TaxTMI 
TaxTMI 
1992 (5) TMI 190
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....LIWAL, N.M. JJ. For the Appellants : K.Parasaran, A.K. Ganguli, K.R.D. Karanath and S. Sukumaran For the Respondent : P.P. Rao, R.N. Naransihma Murthy, S.K. Kulkarni, R.P. Wadhwani M.Veerappa and Kh. Nobin Singh The Judgment of the Court was delivered by G.N. RAY, J. This Civil Appeal arising out of Special Leave Petition (Civil) No. 5890 of 1988, is directed against the judgment passed by the Division Bench of Karnataka High Court on April 19, 1988 in Writ Petition No. 6257 of 1981. The appellants prayed for a Writ in the nature of certiorari for directing the respondents to withdraw the letter dated July 3, 1980 (Annexure G to the Writ Petition) and Notification dated June 30, 1980 and for appropriate writs and directions commanding the respondents to refund a sum of Rs, 60,28,175.08 collected by the respondent illegally. There was also a prayer for appropriate writs and directions on the respondents to withdraw the supplementary electricity bills for the months of November and December, 1980 and also the bills of January, 1981 and February, 1981 respectively (being Annexures CC, Y, X and GG) and for a direction to refund a sum of Rs. 18,40,800.58 collected by the respon....
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....lter plant at Belgaum. There was a tripartite agreement entered into between the Company, the Board and the State on March 26, 1966. Later on, a fresh tripartite agreement was entered into between the parties in modification of the aforesaid tripartite agreement and the latter agreement was entered into on August 7, 1976. In the said tripartite agreement several clauses were incorporated to ensure uninterrupted supply of power and there were also provisions for supply of power at concessional rates. The State promulgated the Electricity Supply Karnataka (Amendment) Ordinance, 1980 purporting to amend Section 49 of the Electricity (Supply) Act, 1948. Such Ordinance was replaced by the Karnataka Act 33 of 1981. Before the promulgation of the Ordinance which was replaced by the said Act, the Board increased the power rate in July 1980 far beyond the rate prescribed in the agreement. After promulgation of the Ordinance since replaced by the Act on February 1, 1981, the Board futher increased the tariff rates. The Aluminium Control Order was issued by the Central Government in 1970 to control the price of aluminium ingots, wire bars, billets etc. On July 15, 1975, the Central G....
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....such change of surcharge effective from June 1, 1980 had also been challenged and the legality and validity of imposition of surcharge for the period between July 1, 1980 to November 1, 1980 before the promulgation of the said ordinance, were challenged in the Writ Petition. On November 21, 1980, the State of Karnataka promulgated Electricity Supply (Karnataka Amendment) Ordinance for amending Section 49 of the Electricity (Supply) Act which as afsoresaid was replaced by Act 33 of 1981. The effect of such amendment of Section 49 of the Electricity (Supply) Act is that it has empowered the Board to increase tariff rates notwithstanding any agreement with the consumers. On February 2, 1981, the Board increased the tariff rate to Rs. 25.93 per unit. Being aggrieved by increase of tariff rates and consequential demands for payment of bills on the basis of increased tariff in complete disregard of the said agreement of 1976, the Company and one of its share holders moved the said Writ Petition No. 6257 to 1981 for the reliefs indicated hereinbefore. It may be indicated here that existing rate of electricity was Rs. 22.5 per unit and Rs. 22 per KVA on 27.5.1991. The Board had thereaft....
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....electricity is not only a motive power but also an important raw material. Uninterrupted supply of power at a very high degree is essentially necessary for breaking the chemical bond for aluminium oxygen in the compound of aluminium oxide. The process of manufacture of primary alumina is done at two stages-first, alumina, i.e., pure oxide of aluminium is extracted from its ore, bauxite by a chemical process. Such alumina is further processed in the smelter plant. In this smelter plant, the alumina is treated with the help of electrolytic cells. In the smelter plant at Belgaum, there are three lines with 492 installed electrolyic cells. Alumina is charged into the molten cryolite in which it gets dissolved and direct electric current is passed through it continuously. By the passage of electric current the alumina gets split into aluminum and oxygen. The cryolite is kept at a temperature of about 970 degree C. The melting point of aluminium is less than this temperature. The aluminium formed by the splitting up of the alumina is molten at this temperature and then it settles down at the bottom of the cells from which it is periodically siphoned out in the molten form for casting int....
