TaxTMI 
TaxTMI 
2019 (5) TMI 1984
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....umbai. The tariff payable by BSES to TPC included a component of standby charge. The entire standby charges paid by TPC to Maharashtra State Electricity Board (for short 'the MSEB') were being recovered by TPC from its customers through its tariff. Due to change in shareholding pattern, the BSES was changed to Reliance Energy Limited on 24.2.2004. 2. The brief facts indicate that TPC and MSEB met on 12.3.1985 to finalise the interconnection between representatives of TPC and MSEB with respect to demand charges. Following decision was arrived at: " A) Demand Charges: Effective 1284 a monthly firmed demand of 300 MVA would be billed by MSEB. This would increase by 50 MVA each year effective 141985 to take care of TEC's own load growth annually. This is irrespective of TEC's actual net offtake recorded at the 4 interconnecting points of supply and also irrespective of MSEB's total offtake from TEC system" 3. Prior to 1985, the TPC was supplying entire electricity generated by it to the distributors of electricity in Mumbai. Since the quantity generated by TPC was not sufficient to meet the entire demand, TPC used to buy electricity from MSEB. BSES/REL was purchasing its entire ....
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.... provided at Borivali GIS switching station to take care of emergencies in BSES 220 KV system. The TPC already have arrangements with MSEB wherein standby capacity is provided by MSEB to TPC in case of emergencies in TPC system. Standby capacity to BSES may be provided from the standby capacity reserved by TPC with MSEB and appropriate sharing of charges by BSES could be worked out as provided in clause 12.0. The BSES prior to September 1995 was purchasing its entire requirement of power from TPC and distributing it within its licensed area as TPC distributing licensee. After its two Dahanu generating units were commissioned in January/March 1995, BSES started bringing the power generated by Dahanu to supply to its consumers after September 1995 in the suburbs of Mumbai city. As supply was started from the Dahanu, TPC surplus capacity began to increase. The TPC after 1995 required only 275 MVA standby facility against the standby capacity of 550 MVA. 6. The MSEB issued notice on 28.6.1996 revising its tariff to TPC effective from 1.10.1996. The MSEB raised its maximum demand charges per month with respect of standby facility/supply from Rs.190/per KVA to Rs.450/per KVA. Consequent....
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....old to the Western Regional Grid through MSEB's Biosar Interconnection. As a result, the government's main objective that electricity generated at Dahanu should be used within the BSES area of supply has not been met and BSES license conditions are violated. For this Government had appointed a Committee under the Chairmanship of the Principal Secretary, Energy. In this committee, representatives of MSEB, TEC, and BSES were members. This Committee has examined the total situation and has submitted its report to the Government. GOM thereafter ordered as follows: "Taking into account the recommendations of the Committee, following are orders of the Government. BSES should complete interconnection at Borivli by January 26, 1998. BSES should take 275 MVA standby power supply from TEC for Dahanu generating station. For taking above standby supply, BSES should pay standby charges to TEC. After the interconnection is commissioned, BSES should stop selling electricity through MSEB's Boisar substation to Western Regional Grid. TEC may charge standby charges for 275 MVA supply to BSES. Whenever required during an emergency, additional electricity may be taken for areas outsi....
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....t than the agreement between TPC and MSEB. 11. Even after providing the standby facility of 275 MVA to BSES/REL, TPC still enjoyed the standby facility of 550 MVA from MSEB. The TPC entitlement to avail 550 MVA standby facility from MSEB did not change. 12. The standby facility that has been availed of by BSES/REL through TPC since then it actually drew on about 119 occasions till May 2004, of which 57 occasions in excess of 275 MVA. It has been observed by the Appellate Tribunal for Electricity (in short 'the APTEL') that TPC in 90 percent of the above occurrences has supplied standby powers from its own generation and never drawn back the power from MSEB. The TPC has actually drawn standby from MSEB on a large number of occasions and on several occasions far in excess of 275 MVA. The standby drawn by TPC from MSEB is as under: "439 MVA highest in 19981999 271 MVA highest in 19992000 358 MVA highest in 20002001 325 MVA highest in 20022003 415 MVA highest in 20022003 763 MW highest in 2004" 13. It is also pertinent to mention that even after BSES/REL started drawing power from its Dahanu generation station, BSES/REL continued to purchase approximately 35 percent of T....
