the State was not totally freed of the duty to act fairly and rationally, merely because it could do so under a contract. The High Court stated that though it might be accepted that a public 41 body like the respondent should not act unreasonably or unfairly but it did not follow that every time they decided to take action against the contractual tenants, they had to decide the said action in terms of fairness, equity and good faith. In support of this proposition, reliance was placed on the observations of this Court in L.I.C v. Escorts, (supra). In this connection, Mr Chinai appearing for the appellant reiterated before us as he did before the High Court, that the basis of the legitimate assumption or expectation of which the statutory exemption had been granted by the Legislature to the Bombay Port Trust provided a guideline or touch-stone by which the conduct of the public authority which had been granted exemption, should be judged. And, according to him, the necessity of eviction in the instant case, must have been only in public interest. Reliance was placed on several decisions referred to hereinbefore.
27. We are inclined to accept the submission that every activity of a public authority especially in the background of the assumption on which such authority enjoys immunity from the rigours of the Rent Act, must be informed by reason and guided by the public interest. All exercise of discretion or power by public authorities as the respondent, in respect of dealing with tenants in respect of which they have been treated separately and distinctly from other landlords on the assumption that they would not act as private landlords must be judged by that stansdard. If a governmental policy or action even in contractual matters fails to satisfy the test of reasonableness, it would be unconstitutional. See the observations of this Court in Kasturi Lal Lakshrni Reddy, (supra) and R.D. Shettv v. The International Airport Authoritv of India & Ors., [1979] 3 SCR 1014 at 1034."
31.2. In CRRC Corporation Limited (supra), the Hon'ble Supreme Court, in paragraphs-1, 8, 11, 20, 29, 30, 34 and 40, has observed as under:
"1. The dissension centers around the exposition of an eligibility norm engrafted in the tender conditions qua a prestigious project with global participation. The appellant stands disqualified by the respondent on the touchstone of its perception of the relevant qualifying criterion as endorsed by the High Court vide judgment and order dated 18.11.2016 rendered in CRRC Corpn Ltd. v. Metro Link Express Gandinagar & Ahmedabad (Mega) Co. Ltd., thus propelling it to this Court for redress.
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8. As per the tender prescriptions, an affirmative determination of the eligibility and qualification criteria, on the basis of the particulars furnished in the first envelope was to be the prerequisite for the opening of the envelopes containing the "technical bids" and the 42 "price bids" in that order applying the same test. Prior thereto, pre- bid meetings were held, as referred to hereinabove, in which representatives of various participating bidders attended and submitted their queries for clarifications as per Clause 7 of the Instructions to Bidders, which were accordingly deliberated upon. Clarifications, as sought for, were furnished accordingly. The appellant has averred that it did submit the envelopes, as required, containing all essential documents/certificates, as mandated fulfilling, amongst others, the requirements of the general/specific experiences. On 25-5-2016, as scheduled, the envelopes containing the "Initial Filter-cum-Qualification Requirement Bid" of the four bidders were opened and thereafter on 9-6-2016, the respondent raised 16 queries and required the appellant to submit its response thereto.
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11. The respondent Corporation, apart from raising preliminary objection to the maintainability of the writ petition filed by the appellant, pleading non-joinder of necessary parties i.e. the surviving tenderers in the fray, asserted that the project was financed through budgetary resources of the State of Gujarat, the Government of India and Japan International Cooperation Agency (for short hereinafter to be referred to as "JICA"). It also mentioned that through international competitive bidding, the General Engineering Consultant, which is a consortium of four renowned companies, had been appointed to provide independent expert professional advice regarding the preparation of tender documents, evaluation of tender offers, etc. for works related to the Ahmedabad Metro Rail Project -- Phase I i.e. the project in hand. While generally admitting the facts pertaining to the issuance of the notice inviting tender on 15-1-2016 and the participation of the four bidders including the appellant, MEGA, however, categorically asserted that in course of the pre-bid meetings, it was clarified in response to a pointed query, that the experience of subsidiary companies/group companies will not be taken into account in any case and that if the parties are desirous of such experience being counted, the subsidiary companies/group companies would have to form a joint venture (hereafter referred to also as "JV") or a consortium.
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20. To reiterate, the parties before us are at issue only on the aspect as to whether the appellant Corporation, to meet the experience norm, as prescribed by Clause 2.4 of the "evaluation and qualification of criteria", can utilise the experience of its subsidiary companies to qualify in the "Initial Filter-cum- Qualification Requirement Bid". No other contention has been raised. The present scrutiny thus would be limited only to this facet of the lis.43
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29. It would be advantageous, in view of the striking analogy of the overall perspectives, to recount the relevant observations recorded therein and having a decisive bearing on the issue under scrutiny: (Consortium of Titagarh Firema Adler S.P.A. case, SCC pp. 504-11, paras 27, 29-30, 32 & 35-38) "27. The core issue, as we perceive, pertains to acceptance of the technical bid of Respondent 2 by the first respondent and we are required to address the same solely on the touchstone of eligibility criteria regard being had to the essential conditions. The decision on other technical aspects, as we are advised at present, is best left to the experts. We do not intend to enter into the said domain though a feeble attempt has been made on the said count.
***
29. What is urged before this Court is that Respondent 2 could not have been regarded as a single entity and, in any case, it could not have claimed the experience of its subsidiaries because no consortium or joint venture with its subsidiaries was formed. With regard to relationship of holding and subsidiary companies, we have been commended to the authorities in Balwant Rai Saluja and also the judgment of the Delhi High Court in Rohde and Schwarz GmbH and Co. K.G. The essential submission is that Respondent 2 as the owner of the subsidiary companies including their assets and liabilities, cannot claim their experience and there is necessity to apply the principle of "lifting the corporate veil", as has been laid down in Renusagar Power Co. and LIC v. Escorts Ltd. It is also argued that the Government-owned entity cannot be treated differently, for a Government- owned entity is distinct from the Government and, for the said purpose, inspiration has been drawn from the authority in Western Coalfields Ltd. v. Special Area Development Authority . It has also been urged that when the tender has required a particular thing to be done, it has to be done in that specific manner, for the law envisages that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all. For the aforesaid purpose, inspiration has been drawn from the authority in Central Coalfields 44 Ltd. wherein reliance has been placed on Nazir Ahmad v. King Emperor .
30. Before we proceed to deal with the concept of single entity and the discretion used by the first respondent, we intend to deal with role of the Court when the eligibility criteria is required to be scanned and perceived by the court. In Montecarlo Ltd., the Court referred to Tata Cellular wherein certain principles, namely, the modern trend pointing to judicial restraint on administrative action; the role of the court is only to review the manner in which the decision has been taken; the lack of expertise on the part of the court to correct the administrative decision; the conferment of freedom of contract on the Government which recognises a fair play in the joints as a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere, were laid down. It was also stated in the said case that the administrative decision must not only be tested by the application of Wednesbury principle of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. The two-Judge Bench took note of the fact that in Jagdish Mandal it has been held that, (SCC p. 531, para 22) if the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The decisions in Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd., B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. and Michigan Rubber (India) Ltd. have been referred to. The Court quoted a passage from Afcons Infrastructure Ltd. wherein the principle that interpretation placed to appreciate the tender requirements and to interpret the documents by owner or employer unless mala fide or perverse in understanding or appreciation is reflected, the constitutional courts should not interfere. It has also been observed in the said case that it is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the 45 interpretation given. After referring to the said authority, it has been ruled thus: (Montecarlo Ltd.
case, SCC p. 288, para 26) '26. We respectfully concur with the aforesaid statement of law. We have reasons to do so.
In the present scenario, tenders are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting tenders are scrutinised by the technical experts and sometimes third-party assistance from those unconnected with the owner's organisation is taken. This ensures objectivity. Bidder's expertise and technical capability and capacity must be assessed by the experts. In the matters of financial assessment, consultants are appointed. It is because to check and ascertain that technical ability and the financial feasibility have sanguinity and are workable and realistic.
There is a multi-prong complex approach;
highly technical in nature. The tenders where public largesse is put to auction stand on a different compartment. Tender with which we are concerned, is not comparable to any scheme for allotment. This arena which we have referred requires technical expertise.
