One is in the public interest and the other for captive consumption, says T N Pandey
Article 14 of the Constitution ensures equality before the law. However, this principle does not take away from the state the power of classifying persons for legitimate purposes. This view has again been reiterated in the matter of levy of customs duty by the Supreme Court in its decision in UOI & Ors v Indian Charge Chrome & Anr JT 1999 (6) SC 306.
The issue before the court, related to levy of duty on imports concerning power projects and power plants. The distinction concerning these has been duly recognised in the Industrial Policy Resolution of 1956. In exercise of power conferred by Section 25 of the Customs Act, 1962, which permits grant of exemption from payment of duty of customs leviable under the Act, a distinction was drawn by the customs department in the matter of levy of duty on power projects and power plants for captive consumption. On 19\4\1985, Notification No 133/85 was issued under Section 25(1) of the Customs Act, 1962, to the effect that in the public interest goods falling under the Heading No 84.66 of the First Schedule to the Customs Tariff Act 1975 (51 of 1975) when imported into India for power projects (including gas turbine power projects), are exempted from the whole of the duty of customs. Vide Notification No 306/86, an explanation was added to the notification dated 19th April 1985 which reads as under:
"Explanation:- For the purposes of this notification, the expression power projects (including gas turbine power projects) shall 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."
The petitioner before the Supreme Court contended that the distinction drawn between two types of power plants was violative or Article 14 of the Constitution. Earlier, the High Court held that no distinction can be drawn between a power project set up for generating electricity meant for distribution generally and a power plant set up by units engaged in activities other than power generation, that is whose end product is not necessarily power and power only.
The Supreme Court has not agreed with the petitioner's view. According to it, the two cannot be equated with each other. A power project is set up by the government to cater to the needs of the public, while a captive power plant is set up by an industrial unit to feed power to its own plant or unit for manufacturing of goods other than power.
The two classes have a well defined differentiation. There is nothing wrong in the central government forming an opinion that it was in public interest to grant exemption from payment of custom duty to the imports meant for power projects engaged in production of power as an end product meant for public distribution as such, while denying a similar benefit to imports for plants generating electricity for captive consumption only.
In deciding the appeal the court has reiterated its earlier view that power to grant an exemption also implies power to withdraw it. In this context, the court has quoted from its earlier decision in the case of Kasinka Trading and Anr v UOI wherein it has been held (vide para 21) that the power to grant exemption from payment of duty, additional duty etc under the Act, as already noticed, flows from the provisions of Section 25(1) of the Act. It does no make items which are subject to levy of customs duty etc as items not leviable to such duty. It only suspends the levy and collection of customs duty.
Thus the decision is again a step forward to establish that the principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position.