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....ES/REL as a consumer. The standby charges used to be paid and otherwise included in the tariff. BSES/REL has received 35 percent of the energy supplied from TPC as a consumer and for the same, TPC was recovering an amount of Rs.24.75 crores per month and an additional sum of Rs.3.5 crores per month. This Court in BSES Ltd. v. Tata Power Co. Ltd., (2004) 1 SCC 195 has observed that tariff notice as being illegal. Since the dispute between the TPC and BSES/REL could not be sorted out, an order dated 22.3.2000 was passed by the Government of Maharashtra endorsing the Committee's Report. Vide aforesaid order, BSES/REL was directed to pay Rs.9 crores as observed in BSES Ltd. v. Tata Power Co. Ltd. (supra) by this Court. 15. The Electricity Regulatory Commission Act, 1998 (in short 'the Act of 1998') came to be promulgated which conferred jurisdiction on Maharashtra Electricity Regulatory Commission (in short 'the MERC') to determine the tariff of supply of electricity and later on to adjudicate the dispute between the parties. The dispute came to be referred to MERC by the parties. The order dated 22.3.2000 passed by the State Government has been set aside by the High Court, which deci....
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....by charges from BSES/REL did not give credit for the said sum in the computation of standby charges to the extent of 23 percent held to be payable by BSES/REL. The appeal of BSES/REL in respect of the aforesaid was rejected by the APTEL vide judgment and order dated 20.4.2007. TPC filed Civil Appeal No.415 of 2007 before this Court. BSES/REL has also filed Civil Appeal No.3229 of 2007 aggrieved by the judgment and order dated 20.4.2007 of APTEL. 19. Shri Gopal Jain learned senior counsel appearing on behalf of TPC has contended that TPC has not recovered standby charges from its customers for the facility in excess of 275 MVA out of 550 MVA standby facility for the period April 1999 to March 2004 provided by MSEB. Thereafter as provided by tariff order dated 11.6.2004, TPC has recovered from its customers to the extent of 78 percent of the standby charges. This Court has granted interim stay on 7.2.2007 and required the appellant to furnish bank guarantee in the sum of Rs.227 crores and in addition, deposit a sum of Rs.227 crores with the Registrar General of this Court, which may be withdrawn by respondent no.1 subject to their furnishing an undertaking to this Court that in the ....
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....f 550 MVA standby facility given by MSEB. The TPC and BSES/REL should share in the ratio of 50:50. The APTEL has not followed the decision of this Court in BSES Ltd. v. Tata Power Co. Ltd. (supra). This Court in the aforesaid decision has observed as under: "16. The word "tariff" has not been defined in the Act. "Tariff" is a cartel of commerce and normally it is a book of rates. It will mean a schedule of standard prices or charges provided to the category or categories of customers specified in the tariff. Subsection (1) of Section 22 clearly lays down that the State Commission shall determine the tariff for electricity (wholesale, bulk, grid or retail) and also for use of transmission facilities. It has also the power to regulate power purchase of the distribution utilities including the price at which the power shall be procured from the generating companies for transmission, sale, distribution, and supply in the State. "Utility" has been defined in Section 2(l) of the Act and it means any person or entity engaged in the generation, transmission, sale, distribution or supply, as the case may be, of energy. Section 29 lays down that the tariff for the intra-State transmission ....
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....reby a fixed quantity of electrical energy was guaranteed to TPC and BSES at their desire, is bound to constitute a component of the price which they (BSES and TPC) would be charging from their consumers towards the cost of the electrical energy actually consumed by them. The determination or quantification of the amount which is payable for this kind of standby arrangement made in favour of TPC and BSES would, in reality, mean determination of the price or charges for wholesale or bulk supply of electricity. It will, therefore, clearly fall within the expression "determine the tariff for electricity, wholesale, bulk, grid or retail" as used in clause (a) of subsection (1) of Section 22 and also in the expression "regulate power purchase ... including the price at which the power shall be procured from the generating companies ..." as used in clause (c) of subsection (1) of Section 22. Therefore, the determination or quantification of the amount which BSES has to pay to TPC falls within the jurisdiction of the State Commission under Section 22 of the Act. This legal position is also reflected by Section 29 of the Act which confers an overriding power and clearly lays down that notw....
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....f electricity. Section 29(6) of the Act specifically lays down that notwithstanding anything contained in Sections 57A and 57B of the Electricity (Supply) Act, 1948, no Rating Committee shall be constituted after the date of the commencement of the Act. The effect of Section 29 and the Regulations framed thereunder is that it is no longer open to a licensee or utility to unilaterally increase the tariff. The tariff can be enhanced only after approval of the Commission and charging of an enhanced tariff which has not been approved by the Commission will amount to commission of an offence. Therefore, the notice to enhance the charges given by TPC, which was subsequent to the enforcement of the Act, can have no legal effect. 20. Shri Nariman has also submitted that even assuming that the standby charges are a matter relating to tariff as the same is passed on to the consumers, but the sharing of standby charges between TPC and BSES is not a matter relating to determination of tariff and, therefore, the Commission can have no jurisdiction to enter into such an exercise under Section 22 of the Act. The submission proceeds on an assumption that the dispute relates to the sharing of sta....