Parameters applied are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. But, that does not mean, these tenders will escape scrutiny of judicial review. Exercise of power of judicial review would be called for if the approach is arbitrary or mala fide or procedure adopted is meant to favour one. The decision-
making process should clearly show that the said maladies are kept at bay. But where a decision is taken that is manifestly in consonance with the language of the tender document or subserves the purpose for which the tender is floated, the court should follow the principle of restraint. Technical evaluation or comparison by the court would be 46 impermissible. The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner should be allowed to carry out the purpose and there has to be allowance of free play in the joints.' * * *
32. In Reliance Telecom Ltd. v. Union of India , the Court referred to the authority in Asia Foundation & Construction Ltd. v. Trafalgar House Construction (I) Ltd. wherein it has been observed that:
(Reliance Telecom Ltd. case[Reliance Telecom Ltd. case, SCC p. 317, para 58) '58. ... though the principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the Court that in the matter of award of a contract power has been exercised for any collateral purpose.' Thereafter, the Court in Reliance Telecom Ltd. proceeded to state thus: (SCC p. 317, para 58) '58. ... In the instant case, we are unable to perceive any arbitrariness or favouritism or exercise of power for any collateral purpose in NIA. In the absence of the same, to exercise the power of judicial review is not warranted. In the case at hand, we think, it is a prudent decision once there is increase of revenue and expansion of the range of service.' And again: (SCC p. 317, para 59) '59. It needs to be stressed that in the matters relating to complex auction 47 procedure having enormous financial ramification, interference by the courts based upon any perception which is thought to be wise or assumed to be fair can lead to a situation which is not warrantable and may have unforeseen adverse impact. It may have the effect potentiality of creating a situation of fiscal imbalance. In our view, interference in such auction should be on the ground of stricter scrutiny when the decision-making process commencing from NIA till the end smacks of obnoxious arbitrariness or any extraneous consideration which is perceivable.' ***
35. Respondent 2, as is evident, is a company owned by the People's Republic of China and, therefore, it comes within the ambit of Clause 4.1 of the bid document as a Government-
owned entity. We have already reproduced the said clause in earlier part of the judgment. As perceived by the first respondent, a single entity can bid for itself and it can consist of its constituents which are wholly-owned subsidiaries and they may have experience in relation to the project. That apart, as is understood by the said respondent, where the singular or unified entity claims that as a consequence of merger, all the subsidiaries form a homogenous pool under its immediate control in respect of rights, liabilities, assets and obligations, the integrity of the singular entity as owning such rights, assets and liabilities cannot be ignored and must be given effect. While judging the eligibility criteria of the second respondent, the first respondent has scanned Article 164 of the Articles of Association of Respondent 2 which are submitted along with the bid from which it is evincible that the Board of Directors of Respondent 2 has been entrusted with the authority and responsibility to discharge all necessary and essential decisions and functions for the subsidiaries as well. According to the first respondent, the term "Government-owned entity" would include a Government-owned entity and its subsidiaries and there can be no matter of doubt that the identity of the entities as belonging to the Government when established can be treated as a Government-owned entity and the experience claimed by the parent of the subsidiaries can be taken into consideration.
36. The learned Senior Counsel for the first respondent has drawn our attention to the "lifting of corporate veil" principle or doctrine of "piercing the veil" and in that context, reliance has 48 been placed on Littlewoods Mail Order Stores Ltd. v. McGregor, D.H.N. Food Distributors Ltd. v. Tower Hamlets London Borough Council and Harold Holdsworth & Co. (Wakefield) Ltd. v. Caddies. The learned Senior Counsel has also placed reliance upon the principles stated in Renusagar Power Co. that have been reiterated in New Horizons Ltd. In the written submission filed on behalf of the first respondent, the relevant paragraphs from Renusagar Power Co. have been copiously quoted. It is also urged that in the current global economic regime the multinational corporations conduct their business through their subsidiaries and, therefore, there cannot be a hypertechnical approach that eligibility of the principal cannot be taken cognizance of when it speaks of the experience of the subsidiaries. It is also contended by Mr Subramaniam that in the context of fraud or evasion of legal obligations, the doctrine of "piercing the veil" or "lifting of the corporate veil" can be applied but the said principle cannot be taken recourse to in a matter of the present nature.
37. With regard to the satisfaction of the first respondent, it has been highlighted before us that the said respondent had thoroughly examined the bid documents and satisfied itself about of the capability, experience and expertise of Respondent 2 and there has been a thorough analysis of the technical qualification of Respondent 2 by the independent General Consultant and the reports of the Appraisal and Tender Committee of the first respondent and also the no objection has been received from KfW Development Bank, Germany which is funding the entire project. Narrating the experience of Respondent 1, it has been stated in the written submission filed on behalf of the first respondent:
'36. That it is further clear from the record that besides being the lowest bidder, the experience of R-2 in supplying metro trains across the world exceeds the petitioner's experience by a huge margin. Where for Clause 12, R-2 has shown a figure of 594 metro cars, petitioner has shown only 72 cars; and for Clause 12.1 where R-2 has shown 432 cars, petitioner has again shown only 72 cars. This vast experience of R-2 would be beneficial for the project and would further public interest.
37. That R-1 without any malice, or mala fide has treated R-2 along with its 100% subsidiaries as 49 one entity. This understanding of the clause has been at the ends of both parties viz. R-1 and R-2, who were ad idem vis-à-vis the eligibility of the parent company to bid using the experience and executing the contract through its various 100% wholly-owned subsidiaries.
38. That the above understanding of R-1 of treating R-2 along with its 100% subsidiaries is supported by the understanding of the Delhi Metro Rail Corporation Ltd., which has on a similarly, if not same, worded bid document granted the tender/agreement to R-2, which had even there bid as a parent company claiming experience of and execution through 100% wholly-owned subsidiaries.
39. That moreover, there is no bar, whatsoever, express or implied, in the tender document to treat the parent company along with its 100% wholly-owned subsidiaries as one entity.
Therefore, the scope of judicial review should be limited in adjudging the decision taken by R-1 in the best interest of the project, and thereby, the public.
40. That arguendo, no project, whatsoever, has been caused to the project or to other bidders including the petitioner by the above understanding of the tender conditions by R-1. It is humbly submitted that R-2 fulfilled all the technical requirements. The bid document itself provided for bidding as a consortium, and did not require in such a case fulfilment of any material condition, which if not fulfilled would prejudice any parties or the project. Moreover, the scheme of the bid document is such that it itself provides for a parent company guarantee. According to this parent company guarantee form, a parent company would have to perform the works under the agreement in case the subsidiary failed.
Therefore, the objections raised by the petitioner are hypertechnical and have been raised only to stall the project once it was found to be unsuccessful.' 50
38. As is noticeable, there is material on record that Respondent 2, a government company, is the owner of the subsidiary companies and subsidiary companies have experience. The first respondent, as it appears, has applied its commercial wisdom in the understanding and interpretation which has been given the concurrence by the Committee concerned and the financing bank. We are disposed to think that the concept of "Government-owned entity"
cannot be conferred a narrow construction. It would include its subsidiaries subject to the satisfaction of the owner. There need not be a formation of a joint venture or a consortium. In the obtaining fact situation, the interpretation placed by the first respondent in the absence of any kind of perversity, bias or mala fide should not be interfered with in exercise of power of judicial review. Decision taken by the first respondent, as is perceptible, is keeping in view the commercial wisdom and the expertise and it is no way against the public interest. Therefore, we concur with the view expressed by the High Court."
(emphasis supplied)
30. Be that as it may, it would notwithstanding the above, be indispensable to examine and decipher the import of the relevant clauses pertinent to the question to be addressed. Clause 4.1 of Section I of the Instructions to Bidders which define "eligible bidders" is in the following terms:
"Eligible bidders.--
4.1. A bidder may be a firm that is a single entity or any combination of such entities in the form of a joint venture (JV) under an existing agreement or with the intent to enter into such an agreement supported by a letter of intent. In the case of a JV:
Consortium formation is acceptable.
Tender condition prevails.
(a) All members shall be jointly and severally liable for the execution of the contract in accordance with the contract terms, and
(b) The JV shall nominate a representative who shall have the authority to conduct all business for and on behalf of any and 51 all the members of the JV during the bidding process and, in the event the JV is awarded the contract during contract execution."
(emphasis supplied) xx xx xx
34. A plain reading of Clause 4.1 reveals that a bidder can be a single entity or a combination of such entities in the form of a JV or a consortium under an existing agreement or with the intent to enter into such an agreement supported by a letter of intent. Thus, a single entity has been construed to be a valid bidder for all intents and purposes.
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40. In the wake of above determination, the impugned disqualification of the appellant on the ground of deficiency, in experience in terms of Clause 2.4, is unsustainable in law and on facts being grossly illegal, arbitrary and perverse. As a corollary, the judgment and order of the High Court in challenge is also set aside. The tender process in view of the above conclusion, would be furthered hereinafter as per the terms and conditions thereof and in accordance with law and taken to its logical end as expeditiously as possible. We make it clear that the present adjudication is confined only to the issue of disqualification of the appellant on the ground of experience on the touchstone of Clause 2.4 of the "Eligibility and Qualification Criteria" of the tender document and no other aspect." 31.3. In Reliance Airport Developers (P) Ltd.,(supra) the Hon'ble Supreme Court, in para-56, 62 and 63, the Hon'ble Supreme Court has held as under:
"56. One of the points that falls for determination is the scope for judicial interference in matters of administrative decisions. Administrative action is stated to be referable to broad area of Governmental activities in which the repositories of power may exercise every class of statutory function of executive, quasi- legislative and quasi-judicial nature. It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary (See State of U.P. and Ors. v. Renusagar Power Co. and Ors. (AIR 1988 SC 1737). At one time, the traditional view in England was that the executive was not answerable where its action was attributable to the exercise of prerogative power. Professor De Smith in his classical work Judicial 52 Review of Administrative Action 4th Edition at pages 285-287 states the legal position in his own terse language that the relevant principles formulated by the Courts may be broadly summarized as follows. The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it; it must not act under the dictates of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion, it must not do what it has been forbidden to do, nor must it do what it has not been authorized to do. It must act in good faith, must have regard to all relevant considerations and must not be influenced by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. These several principles can conveniently be grouped in two main categories: (i) failure to exercise a discretion, and (ii) excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account, and where an authority hands over its discretion to another body it acts ultra vires.
