1. A search for the heart of the problem in this first appeal referred by a Division Bench to a larger Bench reveals that the solution lies in 4he answer to the, crucial, question:-
Whether the plaintiff Company which has purchased in 1964 an industrial undertaking that was in existence prior to May 1, 1960 and was manufacturing goods prior to that date can claim exemption under Section 3(2)(vii)(b) of the Bombay Electricity Duty Act which entitles an undertaking established on or after lst May 1960 to claim exemption from payment of duty for a period of five years from 1-1-62 or the date on which the undertaking commences manufacture of goods in case the manufacture of goods is commenced later L e. after 1-1-62?
2. A Company known as 'Bharatkhand Textiles .', hereinafter referred to as 'Bharatkhand Textiles', was engaged in manufacturing of textiles. It was manufacturing textiles from before May 1. 1960. In 1963 the Company was involved in financial difficulties. On April 10, 1963 it closed down the manufacture of textiles. On May 1,1963 two petitions (Company Petitions Nos. 9/63 and 10/63) for winding up of the Company were presented in the High Court. The plaintiff-Company, The New Swadeshi Mills of Ahmedabad Ltd., which is also a Company which was established before May 1, 1960, and was producing textiles from before May 1, 1960 made an offer to purchase the manufacturing unit of Bharatkhand Textiles consisting of the entire block inclusive of land, building, machinery etc. A scheme was presented before the High Court and after obtaining the sanction of the High Court the block of manufacturing unit was sold and conveyed to the plaintiff Company for a consideration of Rupees 55,00,000. It is the case of the plaintiff Company that it entered into financial arrangement with the Central Bank of India and restarted manufacture of textiles under the name and style of Manjushri Textiles on January 15, 1964. The competent authority presented bill for electricity duty for the period from January 15, 1964 to November 19, 1964. Thereupon the plaintiff Company addressed letter, Ex. 11 dated November 19, 1964 and lodged a protest on the premise that the plaintiff Company was entitled to exemption from payment of electricity duty under Section 3(2)(vii)(b) and that the demand for electricity duty was not in accordance with law. The Ahmdabad Electricity Company, defendant No. 2 herein, addressed a communication dated December 7, 1964 as per Ex 157 and requested the Collector to decide the claim for exemption for five years from January 15, 1964 made by the plaintiff Company. By order Ex, 13 the Collector rejected the claim on June 15, 1965. The plaintiff Company served a statutory notice on November 9, 1965 and instituted the suit giving rise to the present appeal on July 19, 1966. The case of the plaintiff Company was as follows. It had 'not' Purchased the 'running business' of Bharatkhand Textiles with 'goodwill' but it had only purchased the block of Bharatkhand Textiles along with the land and machinery etc., had overhauled the machinery, and had installed some items of machinery which were missing. What had come into existence was a complete economic unit and the plaintiff-Company had made a financial arrangement with the Central Bank of India and had made investments from time to time for operating the unit under the name and style of Manjushri Textiles. On these premises it was contended that the plaintiff Company was entitled to exemption from payment of electricity duty having regard to the provision contained in Section 3(2)(vii)(b). The learned trial Judge came to the, conclusion that the evidence disclosed that the plaintiff-Company had purchased the entire block consisting of land and machinery along with the right to the tex marks, the quotas ins respect of cotton, printing, Dhoties etc. of Bharatkhand Textiles as also the Industrial licence and the factory licence of the Bharatkhand Textiles had been transferred to the plaintiff Company for running the undertaking in the name of Manjushri Textiles by operating the productive unit purchased from the Bharatkhand Textiles and that under the circumstances it cannot be said that an undertaking had been established after May 1, 1960. In this view of the matter the learned trial Judge came to the conclusion that the plaintiff Company was not entitled to claim exemption and dismissed the suit. Thereupon the plaintiff Company has approached this Court by way of the present appeal which has been referred to a larger Bench by an order dated February 21, 1979 passed by a Division Bench of this High Court.
