THE HONOURABLE MR v. M/s.Aruppukottai Sri Jayavilas Ltd

For respondent: Mr.K.Alagirisamy,Senior Counsel for Mr.S.Navaneethakrishnan & Mr.S.Kadarkarai JUDGMENTF.M.IBRAHIM KALIFULLA, J.The Chairman, the Member (Distribution) and the SuperintendingEngineer of the Tamil Nadu Electricity Board, are the appellantsherein. 2. The challenge in the Writ Appeal is to the order of thelearned single Judge, who by the impugned order dated 25.2.1999,passed in W.P.No.2389 of 1998, while setting aside the order of thesecond appellant dated 30.12.1997, directed the appellants to treatthe 'B' Unit of the respondent as a 'new industry' and to passappropriate orders and to take consequential steps for the grant oftariff concession.3. Brief facts which are required to be stated are as follows:(a) The respondent own a cotton spinning Mill located atMelakandamangalam Village, Aruppukottai Taluk, Virudhunagar Districtwith High Tension Service Connection (hereinafter referred to as"HTSC") No.68. The said Mill is called as 'A' Unit. Subsequently,the respondent established a new spinning Mill at Tamilpadi Village,Tiruchuli Taluk, which is known as 'B' Unit. The service connectionof the 'B' Unit which was also HTSC, had the number H..T.S.C.No.150.The said 'B' Unit went into commercial production from 1.9.1995 andfor billing purposes, the meter-reading was taken on and from27.9.1995. (b) Under the provisions of the Tamil Nadu Revision of TariffRates of Supply of Electrical Energy Act, 1978 (Tamil Nadu Act 1 of1979), the Government of Tamil Nadu, by way of amendment to theSchedule to the said Act in respect of high-tension industries'tariff rates, used to fix the rates by the issuance of GovernmentOrders. While making such amendment to the tariff rates, the StateGovernment also used to announce the tariff concession for high-tension industries coming under the category of High Tension Tariff-I. Such tariff concession was being extended and periodically alteredby issuance of different Government Orders. (c) During the relevant point of time, when the respondentcommenced operation of its 'B' Unit on 27.9.1995, the relevantGovernment Order in operation was G.O.Ms.No.29, Energy (A.2)Department, dated 31.1.1995. The amendment to the Schedule to TamilNadu Act 1 of 1979 under the said G.O. came into force on and from1.2.1995. The said G.O. was in respect of the registered factories,among other industries, the textile industry, falling under High https://hcservices.ecourts.gov.in/hcservices/ Tension Tariff-I. The rate per KWH and rate per KVA in respect ofsuch industries functioning in the Madras Metropolitan area and Non-Metropolitan area, were separately fixed. It also provided fortariff concession in the case of new industries to be set up in theareas other than the Madras Metropolitan areas, which was to becharged for the first three years from the date the consumer is beinggiven the service connection under high tension tariff. (d) By way of an explanation to Clause (a) of the said Scheduleas amended, it was stated that for the purpose of electricity tariffconcession for new industries, the term 'new industries' should betaken to mean a new investment by any entrepreneur including by anexisting industry in any area other than the Madras Metropolitanareas, subject however to the condition that the assets other thancash of the existing industry, are not transferred and shown asassets of the new industry. (e) Under Clause (aa) of the said amended Schedule, it ismentioned that the tariff concession should be made applicable toexpansion of industry also, to be set up in any City, Municipality,Town-ship or Panchayat Union limit other than the MadrasMetropolitan area in which the main industry is functioning.Hereagain, it is stipulated that the assets other than cash of theexisting industry, are not transferred and shown as the assets of theexpanded Unit. (f) Further, by way of explanation to Clause (aa), what is meantby 'expansion' has been stated to mean that an increase in productionof such expanded Unit, which results in an increase of 25% or more inthe consumption of electricity by the industry with reference to thehighest electricity consumption of such industry in the threecompleted financial years preceding the application.(g) Under Clause (c) of the said amended Schedule, it has beenspecifically stated that the new industries to be set up in theMadras Metropolitan areas shall not be eligible for any tariffconcession.(h) The respondent applied for tariff concession for its 'B'Unit for a period of three years, namely from 27.9.1995 to 26.9.1998.However, the appellants took the stand that the 'B' Unit of therespondent can only be held to be an expansion of its 'A' Unit andsince the 'B' Unit satisfied the conditions stipulated in theexplanation to Clause (aa) of the amended Schedule as perG.O.Ms.No.29, dated 31.1.1995, only from 26.2.1996, it would beentitled for such tariff concession (i.e) between 26.2.1996 and26.9.1998. In other words, the tariff concession extended to 'B'Unit of the respondent was restricted between 26.2.1996 and26.9.1998. To put it differently, in view of the stand of theappellants that the 'B' Unit of the respondent was only by way of anexpansion to its 'A' Unit, it was not entitled for full three yearsof tariff concession, but only from the date it satisfied theconditions stipulated in the explanation to Clause (aa) of theamended Schedule as per the said G.O.Ms.No.29, which date was noted https://hcservices.ecourts.gov.in/hcservices/ as 26.2.1996.