62. Therefore, to arrive at a decision on reasonablenessthe Court has to find out if the administrator has left out relevant factors or taken into account irrelevant factors. The decision of the administrator must have been within the four corners of the law, and not one which no sensible person could have reasonably arrived at, having regard to the above principles, and must have been a bona fide one. The decision could be one of many choices open to the authority but it was for that authority to decide upon the choice and not for the Court to substitute its view.
63. The principles of judicial review of administrative action were further summarized in 1985 by Lord Diplock in CCSU case as illegality, procedural impropriety and irrationality. He said more grounds could in future become available, including the doctrine of proportionality which was a principle followed by certain other members of the European Economic Community. Lord Diplock observed in that case as follows:
....Judicial review has I think, developed to a stage today when, without reiterating any analysis of the steps by which the development has come about, one can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground I would call illegality, the second irrationality and the third procedural impropriety. That is not to say that further development on a case-by-case basis may not in course of time add further grounds.53
I have in mind particularly the possible adoption in the future of the principle of proportionalitywhich is recognized in the administrative law of several of our fellow members of the European Economic Community."
31.4. The Hon'ble Supreme Court in the case of Reliance Energy Ltd. (supra), in para-36, has observed as under:
"36. We find merit in this civil appeal. Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of public power in a democracy. Article 14 of the Constitution embodies the principle of "non- discrimination". However, it is not a free- standing provision. It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution. The said Article 21 refers to "right to life". In includes "opportunity". In our view, as held in the latest judgment of the Constitution Bench of nine-Judges in the case of I.R. Coelho vs. State of T.N., Article 21/14 is the heart of the chapter on fundamental rights. It covers various aspects of life. "Level playing field" is an important concept while construing Article 19(1)(g) of the Constitution. It is this doctrine which is invoked by REL/HDEC in the present case. When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of "level playing field". We may clarify that this doctrine is, however, subject to public interest. In the world of globalization, competition is an important factor to be kept in mind. The doctrine of "level playing field" is an important doctrine which is embodied in Article 19(1)(g) of the Constitution. This is because the said doctrine provides space within which equally-placed competitors are allowed to bid so as to subserve the larger public interest. "Globalization", in essence, is liberalization of trade. Today India has dismantled licence-raj. The economic reforms introduced after 1992 have brought in the concept of "globalization". Decisions or acts which results in unequal and discriminatory treatment, would violate the doctrine of "level playing field" embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14 which refers to the principle of "equality" should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of "level playing field". According to Lord Goldsmith - commitment to "rule of law" is the heart of parliamentary democracy. One of the important elements of the "rule of law" is legal certainty. Article 14 applies to government policies and if the policy or act of the government, even in contractual matters, fails to satisfy the test of "reasonableness", then such an act or decision would be unconstitutional.54
31.5. The Hon'ble Supreme Court in the case of M/s. Ajar Enterprises (supra), in para-49, has observed as under:
"49 Undoubtedly, disposal of natural resources by auction is not a mandatory principle for, as the Constitution Bench held, individual statutes may provide for modalities of transfer by alternate modes which subserve public interest. In the present case, as we have noted, Rule 5 of the 1975 Rules provides four modalities: (i) direct negotiations; (ii) auction; (iii) inviting tenders; and (iv) concessional terms. Where the statute has provided for several modes of disposal, the choice among one of the available methods must facilitate the fulfilment of public interest. That inter alia requires consideration being given to all aspects of the matter including the nature and value of the land, the purpose of the allotment and the need for the authority to generate funds to facilitate the objects for which it was constituted, such as planned development. The choice of one of a range of permissible choices can never be based on the anvil of conferring an undeserved benefit on a commercial developer. The choice of methods is not left to the unbridled discretion of a public authority. Where a public authority exercises an executive prerogative, it must nonetheless act in a manner which would subserve public interest and facilitate the distribution of scarce natural resources in a manner that would achieve public good. Where a public authority implements a policy, which is backed by a constitutionally recognised social purpose intended to achieve the welfare of the community, the considerations which would govern would be different from those when it alienates natural resources for commercial exploitation. When a public body is actuated by a constitutional purpose embodied in the Directive Principles, the considerations which weigh with it in determining the mode of alienation should be such as would achieve the underlying object. In certain cases, the dominant consideration is not to maximize revenues but to achieve social good such as when the alienation is to provide affordable housing to members of the Scheduled Castes or Tribes or to implement housing schemes for Below the Poverty Line (BPL) families. In other cases where natural resources are alienated for commercial exploitation, a public authority cannot allow them to be dissipated at its unbridled discretion at the cost of public interest".
31.6. In Nokia India Sales Pvt. Ltd. (supra), the Madras High Court in para-38 and 39 has held as follows:
55
"38. What is important for us to note from Section 30 of the Central Act and Section 15 of the State Enactment is that both of them use the every same expression any goods removed from a SEZ to the DTA. Both of them also use the same expression shall be chargeable. Both Sections make the chargeability contingent upon the conditions specified in the Rules made by the respective Governments.
39. But, there is an essential difference between the field of operation of Section 30 of the Central Act and Section 15 of the State Act. For all practical purposes, a Special Economic Zone is treated as a territory out of India. Therefore, the moment goods are removed from a Special Economic Zone and they enter a Domestic Tariff Area, an import takes place. An importer becomes liable to pay duties of customs, anti-dumping, countervailing and safeguard duties, the moment the imported goods arrive into the territory of India. The chargeability to duties of customs, countervailing duty etc., does not depend upon the question as to whether the importer proposes to make use of the goods for his own consumption or for sale in India. Even in cases where the importer proposes to process those goods to make out of them yet another product so as to re- export them to the same or another country, the chargeability does not get removed. He would only be entitled, upon re-export, to duty drawback or credit, etc."
32. Mr. R.K. Rath, learned Senior counsel for the opposite party- NALCO has submitted that M/s. Vedanta Limited, the petitioner is the largest manufacturer and export of the aluminum like Hindalco and NALCO. There is competition between the petitioner No.1-M/s. Vedanta Limited and the opposite party-NALCO. The practice has been established by the opposite party right from 2005 in NALCO Marketing Guideline. 32.1. He has taken us to the averments made in the counter affidavit in paragraphs-2, 5, 6, 9, 23, 24, 28 and 39 which are reproduced hereunder:
"2. I say that I am conversant with the facts and circumstances of the present case on the basis of perusal of the records of the Opposite Party maintained in ordinary course of business, and as such competent to depose by way of this affidavit on behalf of the 56 Opposite Party No.1 I have read and understood the contents of the Writ Petition filed by the Petitioner, and emphatically deny all the averments, contentions, allegations and submissions raised therein, which are contrary to and/or inconsistent with what is stated and averred in the instant Counter Affidavit. Unless expressly admitted hereinafter, nothing in the Petition shall be deemed to have been admitted for reason of non-traversal or otherwise. The grounds/averments raised in the Counter Affidavit herein below are to be read in addition to and without prejudice to each other.
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5. At the very outset, I state and submit that the writ petition filed by the petitioner is wholly misconceived and untenable in law. In essence, the Petitioner is praying that the terms and conditions of the spot/term (periodical) contract tender for the sale of Metallurigal Grade Clacined Alumina be so read and understood so as to qualify the petitioner to submit hid bid; whereas the consistent case of the Opposite Party, as will appear hereafter has been that such sale is confined to Overseas customers only.
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6. The case set up by the petitioner and the relief claimed are not amenable to the judicial review in asmuch as it would amount to interfere with the purely commercial and marketing/sales policy of NALCO. It is not the case of the petitioner that it has been signled out for hostile discrimination whereas others like him are permitted to submit their bids for purchse of Calcined Alumina. It is also revealed from a reading of the writ Peititon that the petitioner has filed the instant petition at the present juncture, since its own mining and refinery faciliteisa re not able to supply the alumina that it may need for its smelter plant at Jharsuguda, and it unequivocally evinces that the Writ Petition has been filed only to cater to the busienss and vested requirements/interetrs of the petitioner and no public interest is involved in the matter. It is submitted here that a host of commercial considerations are invfolved in the policy decisions, which have been in force for past several years, whereby the opposie party sells Metallurical Grade Calcined Alumina in bulk quanityy to the 'oversead customers' and small quantity olf Metallurigal Grade Calcined Alumina and Alumina Hydrate by Truck Loads to the small enterprises/companies in the domestic market. The opposite party further respectfully says and submits that the issues raised are not justifiable and any intervention by the Court would result in a situation causing immense loss internationally recognized status and position of the Opposite party in the alumina market would be severely affect/compromised.
