Electricity Duty Exemption For Mega Projects Under BEDA Extends With Eligibility Certificate: Bombay High Court

The Bombay High Court has held that the exemption from payment of electricity duty granted to Mega Projects under the Package Incentive Scheme, by a 1999 notification issued under the Bombay Electricity Duty Act, 1958, continues to operate so long as the Eligibility Certificate remains valid, where the notification links the benefit to the eligibility period mentioned in the certificate.

“The plain language of the Notification, read with the language of the Addenda III and the language of the Eligibility Certificate, leaves no doubt that the exemption granted under Section 5A of the BEDA,1958 [by issuing the Notification], is directly linked to the Eligibility Certificate. In fact, the language of the Notification clearly suggests that the intention of the State was to directly link the benefit of the exemption under the Act with the Eligibility Certificate granted under the Scheme,” the court observed.

The Court held that the benefit would continue for as long as the Eligibility Certificate remained valid.

A division bench of Justices B. P. Colabawalla and Amit S. Jamsandekar was hearing writ petitions filed by JSW Steel Limited, challenging the denial of exemption from payment of electricity duty for the period from August 6, 2012 to August 5, 2019.

JSW Steel, classified as a 'Mega Project' under the Package Incentive Scheme, had been granted an Eligibility Certificate initially valid from August 6, 1998 to August 5, 2012. The certificate was subsequently extended up to August 5, 2019 through Addenda III after the company had not exhausted the full extent of incentives available within the original period.

The dispute arose after authorities denied the continuation of electricity duty exemption beyond August 2012. The company argued that the exemption granted under a notification dated December 29, 1999, issued under Section 5A of the Act, was expressly linked to the “period of eligibility” mentioned in the Eligibility Certificate, and therefore automatically extended along with it.

The State, on the other hand, contended that the exemption was confined to the original period and that any continuation required a fresh notification.

After examining the scheme, the court noted that the notification granted exemption from electricity duty to Mega Projects “for the period of eligibility of the said project as mentioned in the Eligibility Certificate.”

It found that the State, while issuing the notification, had consciously chosen not to impose any independent time limit and instead tied the benefit to the eligibility period in the certificate.

Rejecting the State's argument that there was a distinction between the “validity period” and the “period of eligibility” of the certificate, the Court held that such a distinction was contrary to both the scheme and the material on record.

It also noted that even the State's own affidavit acknowledged that Addenda III extended the eligibility period up to August 5, 2019.

The bench further held that once the Eligibility Certificate was extended, the exemption under the notification automatically continued, and there was no requirement for the issuance of a fresh notification. It observed that if the State intended to limit the exemption to a fixed date, it could have expressly done so while issuing the notification under Section 5A.

The court also rejected the State's contention that the benefit ceased upon the enactment of the Maharashtra Electricity Duty Act, 2016. It held that the savings provisions under the 2016 law preserved existing notifications and rights accrued under the earlier law, and therefore did not affect the petitioner's entitlement.

Holding that the decision of the State to deny the benefit was “untenable, arbitrary and contrary to the very object of the Scheme,” the Court allowed the petitions and declared the action of the authorities illegal.

It directed the respondents to refund Rs. 47,47,61,492 paid by the company towards electricity duty for the period from August 2012 to August 2019, within 12 weeks.

For Petitioner: Senior Advocate Janak Dwarkadas with Advocates Chirag Kamdar, Vineet Unnikrishnan, Sonu Bhasi, Veena Hari and Karthika Sanjay instructed by Cyril Amarchand Mangaldas

For State: Additional Government Pleader Shruti D Vyas with Advocate M M Pabale

For Respondent Nos 1 and 2: Advocate Harinder Toor instructed by Expletus Legal