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....paid for actual supply are completely different from the guarantee and charges payable for providing such a guarantee/arrangement. It is further urged that generating capacity comes at a cost. The Technical Member therefore wrongly assigns Zero cost for this generating capacity. This is an error apparent in the impugned order where the spinning reserve has been treated as zero cost. 22. Learned senior counsel has relied on the decision in Binani Zinc Ltd. v. Kerala State Electricity Board, (2009) 11 SCC 244, to contend that notice dated 30.9.1998 was legal and valid. The relevant portion of the aforesaid decision is extracted hereunder: "28. Thus, it would be one thing to say that upon coming into force of the 1998 Act the provisions contained in the 1948 Act which are found to be inconsistent with the former shall give way thereto but it is another thing to say that although no Commission is constituted, the Board would have no jurisdiction at all to frame a tariff. *** *** *** 33. It is of some significance to note that the Commission in terms of clauses (a) and (b) of subsection (2) ....
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....s of the case. The submission made on the basis of Binani Zinc Ltd. v. Kerala State Electricity Board (supra) is not tenable. The total generating capacity of TPC was 1777 MW, whereas that of BSES/REL is 500 MW. It is incorrect that TPC has recovered only 50 percent of standby charges payable to MSEB. The standby charges of Rs.24.75 crores per month i.e., Rs.297 crores per annum were factored into TPC tariff in addition to the amount of Rs.3.5 crores per month was paid by BSES/REL. It wanted to realise 75 percent of the charges from BSES/REL by claiming a 50:50 ratio sharing. The TPC has spinning reserve surplus of 317 MVA with regard to its total capacity of 1777 MW. It was not MSEB but TPC which has provided standby support to BSES/REL on 90 percent occasions. It is further contended that the appeal filed by BSES/REL should be allowed and the excess amount has been worked out by the APTEL. The same may be suitably reduced. 24. The period in dispute is 1.4.1999 to 30.9.2004. It is apparent that TPC has an agreement with MSEB for standby supply of 550 MVA. Initially, in 1985, TPC has increased its generating capacity whereby reducing the offtake of electricity from MSEB to zero. I....
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.... month. The parties had agreed to cooperate in order to ensure that Government order dated 19.1.1998 is implemented in the spirit of it. A detailed power supply agreement was to be entered into by 21.4.1998. The agreement could not be executed as consensus with respect to several aspects could not be reached. The order dated 22.3.2000 has been set aside by the High Court, which order was not interfered with by this Court and the case was remitted for the decision to MERC, which is an expert body. The power was conferred upon the MERC vide notification dated 27.10.2000 under the provision of Section 22(2)(n) of Electricity Regulatory Commission Act, 1998, to adjudicate upon the disputes and differences between licensees and utilities. On 4.12.2000, BSES/REL had filed an application to MERC in respect of sharing of standby charges between BSES/REL and TPC. The prayers were made to regulate action and standby charges levied by them and to fix and determine the standby charges payable by them. 28. Ultimately, the APTEL by the impugned orders has decided the matter. The Chairman has held that liability to be in proportion of 2:1 tariff, whereas Judicial Member has concurred with the Te....
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....the license granted to the former. It was further observed that Commission to decide the dispute early. A clarificatory order was passed by this Court on 9.1.2004 considering the decision in Binani Zinc Limited (supra). The petition was filed by TPC for review. On the basis of the decision in Binani Zinc Limited (supra), the same was dismissed. The MERC has passed the order on 31.5.2004, the following observations were made by MERC: "94. In this context, the Commission is also of the view that, since the standby facility ensures the reliability of the Mumbai system and thus benefits all the consumers in the Mumbai area, they have to contribute towards the cost of standby through the mechanism designed by the Commission. TPC has been recovering the cost of standby that was applicable in January 1998 i.e., Rs.24.75 crore per month, from its consumers through its tariff, viz. fixed charges and energy charges. This aspect has been dealt with in detail subsequently in this Order. Now, depending on the ratio of sharing of the standby cost determined by the Commission, the consumers of TPC and BSES will have to pay the cost applicable to their respective licensees, in the manner decided....
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....er which has been under dispute for such a long time. Hence, the Commission has computed the interest payable by BSES to TPC for delayed payments in FY 199899 and FY 199900, and the interest payable by TPC to BSES on the excess amounts deposited by BSES with TPC for onward payment to MSEB. The Commission has considered the fact that the interest rate on delayed payments to MSEB is 18% for overdue over 6 months. However, in this instance, the payment liabilities as between TPC and BSES have been crystallized only now through this Order of the Commission. Moreover, the deposits made by BSES earlier were consequent to Court Orders and were not regular payments. Hence, taking into account the prevailing market interest rates (SBI PLR) in each of these years, the net (simple) interest payable by BSES works out to Rs.8.37 crore, as shown in the table below, which can be adjusted against the refund due to BSES from TPC." 31. The MERC directed sharing of standby charges payable to MSEB between TPC and BSES/REL on the basis of their respective peak load requirements and directed TPC to pay to BSES/REL a sum of Rs.315.30 crores within 15 days. It was also observed that the quantum of standb....