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....th regard to the power and 'firm power' concept is the key note in this industry. Since aluminium industry requires a large amount of power not comparable with any other industry, cost of power is the most important element in the cost of production of aluminium. At the relevant time when the Writ Petition was presented the cost of power formed about 38% of the total cost of production and it is very strongly contended that in no other industry such large amount of power is required and consequently power cost element in the cost of production in other industries is substantially lower. In the aluminium policy notified by the Government of India in 1975, it was indicated that the production of aluminium metal had declined considerably since 1971-72 in spite of the fact that installed capacity had been going up. It was also indicated that such decline was primarily due to the restrictions on power supply to the aluminium producers. It was further indicated that the rates at which electricity Board had contracted in the past for supply of power to the aluminium industry, proving to be unremunerative for the Boards has also been responsible for this situation, and the electric....
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....g agreement of 1976 is wholly illegal and inoperative. It was also contended that in the aforesaid circumstances amendment of Section 49 of the Electricity (Supply) Act, applicable to the Board and its consumers, was not applicable to the Company and the Company despite such amendment was entitled to enjoy the privileges emanating from the agreement of 1976. The validity of the amending Act was challenged by the Writ Petitioners before the High Court. It was contended by the Writ Petitioners before the High Court that the amending act does not affect the existing agreement of 1976 inter alia on the following grounds : (a) The agreement is a tripartite agreement not contemplated by the amending Act but the agreement envisaged under the amending Act is a bipartite agreement between the consumer and the Board. (b) The tripartite agreement was the result of aluminium policy of the Government of India and such Governmental policy cannot be negatived by the amending Act. (c) The Board is estoppel from claiming any higher tariff not contemplated by the agreement. (d) The amending Act is ultra vires inasmuch as : (i) It treats, all consumers at par irrespective of the spe....
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....a solemn assurance or representation on the part of the State Government. However, such a term in the agreement will not bind the Board to revise the tariff in exercise of its statutory powers. (vii) Surcharge of 2 paise per unit was levied and collected by the Board, as applied to others. (viii) In view of the ordinance with effect from 22.11.1980 the tariff schedule H.T.1A (Electrical Power Tariff of 1978, with all other charges like surcharges and additional surcharge etc.) is applicable and the petitioner is governed by that H.T.1A Tariff Schedule, in supersession of the terms set out in the agreement. The Ordinance nullifies all the rates and the mode of billing envisaged in the supply agreement. (ix) The plea of promissory estoppel put forward by the petitioner is untenable, since the amending Act is a legislative measure. (x) The State legislature has plenary powers to legislate on all matters pertaining to electricity and the powers of the State legislature in this behalf, cannot be curtailed by an agreement entered into by the State with the petitioners or any other person. To appreciate the respective contentions of the parties on the question of legislativ....
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.... three different aspects (1) raw materials which are an integral part of the industrial process (2) the process of manufacture or production, and (3) the distribution of the products of the industry. The raw materials would be goods which would be comprised in Entry 27 of List II. The process of manufacture or production would be comprised in Entry 24 of List II except where the industry was a controlled industry when it would fall within Entry 52 of List I and the products of the industry would also be comprised in Entry 27 of List II except where they were the products of the controlled industries when they would fall within Entry 33 of List III. This being the position it cannot be said that the legislation which was enacted by the Centre in regard to sugar and sugarcane could fall within entry 52 of List I. Before sugar industry became a controlled industry, both sugar and sugarcane fell within Entry 27 of List II but, after a declaration was made by Parliament in 1951 by Act 65 of 1951 sugar industry became a controlled industry and the product of that industry viz. sugar was comprised in Entry 27 of List II. Even so, the Centre as well as the Provincial Legislatures had co....
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....al prerequisite before any repugnancy could ever arise." It may be noted here that for the purpose of finding that electricity was a raw material for the smelter plant, the High Court referred to relevant pleadings of the Writ Petitioners and also referred to the decision of this Court concerning the petitioner company itself inIndian Aluminium Co. v. Kerala State Electricity Board, AIR 1975 SC 1967 wherein this Court referring to the process of manufacture of aluminium from alumina has held that electricity is a raw material for such manufacturing process. Similar view was also expressed by this Court in the decision of Delhi Cloth and General Mills Co. Ltd. v. The Rajasthan State Electricity Board,AIR 1986 SC 1126 while considering electro chemical and PVC and other allied industrial products in a power oriented industry. The High Court also negatived the contention of the Writ Petitioners that when Parliament has evinced interest in Aluminium Industry, the entire field of legislation touching all aspects of the said industries vests in the Parliament and State Legislature has lost its competence as the field of legislation will be only under Entry 52 of List I. The High....