(i) By order dated 10.12.1997, signed on 30.12.1997, the secondappellant herein confirmed their earlier stand in their communicationdated 27.4.1996 and refused to allow full period of three years bytreating the 'B' Unit of the respondent as a 'new industry'. (j) When the said order of the second appellant was challengedin W.P.No.2389 of 1998, the learned single Judge, by order dated25.2.1999, held that the rejection of the respondent's claim to treatits 'B' Unit as a 'new industry' for the grant of tariff concessionon the ground that the machineries installed in the said 'B' Unitwere identical to the one installed in the 'A' Unit of the respondentand the products manufactured in the 'B' Unit were also the same likethat of the 'A' Unit, was not valid in law. Accordingly, the learnedsingle Judge directed the appellants to treat the 'B' Unit of therespondent as a 'new industry' and grant the tariff concession onthat basis.(k) The Writ Appeal preferred against the said order of thelearned single Judge, came to be disposed of by the earlier DivisionBench of this Court, by judgment dated 26.9.2003. In the saidjudgment, it was held that the consideration of the issue, namelywhether 'B' Unit is by way of a new investment by the existingentrepreneur, namely 'A' Unit, or an expansion of 'A' Unit, wouldrequire scrutiny of very many material facts, which cannot beexamined in Writ proceedings and that such exercise can be carriedout only before the competent Civil Court. So saying, by the earlierjudgment, the Division Bench set aside the order of the learnedsingle Judge while dismissing the Writ Petition, and held that suchdecision was without prejudice to the right of the respondent toapproach the Civil Court if they are so advised. (l) As against the above judgment of the Division Bench in theWrit Appeal dated 26.9.2003, a Special Leave Petition was preferredby the respondent herein before the Supreme Court of India in CivilAppeal No.899 of 2005 (arising out of SLP(C).No.1135 of 2004) and thesaid Civil Appeal came to be disposed of by the Supreme Court, byorder dated 4.2.2005, holding as under:"Leave granted.Heard learned counsel for the parties.The Division Bench of the High Court whilereversing the order of the learned Single Judgeand dismissing the writ petition of thepetitioner merely stated that the questionwhether 'B' unit of the company came intoexistence by new investment made by anyentrepreneur including the existing industrycould be gone into only in appropriate civilproceedings before the competent Civil Court.After hearing the learned counsel for the https://hcservices.ecourts.gov.in/hcservices/ parties, we do not find that the writ court was,in any way, inhibited from going into the factson record for deciding the question whether the'B' unit came into existence by new investment orit was merely an old unit so as to be denied theconcessional tariff.In these circumstances, we allow this appealand remit the writ appeal to the Division Benchfor deciding the appeal afresh after hearing theparties on the disputed question."(m) In the light of the abovesaid order of the Supreme Court, wewere obliged to hear this Writ Appeal again and render this judgment.4. We have heard Mr.P.S.Raman, learned Additional AdvocateGeneral appearing for the appellants and Mr.Alagirisamy, learnedSenior Counsel appearing for the respondent.5. In the course of his submissions, learned Additional AdvocateGeneral, after referring to G.O.Ms.No.29, Energy (A.2) Department,dated 31.1.1995 as well as the earlier G.O.Ms.No.102, Public Works(Electricity) Department, dated 24.1.1992, contended that the benefitof tariff concession extended to expansion of an existing Unit, canonly relate to such expanded Unit which also manufactures the verysame product. According to him, if the product manufactured inanother Unit started by the same entrepreneur is identical to theproduct manufactured in the existing Unit, that can only becategorised as an 'expansion' of the existing Unit and the same cannever be called a “new industry”.6. To draw support to his submissions, learned AdditionalAdvocate General would lay heavy stress upon the definition clause of'expansion' in the Government Order and contend that for the purposeof the G.O., increase in production was the necessary criteria andthe production would always be one and the same only in the case of'expansion' and therefore, it will have to be held that the 'B' Unitwhich manufactured the very same product of 'Hank Yarn', which ismanufactured by 'A' Unit, it can only be called as an 'expansion' of'A' Unit and not a 'new industry'. 7. According to learned Additional Advocate General, there cannever be a case of a new industry by the existing entrepreneur, ifthe product manufactured is one and the same, even if otherconditions stipulated in the G.O. are satisfied.8. Learned Additional Advocate General contended that the grantof advantage of benefit from the payment of electricity tax bytreating the 'B' Unit as a 'new industry' under the Tamil NaduElectricity (Taxation on Consumption) Act, by itself would notentitle the respondent to claim the benefits under the Tamil Nadu Act1 of 1979, since the former legislation does not make any distinctionbetween a 'new industry' and an 'expansion' of an existing industryfor the purpose of granting exemption from levy of additional https://hcservices.ecourts.gov.in/hcservices/ electricity tax.9. Learned Additional Advocate General however fairly placedbefore the Court the decision of the Supreme Court reported in AIR1977 SC 1134 (T.M.Corpn., Calcutta vs. I.T.Commr., W.B.) and AIR 2003SC 1132 (State of Gujarat vs. Saurashtra Cement and ChemicalIndustries