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9. In Balco Employees' Union vs. Union of India, (2002) 2 SCC 333, Hon'ble Supreme Court has held that unless a decision is contrary to any statutory provision or consideration, the court cannot interfere with it. It cannot examine relevant merits on different economic policies and cannot strike down a policy merely on the ground that another policy would have been fair and better.
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23. The contents of the para 7 are denied as false and misleading, except to the extent that NALCO is one of the largest producers of Alumina in India, with the Petitioner being the largest producer of Aluminium amongst the competitors. It is stated that for NALCO a part of the production of alumina is self utilized by NALCO and the balance is exported by way of a time-tested tender process to the overseas registered customers. It is submitted that the petitioner does not meet the eligibility criteria for participation in the tender process and NALCO has amply clarified to the petitioner that if it wishes to participate in the NALCO's export tender for purchase of alumina, it may do so with the registration of its holding company, M/s. Vedanta Resources PLC, London in the tender process it is also specified that the details of the registration, its eligibility criteria and documents required to be submitted for registration of M/s Vedanta Resources PLC, London are available on the website www.nalcoindia.com . It is trite that certain preconditions or qualifications for tenders have to be laid down to ensure that the customer has the capacity and the resources to successfully execute the sale order.
A tablular representation showing Comparison of Total Population, Domestic Sale and Exports of Aluminium of NALCO, HINDALCO, and VENDANTA is extracted (from the figures collected from market soruces and given for sharing of market trend for reference purpose) hereinafter for reference of this Hon'ble Court.
YEARS PARTICULARS NALCO HINDALCO VEDANTA
(approx. in
nature and
collected from
market
sources)
2017-18 PRODUCTION 425515 128851 1669741
(MT)
% of total 12.58 38.08 49.35
population of
Three
producers
DOMESTIC 350469 640617 671946
SALE (MT)
% of total sale 21.07 38.52 40.40
by three
producers
58
EXPORT SALE 75847 649986 998522
(MT)
% of total 4.40 37.69 57.91
export by
three
producers
YEARS PARTICULARS NALCO HINDALCO VEDANTA
(approx. in
nature and
collected from
market
sources)
2018-1 (Till PRODUCTION 367096 108852 1642685
JAN) (MT)
% of total 11.85 35.14 53.01
population of
Three
producers
DOMESTIC 331887 515737 490408
SALE (MT)
% of total sale 24.80 38.54 36.65
by three
producers
EXPORT SALE 30308 539452 1125700
(MT)
% of total 1.79 31.82 66.39
export by
three
producers
To produce 1 MT of Aluminium, 1.93 MT approximately of Alumina is required.
That from the aforesaid Table, it is clearly evinced that the petitioner is the largest producer of Aluminium, as also the largest exporter, with its exports to the overseas market amounting to nearly 60% of its total production of aluminum. Therefore, the submission of the petitioner that due to the non-availability of alumina in India on account of exports by NALCO to the overseas customers, domestic industry is suffering is totally baseless and misleading.59
24. The contents of para 8 are denied as false and misleading, except to teh extent they are a matter of record. The Petitioner is falsely imputing a palpably erroneous advice/statement to NALCO, is stark contrast to the advice tendered by NALCO to Vedanta NALCO has only advised Vedanta to register their holding company Vedanta Resources PLC, London with NALCO, but not to "take it to high seas and thereafter sell it to the Petitioner No.1". The contents of para 8 are misconceived and merits no response for they are based on a fallacious premise sought to be advanced by the petitioner to prejudice this Hon'ble Court and halt the tender process floated by NALCO.
It is submitted that through the impugned tender process, NALCO is earning valuable foreign exchange every year. It may be stated that NALCO is a major forex to the tune of Rs.3047 crores from the export alumina. Further, it is settled law that the employer should be allowed to carry out the purpose and there has to be allowance of free play in the joints. The Petitioner has stated in its Petition that there is two-way export-import market. Like other commodities, alumina is exported as well as imported. This depends on the relative market conditions abroeda and in India and other factors, such as export incentivizes, foreign exchange fluctuations, etc. NALCO is exporting through competitive international building. If petitioner is offering higher price than the price NALCO is getting through international auction, it can as well find alumina in the international market at cheaper price.
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28. The contents of para-12, 13 and 14 are admitted to the extent that they are borne out of the record. It is submitted that NALCO has a transparent and time-tested policy for registration of its overseas customers/companies and floating tenders for exporting alumina to these registered customers alone. It is only the overseas prospective buyers/companies with sound financial credentials and experience who are eligible for such registration the impugned marketing policy and guidelines are in prevalence since 30.07.2005, and wee approved in teh 196th Board Meeting of NALCO held on 22.07.2005. In view of such transparent and fime- tested mechanism which is widely appreciated in world alumina market have registered themselves with NALCO. At present, around 34 overseas customers are registered customers for alumina tender. Due to NALCO's marketing policy, NALCO has been able to generate good competition among the buyers and on account of the turnover and profitability in alumina, this segment has been doing excellent for the Company., It is apprehended that by changing the marketing policy to include SEZ/domestic buyers are also allowed to participate.
In such cases, the market and the brand which NALCO has earned over more than 55 years in international alumina market may get completely jeoparadized and may adversely affect the 60 performance of the profitable Navratna PSU-NALCO in times to come. This will neither be in the interest of NALCO nor the country. Further, it is submitted that relaxation or waiver of the eligibility criteria in favour of one bidder-the Petitioner would create justifiable doubts in the minds of other bidders would impair the rule of transparency and fairness and provided room for manipulation to suit the whims of the petitioner, who is in fact a business competitors of the opposite party-NALCO.
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39. Incidentally, it may be stated that Metallurgical Grade Calcine Alumina as per the policy in vogue is sole domestically to traders/MSME Units, whose need does not exceed a few truckloads in a year. It may also be stated that the total sale, thus effected domestically, constitutes hardly 1% of sales to foreign buyers as details given above. A true copy of the Marketing Guidelines dated 30.07.2005 as approved in the 196th Board Meetign of NALCO held on 22.07.2005 is annexed herewith and marked as ANNEXURE-C. It is stated at Preamble to Chapter-04 of the said Marketing Guidelines dealing with 'Domestic Sale of Alumina Hydrate, Calina Alumina' that, "Small quantity of Alimina Hydrate & Calcined Alumina is being sold in the domestic market on Ex-works basis from out Alumina refinery at Damanjodi depending on indigenous requirements & market scenario. The present logistics for sale of Calcined Alumina & Alumina Hydrate in domestic market is capable of handling few truck loads of daily dispatch. Hence, a large scale of Calcined Alumina for metallurgical grade application are not being done". It may not be out of place to mention that the Petitioner is fully award of the Opposite Party's domestic sales, and in the year 2013, the Petitioner placed an order for purchase of alumina from the Opposite Party , which could not be executed as the terms and conditions of the said transaction were not acceptable to the Petitioner."
33. In that view of the matter, learned counsel for the opposite party contended that the policy has been prevailing for the last 14 years and in 2012 also the petitioner has been denied registration for purchase of Calcina Alumina as it is not an 'Overseas' purchaser.
34. Mr. Rath, learned Senior counsel for the opposite parties has further submitted that it has been clearly indicated in the counter affidavit, 61 specifically under para 28 of the counter, that the impugned market policy and guidelines are in force since 30.07.2005. Being approved in the 196th Board Meeting of NALCO held on 22.07.2005, such a time tested transparent mechanism has been brought into force, by which a large number of overseas companies, who are major players in the world alumina market, around 34 in number, have registered themselves as customers for aliumina tender. Due to such marketing policy, which is based on commercial considerations, NALCO has been able to generate good competition amongst the overseas buyers, for which NALCO is earning in foreign exchange (huge amount) for the country. NALCO has earned Rs.3047 Crores Forex earning in the F.Y. 2017-18, Rs.2442.98 Cr. in F.Y. 2016-17, Rs.2198.50 Cr. in F.Y. 2015-16 and since last several years NALCO is one of major Forex earning entity in India, if petitioner will be allowed to participate in bid and they become successful bidder, India will lose substantial Forex earning through NALCO as the NALCO is earning Forex from actual overseas customers (not from SEZ entities who will spend from their Forex reserves), available in their Account in India.
