TaxTMI 
TaxTMI 
2024 (11) TMI 216
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....of the Punjab State Electricity Regulatory Commission (for short the "State Commission"), insofar as issue no. 1 discussed therein was concerned. That issue concerned the aspect of Mega Power Policy and the effect of the Press Release of 01.10.2009. We are only concerned with the said issue in this Appeal. FACTS OF THE CASE : - A) Customs Notification No. 21/2002 dated 01.03.2002. 2. To appreciate the issues involved, certain background facts need to be set out. Goods imported for setting up a Mega Power Project had, under a notification issued under Section 25 of the Customs Act dated 01.03.2002, been granted certain exemptions from customs duty. It will be useful to set out the relevant part of the 01.03.2002 notification. "Exemption and effective rates of basic and additional duty for specified goods of Chapters 1 to 99. - In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 17 /2001- Customs, dated the 1st March, 2001 [G.S.R. 116(E), dated the 1st March, 2001], the Central Government, b....
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.... (b) In the case of imports by a Central Public Sector Undertaking, the quantity, total value, description and specifications of the imported goods are certified by the Chairman and Managing Director of the said Central Public Sector Undertaking; and (c) In the case of imports by a Private Sector Project, the quantity, total value, description and specifications of the imported goods are certified by the Chief Executive Officer of such project." B) Mega Power Policy of 2006 3. On 10.06.2009, when competitive bidding was initiated by the respondent, what was in vogue was the Mega Power Policy, 2006. If a thermal plant was covered as a Mega Power Project under the Mega Power Policy of 2006, it was entitled to the benefit of certain exemptions under the customs notification dated 01.03.2002 extracted hereinabove. 4. The Mega Power Policy, 2006 prescribed the following conditions to be fulfilled by the developer for grant of mega power status:- "MEGA POWER PROJECTS: REVISED POLICY GUIDELINES The following conditions are required to be fulfilled by the developer for grant of mega project status:- (a) an inter-state thermal power plant ....
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....portant is the phrase "Inter-State Thermal Power Plant" employed in the policy. C) Request For Proposal 5. It was when this legal regime was in force that on 10.06.2009, the erstwhile Punjab State Electricity Board [now after unbundling-the distribution being known as Punjab State Power Corporation Limited (PSPCL)] through its then wholly owned subsidiary and a special purpose vehicle, appellant no. 1- Nabha Power Limited issued a Request For Proposal (RFP). The RFP was for selection of developers through tariff-based bidding process under Section 63 of the Electricity Act 2003, for procurement of power on long-term basis from the power station to be set up at village Nalash, near Rajpura, District Patiala, Punjab. This was as per the Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by Distribution Licencees issued by the Ministry of Power, Government of India. In terms of RFP, the bidders were required to quote the Capacity Charge (i.e. capital cost component) and Station Heat Rate (i.e. amount of heat required by the plant to generate one unit of electrical energy/efficiency of the plant) to convert the heat energy for the project and based....
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....under the RFP Project Documents nor shall the Seller be entitled to any extension of time or financial compensation by reason of the unsuitability of the Site for whatever reason. 2.7.2.2 In their own interest, the Bidders are requested to familiarize themselves with the Electricity Act, 2003, the Income Tax Act 1961, the Companies Act, 1956, the Customs Act, the Foreign Exchange Management Act, IEGC, the regulations framed by regulatory commissions and all other related acts, laws, rules and regulations prevalent in India. The Procurer/Authorised Representative shall not entertain any request for clarifications from the Bidders regarding the same. Non-awareness of these laws or such information shall not be a reason for the Bidder to request for extension of the Bid Deadline. The Bidder undertakes and agrees that before submission of its Bid all such factors, as generally brought out above, have been fully investigated and considered while submitting the Bid." Press Release of 1.10.2009 7. When the matter stood thus, a Press Release was issued by the Press Information Bureau, Government of India under the heading "Modification of Mega Power Policy". It will be safer....