Ltd.), where the expression 'expansion' or 'new industry'has been discussed in detail.10. An extreme stand was also taken on behalf of the appellantsthat the 'B' Unit of the respondent was not entitled for any tariffconcession either by way of 'expansion' or a 'new industry', sincethe 'B' Unit was established in different village, though fallingunder the same Panchayat Union.11. As against the above submissions, Thiru.Alagirisamy, learnedSenior Counsel appearing for the respondent, by tracing the historyof tariff concession granted under different Government Orders, rightfrom the one issued in G.O.Ms.No.861, dated 30.4.1982 to the onedated 31.1.1995 in G.O.Ms.No.29, pointed out that originally, thetariff concession was not made available for subsequent expansion ordiversification of production in the year 1982. In the year 1988,such concession was extended even to a 'new industry' made by theentrepreneur of an existing industry, subject to the condition thatthere was no transfer of assets of the existing industry and shown asassets of the 'new industry'. It was pointed out that while makingsuch a relaxation in the year 1988, the restriction, namely that suchtariff concession would be applicable only once to a consumer for anew industrial undertaking and the same would not be available forany subsequent expansion or diversification of production. LearnedSenior Counsel appearing for the respondent, then pointed out that inthe year 1991 and 1992, extension of such tariff concession for anyexpansion of the industry within the City, Township, Municipality orPanchayat Union limits in which the main industry was functioning,was retained, meaning thereby that such concession would be availablein case of expansion of the industry outside the areas in which themain industry was functioning. By referring to the subsequent G.Os.in G.O.No.1330, dated 17.9.1992 and G.O.No.313, dated 26.2.1993,learned Senior Counsel appearing for the respondent contended that afurther relaxation came to be made in respect of expansion ofindustry also to be set up in the same City, Municipality, Townshipor Panchayat Union limits in which the main industry was functioningand the only exclusion was the areas where such industry wasfunctioning within the Madras Metropolitan area.12. Learned Senior Counsel also relied upon a communication ofthe appellants dated 11.10.1995, wherein, the appellants grantedexemption to the respondent from levy of additional electricity taxfor the period 27.9.1995 to 26.9.1998 (three years) treating the sameas a 'new industry' by applying the appellants' Board Proceedings inPermanent B.P.(F.B.).No.119, dated 17.6.1993. Learned Senior Counselby drawing the attention of this Court to paragraphs 4 and 5 of theabove referred to B.P., contended that when the said B.P. came to beissued by the appellants in tune with the definition of a 'new https://hcservices.ecourts.gov.in/hcservices/ industry', different yardstick applied by the appellants forgranting the tariff concession under G.O.Ms.No.29, dated 31.1.1995,was erroneous in law and therefore, the same is liable to be setaside.13. Having heard the learned counsel for the respective parties,for better appreciation of the issue in controversy, namely whetherthe 'B' Unit of the respondent would fall within the category of a'new industry' or 'expansion' of its 'A' Unit, relevant Clauses inthe amended Schedule as per G.O.Ms.No.29, as well as the B.P. dated17.6.1993 need extraction.14. In G.O.Ms.No.29, Energy (A.2) Department, dated 31.1.1995,the relevant Clauses are Clause (a), Clause (aa) and Clause (c)(i)to the amended Schedule, which are to the following effect:"(a) In the case of new High TensionIndustries to be set up in the areas other thanthe Madras Metropolitan areas the followingconcessional tariffs shall be charged for thefirst three years from the date, the consumer isgiven service connection under high tensiontariff:--For the first year .. ..60 per cent of the High Tension rates.For the second year .. ..70 per cent of the High Tension rates.For the third year .. ..80 per cent of the High Tension rates.For the fourth year .. .. Full tariff.The above concession shall apply to bothunit rates and maximum demand charges. Thisconcession shall not however, be applicable to anindustry set up before the 3rd May 1989. Theconcession shall not also be applicable to aconsumer, who utilises power from his owngenerating units or makes other arrangements forproduction purposes and utilises the powersupplied by the Board for auxiliary purposesonly:Provided that the High Tension Industriesset up in any area (including industrially underdeveloped area, notified as such by theGovernment) before the 3rd May 1989 which areavailing tariff concessions or reduction underHigh Tension Tariff I as on the 2nd May 1989,shall continue to avail the said tariffconcession or reduction until the expiry ofthe period of five years from the date theconsumer is given service connection under HighTension Tariff I.Explanation.-- For the purpose of https://hcservices.ecourts.gov.in/hcservices/ electricity tariff concessions for new industriesthe term 'new industries' shall mean a newinvestment by any entrepreneur including by anexisting industry in any area other than theMadras Metropolitan areas, provided the assetsother than cash, of the existing industry, arenot transferred and shown as assets of the newindustry.""