Decided on September 11,1979

STATE Respondents


M.P.THAKKAR - (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 the 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 sec. 3(2) (vii) (b) of the Bombay Electricity Duty Act which entitles an undertaking established on or after 1st 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 i.e. after 1-1-62?
(2.) A Company known as Bharatkhand Textiles Manufacturing Co. Ltd. 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 Rs. 55 0 0 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 bills 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 sec. 3(2) (vii) (d) and that the demand for electricity duty was not in accordance with law. The Ahmedabad 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 sec. 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 in 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 il cannot be said that an undertaking had been established after May 1 1960 In this view of the matter the learned trial Judge carne 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 has 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 fights accrued in itsfavour and such other rights.;

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