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....ovided they meet the eligibility criteria. (v) The requirement of undertaking international competitive bidding (ICB) by the developers for procurement of equipment for mega power projects would not be mandatory, if the requisite quantum of power has been tied up through tariff based competitive bidding or the project has been awarded through tariff based competitive bidding. (vi) A basic custom duty of 2.5% only would be applicable on brown field expansion of existing mega projects. All other benefits under mega power policy available to Greenfield projects would also be available to expansion unit(s) (Brownfield projects) even if the total capacity of expansion unit(s) is less than the threshold qualifying capacity, provided the size of the unit(s) is not less than that provided in the earlier phase of the project granted mega power project certificate. All other conditions for grant to the mega power status shall remain the same. (vii) Mega Power Projects would be required to tie up power supply to the distribution companies/utilities through long term PPA(s) and may also sell power outside long term PPA(s) in accordance with the National Electricity P....
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....y of Power. The letter proceeded to State that in this regard the matter was examined in the Ministry of Power and a follow up meeting was held on 28th October, 2009 with the representatives of State Power Departments. It was set out that in the said meeting various measures for distribution reforms that could be taken up by the State Governments were discussed in detail and the letter annexed the summary of the minutes of the meeting of 28.10.2009. An undertaking was to be taken from the States in a prescribed format and the operative portion of the letter, which is crucial, is extracted hereinbelow: "Accordingly, in pursuance of the Cabinet decision dated 1st October 2009 on the modification to the Mega Power Policy, following four distribution reform measures hereby laid down by the Ministry of Power required to be undertaken by the states purchasing power from the mega power projects: a) Timely release of subsidy as per Section 65 of Electricity Act 2003. b) Ensure that Discoms approach SERC for approval of annual revenue requirement/tariff determination in time according to the SERC regulations. c) Setting up special courts as provided in th....
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....fied in clause (c) above": (ii) after S.No. 400 and the entries relating thereto, the following S.No. and entries shall be inserted, namely :- 1 2 3 4 5 6 400A. 980 1 Goods required for the expansion of any existing Mega Power Project so certified by an officer not below the rank of a Joint Secretary to the Government of India in the Ministry of Power. Explanation: for the purposes of this exemption, Mega Power project means a project as defined in S. No. 400 above. 2.5% Nil 86 B. in the Annexure, in Condition No. 86, for sub-clause (ii) of clause (a), the following shall be substituted namely: (ii) the power purchasing states shall undertake to carry out distribution reforms as laid down by Ministry of Power." (Emphasis supplied) 12. It will be noticed that entry 400 from the notification of 2002 was substituted and in the substituted clause there is no reference to the thermal plant being an inter-State thermal plant. Mega Power Policy of 14.12.2009 13. Close on the heels, on 14.12.2009, the Government of India and the Ministry of Power issued an office memorandum under the subject "revised Mega Powe....
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....all be no further requirement of ICB for procurement of equipment for mega projects if the requisite quantum of power has been tied up or the project has been awarded through tariff based competitive bidding as the requirements of ICB for the purpose of availing deemed export benefits under Chapter 8 of the Foreign Trade Policy would* be presumed to have been satisfied. In all other cases, ICB for equipments shall be mandatory. (vi) The present dispensation of 15% price preference available to the domestic bidders in case of cost-plus projects of PSUs would continue. However, the price preference will not apply to tariff based competitively bid projects of PSUs. 3. This issues with the approval of Secretary (Power). Sd/- (Puneet K Goel) To Principal Sectary/Secretary/ Energy of all States/UTs. Copy to: (i) Chairman, CEA, (ii) CMDs of all PSUs of MOP Copy for information to :- PS to MOP/PS to MOS(P) / PS to Secretary(P) Sr. PPS to AS(AK)/ PPS to AS(GBP)/ All Joint Secretaries/ Directors in the Ministry of Power, Dir (PIB), MOP. Copy also to Cabinet Secretariat, New De....
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.... was notified on 14.12.2009, post submission of the bids and therefore, the benefits could have only accrued post such notification; (iii) the mega power status is granted to a project subject to (a) project getting certified as a MPP from an officer not below the rank of Joint Secretary to the Ministry of Power; (b) the power purchasing States having constituted the Regulatory Commissions with full power to fix tariffs; (c) power purchasing States undertaking to carry out distribution reforms as laid down by the Ministry of Power; (iv) the distribution reforms took place in Punjab in April, 2010 and hence, the bidders could not have considered benefits available under the Mega Policy 2009 prior to the submission of the bid; and (v) in relation to the Project, the Petitioner No.1 had applied to the Ministry of Power for grant of mega power status to the Project on 11.05.2010 and the Ministry of Power had granted the said status vide its letter dated 30.07.2010." 19. Ultimately, after a lengthy exchange of correspondence with each party sticking to their respective position, the appellant no. 1 submitted an undertaking in the specified....