(aa) The tariff concession shall beapplicable to expansion of industry also to beset up in any city, municipality, township orpanchayat union limit other than the MadrasMetropolitan areas in which the main industry isfunctioning, provided the assets other than cashof the existing industry are not transferred andshown as the assets of the expansion:Provided that the tariff concession shall beapplicable only once, to a new industry or anexpansion of the industry in the area comprisingthe satellite town of Maraimalai Nagar New Towndeveloped by the Madras Metropolitan DevelopmentAuthority, irrespective of the fact whether suchindustry has availed of such concession outsidethe area of Maraimalai Nagar earlier or not, andalso whether such industry is considered newinvestment or not:Provided further that the concession for theexpansion of industry shall not be applicable tothe existing industry availing the concession forthe additional load in the High Tension servicefor its expanded activity beyond the period ofthree years or five years, as the case may be, asspecified in item (a) and the proviso thereto,respectively.Explanation -- The term "expansion" shallmean an increase in production which results inan increase in 25 per cent or more in theconsumption of electricity by the industry withreference to the highest electricity consumptionof such industry in the three completed financialyears preceding the application." "(c)(i) The new industries to be set up inthe Madras Metropolitan areas shall not beeligible for any tariff concessions."15. The relevant Clauses in B.P.No.119, dated 17.6.1993, isparagraphs 4 and 5(a), which read as follows:"4. The Government of Tamil Nadu in the https://hcservices.ecourts.gov.in/hcservices/ Tariff Notification issued under Section (4) ofthe Tamil Nadu Revision of Tariff Rates onSupply of Electrical Energy Act 1978 has definednew H.T. Industries as indicated below for thepurpose of extending concessional tariff for aperiod of 3 years."New Industries shall mean a newInvestment by any entrepreneurincluding by an existing industry inany area other than Madras Metropolitanarea provided the assets other thancash of the existing industry, are nottransferred and shown as assets of thenew industry". According to the above classification of newH.T. industry, the Board is allowingconcessional tariff rates to the new H.T.industries eligible for such concessional tariffrates.5. As the Government has defined newindustries as above in respect of industriesavailing H.T. supply, the Board after carefulconsideration orders as indicated below forgiving exemption from payment of additionalelectricity tax to the New Industries availingH.T. supply only.a. all the new H.T. industries as definedin the Tariff Notification issued by the StateGovernment under Section (4) of the Tamil NaduRevision of Tariff Rates on Supply of ElectricalEnergy Act 1978 and who have availed H.T. Supplyon or after 30.7.92 may be allowed theAdditional Electricity Tax exemption for aperiod of 3 years from the date of commencementof manufacture or production of the principalproduct." 16. In the case of the respondent, while its 'A' Unit waslocated at Melakandamangalam Village, Aruppukottai Taluk,Virudhunagar District, its 'B' Unit came to be located at TamilpadiVillage, Tiruchuli Taluk, Virudhunagar District, which commenced itscommercial production from 1.9.1995. The service connection of the'A' Unit was assigned the No. - H.T.S.C.No.68, while its 'B' Unit wasassigned the No. - H.T.S.C.No.150. The tariff concession claimed bythe respondent was for the 'B' Unit for the period 27.9.1995 to26.9.1998 by treating it as a 'new industry'. 17. It is admitted that both 'A' Unit and 'B' Unit aremanufacturing 'Hank Yarn'. It is also not in dispute that while boththe 'A' Unit and 'B' Unit fall within the same Panchayat Union,namely Thiruchuli Panchayat Union, they were located in two differentvillages. https://hcservices.ecourts.gov.in/hcservices/

18. In the abovesaid background, when the stipulations containedin G.O.Ms.No.29, dated 31.1.1995 are analysed, we find that Clause(a) of the amended Schedule in the said G.O.Ms.No.29, deals with theapplicability of tariff concession to new industries. The relevantcriteria to be considered for the grant of such tariff concession are: (a) Such tariff concession will beavailable to such new high tension industriesset up in the areas other than Madrasmetropolitan areas.(b) Such concession shall not beapplicable to an industry set up before 3rd May,1989.(c) Such concession shall not beapplicable to a consumer who utilises powerfrom his own generating Units or by makingother arrangements for production purposes andthe power supplied by the Board is used onlyfor auxiliary purposes. 19. If new industry is set up by way of new investment by anyentrepreneur of an existing industry, such investment can only be byway of cash investment and not by way of transfer of assets otherthan cash and such assets shown as assets of the new industry. Suchset up of new industry by the entrepreneur of an existing industry,should be in any area other than the Madras Metropolitan areas. 20. Under Clause (aa) of the amended Schedule in the saidG.O.Ms.No.29, dated 31.1.1995, the relevant criteria stipulated forthe grant of tariff concession applicable to expansion of anyindustry are:(a) Such expansion activity should be set upin any City, Municipality, Township or PanchayatUnion limit other than the Madras Metropolitanareas.