TaxTMI 
TaxTMI 
2018 (7) TMI 2025
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....Act, 1948 (hereinafter referred to as "Act of 1948") which have been found to be not inconsistent with the provisions of the 2003 Act. The appeals being Under Section 125 of the 2003 Act are required to be answered only on such substantial questions of law that may arise for determination by this Court. 2. First, the facts. The Corporation has been established under the Act of 1948 for the development of the Damodar Valley area falling within the States of West Bengal and Jharkhand. As evident from the provisions of Section 12 of the Act of 1948, three (03) major areas of activity undertaken by the Corporation under the Act of 1948 are: (i) power generation, transmission and distribution; (ii) flood control; and (iii) irrigation and some connected activities like soil conservation, afforestation, etc. 3. Under Section 20 of the Act of 1948, the Corporation was empowered and authorised to determine the tariff chargeable by it from its consumers. Part IV of the Act of 1948 under the heading "Finance, Accounts and Audit" though, superficially, may appear to be dealing with the indoor management of the Corporation contain provisions which could have a relevant bearing to tarif....
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....overned by the provisions of the 2003 Act and the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 (hereinafter referred to as "Tariff Regulations") framed thereunder. Accordingly, the CERC proceeded to determine the tariff after giving due weightage to the various relevant factors which are required to be considered for such determination as spelt out by the Regulations in force. A reading of the order of the CERC would go to show that in determining the tariff due consideration of the following issues was made by the CERC. (i) Choice between GFA and NFA Method; (ii) Capital Cost; (iii) Extra Rupee Liability; (iv) Additional Capitalisation; (v) Debt-Equity Ratio; (vi) Return on equity; (vii) Interest on loan; (viii) Depreciation including Advance against Depreciation; (ix) O & M expenses; (x) Pension and gratuity fund; (xi) Interest on working capital; (xii) Operational Norms; (xiii) Energy charges and the fuel component for the thermal generating stations; (xiv) Fuel Price Adjustment 7. Aggrieved by the afores....
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....aid effect in any of the provisions of the 2003 Act. Accordingly, the learned Appellate Tribunal while rejecting the following five claims and upholding the order of the CERC on the aforesaid counts thought it proper to remand the matter, for a de novo consideration of the remaining five issues by the CERC in the light of the findings recorded by it. The tabular chart, extracted below, would indicate the five issues that have been finalized by the learned Appellate Tribunal by upholding the order of the CERC dated 3rd October, 2006 and the other five issues which have been remanded for re-determination by the CERC. 9. Three substantial questions of law would seem to arise for determination by this Court in exercise of its jurisdiction Under Section 125 of the 2003 Act. The same are enumerated below: (a) Whether the view taken by the learned Appellate Tribunal with regard to the fourth proviso to Section 14 of the 2003 Act and the applicability of the provisions of Sections 32, 37, 38, 39 and 40 contained in Part IV of the Act of 1948 in the matter of tariff determination under the 2003 Act is correct? (b) Whether it is the provisions of the Tariff Regulations (....
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....r the time being in force. 13. Without prejudice to the above, it has been further contended on behalf of the CERC that the learned Appellate Tribunal was clearly in error in holding that in case of a conflict between the Act of 1948 and the Tariff Regulations framed under the 2003 Act the provisions of the Regulations will require to be ignored. The decisions of this Court in Bharathidasan University and Anr. v. AICTE and Ors. (2001) 8 SCC 676 [para 14] and Samsthanan Chethu Thozhilali Union v. State of Kerala and Ors. (2006) 4 SCC 327 [Para 17], relied upon, has been misconstrued by the learned Appellate Tribunal, it is urged on behalf of CERC. It is further contended on behalf of the CERC that Section 61 of the 2003 Act lays down the principles for tariff determination which finds detailed manifestation in the 2004 Regulations. The Regulations, it is contended, embody the principles on which tariff is required to be determined and the provisions thereof cannot be overridden by the provisions of any other statute and, that too, enacted at an anterior point of time i.e. the Act of 1948. The mandate of Section 174 of the 2003 Act which is subsequent in point of time will be comp....
