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TMI Blog1993 (4) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ean, "..... such projects whose output of end-product is power, but shall not include captive power plants set up by units engaged in activities other than power generation." Under Notification No. 67/87-Customs, dated 1-3-1987, goods specified in column (2) of the Table falling under Heading No. 98.01 of the First Schedule to the Customs Tariff Act, 1975, when imported into India have been exempted and though power projects (including gas turbine power 35 per cent ad valorem projects) of capacity 50 Mega Watts and below are described in the Schedule, but an Explanation has been added to the effect that expression "Power Projects" shall mean, "..... such projects whose output or end-product is power, but shall not include captive power plants set up by projects engaged in activities other than power generation." These two Notifications have been annexed as Annexures 1 and 2 respectively to the writ application. 2. Petitioner's case in a nutshell is that petitioner No. 1 manufactures high carbon ferro-chrome/charge chrome as a 100 per cent export-oriented unit. In accordance with the policy of the Union Government and as the normal supply of power in the State of Orissa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge-chrome unit along with the necessary documents. On 28th of January, 1986, petitioner No. 1 applied for registration of the contracts, with Asea Stal and Gotaverken Energy System under the Project Import (Registration of Contract) Regulations, 1965, and for assessment as power project import for 100 per cent export-oriented unit under Tariff Item No. 84.66 of the First Schedule to the Customs Tariff Act, 1975, read with Notification No. 71/85-Cus., dated 17th of March, 1985. All the necessary documents and materials were forwarded by petitioner No. 1 to the Proper Officer. The Government of India by Notification No. 71 dated 17-3-1985 in exercise of powers conferred under Section 25 of the Customs Act exempted goods falling under the Heading 84.66 of the First Schedule to the Customs Tariff Act, 1975, of power projects irrespective of ownership and end-use, whereas industrial plants or projects other than power projects were subjected to 20 per cent ad valorem duty. In view of the aforesaid exemption notification, the Assistant Collector of Customs, Paradeep (opp. party No. 2) by his letter dated 7-2-1986 registered the contract between petitioner No. 1 and Gotaverken Energy Sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 25 of the Customs Act having granted the exemption from levy of duty in respect of all power projects including gas turbine power projects when imported into India as it falls under Heading No. 84.66 of the First Schedule to the Customs Tariff Act, 1975, by the notification dated 17-3-1985, annexed as Annexure-11, the subsequent notifications under Annexures 1 and 2 with the addition of an Explanation to explain the expression "power projects" to mean "such projects whose output or end-product is power but shall not include captive power plants set up by units engaged in activities other than power generation" are arbitrary, irrational and have no reasonable nexus with the object to be achieved and, therefore, the said explanation is illegal, invalid and inoperative and must be struck down. So far as the letter of the Assistant Collector or Customs dated 17-8-1987, annexed as Annexure 3, is concerned, Mr. Mohanty contends that the same is vitiated as the reasons for refusing the application for registration are bad in law and further there is no power under the Regulations to cancel a registration already granted. 4. The opposite parties have filed a counter-affidavit being s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by units engaged in activities other than power generation" can be said to be hit by Article 14 of the Constitution, on the ground that for such differentiation there is no nexus between the classification made and the object sought to be achieved? (ii) Under Section 25(1) of the Customs Act, power has been conferred upon the Central Government to exempt goods of any specified description from the whole or any part of the duty of customs leviable thereon and thus, whether it is permissible for the Central Government in exercise of such power to issue a notification indicating that "power projects" will not include "captive power plants" set up by units engaged in activities other than power generation? (iii) Whether the discretionary power of the Central Government in the matter of exemption under Section 25 of the Customs Act can at all be interfered with by the Court and, if so, under what circumstances? (iv) Whether the letter of the Assistant Collector under Annexure 3 rejecting the petitioner's application for registration can be said to have been based on germane consideration and whether the same is liable to be struck down? and (v) Whether the registration once gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is concerned, certain terms and conditions were imposed. We are not concerned with those terms and conditions in the present case. Admittedly the petitioners' unit manufacturing charge-chrome is a 100 per cent export-oriented unit and being faced with acute shortage of power from the power distributing agencies of the State, it undertook to set up its own captive power plant so that the production and manufacture of the charge-chrome will not come to a half for want of power. Bearing in mind these admitted facts, we will now have to consider the questions posed by us which arise on the contentions advanced by the parties. 