(b) Hereagain, the assets other than cash ofthe existing industry should not have beentransferred and shown as the assets of theexpanded Unit.21. The proviso to the above Clause (aa) carves out yet anotherarea, namely the Satellite Town of Maraimalai Nagar New Town,developed by M.M.D.A. (now known as "C.M.D.A.") and the provisostates that the tariff concession shall be applicable only once to anew industry or an expansion of the industry in the area comprisingthe said Satellite Town, irrespective of the fact whether suchindustry availed of such concession outside the area of MaraimalaiNagar earlier or not, and also whether such industry is considerednew investment or not. Further, in order to qualify for claimingthe concession as an 'expanded' Unit, the increase in productionshould result in a minimum consumption of 25% or more with referenceto the highest electricity consumption for such industry for the https://hcservices.ecourts.gov.in/hcservices/ three completed financial years preceding the application. 22. From the above various criteria stipulated in theG.O., we could discern that the definition of "expansion" by wayof explanation to said Clause (aa), was for the purpose ofeligibility to claim the concession. In other words, while thequalification for the purpose of categorising a Unit as an"expansion" of an existing industry, the relevant Clause is onlyClause (aa). For the purpose of eligibility to grant the concession,such "expanded" Unit has to further satisfy the requirement ofensuring 25% or more of the power consumption in the course ofincrease in production. To put it differently, while the formerprescribes the qualification, the latter is only to test theeligibility criteria for working out the entitlement. It can also besaid that even if the Unit by way of expansion satisfies the criteriaprescribed in Clause (aa), yet, in order to avail the tariffconcession, the minimum requirement by way of increase in powerconsumption has got to be satisfied. However, it has to be pointedout that the latter cannot be the 'sine qua non' for the former,while the converse would require satisfaction of such requirement. 23. On the abovesaid analysis, when we test the submission madeby the learned Additional Advocate General, though it can be heldthat the end-product of the "expanded" Unit may be the same, it neednot necessarily be the same always. We say so because, the"expansion" of an existing Unit can be set up for the production ofnecessary auxiliary products, which can also go a long way forincreasing the production of the existing main product. Forinstance, if a manufacturer of a car industry goes in for "expansion"and sets up an industry by investment of cash without transfer of anyother asset in the expanded Unit, the outcome of the product in theexpanded Unit is in the form of spare parts such as suspension unit,gear-box, carburettor or such other auxiliary spare parts which arerequired for the manufacture of a motor-car, which is the mainproduct, but yet, by virtue of the production in the expanded Unit,the existing Unit could satisfy the requirement of more than 25%consumption by way of electrical energy by way of increase inproduction of its main product of motor car, and thereby satisfy therelevant criteria stipulated in Clause (aa) as well as theExplanation to the said Clause for availing of the tariff concessionas provided therein. Therefore, we are unable to accept thesubmission of the learned Additional Advocate General that the"expansion" should always result in production of the very sameproduct and not otherwise, and only then, it could satisfy theeligibility criteria stipulated in the Explanation to Clause (aa).24. The submission of the learned Additional Advocate Generalwas to drive home his point that if the product manufactured in thesubsequent Unit is the same, it can only be held to be an "expansion"of the existing Unit and can never be declared as a 'new industry'.When we test the said submission also with reference to the variouscriteria stipulated in Clause (a), we find that since we have steeredclear of the position that an existing industry manufacturing a "A"product, can also set up another industry producing the very same https://hcservices.ecourts.gov.in/hcservices/ product "A", the only other consideration to be made is whether sucha new industry satisfies the other requirements stipulated in Clause(a). If the various criteria culled out by us and listed in theforegoing paragraphs, are satisfied by the entrepreneur of anexisting industry by setting up another industry anew, even for theproduction of the very same product, it will have to be held that inthe event of satisfying such requirements, the said industry wouldcertainly fall within the category of 'new industry', even though theultimate product manufactured would be the same to that of the oneproduced by the existing industry of the new entrepreneur. 25. If that is the test and consideration to be made for thepurpose of granting tariff concession for a 'new industry', it willhave to be held that, that and that alone should be the relevant testand consideration to be examined for the purpose of granting tariffconcession as provided under G.O.Ms.No.29, dated 31.1.1995.26. In this context, it will be worthwhile to refer to the abovesaid decisions of the Supreme Court reported in AIR 1977 SC 1134 andAIR 2003 SC 1132, relied on by learned Additional Advocate General. 