34.1. Upon economic and financial consideration and taking into account business factors, such a policy decision has been taken. In view of the aforesaid export, NALCO has achieved Four Star Export House status. If Nalco starts selling within the geographical territory of India, it would not 62 only lose the overseas customers but also the said Four Star Export House status would be lowered.
34.2. For the purpose of sale to the overseas customers, NALCO has created shipping facility, i.e., port facility at Vizag Port by spending several hundred crores. The facilities set up are primarily for the purpose of export of alumina. Nalco has also created the export facility by way of 18 rake of railways (i.e., 900 wagons approximately) for transporting alumina from Damanjodi to Vizag port. If these facilities are not used and get disrupted, huge loss will be sustained by Nalco.
34.3. At Page 13 of the counter, it has been clearly indicated that Vedanta and Hindalco are competitors of NALCO and NALCO is the smallest player in the field. Vedanta in both domestic as well as export market is the biggest player.
34.4. If the parties within India are allowed to compete, overseas customer would back out, as transport cost alone would be a huge difference. Overseas customer have to bear cost of shipping, port charge, loading/unloading cost, whereas petitioner would transport through rail being within the State. Time tested well run mechanism would collapse which will affect the State revenue (See para-12 of SUR-REJOINDER for dividend paid to State), which reads as under:
63
"12. It is submitted that NALCO one of the large profit making PSU of the Government of India and large amount of the profit earns from Export of Alumina to overseas customers and earning 'FOREX' to the Nation since three decades. Further, NALCO has paid dividend of Rs.368.83 Cr. in F.Y. 2015-16, Rs.950.56 Cr. in F.Y. 2016-17 & Rs.656.32 Cr. in F.Y. 2017-18 respectively to the Government of India, which shows that NALCO is continuously doing well and paying substantial amount of divided to the Government exchequer."
34.5. If overseas players because of change in policy back out, the loss that will be suffered in terms of foreign currency cannot be compensated by Vedanta. Rs.3047 crore worth foreign exchange earned by Nalco, if comes down or is reduced, such a loss will be a loss to the country also, and Vedanta will not compensate the said loss to Nalco. If the overseas business would come down, the port facility at Vizag port will be idle and thereby several cores of investment will be lost. The railway facility, i.e., 18 number of rakes (900 wagons) with the employees will be idle and the investment will also be completely lost.
34.6. Once the foreign market would come down because of one party i.e. Vedanta, they (Vedanta) will rule the field. Once foreign traders back out, Vedanta may not even submit bid or submit bid at rate which suits them. In the process, the time tested overseas trade that NALCO has developed in last 14 years would collapse completely.
34.7. The petitioner has admitted in the writ petition at para-6 that the requirement is met mainly from foreign countries like Australia, Indonesia, Vietnama and China. Now it says that it is willing to spend and pay more than 64 the overseas players to NALCO. Then in that case, it can also import by spending that money from foreign market, as it has been doing for several years.
34.8. The petitioner-Vedanta being ultimately a competitor is not authorized/competent to determine the business policy of NALCO. The competitor cannot decide what is good for NALCO. The sole purpose of Vedanta is to ruin the business of NALCO and finally to monopolise the business in their own favour. In this process, the entire business of the PSU NALCO will go down for the following reasons:
(a) Canalization of business in favour of a class of persons for economic and financial reasons is not bad in law.
(b) Award of contract by a private party or by a State is essentially a commercial transaction. It can choose its own methods to arrive at a decision. It is essentially a commercial transaction and in arriving at a commercial decision, considerations which are of paramount importance are commercial considerations.
(c) Wisdom and advisability of economic policies are not amenable to judicial review, unless it is demonstrated that the policy is contrary to statute or constitution.
(d) SEZ territory is not a territory outside India - it is only a territory outside custom territory of India.
(e) Tender condition not open to judicial review.
(f) Delay : The petitioner has ultimately admitted in the writ petition with supporting documents at page-40 and 41 that since 2012 NALCO had rejected the demand made by the petitioner. There 65 is no reason and basis to keep quiet for seven years and as such on that ground alone the writ petition is liable to be dismissed.
(g) It has been clearly pointed out in the counter affidavit that the writ petition is not maintainable it has not been shown how Avijit Pati, Chief Executive Officer of petitioner is competent to file the writ petition. No authorization or decision of the Board of Directors authorizing him to file the case has been filed nor stated in the writ application An individual shareholder is not competent to maintain the writ application.
(h) The petitioner-Vedanta who is a competitor of NALCO in the aluminium market, wants to monopolies the business and that is why the aim and object is to ruin the business of opposite party-
NALCO in overseas sector and thereafter control the business either by submitting the tender according to its own rate or by not filing the tender at all.
35. In support of his submission, Mr. Rath, learned Senior Counsel for the opposite party has relied upon the following decisions:
(i) Krishnan Kakkanth vs. Government of Kerala and others, reported in AIR 1997 SC 128 [Para-2, 24, 25, 26, 27, 30 & 34]
(ii) AIR India Ltd. vs. Cochin International Airport Ltd and others, reported in (2002) 2 SCC 617 (Para-7)
(iii) Montecarlo Limited vs. National Thermal Power Corporation Ltd., reported in (2016) 15 SCC 272 (Para-21 to 25).
(iv) Essar Steel Ltd. vs. Union of India (UOI) decided on 04.11.2009 by the Gujurat High Court in Special Civil Appeal Nos.9656 of 2008 and batch of cases, [Paras-37.4] 66
(v) Tirupatiudyog Ltd. vs. Union of India decided on July 30, 2010 by the Andhra Pradesh High Court in Writ Petition Nos.16932 of 2009 [Para-25 & 26] 35.1. In Krishnan Kakkanth (supra), the Hon'ble Supreme Court in paras-2, 24, 25, 26, 27 , 30 & 34, has held observed as under:
"2. Heard learned counsel for the parties. The constitutional validity of the circular dated 19.5.1995 issued by the Secretary to the Government of Kerala directing that for distribution of pumpsets under comprehensive coconut Development Programme and other similar schemes of the Agriculture Department and in order to streamline the implementation of the schemes specifying specific roles and responsibilities for different agencies involved, M/S Kerala Agro Industries Corporation (KAICO and Regional Agro Industries Corporation (RAIDCO) would arrange supply of pump[sets in the districts of Kesarkoda, Kanner, vyanad, Koznikoda, Malappuram, Palekkao, Trissur and Kottayam and in the remaining districts, supply will be effected by private dealers along with KAICO and RAIDCO, since challenged by the appellants in O.P. No. 16115 of 1995, but upheld by the impugned judgment on the High Court dated February, 1996 is in question in this appeal, Such writ petition was disposed by a common judgment along with other writ petitions being O.A. Nos, 13936 and 14454 of 1995, In the said other writ petitions, the constitutional validity of the circular dated 30.3.1989 issued by the Registrar of Co-operative Societies inter alia directing that all the Land Development Banks, District Co-operative Banks and Service Co-operative Banks in the State of Kerala would patronise RAIDCO to the fullest extent in preference to private dealers in the matter of purchase of Agro Machine under the scheme financed by the Bank/Societies and at in any rate not less than 75% of total requirement of such Agro Machines should be purchased through RAIDCO, was challenged. The High Court has also upheld the validity of such circular by the impugned judgment.
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24. After giving our careful consideration to the facts and circumstances of the case and submissions made by the learned counsel for the parties, it appears to us that the fundamental right for trading activities of the dealers in pump sets in the State of Kerala as guaranteed under Article 19(1) (g) of the Constitution has not been infringed by the impugned circular. Fundamental rights guaranteed under Article 19 of the Constitution are not absolute but the same are subject to reasonable restrictions to be imposed against enjoyment of such rights. Such reasonable restriction seeks to strike a balance between the freedom guaranteed by any of the 67 clauses under Article 19(1) and the social control permitted by the clauses (2) to (6) under Article 19.
25. The reasonableness of restriction is to be determined in an objective manner and from the standpoint of the interests of general public and not from the standpoint of the interests of the persons upon whom the restriction are imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly and even if the persons affected be petty traders (AIR 1958 SC 73- Hanif Versus State of Bihar). In determining the infringement of the right guaranteed under Article 19(1), the nature of right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, enter into judicial verdict (AIR 1981 SC 673 Laxmi ) versus State of U.P.; AIR 1968 SC 1323 Treveli Versus State of Gujarat and Herekchand vs. Union of India. India. AIR 1970 SC 1453).
26. Under Clause (1) (g) of Article 19, every citizen has a freedom and right to choose his own employment or take up any trade or calling subject only to the limits as my be imposed by the State in the interests of public welfare and the other grounds mentioned in clause (6) of Article 19. But it may be emphasised that the Constitution does not recognise franchise or rights to business which are dependent on grants by the State or business affected by public interest Saghir vs. State of U.P. 1955 (1) SCR 707).