3. The order of the High Court under which the conveyance in favour of the plaintiff Company had been executed is at Ex. 105. It shows that the plaintiff Company was not liable for past liability of the Bharatkhand Textiles except and save to the extent that on restarting of the Mills all employees of Bharatkhand Textiles would have to be offered employment. It is also provided in the order that the plaintiff Company would have to treat the services of such employees as continuous taking into account the past services rendered by them with Bharatkhand Textiles. It was also provided therein that the plaintiff Company would be entitled to the benefits of all tex marks belonging to Bharatkhand Textiles, the quota rights accrued in its favour, and such other rights.
4. Some facts which have significance and are not disputed require to be placed into focus and high-lighted for resolving the problem:-
(1) The plaintiff Company, the New Swadeshi Mills of Ahmedabad Limited, was established and was manufacturing textiles prior to the critical date viz. 1-5-60. It is neither established after 1-5-60 nor has it commenced production after 1-5-60.
(2) The plaintiff Company has purchased the block of the manufacturing unit of Bharatkhand Textiles comprising land, structures and machinery along with the right to use its tex marks, avail of its cotton and Dhoti quota and other quotas, and to use its factory licence and the right to avail of the priority of electricity-load etc.
(3) The plaintiff Company is operating the aforesaid unit under the very same licence issued in favour of the Bharatkhand Textiles in the context of the relevant provisions of Industries (Development and Regulations) Act of 1951 without obtaining a new licence after the purchase (see Ex. 161).
(4) No manufacturing or productive unit which was not manufacturing or producing goods prior to the, critical (sic) date (May 1, 1960) has been established after the said date or has commenced production after the said date.
5. In the backdrop of the aforesaid facts which are not in dispute the question has arisen as to whether the plaintiff Company , is entitled to claim immunity from the payment of' electricity duty in the light of Section 3(2)(vii)(b) of the, Bombay. Electricity Duty Act, 1958. The said provision in so far as material deserves to be quoted:--
'3(2) Electricity duty shall not be leviable on the units of energy consumed-
(vii) by an - Industrial undertaking (other than an industrial understating to which sub-section (3) applies) until the expiry of the following period, that is to say:-
(a) in the case of an undertaking which generates energy for its own use, ten years from the date of the commencement of the Bombay Electricity Duty (Gujarat Second Amendment) Act, 1961 (hereinafter referred to as 'the commencement date') or the date of starting the generation of such energy, whichever is later.
(b) in the case of an undertaking established an or after the Ist May 1960, which does not generate energy for its own use, five years from the commencement date or the date on which the undertaking commences manufacture of goods, whichever is later.'
An examination of the anatomy of the aforesaid provision leads to the following analysis:-
(1) A claimant for exemption must have established an undertaking on or after May 1, 1960 which must have commenced production an or after May 1, 1960.
(2) If production is commenced after May 1, 1960 but before the commmeement date (which expression is defined in clause (a) to mean the date of the enforcement of the Amending Act), the exemption will hold good for five years commencing on 1-1-62 (that being the date of the enforcement).
(3) if production is commenced after 1-1-62, exemption will be available for five years calculated from the date of commencement of production.