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....w that the Petitioners shall be entitled to claim 'Change in Law' against the Respondent's claim on the basis of withdrawal of fiscal benefits which were available to the Project under the FTP on the date of bidding on standalone basis, without considering Mega Policy, 2009; (d) award cost in favour of the Petitioners; (e) pass such other and further orders / directions as the Hon'ble Commission may deem appropriate in the facts and circumstances of the case." Though the prayer are not happily worded, the issue raised with regard to the Mega Power Policy issue, as understood by both parties, is whether the legal regime was altered on 01.10.2009 or on 11.12.2009 and 14.12.2009 respectively. 21. The appellant's claim before the Commission was founded on twin basis. The main relief was on the aspect of the Mega Power Policy, the contention of the appellant being that the legal regime was altered on 01.10.2009, with the Cabinet Decision, as noticed in the Press Release of 01.10.2009. The alternative plea was based on the Foreign Trade Policy (in short 'FTP') and the appellants contention was that in the alternative, the appellant was entitled to ....
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....ssion on the said issue. Insofar as the FTP aspect was concerned, the issue was remanded to the Commission. According to the APTEL, the State Commission in the order impugned before it had not analyzed the question as to whether the benefits under the FTP were available to the appellant as on the cutoff date of 02.10.2009 and whether the subsequent withdrawal by the Government of India would amount to change in law. 24. Pursuant to the remand, the Commission revived petition No. 30 of 2012 and issued notice for rehearing on the appellant's alternative claim based on FTP. By its judgment of 16.12.2014, the Commission rejected the claim of the appellant based on the FTP by a majority order. 25. Aggrieved by the same, the appellants filed Appeal No. 47 of 2015 before APTEL. By a judgment of 04.07.2017, the APTEL dismissed the Appeal No. 47 of 2015 of the appellant. Against the said judgment of APTEL dated 04.07.2017, appellant has filed Civil Appeal No. 8694 of 2017. We have in this judgment not touched upon the issues in Civil Appeal No. 8694 of 2017. 26. Coming back to the order of the APTEL dated 30.06.2014, the APTEL while dismissing the appeal insofar as the first issue ....
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....9 and hence the same amounted to law; that the implementing actions that followed the Cabinet Decision also accord the same understanding as would be clear from the Ministry of Power letter dated 03.12.2009, the Minutes of meeting dated 28.10.2009 annexed to the letter dated 03.12.2009, the Memorandum dated 14.12.2009 and the fact that each department was bound to carry out the policy in pursuance of the Cabinet Decision dated 01.10.2009. 31. Learned Senior Counsel further contended that to claim change in law (restitution), three essential ingredients are necessary namely (a) The event must be after the cutoff date (b) it must be an event stipulated in Article 13.1.1 (1 to 4) of the PPA and (c) it must result in change in cost of or revenue from the business of selling electricity under the PPA. 32. Learned Senior Counsel contends that the respondent to claim relief under, 'change in law' must establish with documentary proof that consequent to change in law there has been a decrease in capital cost and since the appellant in its bid submitted on 09.10.2009 had factored in the benefit derived from the Cabinet Decision in relation to Mega projects, it received no economic ben....
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....ation dated 11.12.2009 which brought into force the 'change in law'. 35. Learned senior counsel for the respondent contended that without prejudice to the above submissions, the Cabinet Decision dated 01.10.2009 was only the intent or proposal to implement something in future and not to give effect to something on 01.10.2009 itself ; the Cabinet Decision does not also provide that the benefits therefrom will be effective from 01.10.2009; that the Cabinet Decision/Press release by no means can be said to be a regulation, notification, Code, Rule, or order having a force of law as specified in the definition of the term "Law" in the PPA; that under the Rules of Business of the Central Government, the decision taken in the Cabinet ought to get implemented in the manner provided or under the relevant statute such as by Notification, Rule, Regulation or Code in the case of the plenary legislation, such as the Customs Act; in the absence of any plenary legislation, the manner of implementation is provided under Article 77 by the issuance of an authenticated instrument in the manner provided thereon; that the definition of the term "Law" in the PPA and the expression "Decision" is limi....