27. It may be indicated that where a right is conferred on a particular individual or group of individuals to the exclusion of others, the reasonableness of restrictions has to be determined with reference to the circumstances relating to the trade or business in question. Canalisation of a particular business in favour of specified individual has been held reasonable by this Court where vital interests of the community are concerned or when the business affects the economy of the country (P.T.C.S Vs. R.T.A. AIR 1960 SC 801: Meenakshi Mills Vs. Union of India, AIR 1979 SC 366 and Lala Harichand Seroa Vs. Mizo District Council and Anr, 1967(1) SCR 1012).
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30. It may be indicated that although a citizen has a fundamental right to carry on a trade or business, he has no fundamental right to insist upon the Government or any other individual for doing business with him. Any government or an individual has got a right to enter into contract with a particular person or to determine person or person with whom he or it will deal.
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34. To ascertain unreasonableness and arbitrariness in the context of Article 14 of the Constitution, it is not necessary to enter upon any exercise for finding out the wisdom in the policy decision of the State Government. It is immaterial if a better or more comprehensive policy decision could have been taken. It is equally immaterial if it can be demonstrated that the policy decision is unwise and is likely to defeat the purpose for which such decision has been taken. Unless the policy decision is demonstrably capricious or arbitrary and not informed by any reason whatsoever or it suffers from the vice of discrimination or infringes any statute or provisions of the Constitution, the policy decision can not be struck down. It should be borne in mind that except for the limited purpose of testing a public policy in the context of illegality and unconstitutionality, court should avoid " embarking on uncharted ocean of public policy."
35.2. In AIR India Ltd.(supra), the Hon'ble Supreme Court in para-7 has observed as under:
"7. The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government has been settled by the decision of this Court in R.D. Shetty v. International Airport Authority, 1979 (3) SCC 488; Fertilizer Corporation Kamgar Union v. Union of India, ; Asstt. Collector, Central Excise v. Dunlop India Ltd, , Tata Cellular v. Union of India, ;. Ramniklal N. Bhutta v. State of Maharashtra, and Raunaq International Ltd. v. I.V.R. Construction Ltd., . The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are of paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision making process the Court must exercise its discretionary power under Article 226 with great caution 69 and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should intervene."
35.3. In Montecarlo Limited (supra), the Hon'ble Supreme Court in paras-21 to 25 has held as under:
"21. In Jagdish Mandal v. State of Orissa and Ors ".......a contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out."
22. In Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd and Anr[5], it has been ruled that the State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It has been further held that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the court must exercise its discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point.
23. In B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. and Ors.[6] a two-Judge Bench, after referring to series of judgments has culled out certain principles which include the one that where a decision has been taken purely on public interest, the court ordinarily should apply judicial restraint.
24. In Michigan Rubber (India) Ltd. (supra) the Court referred to the earlier judgments and opined that before a court interferes in tender or contractual matters, in exercise of power of judicial review should pose to itself the question whether the process adopted or decision made by the authority is mala fide or intended to favour someone or whether the process adopted or decision made is so arbitrary and irrational that the judicial conscience cannot countenance. Emphasis was laid on the test, that is, whether award of contract is against public interest.
70
25. Recently in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd.[7] a two-Judge Bench eloquently exposited the test which is to the following effect:-
"We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given."
35.4. In Essar Steel Ltd. (supra), the Gujurat High Court has observed, in paragraphs 2, 3, 10, 12, 34, 35, 35.1, 35.2, 35.3, 35.4, 36, 36.1, 36.2, 37.1 and 37.4, as under:
"2. Special Civil Application Nos. 9656 & 9713 of 2008 are filed by Domestic Tariff Area Units and goods are cleared to SEZ units under LUT/Bond and/ or rebate.
3. Special Civil Application Nos. 11032 & 9806 of 2008 are filed by SEZ Developers and remaining 8 petitions are filed by SEZ Units. The Domestic Tariff Area Suppliers followed the procedure of LUT/Bond while clearing the goods to SEZ Units.
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10. The brief facts giving rise to the present group of petitions are as under :
The petitioner has been supplying the required quantities of Iron Ore Pellets to the SEZ Unit by following the procedure for the same under Rule 30 of the SEZ Rules, from time to time under cover of ARE-1 's and by following the procedure in Notification No. 42/2001-CE, dated 26-6-2001. The petitioner filed the Bills of Export with the Authorized Officer of the SEZ being the respondent No. 4, who after assessment of the same permitted the goods into the zone. By virtue of Section 114(n) read with the 3rd Schedule to the Finance Act, 2007, Heading No. 11 of the Second Schedule - Export Tariff to the Customs Tariff Act, 1975 was substituted with effect from 1-3-2007 so as to read 'Iron ores and concentrates, all sorts' in place of 'Iron ores, all sorts' and the same were subject to export duty at the rate of Rs. 300 per ton. After the Entry No. 11 in the Second Schedule to the Customs Tariff Act, 1975 was amended with effect from 1-3-2007, the ARE-l's 71 Bills of Export for supply of Iron Ore Pellets by the petitioner to the SEZ unit continued to be assessed and the subject goods were permitted for acceptance by the SEZ unit without any demand for export duty. The petitioners addressed a letter dated 12-3-2007 to the Director in the SEZ Section of Ministry of Commerce requesting for clarification/confirmation for the effect that no export duty will be leviable on sale of iron ore/iron ore pellets to SEZ Units in view of Rule 27 of the SEZ Rules, 2006. The Superintendent of Central Excise, Range-I, Surat-I Commissionerate had also sought clarification from the petitioners vide his letter dated 24-10-2007 regarding levy of export duty on iron ore pellets. The petitioners' Hazira Unit had, vide its letter dated 25-10-2007 clarified the matter by pointing out that no export duty was leviable on supplies of pellets to the SEZ Unit, particularly in view of Rule 21 of the SEZ Rules, 2006, it was also clarified that the provisions of Section 12 of the Customs Act, 1962 were inapplicable for the purpose of levying export duty for the aforesaid movement of goods, as such movement could not be considered as that of 'goods exported from India' for the purpose of Section 12. The petitioners submitted that at the relevant time, the authorities were satisfied with the explanation given, as is evident from the fact that the Bills of Export filed for supply of pellets to the SEZ Unit continued to be assessed without levy of any export duty....................
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12. This Court vide its detailed order dated 25-7-2008 admitted the petitions and granted ad interim relief in terms of paragraph 28C(n) whereby the operation and implementation of letters dated 30-6-2008 of the respondent No. 2, letter dated 8-7-2008 of the respondent No. 3 and letter dated 9-7-2008 were suspended and arrangement regarding supply of goods to the SEZ unit as contained in the letter dated 1-2-2008 was ordered to be continued. This ad interim relief was continued with certain modifications. Even in Special Civil Application Nos. 10444 of 2008,10445 of 2008 and 10446 of 2008, the Court has passed separate order on 14-8-2008 and granted ad interim relief despite the fact that it was urged on behalf of the revenue that there are certain distinguishing features in all these three petitions. The Excise Department has challenged the said order before the Apex Court. Even the earlier order dated 25-7-2008 passed by this Court was challenged before the Apex Court and the Apex Court vide its order dated 9-4-2009 dismissed the Special Leave Petition by observing that the said SLP is against an interim order and hence, there is no reason to interfere. However, this Court was requested by the Apex Court to take up the matter for final hearing as the matter is of an important nature. The Apex Court further observed that the views expressed by the High Court in the impugned order are to be treated as tentative views.
It is in the above background of the matter, the entire group was taken up for final hearing.
72
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34. Having heard the learned Counsels appearing for the parties and having gone through their rival submissions as well as pleadings in light of the statutory provisions and decided case law on the subjects, we are of the view that the moot question for our consideration is as to whether the levy of export duty on goods supplied from the Domestic Tariff Area to the Special Economic Zone is justified under law. Dealing with this question, three important aspects are to be borne in mind :
Whether export duty can beimposed under the provisions of the Customs Act, 1962?
Whether Export Duty can be levied under the provisions of the Special Economic Zones Act, 2005?
Whether export duty can be imposed under the Customs Act, 1962 by incorporating the definition of the term 'Export' under the SEZ Act, 2005 into the Customs Act, 1962?
35. These three questions are to be dealt with hereunder:
1. Whether such duty can be imposed under the provisions of the Customs Act, 1962?
35.1 Export Duty is a duty of customs leviable under the Customs Act, 1962 on goods exported from India, under Section 12 read with Section 51 of the said Act and Section 2 read with Second Schedule of the Customs Tariff Act, 1975. Such duty is a condition precedent to sending goods out of the country to other lands. Export Duty is an impost with reference to the movement of property by way of export, particularly with a view to regulating trade and commerce with foreign country insofar as such matters are within the competence of the Parliament. Reference is made to the decision of the Apex Court in the case of Sea Customs Act, 1878 AIR 1963 SC 1760.