No doubt the exemption under clause (b) can be claimed only if the undertaking does not generate energy for its own use. But then it is common ground that the plaintiff Company does not do so. We need not therefore dwell on this aspect for the purposes of the present matter. In view of the aforesaid analysis, it will have to be shown by the Plaintiff Company that it has established the productive unit concerned on or after May 1, 1960 and that it has commenced production some time on or after May 1, 1960. Now, in the present case it is not contended by the plaintiff Company that it was established as a Company after May 1, 1960. It is also not the claim of the plaintiff Company that the productive unit purchased by it in 1964 has come into existence for the first time after May 1, 1960. It is an admitted position that the said unit was manufacturing and Producing textile goods even prior to May 1, 1960 at the point of time when the unit was owned by Bharatkhand Textile . It is not the case of the plaintiff Company that manufactured goods or products were produced by this productive unit for the first time after May 1, 1960. It is, therefore, clear that the plaintiff Company does not fulfil Conditions Nos. 1 and 3 adumbrated hereinabove. It is also not in dispute that all that has happened is that the plaintiff Company has purchased the block of the Bharatkhand Textile Mill including the land, structures and the productive unit comprising of the machineries etc. from Bharatkhand Textile Mills Ltd. which was established before 1960 and which was manufacturing and producing goods before May 1, 1960. All that has happened is that the ownership has changed hands. Mere change of ownership after May 1, 1960, it is obvious will not satisfy the condition regarding astablishment of an undertaking on or after May 1, 1960. Another change which has occurred is that the name of the productive unit has been changed to Manjushn Textiles owned by the plaintiff Company. It is also clear that mere change in the name of the productive unit after May 1, 1960 is not sufficient to hold that an undertaking has been established after May 1, 1960. Apart from these two changes no other change has taken place in regard to the productive unit which was manufacturing the goods under the ownership of Bharatkhand Textile , from before May 1, 1960 till the owners of the plant were obliged to cease production, an account of economic difficulties, an April 10, 1963. It is no doubt true that production ceased an April 10, 1963 and was recommenced some nine months thereafter on January 15, 1964 on which date production was commenced by the plaintiff Company. But the mere fact that the production was discontinued by this unit for about nine months by itself is a circumstance which cannot help the plaintiff Company. Surely it cannot be said that manufacture or production was commenced for the first time after May 1, 1960, for manufacture and production was, being made by this very Plant at this very place from before May 1, 1960 and all that had happened was that there was an interruption in production for about nine months between April 1963 and January 15, 1964. Resumption of production after an interruption cannot be equated with commencement of production by the unit for the first time. Of course it can be said that the Plant resumed or recommenced production on January 15, 1964. It cannot, however, be said, without violating truth. that manufacture or Production was commenced for the first time on January 15, 1964 i. e. on a date after May 1, 1960. The position would remain the same whether the original owner, Bharatkhand Textile ., resumed or recommenced production after an interruption of nine months or whether a purchaser, namely, the plaintiff Company did so. Nothing turns on the question as to who owned the Plant before interruption or at the point of time of recommencement. If the same owner cannot claim exemption from payment of electricity duty by the mere reason of interruption of production for nine months, the subsequent purchaser cannot claim exemption by virtue of the said circumstance. It hardly needs any argument to support this proposition. If the same owner closes down the manufacturing unit for nine months and resumes or recommences production after nine months, it cannot be said that the undertaking has commenced production for the first time after May 1, 1960 because it was manufacturing and producing goods even before May 1, 1960 and it has continued to do so albeit after a short interruption which occurred in 1963. The dividing line is of May 1, 1960 and it must be shown that the unit concerned was not manufacturing or producing goods prior to May 1, 1960 and commenced doing so only after the critical date viz. May 1, 1960 as enjoined by Section 3(2)(vii)(b). On a plain reading of the provision it is therefore evident that the plaintiff Company cannot claim exemption under the aforesaid provision. No serious question of interpretation of the Provision in the facts and circumstances of the case can or does arise. Were it necessary to undertake the exercise of interpretation of the said provision, it would have to be done in the light of the intendment and the purpose of the exemption clause, which is writ large, on the face of the provision. The Legislature could not have contemplated grant of exemption so as to violate the antidiscrimination mandate of the Constitution. Exemption could be extended to a class of consumers subject to the rider that the classification could successfully withstand a challenge made from the platform of discrimination by answering the test of rationality and nexus with the object underlying the policy of exemption Legislature must be ascribed the awareness of this aspect That is why the conceivable purpose of the exemption clause must be deciphered. Having regard to the fact that the exemption clause has in its perspective an undertaking established on or after May 1, 1960 which has commenced production thereafter, and that it contemplates exemption for five years after commencement during the infancy of the undertaking, it is possible to conceive of three objects for designing the aforesaid provision; (1) In view of the fact that the critical date has been specified as May 1, 1960. it would be reasonable to assume that the Legislature had in its mind the date of the formation of State of Gujarat which was carved out from the bigger bilingual State of Bombay and was established on that date. The conceivable purpose in providing for exemption in the case of an undertaking established after May 1. 