TaxTMI 
TaxTMI 
1992 (5) TMI 190
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....aranath 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 ₹ 18,40,800.58 collected by the respondents on accounts of the electricity bills. There was also a prayer for a....
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....een 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 Government notified the aluminium policy. It was indicated in the said policy t....
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....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 ₹ 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 ₹ 22.5 per unit and ₹ 22 per KVA on 27.5.1991. The Board had thereafter increased the rate periodically from time to time as follows: ....
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....e 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 into different forms like ingots, slabs, etc. It is contended that if the electric supply is curtailed or interrupted, the temperature of the cryolite bath will come down and if the interruption period is more than 2 hours, the bath will cool down and solidify. Once the cryolity bath gets solidified, it will not be able to pass electric current through the cell and even if the power supp....
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....st 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 electricity Boards were the largest users of aluminium. Government of India., therefore, considered it imperative that power tariffs need to be revised in a way which would be fair to the Electricity Boards but which would not result in rising of the price of aluminium. The Writ Petitioners have contended that under clause 5 of the agreement of 1976, the payment for supply is to be m....
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....mending 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 special features of each class of consumers and therefore arbitrary offending Article 14 of the Constitution (ii) The increase of tariff by virtue of the amending Act directly hits at the price of aluminium fixed under the Aluminium Control Order issued by the Central Government and hence illegal and ultra vires. (iii) Aluminium industry is a scheduled industry under the control of th....
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....er 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 legislative competence for the amending Act, the High Court referred the Entries 52 and 54 of List I of VIIth Schedule of the Constitution, Entries No. 26 and 27 List II Entries 33,34 and 38 of List III of the VIIth Schedule. The High Court also referred to and relied on the discussion of this Court in the case ofTika Ramji v. State of U.P. (AIR 1956 S.C. 676) where the concept of `industry' as a topic of....
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....olled 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 concurrent jurisdiction in regard to the same. In no event could the legislation in regard to sugar and sugarcane be thus included within entry 52 of List I. The pith and substance argument also cannot be imported here for the simple reason that, when both the Centre as well as the State Legislatures were operating in the concurrent field, there was no question of any trespass upon the exclusive juri....
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....975 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 Court has held that mere declaration by Parliament that a particular industry is a controlled industry under the Industries Development and Regulation Actis by itself not sufficient to exclude the competence of State legislature to enact a law over a subject which otherwise falls within its field of legislation. The High Court referred to the decision of this Court in the case ofState of Utta....
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.... 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 Act on the subject. However, in case of repugnancy between a State Act and a Union Law on a subject enumerated in List III, the State law must yield to the Central law unless it has been reserved for the assent of the President and has received his assent under Article 254 (2).The question of repugnancy arises only when both the Legislatures are competent to legislate in the same ....
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....he 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 14. Classification is based on broad principles, to be connected reasonably with the object to be achieved. It has been held by the High Court that the Scheme of Section 49 of the Electricity Supply Act indicates that uniformity will be the basis of tariff and since all power intensive industries have been treated alike in view of the amended provision of Section 49in superse....
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....so 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 authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that....
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.... 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 the vires of the amending Act but we are unable to accept the contentions that the Act suffers from any infirmity affecting its vires either on the score of legislative competence or for offending Articles 19(1) (g) or Article 14of the Constitution. It appears that the High Court has given cogent reasons for upholding the vires of the amending Act and for dispel....
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....d 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 in a smelter plant and the extreme need of uninterrupted supply of energy to the plant of the petitioner-Company at Belgaum. Mr. Parasaran has submitted that as the State and the Board were fully aware of the implication of tariff of electricity in the smelter plant, special provisions were made in the agreement for billing and rates to be charged in the event of in....
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....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 person having a reasonable expectation if likely to be affected by a decision to be taken by an authority has been indicated. Mr. Parasaran also relied on a decision of Queen's Bench Division in R v. Secretary of State for Home Department ex parte Ruddock & others (1987) 2 All England Law Reports page 518. It has been indicated in the said decision that the....
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....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 mind an attempt has been made to treat an unequal with equals, Mr. Parasaran has also contended that before purporting to annul the agreement by taking recourse to the amended provisions of Section 49, the Board should have given proper opportunity to the petitioner-Company to substantiate that there had been a clear case of promissory estoppel and such pro....
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....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 the Electricity (Supply) Act was entered into. He has contended that later on, in view of changed circumstances a new agreement was entered into between the parties in 1976 for the purpose of getting uninterrupted supply of electricity on agreed rate and in a particular manner. Both the said agreement of 1966 and 1976 were the outcome of usual bargaining between ....
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.... 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 agreement is only embodiment of the terms and conditions unilaterally held out by the State and the Board. Mr. Narasimhamurthy has, therefore contended that the very foundation of promissory estoppel is absent in the case and the High Court was justified in not accepting the case of promissory estoppel. Mr. Narasimhamurthy has submitted that sub-section 1 and 2 Sect....
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....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 petitioner-Company and the Board is justified in treating the agreement as annulled and subjecting the petitioner-Company to the uniform tariff rate applicable to all the industries categorised as ST-IA. He has submitted that if in terms of the statutory provision, a uniform rate of tariff is applicable to the petitioner-Company on the basis of category of th....