27. In AIR 1977 SC 1134 (supra), the Supreme Court consideredthe scope of application of Section 15-C of the Indian Income TaxAct, 1922, which provides exemption from tax of newly establishedindustrial undertakings. While considering the benefit to be grantedunder the said provision, the Supreme Court has set out the factorswhich are to be considered in order to hold whether an industrialundertaking can be held to be a 'new undertaking' or only a 'split-up' of the old existing business. Paragraphs 16 to 18 of the judgmentof the Supreme Court would be relevant for our purpose, which read asunder:"16. the assessee continues to be the samefor the purpose of assessment. It has itsexisting business already liable to tax. Itproduced in the two concerned undertakingscommodities different from those which he hasbeen manufacturing or producing in its existingbusiness. Manufacture or production of articlesyielding additional profit attributable to thenew outlay of capital in a separate and distinctunit is the heart of the matter, to earn benefitfrom the exemption of tax liability under Sec.15-C. Sub-section (6) of the section also points tothe same effect, namely, production of articles.The answer, in every particular case depends uponthe peculiar facts and conditions of the newindustrial undertaking on account of which theassessee claims exemption under Section 15-C. Nohard and fast rule can be laid down. Trade andindustry do not run in earmarked channels andparticularly so in view of manifold scientificand technological developments. There is greatscope for expansion of trade and industry. The https://hcservices.ecourts.gov.in/hcservices/ fact that an assessee by establishment of a newindustrial undertaking expands his existingbusiness, which he certainly does, would not, onthat score, deprive him of the benefit underSection 15-C. Every new creation in business issome kind of expansion and advancement. The truetest is not whether the new industrialundertaking connotes expansion of the existingbusiness of the assessee but whether it is allthe same a new and identifiable undertakingseparate and distinct from the existing business.No particular decision in one case can lay downan inexorable test to determine whether a givencase comes under Section 15-C or not. In orderthat the new undertaking can be said to be notformed out of the already existing business,there must be a new emergence of a physicallyseparate industrial unit which may exist on itsown as a viable unit. An undertaking is formedout of the existing business if the physicalidentity with the old unit is preserved. Thishas not happened here in the case of the twoundertakings which are separate and distinct.17. It is clear that the principal businessof the assessee is heavy engineering in thecourse of which it manufactures boilers, wagons,etc. If an industrial undertaking producescertain machines or parts which are, bythemselves, identifiable units being marketablecommodities and the undertaking can exist evenafter the cessation of the principal business ofthe assessee, it cannot be anything but a new andseparate industrial undertaking to qualify forappropriate exemption under Section 15-C. Theprincipal business of the assessee can becarried on even if the said two additionalundertakings cease to function. Again, theconverse is also true. The fact that thearticles produced by the two undertakings areused by the Boiler Division of the assessee willnot weigh against holding that these are new andseparate undertakings. On the other hand thefact that a portion of the articles produced inthese two industrial undertakings had been soldin the open market to others is a circumstance infavour of the assessee that the new industrialunits can function on their own. Use of thearticles by the assessee is not decisive to denythe benefit of Section 15-C.18. Section 15-C partially exempts from taxa new industrial unit which is separatephysically from the old one, the capital of which https://hcservices.ecourts.gov.in/hcservices/ and the profits thereon are ascertainable. Thereis no difficulty to hold that Sec.15-C isapplicable to an absolutely new undertaking forthe first time started by an assessee. The caseswhich give rise to controversy are those wherethe old business is being carried on by theassessee and a new activity is launched by him byestablishing new plants and machinery byinvesting substantial funds. The new activity mayproduce the same commodities of the old businessor it may produce some other distinct marketableproducts, even commodities which may feed the oldbusiness. There products may be consumed by theassessee in his old business or may be sold inthe open market. One thing is certain that thenew undertaking must be an integrated unit byitself wherein articles are produced and at leasta minimum of ten persons with the aid of powerand a minimum of twenty persons without the aidof power have been employed. Such a newindustrially recognisable unit of an assesseecannot be said to be reconstruction of his oldbusiness since there is no transfer of any assetsof the old business to the new undertaking whichtakes place when there is reconstruction of theold business. For the purpose of Section 15-Cthe industrial units set up must be new in thesense that new plants and machinery are erectedfor producing either the same commodities or somedistinct commodities. In order to deny thebenefit of Section 15-C the new undertaking mustbe formed by reconstruction of the old business.Now in the instant case there is no formation ofany industrial undertaking out of the existingbusiness since that can take place only when theassets of the old business are transferredsubstantially to the new undertaking. There isno such transfer of assets in the two cases withwhich we are concerned." (underlining is ours) 28. In the subsequent decision reported in AIR 2003 SC 1132(supra), the Supreme Court applied the principles set out in thedecision reported in AIR 1977 SC 1134 (supra) in respect of a casewhich arises under the Bombay Electricity Duty