1960 i e. the date on which the State of Gujarat was established, was presumably to encourage establishment of new industrial units with a view to developed the industrial capacity of the nascent State- Establishment of new units would result in production of more consumer goods for the citizens as also provide more employment opportunities for the citizens of Gujarat. It would accelerate the industrial growth of the newly born State, (2) Another conceivable purpose is to attract capital investment in the newly formed State. If exemption from duty was granted for the first five years during the infancy period of the newly established industry, it would tempt industrialists to investor capital in the State of Gujarat, and (3) perhaps it was intended that new entrepreneurs should be encouraged so that the pace of industrial development could be accelerated.. It stands to reason, for a new entreprenuer cannot compete on equal terms with his counterparts who are already well entrenched. A Company which was already established and had found its feet in business does not need any protection or concession whereas an industry which is newly established would take time before it can commence making profits and compete on equal terms with the existing undertakings. In fancy benefit by way of exemption from electricity duty was Perhaps extended from this perspective. Be that as it may, One thing is clear. The exemption was not extended without some purpose and if the productive capacity was not to be augmented after May 1, 1960, there was no question of according exemption. The productive capacity prior to May 1, 1960 and the capacity subsequent thereto has to be placed in juxtaposition and one has to find out whether by virtue of the establishment of the undertaking (which claims exemption) productive capacity which was not in existence has come into existence. This object could never be served by the change of ownership or the change of name of the same productive unit. It may also be realised that cessation of manufacturing activity for nine months in 1963 has no relevance because the test to be satisfied is the test with reference to the critical date of May 1, 1960, and with reference to no other date, apart from the fact that, as discussed earlier, mere disruption in production cannot justify the claim for exemption Otherwise the owner of an undertaking can always discontinue production for a short interval and claim exemption. It would make little difference whether the same owner resumes production after interruption or some other concern does so. It is, therefore, difficult to comprehend how the plaintiff company can claim exemption. on the hypothesis that it has established an undertaking after May 1, 1960 which has commenced manufacture of goods for the first time thereafter.
6. Learned counsel for the plaintiff Company, however, contended that the expression 'undertaking' is of wide import and includes not only the plant of the factory but also the organisation Reliance has been placed on the meaning assigned to the said expression in Corpus Juris Secundum, Vol. 90, at -page 1031, namely-.-
'A very comprehensive and sweeping term......................... In still another sense, it is an enterprise, any business, work, or project which a person engages in or attempts to perform, and in this sense the term has been distinguished from plant.'
Reliance is also placed on R. C. Cooper v. Union of India, AIR 1970 SC 564, wherein Ray J. (as he then was) has observed in paragraph 175 that 'the company whether it has a plant or whether it has an organisation is considered as one whole unit and the entire business of the going concern is embraced within the word 'undertaking'.' It is argued that instead of the old organisation of Bharatkhand Textiles a new organisation has come into existence. Funds belonging to the plaintiff-Company have come to be employed and the plaintiff-Company has borrowed large amounts from the Bank in order to finance the manufacture and production of goods through the instrumentality of this productive unit. It is argued that under the circumstances it must be treated as an undertaking which has been established in 1964 after the plaintiff-Company purchased the block of productive unit including land, structures, machineries etc. In our opinion, howsoever widely and elastically the expression 'undertaking' may be construed, it cannot buttress the claim of the plaintiff Company for exemption under Section 3(2)(vii)(b) for the very good reason that it cannot be said that it is established on or after May 1, 1960 and has commenced manufacture of goods thereafter. The plaintiff Company, namely, the New Swadeshi Mills of Ahmedabad Limited was established or formed as a Company much prior to the critical date of May 1, 1960. It is not established after the said date as the Company. Merely because it has purchased a unit which was already producing goods before May 1, 1960, it cannot be said that it is an undertaking established after May 1, 1960. If it had established a productive unit which was not producing goods before May 1, 1960, it might have been said that a productive unit had been established after May 1, 1960. Nor can it be said that this productive unit has commenced manufacture or production on or after May 1, 1960 for this very unit was already manufacturing and producing goods prior to May 1, 1960, albeit, when it was owned by Bharatkhand Textiles from whom the plaintiff Company purchased the plant. We are, therefore, unable to comprehend how the plaintiffCompany can without doing violence to language and to truth say that an undertaking has been established after May, 1960 which has commenced production after May 1, 1960.