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....d if so did the extant legal regime as on 01.10.2009 undergo a change from the said date"? Analysis and reasons: 38. The appellant's case, as set out above, is that with the press release on 01.10.2009, a new legal regime commences and on that basis, it is contended that the appellant in its bid of 09.10.2009 factored the altered position including the fiscal benefits due to customs duty exemptions. The respondent's case is that the press release of 01.10.2009 only sets out the proposal for modification and the real modification happened on 11.12.2009 and 14.12.2009 (preceded by the letter of 03.12.2009). According to them, since the change of law having happened on 11.12.2009/14.12.2009 the benefits that have accrued to the appellant ought to be passed on. This is the simple issue to be resolved. 39. To answer this question, certain clauses from RFP needs to be set out. The RFP carried the format of the power purchase agreement as Format 1 Annexure 3. There is no dispute that the same clauses occurred in the power purchase agreement executed on 18.01.2010. Clause 1.1 defines law as under : "Law: means, in relation to this Agreement, all laws including Electricity....
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....ve due regard to the principle that the purpose of compensating the Party affected by such Change in Law, is to restore through Monthly Tariff payments, to the extent contemplated in this Article 13, the affected Party to the same economic position as if such Change in Law has not occurred. a) Construction Period As a result of any Change in Law, the impact of increase/decrease of Capital Cost of the Project in the Tariff shall be governed by the formula given below: For every cumulative increase/decrease of each Rupees 16,50,00,000/- (Rupees Sixteen crore fifty lakhs) in the Capital Cost over the term of this Agreement, the increase/decrease in Non Escalable Capacity Charges shall be an amount equal to 0.267% (percentage zero point two six seven) of the Non Escalable Capacity Charges. Provided that the Seller provides to the Procurer documentary proof of such increase/decrease in Capital Cost for establishing the impact of such Change in Law. In case of Dispute, Article 17 shall apply: It is clarified that the above mentioned compensation shall be payable to either Party, only with effect from the date on which the total increa....
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....1.8. However, in case of any change in Tariff by reason of Change in Law, as determined in accordance with this Agreement, the Monthly Invoice to be raised by the Seller after such change in Tariff shall appropriately reflect the changed Tariff." 41. The golden rule of interpretation is that the words of a contract should be construed in their grammatical and ordinary sense, except to the extent that some modification is necessary in order to avoid absurdity, inconsistency or repugnancy. (See para 5.01 Kim Lewison, The interpretation of Contracts, 3rd Edition). Similarly, any invocation of the business efficacy test as canvassed would arise only if the terms of the contract are not explicit and clear. The business efficacy test cannot contradict any express term of the contract and is invoked only if by a plain and literal interpretation of the term in the agreement or the contract, it is not possible to achieve the result or the consequence intended by the parties acting as prudent businessmen. [See Nabha Power Limited (NPL) vs. Punjab State Power Corporation Limited (PSPCL) and Another, (2018) 11 SCC 508, (para 49) and Adani Power (Mundra) Limited vs. Gujarat Electricity Regul....
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....ed by the appellant that no notice of change of law was issued by the respondent under Clause 13.3.1 and 13.3.2 does not impress us. The said clause expressly deals only with a seller having to issue the notice if it is beneficially affected by the change of law. In this case, PSPCL is the buyer. Further, post the change in law on 11.12.2009/14.12.2009 there is a change in cost with the reduction of customs duty which will enure to the benefit the appellant-seller and under 13.1.1. the benefit ought to be passed on to the respondent. 45. The words of clause 13.1.1 read with the definition of law in Clause 1.1 are plain and clear. For a change in law to occur, the following events ought to have happened seven days prior to the bid deadline that is on 02.10.2009 in our case; (i) the enactment brining into effect, adoption, promulgation, amendment, modification or repeal of any law or (ii) a change in interpretation of any law by a competent court of law, Tribunal or Indian Governmental instrumentality provided such court of law, Tribunal or Indian Governmental instrumentality is the final authority under law for such interpretation or (iii) change in any consents, approvals or lic....
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....ers of the Appropriate Commission", only refer to the rules, regulations, decisions and orders of the Appropriate Commission. 49. It is important to bear in mind that 'law' is one thing and 'change in law' is another, in the sense that the two are two different concepts. For the case in question, we need to understand what the extant law was on 01.10.2009 and then decide whether there was a legal regime alteration as defined under 13.1.1 on the said date. 50. The law, as it stood prior to the press release of 01.10.2009 insofar as the financial implications for the matter is concerned, was the notification under Section 25 of the Customs Act issued on 01.03.2002 and entry 400 thereof, extracted in the earlier part of this judgment. That notification, subject to the conditions mentioned thereon in entry 400 granted exemption from customs duty for import of goods required for setting up of any Mega Power project if such Mega Power project was an inter-State power plant and if it fulfilled the other conditions mentioned in the notification. Section 25(1) of the Customs Act under which the notification is issued reads as under: "25. Power to grant exemption from duty.- (....
