LexSTATE OF U.P. AND ORS. versus RENUSAGAR POWER CO. AND OTHERS
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STATE OF U.P. AND ORS.
v.
RENUSAGAR POWER CO. AND OTHERS
JULY 28, 1988
[SABYASACHT MUKHARJI ANDS. RANGANATHAN, JJ.]
U.P. Electricify (Duty) Act, 1952-Whether Renusagar Power
Co., respondent No. I, is 'own' source of generation of electricity of
Hindalco,. respondent No. 2 under section 3(1)(c) of-Whether
Hindalco is liable to pay electricity duty on ihat.footinirWhether
corporate veil should be lifted in the facts of the case-Whether
Hindalco is entitled to exemption from levy of electricity duty under
sub-section (4) of section 3-0f.
Disallowing request for exemption from levy of electricity duty
under sub-section (4) of section 3 of the U.P. Electricity Duty Act, 1952
A
B
c
('the Act'), as amended, the appellants issued notice of demand asking
D
respondent No. 1, Renusagar Power Co., to pay electricity duty on the
energy supplied by it to respondent No. 2, Hindalco, for industrial
purposes. Being aggrieved by the decision of the State Government, the
..,.
respondents filed a writ petition in the High Court. The High Court
allowed the writ petition, holding that the impugned order of the State
Government was not maintainable in law, and quashing the order as
E
well as the notice of demand abovesaid. The State Government was also
directed to consider the request of the respondents for exemption in
accordance with the directions issued by the High Court in the earlier
Writ Petition No. 4521 of 1972 filed by the respondents. Being
aggrieved by the decision of the High Court the appellants moved this
Court for relief.
F.
Disposing of the appeal, the Court,
HELD: Per Sabyasachi Mukharji, J.
There were two different aspects of the case to be considered. One
G
was whether the respondent No. 1, the Renusagar Power Co. Ltd., was
'own' source of generation of electricity for respondent No. 2, the
Hindalco, under section 3(l)(c) of the Act. The second aspect was
whether the order passed by the State Government was in accordance
with the principles of natural justice in so far as the same were applic-
able to the case. [646C]
H
627
A
628
SUPREME COURT REPORTS
[1988] Supp. 1 S.C.R.
From 1952 to 1970, no duty was payable if electriciiy was
generated from own source of energy. From 1970 to 1973, duty of one
paisa was payable in respect of electricity supplied from own source of
generation. After 1973, no duty was payable in respect of electridty
supplied from own source of generation. (6460]
B
Renusagar, a 100% subsidiary of Hindalco, wholly owned and
controlled by Hindalco, was incorporated in March, 1964. Hindalco
had established the power plant through the agency of Renusagar to
avoid complications in the case of a possible take-over of the power
plant by the State Electricity Board as power generation is generally not
permitted in normal conditions in the private sector. The respondents
C highlighted that the sanction under section 28 of the Indian Electricity
Act, 1910, given to Renusagar and its amendment established that
Renusagar was not a normal type of sanction under Section 23 of ihe
1910 Act as the holder could supply power only to Hindalco. All these
steps for the expansion of the power in Renusagar so as to match the
power requirement of Hindalco's expansion were taken by Hindalco
D even though Renusagar had been incorporated. Applications for all the
necessary sanctions and permissions were made by Hindalco. Per-
missions and sanctions were first intimated to Hindalco even though
Renusagar was in existence. Changes in the sanctions and/or permis-
sions were obtained by Hindalco and not Renusagar. The expansion of
the power plant in Renusagar was to exactly match the requirements of
E Hindalco for the production of Aluminium. The expansion of the power
plant in Renusagar was part and parcel of the expansion of the
aluminium plant of Hindalco. All the steps to set up the power plant in
Renusagar and its expansion were taken by Hindalco. Hindalco con-
sumed about 255 MW power out of which 250 MW came from
Renusagar. There was only one transmission line going out of
F Renusagar and that went to Hindalco, which had complete control over
Renusagar. The agreement between Renusagar and Hindalco indicated
this was not a normal sale-purchase agreement between two inde-
pendent persons at arms length. The price of electricity was determined
according to the cash needs of Renusagar. This covenant also showed
complete control of Hindalco over RennsagExcerpt shown. Read the full judgment & AI analysis in Lexace.