ACC LTD Vs. STATE OF HIMACHAL PRADESH

JUDGEMENT

(1.) THE brief facts of the case are that the petitioner is a public limited company duly incorporated under the Indian Companies Act, 1956. It is engaged in the manufacture of cement. The company has been set up at Barmana in District Bilaspur in the State of Himachal Pradesh. The company also has a mining lease to extract lime stone and from this lime stone, it manufactures clinker and cement. This company set up its first unit prior to the year 1984 but the unit was commissioned sometime in the year 1984. In 1984, the installed capacity of plant was 5.6 lakhs ton per annum (LTPA). In 1989, the capacity of the plant was increased from 5.6 to 7.6 LTPA. Thereafter, the company again contemplated an increase in the manufacturing capacity of cement by 10 LTPA but finally instead of increasing the capacity of the old unit, it set up another unit (hereinafter referred to Unit No. II). The company invested more than Rs. 200 crores and gave employment to more than 200 people in the second unit. In earlier litigation in LPA No. 23 of 2004 decided by this court on April 10, 2008, this court clearly held that the two units were separate units and were not one unit. This judgment of the court was upheld by the apex court by dismissing special leave petition on August 2, 2010. Therefore, there is no dispute that the two units are separate units.

(2.) THE second unit was set up sometime in the year 1994 and commercial production started on September 15, 1994. The main dispute in this case is that while granting sales tax exemption to the company, the State laid down a condition that this incentive of sales tax exemption to the second unit would be available to the company only if the production of the first unit does not fall below the level of 922692 MT of cement. It is this condition which is the bone of contention and according to the company, the State had no jurisdiction to lay down such a condition.

(3.) ON the other hand, on behalf of the State, Shri Vivek Thakur, learned Additional Advocate -General, urges that the benefit of sales tax exemption to the company has been given only under section 42 of the Act and this benefit was not available to the company under the various incentive policies and, therefore, the company cannot take the benefit of some portion of the incentive policies and urge that the benefit to unit No. II should be granted irrespective of the production level of unit No. I. It is submitted by Shri Thakur that in case this interpretation is accepted then any company would close down the old unit, establish a new unit and the production would be shown to be that of the new unit only. He submits that the State being alive to such a situation, purposely laid down a condition that the production level of unit No. I should be maintained at the same level at which it was producing immediately before unit No. II went into commercial production. He further submits that it is nobody's case that unit No. I is not capable of production. His last submission is that both unit No. I and unit No. II of the company manufacture cement from the raw material which is extracted from the same mines and the feeding area for both the units is the same. Unit No. I has already taken the benefit of incentives and now that the period of incentives of unit No. I is over, there is every possibility that the production of unit No. I is lowered and transferred to unit No. II only with the purpose of taking tax benefits of unit No. II and hence the need to impose such a condition.