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.....2009. According to the appellants, as such, when the notifications for amendment were issued on 11.12.2009 and when the policy document was amended on 14.12.2009, there was no change in law because the legal regime stood altered on 01.10.2009 with the press release. Respondents contended that any clarification for the bid ought to have been sought before 25.09.2009 and independent of that they also contend that press release of 01.10.2009 does not tantamount to law and that the change in law happened only on 11.12.2009/14.12.2009. 54. The scenario that emerges is that there was a legal regime operating, which continued to have force since there was no repeal of the notification of 01.03.2002 or the supersession of the Mega Power Policy document of 07.08.2006 on 01.10.2009. The press release clearly mentioned as to what was envisaged and the conditions that were to be replaced and removed. 55. In our considered opinion, the press release did not alter/amend/repeal the existing law as on 01.10.2009. It was at best the announcement of a proposal approved by the Cabinet which had to be given shape after fulfilment of the conditions mentioned therein. Some of the conditions were ....
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....ht vests when all the facts have occurred which must by law occur in order for the person in question to have the right (see Salmond on Jurisprudence, Twelfth Edition P.J. Fitzgeral page 245). It is only when the right vests will there be a corelative duty on the other as far as nature of the right involved in the present case is concerned. 60. Accepting the argument would also create tremendous uncertainties in the law. In the absence of any repeal of 01.03.2002 notification and the 07.08.2006 Mega Power Policy, between 01.10.2009 and 11.12.2009/14.12.2009 there will be two legal regime operating. 61. Lord Bingham of Cornhill in his locus classicus 'The Rule of Law' rightly identifies as one of the facets of rule of law, the following - "the law must be accessible and so far as possible intelligible, clear and predictable." The second and third reason given to support the principle makes for fascinating reading and are reproduced hereinbelow. "The second reason is rather similar, but not tied to the criminal law. If we are to claim the rights which the civil (that is, noncriminal) law gives us, or to perform the obligations which it imposes on us, it is important to....
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....ll-pervasive and that there is hardly any field of activity where governance by delegated or subordinate legislative powers is not as important if not more important, than governance by parliamentary legislation. But unlike parliamentary legislation which is publicly made, delegated or subordinate legislation is often made unobtrusively in the chambers of a Minister, a Secretary to the Government or other official dignitary. It is, therefore, necessary that subordinate legislation, in order to take effect, must be published or promulgated in some suitable manner, whether such publication or promulgation is prescribed by the parent statute or not. It will then take effect from the date of such publication or promulgation. Where the parent statute prescribes the mode of publication or promulgation that mode must be followed...." (Emphasis supplied) 63. The appellant has relied upon RFP to contend that the Press release of 01.10.2009 could not have been ignored by them. We do not find merit in this submission. Those clauses in the RFP obligate the bidder to satisfy itself about the extant legal regime and those clauses cannot operate as a crutch to elevate the press releas....
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....Regulatory Commission and Others, (2017) 14 SCC 80 will also not help the appellant. The appellant's main reliance has been on Lloyd Electric and Engineering Limited vs. State of Himachal Pradesh and Others, (2016) 1 SCC 560. In Lloyd Electric (supra), the appellant therein was already enjoying the concessional rate in CST @ 1% up to 31.03.2009. Not only this, after the Cabinet note, a policy decision was taken to extend the period of concession up to 31.03.2013 or till CST was phased out. The Department of Industries had issued a notification extending concessions from 01.04.2009 to 31.03.2013 or till the time CST is phased out. The dispute arose because the Excise and Taxation Department issued a notification of 18.06.2009 granting benefit with immediate effect for the period ending 31.03.2013. It was in that context that this Court held that the State Government cannot speak in two voices and gave effect to the notification of the Industries Department so as to maintain continuity in exemption from 01.04.2009 and set aside the judgment of the High Court which denied exemption from 01.04.2009 till 18.06.2009 which was the date on which the Excise Department issued the notificatio....