Act, 1958, whichprovided for exemption from electricity duty under that Act. TheSupreme Court set out the facts involved in that case in paragraph 2,which are to the following effect:"2. Briefly the facts are that therespondent is engaged in manufacture of portlandcement. It installed a manufacturing plant in theyear 1960 with a capacity of producing 660 metrictones of clinker per day. The respondent added https://hcservices.ecourts.gov.in/hcservices/ one more kiln in 1965 and increased itsproduction capacity to 1000 metric tones. ByAugust 1969 the respondent installed furthermachinery in a new building erected within thesame premises to further increase its productioncapacity. The respondent installed a new kilnalong with separate silos, lepol and nodulizers,coal mill and cement mill. This unit startedmanufacturing cement on 24 June, 1971. The unitwas using existing idle capacity of crushers,cranes, packing machines, coal mills, and rawmills." While the respondent in that case claimed that new kiln set up in1969 was a new industrial undertaking as contemplated by Section 3(2)(vii)(b) of the Bombay Electricity Duty Act, 1958, which contentionfound favour with the High Court, the Supreme Court has held as underin paragraph 10:"10. This meaning is to be applied to thefacts on record. The respondent company when itinitially started had a production capacity of660 metric tonnes which was subsequentlyincreased to 1000 metric tonnes. In 1969-70 bysetting up the alleged new unit, productioncapacity of the company more than doubled. Butas already seen this unit is not self-contained.It is not an independent viable unit. It isdependant on various items of plant and machineryand mills of the existing unit. Furtherrespondent was having two kilns and third isadded. This leads to the inevitable conclusionthat the new unit is an expansion of an existingundertaking in the State. Once it is held to be acase of expansion, the claim for exemption fromelectricity duty, set up by the respondent,completely falls to the ground. In the facts andcircumstances of the case we are clearly of theview that the respondent is not entitled toexemption from electricity duty. The High Courtfailed to apply the real test which emerges fromthe judgment of this Court in Textile MachineryCorporation (supra) which was affirmed in asubsequent decision in Bajaj Tempo Ltd. Bombay v.Commissioner of Income Tax, Bombay City-III,Bombay (1992 (3) SCC 78). Accordingly, thisappeal is allowed. The judgment of this HighCourt under appeal is set aside. The respondentis held not entitled to exemption fromelectricity duty." (underlining is ours)29. From a reading of the above referred two decisions, it willhave to be held that in the light of the G.O.Ms.No.29, dated https://hcservices.ecourts.gov.in/hcservices/

31.1.1995, while considering the various material facts relating tothe two industries of an entrepreneur, if it were to be held that thesubsequent industry was by way of an 'expansion' of the existingindustry irrespective of the product manufactured in the subsequentindustry, if there is inter-dependence as between the former and thelatter, the latter can only be called as an 'expansion' of theformer. In such a situation, it can be seen that the existence ofthe latter would always depend upon the former, and in the event ofthe former establishment failing, there would be very little scopefor the latter to continue to exist, even though there would be onlycash investment of the former without transfer of other assets by theformer to the latter. However, in contra distinction to the above,in the case of a 'new industry', both the Units will be independentlyexisting without any inter-dependence. Even if there is any source ofsupply from the subsequent Unit to the earlier existing Unit, that byitself would not in any way affect the independent existence of thelatter, so long as its trading operation is totally independent ofthe former. Added to the above test, such other factors, namelyindependent registration under the relevant Act as well as taxstatutes, employment of different set of employees governed by thedifferent set of working condition, independent coverage under theprovisions of the Employees' Provident Fund and MiscellaneousProvisions Act, Employees' State Insurance Act and other welfarelegislations, would also be available to the entrepreneur to claimthat such establishment should be construed as a 'new industry' andnot an 'expansion' of the existing industry. 30. In this context, it would be relevant to refer to Section 20of the Tamil Nadu General Sales Tax Act and Rules 43 and 45 of theTamil Nadu General Sales Tax Rules, which read as follows:“Section 20: Registration of dealers – (1)(a): Every dealer whose total turnover in anyyear is not less than three lakhs rupees shall,and any other dealer or person intending tocommence business may, get himself registeredunder this Act.” “Rule 43: If at any time aregistered dealer (a) discontinues or sells orotherwise disposes of, the whole or any part ofany business carried on by him, or (b) changeshis place of business or any of his places ofbusiness, or (c) opens a new place of business,or (d) changes the name of any business carriedon by him, he shall notify the fact to theregistering authority and to the assessingauthority if he is different from theregistering authority, and if the registereddealer has more than one place of business, alsoto the Commercial Tax Officer or the DeputyCommercial Tax Officer in whose area ofjurisdiction the registered dealer has a placeof business, within thirty days