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...., the Entries should be read together without giving a narrow and restricted sense to either of them. Secondly, an attempt should be made to see whether the two Entries cannot be reconciled so as to avoid a conflict of jurisdiction. It should be considered whether a fair reconciliation can be achieved by giving to the language of the Union Legislative List a meaning which, if less wide than it might in another context bear, is yet one that can properly be given to it and equally giving to the language of the State Legislative List a meaning which it can properly bear. The non obstante clause in Article 246 (1) must operate only if such reconciliation should prove impossible. Thirdly, no question of conflict between the two lists will arise if the impugned legislation, by the application of the doctrine of `pith and substance' appears to fall exclusively under one list, and the encroachment upon another list is only incidental. Union and State Legislatures have concurrent power with respect to subjects enumerated in List III, subject only to the provision contained in Cl. (2) of Article 254 i.e., provided the provisions of the State Act do not conflict with those of any Central ....
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....ion prescribing the extent and scope of control." The High Court also referred to few more decisions of this Court for the purpose of appreciating the contention whether the supply of electricity and tariff rates were controlled by Entry 52 of List I, thereby taking away legislative competence of the State Legislature and whether or not the Notification issued by the Central Government fixing the aluminium policy and also indicating the tariff affecting the aluminium industry became repugnant to the impugned provisions under the amending Act of State Legislature. The High Court by giving a long reasoning has come to the finding that the impugned legislation was quite valid and did not suffer either from the want of legislative competence or on the score of repugnancy between the Central and the State legislation. The High Court also negatived the contention of the Writ Petitioners that aluminium industry is special class of its own and thus cannot be categorised with other industries. It was indicated by the High Court that if a microscopic analysis is to be done almost every industry will have its own special features. Such as analysis is outside the scope of Article 1....
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....ision of this Court in Excise Commissioner, U.P. etc. etc. v. Ram Kumar etc. etc., AIR 1976 SC 2237 wherein it was observed by this Court to other following effect:- "It is now well settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers." Reference was also made to another decision of this Court inUnion of India and others v. Godfrey Philips India Ltd., AIR 1986 SC 806. The observation of this Court appearing at para 14 was referred to by the High Court to the following effect:- "...It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires, if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the government or public aut....
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....tion was accordingly dismissed. Mr. Parasaran,the learned Senior Counsel appearing for the appellants in his usual fairness had indicated that detailed arguments had been advanced before the High Court of Karnataka at the hearing of the Writ proceeding on the question of vires of the amending Act, on the score of legislative competence and also on the ground of arbitrary action in revising the tariffs without justification and unjust classification of the smelter plant in the category of other power intensive industries included in the category of HT-1A without appreciating the peculiar features of the productive mechanism in a smelter plant thereby offending Article 14of the Constitution. He has submitted that as he intends to advance the same contentions raised before the High Court on the question of vires for appropriate consideration by this Court he does not intend to elaborate the same once more. It is precisely for the aforesaid reason, we have indicated in detail the reasonings of the High Court in dispelling the contentions of the Writ Petitioners that the amending Act is ultra vires. We have given our anxious consideration to the contentions raised for challenging ....
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....t has some special and peculiar features in its manufacturing mechanism of aluminium from alumina. He has drawn our attention to the pleadings in the Writ Petition where such mechanism and the key role of electricity have been elaborately high-lighted. Mr. Parasaran has also drawn our attention to the accepted position all over the world about the very important and key role of electricity in the electrolytic process in manufacture of aluminium in a smelter plant and its impact as a basic raw material with a very high implication in the cost of manufacture. In the aforesaid context, Mr. Parasaran has contended that it is only unjust and improper to classify the smelter plant in the general group of power intensive industries. To classify the smelter plant only as a power intensive industry like various other power intensive industries, will not be proper classification. The very distinctive and unique features of smelter plant are well known to the State and the Board. He has drawn the attention of the Court to various clauses of the agreement of 1976 for the purpose of showing that the State and the Board were fully aware of the role of electricity in the manufacturing mechanism i....