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....her PSU i.e. NTPC ignoring the fact that the Regulation 20 of the Tariff Regulations provide for a ratio of 70:30. 18. Likewise, the findings with regard to Pension and Gratuity Fund, particularly, the recovery of the entire fund from the consumers (in reversal of the decision of the CERC permitting recovery from consumers to the extent of 60% and contribution by the Corporation of the balance 40%) has been assailed on the ground that no discernible or rational basis is disclosed for the view taken, particularly when the Corporation has been permitted and, in fact, collected tariff at the rate fixed by the Corporation itself under the Act of 1948 for the years 2004-2005 and 2005-2006 which constitute 40% of the tariff period. 19. The allowances of capital investment in respect of Head Office, Regional Offices, Administrative & other Technical Centres have also been assailed as being contrary to the provisions of the Tariff Regulations. 20. The above contentions made on behalf of the CERC has been reiterated on behalf of the consumers who are the Appellants in Civil Appeal Nos. 971-973 of 2008. So far as the interpretation of the provisions contained in the fourth proviso t....
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.... which, according to the Appellants - consumers should hold the field. 22. The Corporation which is the Respondent in the appeals filed by the Regulatory Commissions and the Consumers had filed its cross-objections in the said appeals. Emphasis is laid on the status and peculiar characteristics of the Corporation as envisaged by the statute i.e. the Act of 1948 constituting the said body. Reference has been sought to be made to the various social welfare activities that the Corporation is statutorily mandated to perform over and above electricity generation and transmission. The aforesaid peculiar characteristics of the Corporation and its multifarious duties, according to the Corporation, would justify continuity of the due application of the provisions of the Act of 1948 as are not inconsistent with the provisions of the 2003 Act. It is only such of the provisions of the Act of 1948 which are in clear conflict with the provisions of the 2003 Act that will give way. The provisions of the Act of 1948 that may be in conflict with those of the Tariff Regulations will however not have the same effect inasmuch as the provisions of a subsidiary legislation cannot have an overriding e....
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....Regulations in force. 26. Before delving into the issues arising in the appeals, two preliminary questions need to be answered which we propose to do at the outset. The first pertains to the grant of a transitory period making the tariff order effective from 1st April, 2006 instead of 1st April, 2004. 27. We have considered the reasons which had weighed with the CERC as well as the learned Appellate Tribunal in granting the aforesaid transitory period. The present dispute, regardless of the way it is resolved, would have relevance to the quantum of the tariff, depending on whether the determination is made on the basis of the provisions of Part IV of the Act of 1948 or the provisions of the Tariff Regulations, as may be. So far as the grant of the transitory period is concerned, the same, we have noticed, has been so granted having due regard to the statutory functions/social responsibilities that the Corporation is mandated to undertake in terms of the Act of 1948. The tariff fixed is also lower than the tariff that has been fixed by the Jharkhand and West Bengal Electricity Regulatory Commission for the general/domestic classes of consumers. While it is correct that the cla....
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....ing for the Tennessee Valley Authority to make recommendations and suggestions in this regard. 31. The preamble to the Tennessee Valley Authority Act1, 1933, reads that the statute has been enacted by the Congress "to improve the navigability and to provide for the flood control of the Tennessee River; to provide for reforestation and the proper use of marginal lands in the Tennessee Valley; to provide for the agricultural and industrial development of said valley; to provide for the national defence by the creation of a corporation for the operation of Government properties at and near Muscle Shoals in the State of Alabama, and for other purposes." As can be observed, the primary objective of the Tennessee Valley Authority Act is to prevent floods across the Tennessee River Valley and the generation of electricity is incidental to this activity of flood-control. 32. The objects and reasons behind the incorporation of the Act of 1948 may now be noticed: The Damodar River rises in Western Bihar and flows generally in a south-easterly direction into Bengal. It is a seasonal river having a large flow of water during the rains which, apart from being generally wasted, at ti....