7. Learned counsel for the plaintiff-Company called our attention to the amendment introduced by Gujarat Act No. 20 of 1968 whereby a transformation has taken place in regard to the exemption clause embodied in Section 3. It appears that the relevant provision has been amended in the light of the experience of the working of the provision gathered during the intervening seven years. The provision has been made more elaborate and exhaustive. Presumably in the light of the experience of the working of the exemption clause some policy departures were considered necessary. It may be stated that a number of claims had been advanced for exemption which had resulted in a number of petitions having been filed in the High Court (for instance Special Civil Applications Nos. 1077/67 and 1338/67) which were ultimately disposed of on August 20, 1970. Perhaps the contentions raised therein awakened the Legislature to the need for taking a fresh look at the existing provision. Be that as it may we do not comprehend how the amendment introduced seven years after the enactment of the aforesaid provision can render assistance in regard to the question posed by the present appeal or help us in the interpretation of S. 3(2)(vii)(b) as it was enacted in 1961 and as it stood at the time when the claim for exemption arose between 1965 to 1968. All the same we will deal with the submission urged by the learned counsel in the light of the aforesaid provision which reads as under:-
'3 (2). Electricity duty shall not be leviable on the units of energy consumed:-
xx xx xx(vii) for motive power and lighting in respect of premises used by an industrial undertaking for industrial purpose until the expiry of the following period, that is to say:-
(a) in the case of an industrial undertaking which generates energy for its own use, ten years from the date of the commencement of the Bombay Electricity Duty (Gujarat Second Amendment) Act, 1961 (hereinafter referred to as 'the commencement date') or the date of starting the generation of such energy, whichever is later;
(b) in the case of a new industrial undertaking established on or after lst May, 1960, which does not generate energy for its own use, five year from the commencement date or the date on which the industrial undertaking commences for the first time manufacture or production of goods, whichever is later:
Provided that no industrial undertaking shall be entitled to exemption from payment of electricity duty under this clause, unless it has obtained a certificate regarding eligibility for such exemption in prescribed form by making an application therefor in prescribed form and within prescribed period to such officer as the State Government may, by notification in the Official Gazette, specify.