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....ion may have a number of different consequences and one of such consequences is that the authority ought not to act so as to defeat the expectation without some overriding reason of public policy to justify its doing so. It may also mean that if the authority proposes to defeat a person's legitimate expectation it must afford him an opportunity to make representations in the matter. In this connection, Mr. Parasaran has referred to the decision of House of Lords in Council of Civil Service Union and others v. Minister for the Civil Service, (1985) 3 All England Reporter page 935. It has been held in the said decision that an aggrieved person was entitled to invoke judicial review if he could show that a decision of public authority affected him of some benefit or advantage which in the past he had been permitted to enjoy and which he legitimately expected to be permitted to continue to enjoy either until he was given reasons for withdrawal and the opportunity to comment on these reasons. Mr. Parasaran has also referred to a decision of Court of Appeal in R v. Secretary of State for Home Department, (1985) 1 All England Reporter page 40 wherein the right of being heard by a pers....
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....gory, such amendment does not stand in the way of giving special privilege to the petitioner-Company in the matter of tariff for the supply of electricity in view of the fact that the smelter plant cannot be equated with other power intensive industries placed in the category HT IA and Section 49(3)of the Electricity (Supply) Act still empowers the Board to fulfil its obligation in terms of the agreement of 1976. Mr. Parasaran, in his fairness, has stated that promissory estoppel cannot operate in violation of the statutory provisions but Section 49(3)of the Act empowers the Board to fix tariff in conformity with the promise held out to the petitioner- Company because the petitioner-Company was entitled to be treated altogether differently for the reasons indicated hereinbefore. In view of such enabling provision under Section 49(3), Mr. Parasaran has submitted, that the obligation to abide by the agreement consistent with the case of promissory estoppel still survives. He has also submitted that there has been clear non-application of mind by the Board in not considering the manufacturing process in the smelter plant in its proper perspective and because of such non-application of....
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....ry provision, the party having reasonable expectation flowing from a promise or representation may ask for enforcement of such legitimate expectation founded on representations or assurances on the part of the administrative body in appropriate cases. But in the instant case, the very foundation of promissory estoppel is absent and as such consideration of the question of promissory estoppel does not arise. In this connection, he has drawn the attention of this Court to the preamble of the first agreement of 1966. He has submitted that if a reference is made to the preamble of the agreement and other clauses it is quite apparent and evident that the same do not indicate that on the invitation by the electricity Board or the State Government, the smelter plant of the petitioner-Company had been established at Belgaum. It is quite evident that on coming to know that the State and the Board were in a position to supply electric energy without any interruption according to the need of the smelter plant the petitioner-Company became interested in establishing its smelter plant at Belgaum and thereafter negotiations were made between the parties and an agreement under Section 49(3) of th....
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....lectric power as the supplier was anxious and willing to supply the same, there is no case of promissory estoppel. Mr. Narasimhamurthy has submitted that facts and circumstances in the instant case clearly reveal that the State government was eager to have industries established in the State and for the purpose took steps to supply sufficient electric energy to various industries including the petitioner-Company. The petitioner-Company was also equally anxious to establish its smelter plant in the State of Karnataka in view of the facilities made available in the State, and both the parties thereafter entered into negotiations and on such negotiations terms and conditions were arrived at. The agreement was made in accordance with the Section 49(3)of the Electricity (Supply) Act. It is not the case that there was no occasion to enter into any negotiation for settling the terms but clearly unilateral assurances were given by the State and the Board to give uninterrupted supply of electricity on specific conditions and on agreed rate promised to the Company and only on the basis of such promises held out to the petitioner-Company, the said smelter plant was established and the agreeme....
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....pears that for 1978 tariff rates, the plant of the petitioner-Company was included in HT IA category. Mr. Narasimhamuarthy has contended that such categorisation by the electricity Board made as far back as in 1978 is not under challenge, and no protest had been made by the petitioner-Company for categorising the plant of the petitioner-Company in HT-IA. Mr. Narasimhamurthy has also contended that industries may have some distinctive features but still then a broader classification is possible taking into consideration, the power intensive nature of various industries. The Board has taken into consideration such power intensivity in the manufacturing process and has made a broad based categorisation. The smelter plant has been included in HT-IA not only for the first purpose of applying the amended provisions of Section 49of the Act but such categorisation was made long back. Even in 1978 such categorisation was made without any protest from the petitioner-Company. If such categorisation has a rational basis and not arbitrary, capricious or illusory, no exception need be made to such categorisation. Accordingly, sub-sections 5 and 6 of Section 49 are squarely applicable to the peti....