35.2 The various terms used in Section 12 of the said Act, which is the charging section for the purpose of levy of duty, have been defined under the said Act itself, Section 2(18) defines export to mean taking out of India to a place outside India; Section 2(19) defines export goods as goods which are to be taken out of India to a place outside India; Section 2(27) defines India as including the territorial waters of India. Therefore, the taxable event contemplated under the Customs Act, 1962 for the purpose of levy of Export Duty is taking the goods out of the territorial waters of India to a place outside India, in which case the goods would be dutiable goods as contemplated under Section 12 of the said Act and attract levy of export duty, to be paid at the time of exportation of such goods.
Export under the Customs Act, 1962, therefore, can be said to have taken place only upon movement of the goods outside the territorial 73 waters of India. Reference is made to the decision of the Apex Court in the case of Rajindra Dyeing & Printing Milk Ltd. (supra). 35.3 In the absence of any amendment of the definitions of the terms 'Export' and 'India' in the Customs Act, 1962, or any amendment in the charging section, i.e., Section 12 or insertion of a charging provision contemplating movement of goods from the Domestic Tariff Area to the Special Economic Zone as a taxable event entailing a levy of Export Duty as in the case of export, the levy of Export Duty cannot be justified under the provisions of the Customs Act, 1962.
35.4 The very fact that such a charging provision, i.e., Section 76F had to be introduced by inserting Chapter X-A in the Customs Act, 1962 containing Sections 76A to 76N being Special Provision Relating to Special Economic Zone, clearly indicates that in the absence of the newly added provision, the said movement of goods was not a taxable event attracting levy of Export Duty under the provisions of the said Act. The entire Chapter has been omitted by the Finance Act, 2007 with effect from 11-5-2007 and, therefore, the aforesaid movement of goods is no longer a taxable event under the said Act.
36. Whether Export Duty can be levied under the provisions of the Special Economic Zones Act, 2005?
36.1 The Department has demanded Export Duty on the subject goods by invoking the provisions of Section 12 of the Customs Act, 1962 read with Section 2 and Second Schedule-Export Tariff (Heading No. 11) of the Customs Tariff Act, 1975 and for the purpose of considering the effective rate of duty, has taken into account Notifications issued under Section 25 of the Customs Act, 1962. Therefore even as per the Department, the levy and the procedure adopted for recovery thereof is under the Customs Act, 1962 and the aforesaid issue does not arise for consideration on the stand of the Department itself.
36.2 The provisions of the SEZ Act do not envisage the movement of goods from the Domestic Tariff Area to the Special Economic Zone to be a taxable event as the said provisions do not contain any charging provision providing for the levy and imposition of Export Duty, and the said Act does not contain any provisions for recovery of such duty. In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the revenue establishes that the case falls strictly within the provisions of the law, the subject can be taxed and if on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or analogy or by trying the probe into the intention of the Legislature and by considering what was the substance of the matter. Reference is made to the decision of the Apex Court in the case of E.V. Fernandez (supra) 74 xx xx xx 37.1 The term 'export' having been defined in the Customs Act, 1962, for the purposes of that Act, there is no question of adopting or applying the meaning of the said term under another enactment for any purpose of levying duty under the Customs Act, 1962. In other words, a definition given under an Act cannot be displaced by a definition of the same term given in another enactment, more so, when the provisions of the first Act are being invoked. Even in the absence of a definition of the term in the subject statute, a definition contained in another statute cannot be adopted since a word may mean different things depending on the setting and context. Reference is invited to the decisions of the Apex Court in the case of Ellis Bridge Gymkhana (supra), Venkateswara Hatcheries (P.) Ltd.'s case (supra) and Qazi Noorul H.H.H. Petrol Pump s case (supra). In fact, the interpretation canvassed by the department is not merely the adoption of a definition of another statute, but the incorporation of a taxable event itself, which is impermissible under the law.
xx xx xx 37.4 Similarly, reliance on Section 53 of the SEZ Act, 2005 to contend that a Special Economic Zone is a territory outside India, is misconceived. Section 53 provides that the Zone would be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The term 'customs territory' cannot be equated to the territory of India and in fact, such term has been defined in the General Agreement of Tariffs & Trade, to which India is a signatory, to mean an area subject to common tariff and regulations of commerce and that there could be more than one customs territory in a country. Moreover such an interpretation would lead to a situation where a Special Economic Zone would not be subject to any laws whatsoever. The entire SEZ Act, 2005 would be rendered redundant since it is stated to extend the whole of India. In any case, various provisions of the SEZ Act would be rendered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible."
35.5. In Tirupatiudyog Ltd. (supra), the Andhra Pradesh High Court in paras-25 and 26 has held has under:
"25. Under Section 53(1) of the SEZ At a Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purpose of undertaking authorized operations. Section 53(1) of the SEZ Act creates a legal 75 fiction but the legal fiction but the legal fiction is limited in its scope. In interpreting a provision creating a legal fiction the Court is to ascertain for what purpose the fiction is created, and after ascertaining this, the court is to assume all those facts ad consequences which are incidental or inevitable corollaries to the giving effect to the fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created, or beyond the language of the Section by which it is created. It cannot also be extended by importing another fiction. [Mancheri Puthusseri Ahmed v. Kuthiravattam Estte Rceiver-(1996) 6 SCC 185; CJT v. Shakuntala- AIR 1966 SC 719; CJT v. Moon Mills Ltd.-AIR 1966 SC 870; State of West Bengal v. Sadan K. Bormal-2004 (5) Supreme 29]. The scope of a fiscal provision cannot be enlarged by creating a fiction.[Wilayatullah v. C.S. Sub-Committee-AIR 1950 Nagpur223]. A legal fiction must be limited to the purpose for which it has been created and cannot be extended beyond its legitimate field. [The Modi Sugar Mills Ltd.-(1961) 2 SCR 189]. It is only for the limited purpose of undertaking authorized operations, i.e., operations which the Central Gov ernment may authorize to be undertaken by a developer in a Special Economic Zone, is the Special Economic Zone to be deemed as a territory outside the customs territory of India and not for the purpose of levy of customs duty.
26. The term "customs territory", as referred to in Section 53(1) of the SEZ Act, cannot be equated to the territory of India. This term has been defined in the General Agreement of Tariffs & Trade, to which India is a signatory, to mean an area subject to common tariff and regulations of commerce; and there could be more than one customs territory in a country. The contention that Section 53(1) requires an SEZ to be deemed to be a territory outside India, if accepted, would lead to a situation where a Special Economic Zone would not be subject to any Indian laws. The entire SEZ Act, 2005 would be rendered redundant since it is stated to extend to the whole of India. In any case, various provisions of the SEZ Act would be rendered redundant and unworkable if the Special Economic Zone was to be considered an area outside India. This is apart from the fact that such a declaration would be constitutionally impermissible. [Essar Steel Limited-2010 (249) E.L.T. 3(Guj.)].
36. In view of the above, learned Senior counsel for the opposite party contended that the petitioners are not entitled to any relief, otherwise the foreign currency benefit which has been earned by the opposite party will go.
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37. Mr. Rath, learned Senior counsel for the opposite party has further contended that the Bauxite is a basic mineral/material. The mining refinery and other activities are carried out by the petitioners. There are 34 overseas customers and the petitioners started its production from 2009. Mr Rath has taken us to paras 2 and 6 of the writ petition which read as under:
"2. That the petitioner No.1, Vedanta Limited (hereinafter referred as "Petitioner") is a company incorporated under the Companies Act, 1956, having its registered office at 1st Floor, 'C' Wing, Unit 103, Corporate Avenue, Atul Projects, Chakala, Andheri (East), Mumbai 400093, Maharashtra, India and Site Office at Burkhamunda, P.O. Kalimandir, Jharsuguda, Odisha-758202. The company got initially incorporated on 20th January, 2004 in the name and style of Vedanta Alumina Ltd and subsequently become Vedanta Ltd. following necessary process. The petitioner is engaged in the business of manufacturing and selling of Aluminum products. The company is having 1.6 Million Tonnes Per Annum (MTPA) Aluminum Smelter Plant which includes a Special Economic Zone (SEZ) unit having an Aluminum Smelter Plant with a capacity of 1.25 MTPA at Bhurkamunda, P.O. Siripura, Dist-Jharsuguda, Odisha. The petitioner No.1 has also set up a 1215 MW Captive Power Generating Plant and a 2400 MW Thermal Power Plant within the said premises to supply continuous and uninterrupted power to its aluminium smelter units. In addition to the foregoing business unit, the petitioner also operates a 2 MTPA green field alumina refinery and an associated 75 MW captive power plant at Lanjigarh, Odisha.
xx xx xx
6. The non-availability of Alumina has adversely impacted the operations of the Aluminium Smelters at Jharsuguda. The requirement of Alumina for Aluminium Smelter (with a capacity of 5 lac tonnes per annum) is met by imports from countries like Australia, Indonesia, Vietnama and China. The SEZ Aluminium Smelter of the petitioner No.1 (with a capacity of 12.5 lac tonnes per anum) is operating on a reduced capacity and has been unable to achieve maximum optimization due to the non-availability of Alumina."77
37.1. It is further contended that taking into consideration the business and commercial views, if the petitioner is allowed to participate in the tender, it will create unhealthy competition and destabilize the economic stability of NALCO and the staff are required to be relieved. He further contended that the investment which is made for the purpose of the port and railway line will vanish.
