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Essar Steel India Ltd. and Anr. v. State of Gujarat and Anr.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 4842 of 2017)Decided 2 May 2017
Civil Appeal No. 4842 of 2017
Justice A.K. Sikri · Justice Ashok Bhushan

Background

Essar Steel set up a captive power plant for its steel operations and, through a separate special-purpose generating company in which it held 42% equity, sought exemption from electricity duty on the share of power corresponding to its equity stake, relying on a 1992 Gujarat Government notification and on a separate statutory exemption provision. The State Government rejected the claim multiple times over several years, culminating in a 2009 order demanding over Rs. 1,038 crores in duty and interest for the period April 2000 to August 2009. Essar's writ petition and subsequent Letters Patent Appeal against this demand were both dismissed by the Gujarat High Court, leading to this appeal before the Supreme Court.

Decision Breakdown

The Supreme Court held that Essar failed to meet the specific conditions of the 1992 exemption notification, which required that the generating sets be purchased or commissioned between 1 January 1991 and 31 December 1992; the evidence showed the sets were actually commissioned only in August 1995, and merely placing a purchase order earlier did not amount to actual purchase within the stipulated window. The Court reaffirmed that exemption notifications under taxing statutes must be strictly construed, and every condition in them must be fully satisfied before any exemption can be granted: there is no room for substantial compliance. Finding no error in the High Court's reasoning on both the "captive consumption" argument and the notification-based claim, the Supreme Court dismissed the appeal and upheld the duty demand.

Lesson Learnt

Tax and duty exemptions granted by government notifications are interpreted strictly against the claimant: every precondition stated in the notification (such as a specific purchase or installation window) must be literally satisfied, and good-faith delay or administrative circumstances will not substitute for actual compliance.

Official source (sci.gov.in)View Judgment (PDF)

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