8. Coming to the first question posed by us, sub-section (1) of Section 25 of the Customs Act gives the Central Government a general power of exemption of customs duty on the import of goods. Such exemption may be either partial or total. While exercising power under Section 25(1), the Central Government must be satisfied that it is necessary in the public interest to exempt "power projects" when imported into India from levy of customs duty. Having exempted "power projects" from levy of customs duty in exercise of power of exemption under Section 25(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation. The first one is the case of Kyerbari Tea Co. Ltd. and Another v. State of Assam and Others, AIR 1964 Supreme Court 925, and paragraph 19 of the said judgment was pressed into service by the learned Standing Counsel. But the said case deals with the question with regard to the legislative competence under Entry 56 of List II and the effect of a validating taxing statute operating retrospectively and how far it transgresses Articles 304(b) and 265 of the Constitution. We find it difficult to comprehend how this decision is of any assistance in answering the point in issue. The only relevance so far as the said decision is concerned is the observation made by their Lordships in Paragraph 45 to the effect that the power conferred on the Court to strike down a taxing statute if it contravenes the provisions of Articles 14,19 or 301 of the Constitution has to be exercised with circumspection, bearing in mind that the power of the State to levy taxes for the purpose of governance and for carrying out its welfare activities is a necessary attribute of sovereignty and in that sense it is a power of paramount character. But their Lordships also observed in the self same paragraph th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have no hesitation to come to the conclusion that it has perpetrated hostile discrimination and the same cannot be sustained. In our considered opinion, the two notifications under Annexures 1 and 2 adding Explanation and excluding "Captive power plants set up by units engaged in activities other than power generation" are grossly discriminatory in nature, without any reasonable nexus with the object sought to be achieved and we accordingly quash those two notifications. The first contention of Mr. Mohanty, the learned counsel for the petitioners, therefore, is sustained. 10. Coming to the second question posed by us, under Section 12(1) of the Customs Act, duties of customs have to be levied at such rates as may be specified under the Customs Tariff Act, 1975 on goods imported into or exported from India. Under Section 25(1) of the Act, the Central Government has the power to issue a notification exempting certain goods from levy of customs duty when imported into India if it is satisfied that it is necessary in the public interest so to do. Having been satisfied about the existence of public interest, it exempted power projects from levy of customs duty when imported into Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fers a right of equality and, therefore, its violation could be challenged under Article 226 of the Constitution. Article 14 protects all persons from discrimination by the legislative as well as by the executive organ of the State. An executive action violating the principle of equality before law or equal protection of law is open to challenge under Article 14 as has been held by the Supreme Court in the case of Satwant Singh Sawhney v. V.D. Ramarathnam, Assistant Passport Officer, New Delhi and Others, AIR 1967 Supreme Court 1836. An executive action which results in denial of equal protection of law or equality before law can be judicially reviewed and can be struck down on the ground of discrimination. The wisdom of a legislative policy may not be open to judicial review, but when the wisdom takes the concrete form of law, the same must stand the test of being in tune with the fundamental rights. (See A.L. Kerala v. The Project and Equipment Corporation of India Ltd., AIR 1984 Supreme Court 1361). The purpose of equal protection clause is to secure every person within the State against arbitrary discrimination, whether occasioned by the express terms of the statute or by their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plant. That apart, the purpose of exempting power projects from levy of customs duty when goods are imported into the country is that the cost of generation of power will be less. That object cannot be different when power alone is produced by a person and when power is produced as well as other goods are manufactured. So long as the project generates power, it is difficult to see any rational nexus for excluding the project from the purview of exemption and, therefore, the ground on which the application for registration of the contract has been rejected under Annexure-3 cannot be sustained and the same must be quashed. 13. The only other question that survives for our consideration is whether the registration once granted under the Regulations could at all be cancelled without any power for cancellation under the Regulations. As it transpires, the registration in respect of one contract had been granted under the provisions of the Project Import (Registration of Contract) Regulations, 1965. Registration having been granted under the provisions of the Regulations, unless the Regulations provide for cancellation and grounds for cancellation, the authority has no power to cancel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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