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....ine the validity of the Central Electricity Regulatory Commission (Fixation of Trading Margin) Regulations, 2006 framed in exercise of power conferred Under Section 178 of the Electricity Act?" 35. The observations of this Court in PTC India Limited (supra) with regard to the efficacy of the Tariff Regulations in the light of its statutory character must necessarily be understood in the above context. The opinion rendered in PTC India Limited (supra) itself makes it clear that the Tariff Regulations though statutory in character are a species of subordinate delegated legislation, the purport of which has been described and dealt with in the following manner: 52. In Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India (1985) 1 SCC 641 this Court held that subordinate legislation is outside the purview of administrative action i.e. on the grounds of violation of Rules of natural justice or that it has not taken into account relevant circumstances or that it is not reasonable. However, a distinction must be made between delegation of legislative function and investment of discretion to exercise a particular discretionary power by a statute. In the latter case, the impug....
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....ate legislation cannot have the independent and unqualified authority which is an attribute of true legislative power". It is pointed out by this learned Judge that several legal consequences flow from this doctrine of subordinate legislation. An offence against subordinate legislation is regarded as an offence against the statute and on the repeal of the statute the Regulations automatically collapse. So far, the propositions cannot, and need not, be disputed. But, according to the learned Attorney-General, all that is necessary in subordinate legislation is that the legislature should not totally abdicate its powers and that it should retain its control over the subordinate agency which it can destroy later at any time it likes. If this is proved to exist in a particular case, then the character or extent of the powers delegated to or conferred upon such subordinate agent is quite immaterial and into that question the courts have no jurisdiction to enter. This argument seems plausible at first sight, but on closer examination, I find myself unable to accept it as sound. In my opinion, it is not enough that the legislature retains control over the subordinate agent and could recal....
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....ed on the ratio of the above decisions by the learned Appellate Tribunal in its order dated 23rd November, 2007. 38. This will bring us to a consideration of the purport and effect of the fourth proviso to Section 14 of the 2003 Act on which much debate and discussion have been generated in the course of prolonged hearing of the case that had taken place. Section 14 of the Act may usefully be extracted below at this stage: 14. Grant of Licence: "The appropriate Commission may, on an application made to it Under Section 15, grant a licence to any person (a) to transmit electricity as a transmission licensee; or (b) to distribute electricity as a distribution licensee; or Provided that the Developer of a Special Economic Zone notified Under Sub-section (1) of Section 4 of the Special Economic Zones Act, 2005, shall be deemed to be a licensee for the purpose of this clause, with effect from the date of notification of such Special Economic Zone. (c) to undertake trading in electricity as an electricity trader, In any area as may be specified in the licence: PROVIDED that any person engaged in the business of transmission or supply of ele....
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....s with all the requirements for grant of licence, shall be refused grant of licence on the ground that there already exists a licensee in the same area for the same purpose: PROVIDED also that in a case where a distribution licensee proposes to undertake distribution of electricity for a specified area within his area of supply through another person, that person shall not be required to obtain any separate licence from the concerned State Commission and such distribution licensee shall be responsible for distribution of electricity in his area of supply: PROVIDED also that where a person intends to generate and distribute electricity in a rural area to be notified by the State Government, such person shall not require any licence for such generation and distribution of electricity, but he shall comply with the measures which may be specified by the Authority Under Section 53: PROVIDED also that a distribution licensee shall not require a licence to undertake trading in electricity. 39. It is contended on behalf of the Appellants that the application of a proviso must always be confined and understood within the parameters of the provisions of the main Section of which ....
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....ng to and not merely excepting something out of or qualifying what goes before. 41. The fourth proviso to Section 14 of 2003 uses the expression "....and the provisions of the Damodar Valley Corporation Act, 1948 in so far as they are not inconsistent with the provisions of the Act, shall continue to apply to that Corporation...". On a careful reading of the aforesaid later part of the fourth proviso to Section 14 of the Act of 2003, it is seen that it is clearly a substantive provision to lay down something more than what a proviso generally deals with. If the intention of the proviso was to exclude DVC only from the main part of Section 14 of the Act of 2003 dealing with the requirement of obtaining licence for transmission/distribution/trade in electricity, the purpose is fully achieved by the first part recognising DVC as a 'deemed licensee' and not requiring to apply for and obtain licence. The Legislature could have simply stopped there. There was no necessity to incorporate the second part. The second part of the fourth proviso is to bring in the continued application of some of the provisions of the Act of 1948 which are not inconsistent with the provisions of the Act of....
