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2022 (8) TMI 489 - HC - VAT and Sales TaxDemand of Electricity Duty - consumption of electricity by sister concern Guljag Gases Pvt. Ltd. - consumption of captive power and not sale - HELD THAT - Undeniably, the petitioner M/s Guljag Industries and the company Guljag Gases Pvt. Ltd., are involved in manufacturing different items and thus, one cannot be considered to be the subsidiary of another. The transfer of energy by the petitioner M/s Guljag Industries Ltd. to the Company Guljag Gases Pvt. Ltd., even if the latter is considered to be sister concern in the loose parlance cannot be treated to be generation of electricity for own use and hence, respondents were perfectly justified in levying electricity duty on the energy transferred by the petitioner Company to the Company Guljag Gases Pvt. Ltd. The impugned assessment orders passed by the Appellate Authority and the Revisional Authority dated 15.03.2010 and 17.10.2017 respectively, affirming the levy of electricity duty, do not suffer from any illegality or infirmity whatsoever, warranting interference therein. Petition dismissed.
Issues Involved:
1. Demand for electricity duty from the petitioner. 2. Validity of orders passed by the Appellate Authority and the Revisional Authority. 3. Interpretation of "own use" under the Rajasthan Electricity Duty Act, 1962. 4. Application of the corporate veil doctrine. 5. Distinction between sister concerns and subsidiaries. Issue-wise Detailed Analysis: 1. Demand for electricity duty from the petitioner: The petitioner, M/s Guljag Industries Ltd., challenged the respondents' action of demanding electricity duty on the premise that the electricity supplied to its sister concern, Guljag Gases Pvt. Ltd., should be treated as captive consumption and not as a sale. The petitioner argued that the two companies are closely held, with the Board of Directors belonging to the same family, and their industrial units are located on the same land. Thus, the electricity consumption by Guljag Gases Pvt. Ltd. should not attract electricity duty. 2. Validity of orders passed by the Appellate Authority and the Revisional Authority: The petitioner contested the orders dated 15.03.2010 and 17.10.2017 by the Appellate Authority and Revisional Authority, respectively, which affirmed the demand for electricity duty. The petitioner argued that the Deputy Commissioner (Appeals) had previously decided in favor of the petitioner on 08.10.2003, but the Revisional Authority unjustifiably overturned this decision. 3. Interpretation of "own use" under the Rajasthan Electricity Duty Act, 1962: The core of the dispute revolved around the interpretation of "own use" under Section 3 of the Rajasthan Electricity Duty Act, 1962. The provision exempts electricity duty for energy consumed by a person generating it for "his/its own use or consumption." The respondents argued that since the petitioner sold electricity to Guljag Gases Pvt. Ltd., it did not qualify as "own use" and thus attracted electricity duty. 4. Application of the corporate veil doctrine: The petitioner urged the court to lift the corporate veil, arguing that both companies should be treated as a single entity due to their intertwined business interests and familial Board of Directors. However, the court noted that both companies are separate juristic persons under the Income Tax Act and other statutes, and their distinct legal identities could not be disregarded merely because they share common directors or land. 5. Distinction between sister concerns and subsidiaries: The court distinguished the case from the precedent set in State of U.P. Vs. Renusagar Power Co. & Ors., where the Supreme Court treated Renusagar and Hindalco as a single entity due to their inextricable link. In contrast, the court found that M/s Guljag Industries Ltd. and Guljag Gases Pvt. Ltd. were not incorporated to act as power sources for each other and were involved in manufacturing different products. Thus, they could not be considered subsidiaries or a single entity for the purpose of electricity duty exemption. Conclusion: The court concluded that the transfer of electricity by the petitioner to Guljag Gases Pvt. Ltd. could not be considered as "own use" under the Rajasthan Electricity Duty Act, 1962. The respondents were justified in levying electricity duty on the energy transferred. The orders by the Appellate Authority and Revisional Authority were upheld, and the writ petitions were dismissed as devoid of merit.
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