Essar group had then approached the Gujarat high court which had last year asked the company to pay the electricity duty to the state government.

New Delhi: The Supreme Court today reserved its verdict on a plea of Essar Steel and Essar Power challenging the Gujarat High Court order holding the company liable to pay Rs 1038.27 crore towards electricity duty to the state government.

Essar has been seeking electricity duty exemption for its power plant set up at Hazira but the Gujarat government had rejected its demand, as it sold power to other entities.

The state government had earlier said that electricity duty exemption was only for captive power plants and Essar had not sought prior permission to set up the plant to meet the purpose of selling electricity.

A bench of Justices A K Sikri and Ashok Bhushan concluded the hearing on the appeal filed by Essar against the High Court's order of last year. Counsel, appearing for Essar group companies, said its plant was a captive power plant which supplied power to its stake holders.

He said that Gujarat power board has 58 per cent stake in the power plant while 42 per cent are of other stake holders and it was very much within permissible limits to supply electricity to them.

"It has to be treated as captive power plant because it has generated electricity for its own stake holders and its own use," the counsel said.

Senior advocate C A Sundaram appearing for the state government said the company had itself admitted in one of its letters that they were not captive power plant but a electricity generating unit. He said 58 per cent stake in the plant was of the state government while 42 per cent stake was of Essar Steel and the electricity it generated was being supplied to other firms.

"The state government is seeking tax for the electricity they have generated and supplied to group companies and others and it is not the case that they have used the electricity generated for its own use," Sundaram said, adding that its a power generating company under the State Electricity Act.

He said the state government stood by the verdict of the High Court and the company was liable to pay electricity duty. The state government had earlier said that the electrcity duty exemption was only for the captive power plants and Essar had not sought prior permission to set up the plant to meet the purpose of selling electricity.

The state government had first refused Essar group's claims for duty exemption on electricity in 2003 and asked it to pay more than Rs 1,000 crore that was allegedly due. Essar group had then approached the Gujarat high court which had last year asked the company to pay the electricity duty to the state government.