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.... Electricity Act, 2003 authorizes the Regulatory Commissions to grant licence to persons other than DVC. Therefore, there can be no question of continued application of the Act of 1948 over those provisions. 44. The fourth proviso to Section 14 which uses the expression "....and the provisions of the Damodar Valley Corporation Act, 1948 in so far as they are not inconsistent with the provisions of the Act, shall continue to apply to that Corporation...", in our view, is a positive provision enabling continued application of certain provisions of the Act of 1948 which are not inconsistent with the provisions of the Electricity Act, 2003. The intention behind both the provisions needs to be appreciated and given effect to. 45. There is yet another dimension of the case that has been urged and, therefore, will require our consideration. While dealing with the question as to whether Reports submitted by Parliamentary Standing Committee, can be taken as permissible external aids for interpretation of a statute, this Court in a recent decision in Kalpana Mehta and Ors. v. Union of India and Ors. 2018 (7) SCALE 106. had occasion to observe as follows: &nbs....
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.... the provisions of 2003 Act citing the peculiar, sensitive and specialised nature of task that such bodies have been entrusted by the statutory enactments constituting and governing the said bodies/organizations. Specifically, in this regard, the peculiar duties and responsibilities cast on the DVC by Section 12 of the Act of 1948 had been highlighted before the Parliamentary Standing Committee. It had been urged before us that it was recommended by the Parliamentary Standing Committee that exemption from the provisions of the proposed 2003 Act should be granted to the Corporation in view of its special statutory status which may get eroded if the exemptions are not to be granted. The provisions of Section 58 of the Act of 1948 which is in the following terms were also placed before the Parliamentary Standing Committee while seeking exemption from the operation of the proposed 2003 Act: 58. Effect of other laws: The provisions of this Act or any Rule made thereunder shall have effect notwithstanding anything contained in any enactment other than this Act or any instrument having effect by virtue of any enactment other than this Act. 47. On the other hand, it would appear from....
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....en into account for determination of tariff. Such provisions of the Act of 1948 will also have an overriding effect over the inconsistent provisions of the Tariff Regulations. Our view, as above, will also effectuate the provisions of the Act of 1948 in so far as the activities of the Corporation, other than generation and transmission of electricity, is concerned. We, therefore, affirm the above view taken by the Appellate Tribunal for the reasons afore-stated. 49. The specific heads of tariff fixation on which grievances have been raised by the Appellants in the present set of appeals are enumerated as hereunder: (a) Depreciation rate; (b) Sinking Fund; (c) Debt Equity ratio; (d) Pension & Gratuity Contribution; (e) Return on Capital Investment on Head Office etc.; (f) Revenue relating to afforestation etc., which are not relatable to power generation; (g) Period of transition (two years) allowed for the tariff fixed by the CERC to come into effect; (h) The treatment of entire transmission as inter-State transmission lines thereby divesting the Jharkhand and West Bengal State Electricity Regulation Commiss....
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....n to adjust their sale price to take into consideration the need for meeting the accumulated liability. It is, therefore, an accepted fact that due to postponing of the creation of such fund, the consumers were enjoying lesser tariff than the legitimate tariff otherwise applicable to them. 53. A careful consideration of the reasoning adopted by the learned Appellate Tribunal would not disclose any such error so as to warrant interference of this Court. No error or fallacy, ex facie, is disclosed in the reasoning adopted so as to justify interference Under Section 125 of the 2003 Act. 54. Insofar as the consumers (Appellants in Civil Appeal Nos. 971-973 of 2008) are concerned, an additional issue has been struck, as noticed earlier. This is with regard to the number of employees engaged in the power sector by the Corporation for whom alone proportionate recovery by way of tariff so far as the pension and gratuity is concerned, would be justifiable. Apart from the fact that the issue was not raised in any of the forums below and had been so raised before this Court for the first time and that too in the course of the arguments advanced, the materials on record do not justify a ....