Explanation:- 1. For the purposes of clause (vii)
(i) xx xx(ii) 'a new industrial undertaking' means any such industrial undertaking which-
(a) is not formed by the splitting up or the reconstruction of a business or undertaking already in existence in the State; or
(b) is not formed by transfer to a new business or undertaking of a building, machinery or plant previously used in the State for any industrial purpose, of such value in relation to total investments, as the State Government may, by notification in the Official Gazette, specify; or
(c) is not an expansion of the existing business or undertaking in the State.' ,
It is evident that the Legislature has now restricted the exemption to a new industrial undertaking as defined by clause (ii) of Explanation 1. It is now provided that an undertaking formed by 'transfer' to a new business or undertaking of a building, machinery or plant previously used in the State will not fall within the definition of new industrial undertaking unless having regard to its value it satisfies the test prescribed by a notification that may be issued. It also provides that an expansion of an existing business or undertaking in the State will not fall within the description of a new industrial undertaking. it is, thus, clear that under the amended Act by virtue of Explanation 1 (ii) (b) the plaintiff-Company can perhaps claim exemption in case the test regarding the value of the plant in relation to total investments prescribed in the notification of the State Government is satisfied. Counsel for the plaintiff Company has stated at the Bar that no such notification has been issued as far as he is aware. If that be so even today, after the enforcement of the amended provision, the plaintiff Company cannot claim exemption. If a notification had been issued, the plaintiff Company might have been enabled to claim exemption subsequent to 1968 (with which period we are not concerned for the present purposes) provided it satisfied the test as regards the value of the plant in relation to its investment. Even so it would be subject to one rider. It can do so provided it can be said that the plaintiff Company is a new undertaking to which a plant previously used in the State for any industrial purpose has not been transferred. It will also depend on the meaning and content of the expression 'new business undertaking'. Be that as it may, the fact that by virtue of the amendment in 1968 the plaintiff may be enabled to claim exemption in respect of the productive unit purchased by it in 1963, can scarcely support the plaintiff's claim in the context of the exemption clause as it stood at the relevant time before the amendment of 1968. We have to consider the claim on the basis of the unamended provision as it stood at the material time. The fact that the Legislature introduced a provision subsequent to the relevant period under which exemption could possibly be claimed is no ground to interpret the provision contained in the 1961 statute differently. It cannot be construed with a hindsight available 7 years later. Surely it cannot be argued that the Legislature when it enacted the 1961 Act meant to confer the benefit by way of exemption to a transferee undertaking even though the provision as it stood at the material time did not admit of any such construction. We have already analysed the relevant provision and have concluded that the plaintiff Company cannot claim the benefit of the exemption clause embodied in Section 3(2)(vii)(b) as it stood till 1968 unless the productive unit purchased by it was established for the first time on or after 1960 and that it commenced Its production for the first time on or after May 1, 1960. None of these tests is satisfied. We cannot by recourse to any canon of construction resort to the flashback method and transport the provisions contained in the Amended Act of 1968 into the unamended Act and inject the subsequently born concept thereinto. We are, therefore, unable to accede to the argument urged on behalf of the plaintiff Company in the light of the amended provision. For the purposes of record it may be stated that reliance was also placed on P. G. Textile Mills (Pvt.) Ltd. v. Union of India, (1976) 17 Guj LR 18, by the learned counsel for the plaintiff Company. We do not propose to examine the ratio of the said decision as in the view that we are taking it is unnecessary to do so and as in our opinion, the ratio of that decision does not render any assistance in regard to the interpretation of the unamended provision embodied in Section 3(2)(vii)(b) as it stood at the material time prior to the amendment introduced in 1968. We may also mention that there is no occasion for reconsideration of the decision rendered by a Division Bench of this High court in Special Civil Application No. 1077-67 and the companion matters on August 20, 1970 in view of the fact that the problem posed in the present matter did not at all arise before the Division Bench. The High Court was inter alia confronted with a claim for exemption by existing Companies which had substantially expanded the productive units by installing new machinery and had substantially augmented the productive capacity. The High Court upheld their claim for exemption. We are not, however, concerned with any such question in the present appeal. We may also mention that the decision rendered in the aforesaid matter has been subjected to an appeal in the Supreme Court which we are told is still pending. We, therefore, do not consider it necessary to have a fresh look at the said decision though incidentally in the order of reference it has been stated that the aforesaid decision requires reconsideration by a larger Bench.
8. In the light of the foregoing discussion we are of the opinion that there is no merit in this appeal. We accordingly confirm the decree passed by the trial Court and dismiss the applied with cost.
9. An oral application for certificate of fitness for appeal to the Supreme Court under Article 133(1)(a) of the Constitution of India is made by the learned counsel for the appellant. In our opinion, the case does not involve any substantial question of law of general importance. We are therefore, unable to grant the certificate. Certificate is refused.
10. Appeal dismissed.