thereafter.” https://hcservices.ecourts.gov.in/hcservices/ “Rule 45: Every dealer who is liable toregistration under section 20 of the Act and whois an undivided Hindu family, an association ora club, society, firm or company or who carrieson business as the guardian, or trustee orotherwise on behalf of another person, shall,within the period specified in rule 24, send tothe registering authority and to the assessingauthority if he is different from theregistering authority and if the dealer has morethan one place of business, also to theCommercial Tax Officer or the Deputy CommercialTax Officer in whose area of jurisdiction thedealer has a place of business, a declaration inForm XI stating the name of the person who shallbe deemed to be the manager of such dealer'sbusiness for the purposes of the Act. Allstatements and returns submitted by such managershall be binding on the dealer. Such declarationmay be revised from time to time.” 31. To get independent registration of the business, fulfilmentof such statutory requirements, would also be relevant to be examinedwhen an entrepreneur claims the benefit of tariff concession underthe premise that the subsequent industry is a new industry. 32. In view of the above stated legal background, when theclaim of the respondent is to be considered, we find that theparticulars, based on which the respondent claims tariff concessionon the footing that its 'B' Unit should be construed as a 'newindustry', are not sufficient enough to come to a definiteconclusion. As far as the impugned order dated 30.12.1997 of thesecond appellant is concerned, the only reason which weighed withhim was that the main machineries installed in both the Units are thesame, namely 'ring-frame spinning machineries', that both the Unitsmanufactured '60s count yarn' and therefore, the 'B' Unit should beheld to be an 'expansion' Unit of the 'A' Unit.33. At the outset, it will have to be held that such a solitarytest applied by the appellants to reject the claim of the respondent,cannot be accepted. Therefore, on the face of it, the order impugnedin the Writ Petition is liable to be set aside. However, since thevery many factors which are to be considered for reaching aconclusion as to whether the 'B' Unit of the respondent is a 'newindustry' or 'expansion' of the 'A' Unit, were neither placed beforethe appellants, nor substantiated with relevant materials, we are notin a position to give a definite finding based on the avermentscontained in the affidavit filed in support of the Writ Petition.Therefore, it will not be proper for this Court to either grant therelief to the respondent or non-suit it. Since the appellants are thecompetent authorities to examine any claim for tariff concessionbased on G.O.Ms.No.29, dated 31.1.1995, we are of the considered viewthat the respondent can be directed to furnish all the particulars in https://hcservices.ecourts.gov.in/hcservices/ support of its claim that the 'B' Unit should be construed as a 'newindustry' and not an 'expansion' of its 'A' Unit. In the event ofsuch materials being placed before the appellants, the appellants canbe directed to consider the same on its own merits and in accordancewith law, and in the light of the guidelines set out by us in thisjudgment and pass appropriate orders as to the respondent's claim fortariff concession under G.O.Ms.No.29, dated 31.1.1995 either as a'new industry' or as an 'expansion' of its existing 'A' Unit.34. Though at the instance of the appellants, certainsubmissions were made as regards the location of the respondent's 'B'Unit, as has been raised in paragraph 9 of their written submissions,having regard to the fact that the appellants have accepted theposition that the respondent is entitled for the tariff concession,we feel it appropriate to hold that such a stand now raised on behalfof the appellants to reject the very claim of the respondent fortariff concession based on G.O.Ms.No.29, dated 31.1.1995, cannot bemade and such a stand of the appellants is hereby rejected.35. In the light of our above conclusions, we set aside theimpugned order of the second appellant dated 30.12.1997 and therespondent is permitted to move the third appellant in the form of astatement of claim furnishing all the particulars in support of itsstand that its 'B' Unit is a 'new industry' and not an 'expansion' ofthe existing 'A' Unit and also submit all the relevant documents insupport of the said stand. The respondent shall submit such statementof claim along with supporting materials within one month from thedate of receipt of a copy of this judgment. On such statement ofclaim being filed by the respondent, the appellants shall considerthe same and pass appropriate orders on merits and in accordance withlaw, expeditiously, preferably within a period of one month from thedate of filing of such statement of claim by the respondent. TheAppellants can pass such order uninfluenced by whatever stated by thelearned single judge.36. The Writ Appeal however fails and the same is dismissed.The order of the learned single Judge is upheld on the reasoning andrelief granted herein. No costs. C.M.P. and V.C.M.P. are closed.csSd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ To1. The Chairman, Tamilnadu Electricity Board, No.800, Anna Salai, Chennai-2.2. The Member (Distribution), Tamilnadu Electricity Board, No.800, Anna Salai, Chennai-2.3. The Superintending Engineer, Virudhunagar District Electricity Distribution Circle, Tamilnadu Electricity Board, Virudhunagar - 626 001.1 cc to Mr.S.Kadarkarai, Advocate, SR.42297mdr (co)dv/27.10.06W.A.No.701 of 1999