Formula-based fuel surcharge must be computed strictly within the tariff formula; extraneous elements cannot be included.
Fuel surcharge fixed under a tariff notification was upheld as a formula-based, subordinate legislative levy, so judicial interference was limited and the absence of hearing or detailed reasons did not by itself invalidate it. However, the computation had to remain strictly within the prescribed formula: electricity purchases from TVNL could not be inserted as if TVNL existed in the base year, and deemed supply by DVC to TISCO could not be treated as a separate rate basis for the same source. The amount paid by the coal companies was directed to be adjusted in the recalculation on actuals. The surcharge regime was sustained in principle, but the figures had to be reworked by excluding impermissible elements.
Issues: (i) Whether the formula-based levy and computation of fuel surcharge under the tariff notification could be interfered with on the ground of illegality or arbitrariness. (ii) Whether purchase of electricity from TVNL could be included as a component for calculating the incremental cost in the fuel surcharge formula. (iii) Whether deemed supply by DVC to TISCO could be treated as a separate basis for computing the relevant purchase rate under the formula. (iv) Whether the amount of Rs. 100 crores paid by the coal companies had to be taken into account for reworking the fuel surcharge.
Issue (i): Whether the formula-based levy and computation of fuel surcharge under the tariff notification could be interfered with on the ground of illegality or arbitrariness.
Analysis: Fuel surcharge was treated as part of tariff, and the rate-fixing exercise under the tariff notification was characterised as a legislative or subordinate legislative function involving an arithmetical computation rather than an adjudicatory determination. In that setting, the scope for judicial interference was limited, and absence of hearing or elaborate reasons did not by itself invalidate the exercise. The Court also accepted that the Board was entitled to levy fuel surcharge within the framework of Section 49 of the Electricity (Supply) Act, 1948, subject to consistency with the prescribed formula.
Conclusion: The formula-based levy of fuel surcharge was upheld, subject only to correction of computations that departed from the formula.
Issue (ii): Whether purchase of electricity from TVNL could be included as a component for calculating the incremental cost in the fuel surcharge formula.
Analysis: The formula required the increase in the average unit rate of purchase to be computed with reference to the stipulated base year. TVNL came into existence only in 1996-97 and therefore could not be treated as if it had existed in the base year for the purpose of calculating the incremental increase. Inclusion of TVNL in the computation would distort the formula and introduce an extraneous element into the surcharge calculation.
Conclusion: TVNL could not be included in the computation in the manner adopted by the Board.
Issue (iii): Whether deemed supply by DVC to TISCO could be treated as a separate basis for computing the relevant purchase rate under the formula.
Analysis: The Court held that DVC was one source, and the formula contemplated the actual increase in average unit rate of purchase from that source. The deemed supply arrangement did not justify treating the same source as if it generated two different rates for the purpose of the surcharge computation. To that extent, the Board's calculation departed from the formula and was not sustainable.
Conclusion: Deemed supply to TISCO could not be treated as a separate basis for computing the purchase rate under the formula.
Issue (iv): Whether the amount of Rs. 100 crores paid by the coal companies had to be taken into account for reworking the fuel surcharge.
Analysis: The amount was relevant to the accounts and could affect future recalculation, but the High Court's view that it was not material for the earlier period was not found wholly unsustainable. The matter required adjustment on actuals and was directed to be worked out within a specified time.
Conclusion: The amount of Rs. 100 crores was directed to be adjusted in the recalculation on actuals.
Final Conclusion: The fuel surcharge regime was upheld in principle, but the computation had to be corrected by excluding impermissible elements and by adjusting the accounts as directed. The Board's appeals failed, while the connected matters were disposed of with directions for reworking the figures.
Ratio Decidendi: A tariff-based surcharge fixed under a prescribed formula must be computed strictly within that formula, and any extraneous source or artificial classification that distorts the prescribed base-year comparison cannot be included in the calculation.
TaxTMI 
AI Drafter ✕
TaxTMI 
