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5. The notification dated 1.5.1986 has been the bone of contention and would hereinafter be referred to as amending notification. The respondents' contention before the High Court and also before this Court has been that the amending notification and the explanation appended to Notification No. 67/87 are violative of Article 14 of the Constitution.

6. M/s. Indian Charge Chrome Ltd., the respondent before us is a public limited company and is a 100 per cent export oriented unit of charge chrome. The said respondent would hereinafter be referred to as 'the company', for short. In the year 1984 it entered into two contracts respectively with M/s. Gotaverken Energy Systems of Sweden and M/s. Asea Stal for the supply of power generation equipment for setting up a power plant so as to generate electricity meant for captive consumption of the company and its sister concern. On 28.1.1986, the respondent moved an application before the Assistant Collector of Customs, Paradeep Port, Paradeep for registration of the two contracts abovesaid under the Project Import (Registration of Contract) Regulations, 1965 so as to enable being assessed for exemption under Tariff Item No. 84.66 of the First Schedule to the Customs Tariff Act, 1975 read with Notification No. 71/85 dated 17.3.1985. On 7.2.1986 the Assistant Collector of Customs informed the respondent company that its contract with M/s. Gotaverken Energy Systems, Sweden was allowed registration under the 1965 Regulations by the authority. Vide letter dated 20.3.1986, the Assistant Collector sought for certain clarifications from the respondent with respect to its contract with M/s. Asea Stal. The requisite information was provided by the respondent. On 17.8.1987, the respondent company was informed that in view of the exemption notification having been amended by inserting an explanation thereto, the captive power project of the respondent was not entitled to exemption from payment of duty and therefore the prayer for registration of the contract entered into by the respondent with Asea Stal was being rejected and also the earlier registration of the respondent's contract with M/s. Gotaverken which was allowed earlier on 7.2.1986 was being cancelled.

9. The questions arising for decision in this appeal are:-

(i) what is the nature of power exercised by the Central Government while issuing the amendment notification;
(ii) whether the Central Government have artificially carved out two classes of power plants though in substance they are one;
(iii) whether there is no nexus with the object sought to be achieved by treating the power projects generating electricity for distribution differently from the power plants generating electricity for captive consumption only by such units whose end product is not electricity or power;

12. The learned senior counsel for the respondent submitted that the power under Section 25 was exercisable only in "public interest". While the earlier notification granting exemption speaks of the same having been done in public interest, no material has been brought on record of the Court to show the amendment notification dated 1.5.1986 having been issued in public interest and therefore the same cannot be sustained by reference to Section 25(1) of the Customs Act. The learned senior counsel for the appellants submitted that the amendment notification was merely clarificatory in nature. From the very beginning the intention of the Central Government was to grant full exemption from payment of duty to such power projects as were engaged in generation and distribution of power; it was not the intention of the Central Government to confer the benefit of full exemption from payment of duty on power plants set up by any units for generating power meant for captive consumption and not for distribution generally. The learned senior counsel for the appellants has in support of his submission invited our attention to material available on record substantiating his plea and having considered the same we find merit in the plea canvassed on behalf of the appellants.

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