38. We have heard learned counsel for both the sides.
39. Learned counsel for the petitioners had taken us to the affidavit which are filed pursuant to the very contract, therefore, additional affidavit was filed only with a view to put the correct facts on record. He had contended that the opposite party itself has allowed the holding company to be registered with them. The competition is at the International level and price which prevail in the market cannot be controlled by the individual. The petitioners will take delivery of goods from the site that they can save a huge amount on transportation from their site to the port and can use huge human resources and natural resources for other purposes of the country. The opposite party will earn only in foreign exchange, therefore, the apprehension of the opposite party is misconceived. The policy is of 30th July, 2005 whereas the Act, 2005 came into force in February, 2006.
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40. The decision in Essar Steel Ltd. (supra) rendered by Gujarat High Court is to be read with respect to para-2, 3, 10 and 12 which will not apply in the facts of the present case and review against said judgment is pending before the Hon'ble Supreme Court. It has only persuasive value on the facts of the case. Moreover, the decision Tirupatiudyog Ltd. (supra) rendered by the Andhra Pradesh High Court is solely based on Essar Steel Ltd. (supra). Therefore, dismissal of SLP by the Hon'ble Supreme Court is not confirmation of the judgment.
40.1. Mr. Raval, learned Sr. Counsel for the petitioners has strongly relied upon the decision of the Madras High Court in the case of Nokia India Sales Pvt. Ltd. reported in (2016) 56 GST 229 (Madras), more particularly in paragraph-38 thereof, which has already been quoted hereinabove (in para 31.5 of this judgment). He has further contended that it will earn foreign exchange to the huge extent. Then he has taken us to the notification dated 13th December, 2016 under Annexure-13 issued by the Ministry of Finance (Department of Revenue) regarding "Safeguard Investigation concerning Imports of "Unwrought Aluminium (Aluminum not alloyed and Aluminium alloys") into India.
40.2. Learned counsel for the petitioners has also strongly relied upon the decision of the Hon'ble Supreme Court in the case of M/s. Ajar 79 Enterprises (supra), para-49 whereof has already been quoted hereinabove (in para-31.4 of this judgment).
41. The main contention of the petitioners is that the petitioner No.1-company being an SEZ Unit, is an overseas company for all commercial purposes and when the tender is considered, the Court has to consider the commercial implications and the purpose of foreign exchange is achieved by the act of the petitioners.
42. Learned counsel for the opposite party has mainly contended that in view of the decision of Gujarat High Court in Essar Steel Ltd. referred to above, which has been followed by Andhra Pradesh High Court. In view of para 37 of the judgment of Gujarat High Court, an SLP against Andhra Pradesh High Court has been dismissed. In that view of the matter, the law is final. However, learned counsel for the petitioners has brought on record that the review against the decision rendered by Gujarat High Court is pending and summary dismissal of the SLP is not law declared by the Supreme Court.
43. Apart from the decision of Gujarat High Court, learned counsel for the petitioners has pointed out distinction that it was for the domestic industry giving the goods to the SEZ Unit point was considered. Now the contention which is raised before us is not the subject matter of consideration by the Gujarat High Court.
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44. The other contentions of the opposite party is that the policy is of 2005 and the petitioner is holding chunk of the international as well as the local market compared to the petitioners and if the petitioner No.1 is allowed to participate, the foreign buyer will not participate and the opposite party has to dance at the tune of the petitioners. It is a government corporation and it has taken decision in 2005 which has been consistently followed for almost 14 years. In that view of the matter, the petitioners should not be allowed to participate in the tender.
45. Apart from that more profit of Rs.102 crores could have been secured, if the offer of the petitioners would have been accepted and NALCO would have earned in foreign exchange. Aluminium being an international importance, no individual can keep control over the price. The apprehension put forward by the opposite party is misconceived and only with a view to see that the petitioners do not get alumina from NALCO. The Marketing Policy of NALCO is prior to the creation of the Act, 2005 or existence of Act, 2005 and prior to existence of the petitioners. He has also contended that it is a legal malice only with a view to deprive the petitioners from getting the legitimate right for goods which is available at a distance.
46. We have carefully considered the meaning of "Overseas" as defined in the Cambridge Dictionary, which reads as under:
"Overseas" dictionary meaning:81
Overseas - across, beyond, or from beyond the sea. Oversea(s) adv. - in or to lands beyond the sea : abroad. Overseas (n)- foreign lands"
47. The point which requires for consideration is the tender conditions which have been imposed by the opposite party company-NALCO regarding company which are "Overseas" can only participate, though the petitioner No.1-Vedanta was established under the SEZ zone under the statute. A conjoint reading of all sections will come to a finding that it is not an Indian Company. They cannot deal with any local company and they cannot dispose of any material or goods within the country nor they can deal in Indian currency. Therefore, the very purpose of the Act is to create a company to compete with the international market and to earn foreign exchange.
47.1. If the contention which has been raised by the petitioners is not accepted, they have to import the raw material i.e. Calcina through import Alumina and in that process spend huge amount of ship fare which will add cost to the company in question, whereas if it is allowed to purchase from NALCO, then the Indian raw material can be used within India and will serve the purpose of new policy of the Central Government i.e. "Make in India". Merely because some resolution is passed by the opposite party-NALCO in 2005 and it has not been challenged for 15 years, it is not sine qua non nor is it a rule. It has to be interpreted when it is challenged before the Court. 82
48. The argument of the opposite party-NALCO cannot be accepted because in on one hand, it refuses the petitioner to participate in the tender, on the other hand, the opposite party has allowed the petitioner to apply through its sister concern based in London and spend huge Forex to transport to London and call it back for its use at SEZ, does not find favour with the commercial sense. By allowing them to participate not only there will be a competition as we have seen the first tender has gone 388.5 and the last was gone about 400, 12 Dollars was increased in a month which itself shows that even threat of participation by the petitioners has increased the price of material to be disposed of.
49. In that view of the matter, we are of the opinion that the contention raised by the opposite party is required to be rejected.
50. Coming on the point of last sphere of the field, it is a now open market after 2009. Every company has to meet with international competition. In that view of the matter, the contentions is that at the same price they are disposing of Aluminum Calcina at the International Market and for all practical purposes, the SEZ cannot dispose of the goods at the local market. In that view of the matter, apprehension of competition is also not well founded.
50.1. Taking into consideration the provisions of the SEZ Act, 2005, more particularly, Section 2(u) a Bank Branch situated in the special zone 83 which has taken permission under the Banking Regulation is to be considered "Offshore Banking Unit" coupled with the other provisions which are referred by learned Senior Counsel for the petitioners. The conclusion which is inevitable is that the 'Industry' or the 'Commercial Establishment' situated in Special Economic Zone is not an Indian Company and is Foreign legal entity by legal fiction.
51. The other points which are given in the written submission were not canvassed by learned counsel for the opposite party. The judgments which have sought to be relied upon by the opposite party, the Hon'ble Supreme Court has rightly been distinguished which has adopted by the counsel for the petitioners. Learned counsel for the petitioners has distinguished the decision of the Hon'ble Supreme Court relied upon by the opposite party in the case of Krishnan Kakkanth (supra), paragraphs-2, 24, 25, 26, 27, 30 and 34 thereof have already been reproduced hereinabove.
52. In that view of the matter, we are of the considered opinion that the petitioner No.1 is required to be allowed to participate in the tender floated by the opposite party, even if the decision of Gujarat High Court which has been relied upon by the counsel for the opposite party, the counsel for the petitioners has taken us to the facts as well as observation made by Gujarat High Court particularly to paras-2, 3, 10, 12, 34, 35, 35.1, 35.2, 35.3, 84 35.4, 36, 36.1, 36.2, 37.1 and 37.4 which have been reproduced hereinabove.
53. The writ petition deserves to be allowed limited extent of prayer no.(ii). We declare that the petitioner No.1 should be considered eligible to participate with all prevailing conditions of tender. Accordingly, the writ petition is allowed to the extent stated above.
53.1. However, we make it clear that the matter was argued at length. Admission of the writ petition and granting interim relief would amount to final relief. Therefore, we dispose of the writ petition with prayer no. (ii) only at the stage of admission on consent of the parties. 53.2. We make it further clear that we have considered only prayer No.(ii). The other prayers are not pressed by learned counsel for the petitioners.
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K.R. MOHAPATRA K.S. JHAVERI
(Judge) (Chief Justice)
Orissa High Court, Cuttack
Dated the 26th March, 2019/SKJ