TaxTMI 
TaxTMI 
1992 (1) TMI 365
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....e to the rescue. It is this situation in the case of Kanoria Chemicals and Industries Ltd. (hereinafter referred to as 'the appellant') which has given rise to these appeals. 2. The Electricity (Supply) Act, 1948, (hereinafter referred to as 'the 1948 Act') entrusted the control over the generation and distribution of electric energy to Electricity Boards constituted under the Act. In the State of Uttar Pradesh, the U.P. State Electricity Board (hereinafter referred to as 'the Board,) was constituted on 1.4.1959. At that time, the State Government (hereinafter referred to as 'the State') was in the process of establishing the Rihand Hydro-Electric Generating Plant, which become operational w.e.f. 1.2.62, and attained an ultimate installed capacity of 300 M.W. The control of this remained with the State till 31.3.1965. Since the supply of electrical energy was then available in abundance and only the eastern area of the State was served by the plant, the State considered it expedient to enter into contracts with bulk purchasers both with a view to ensure maximum utilisation of the electricity available and with a view to the industrialisation of the ea....
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..... It may be mentioned that this clause gave rise to disputes which were referred to arbitration. An award was made by justice D.P. Madan, a retired judge of this Court, which was made a decree of this Court by an order dated 1.4.1987. Under the award, the rate of supply was fixed at 8.69 paise per unit. The State's grievance is that it incurred a loss of Rs. 10.55 crores by supplying electricity from Rihand between 1.4.64 and 19.5.83 at concessional rates instead of applying the uniform tariff applicable to other "bulk power" consumers, briefly referred to as "HV-2 rates." It says also that it likewise suffered a loss of 12.4 crores due to the supply at 8.69 paise instead of normal rates, from Obra between 1.4.71 and 31.3.89, when the agreement, came to an end by efflux of time. 6. Obviously, it was not economical to continue supplying energy at the preposterously low rates to which the State had committed itself in 1963 on account of the conditions that prevailed at the time of the agreement. The powers of the State or the Boards to revise contractual rates unilaterally were examined by this Court in Indian Aluminium Company Ltd. v. Kerala State Electricity Board [1976] 1 S....
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....or after April 1, 1965 for the supply of electrical energy to such consumer shall operate subject to the modifications specified in the following clauses, which shall have effect from the date of the commencement of the Electricity Laws (Uttar Pradesh Amendment) Act, 1983 (hereinafter referred to as the said date): (a) the rates to be charged by the Board for the energy supplied by it to any consumer under any contract for which the payment will be due for the first time on or after the said date shall be such as may with the previous approval of the State Government be fixed by the Board, having due regard to the geographical position of the area of supply, the nature of the supply and purpose for which supply is required and any other relevant factor. (b) If the State Government directs the Board under Section 22-B of the Indian Electricity Act, 1910 or under any other law for the time being in force to reduce the supply of energy to a consumer and thereupon the Board reduces the supply of energy to such consumer accordingly, the consumer concerned shall not be entitled to any compensation for such reduction, and if the consumer consumes energy in excess of the ....
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....cts and only reads into them the rates that may be prescribed by the Board. This is the first difference. The second is that while the other legislations affect all agreements entered into before a specified date, the UP. amendment is restricted to contracts for supply of electricity from the Riband Hydro-Electric Generating Station. We are informed that, when the above amendment was sought to be effected, the only outstanding contract of the State for the supply of electricity from the Rihand Hydro-Electric Generating Station was the contract with the appellant on the 30th of September, 1963. There had been two agreements entered into for supply of electricity from this power station but the other one with Hindustan Aluminium Company had become ineffective since that company gave up its claim to supply from the above power plant in 1975-76 having been successful in putting up a power plant for its captive use. Thus, though the Act purports to be one of general application, it was really intended to enable the State and the Board to modify the rates of supply of electricity to appellant under the contract of 30.9.1963. 9. At this stage it may be useful to refer also to the terms....
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....conditions of the Agreement or tariff rates and that no revised rates shall be charged from the appellant till it is heard, and the matter decided, by the State Government. On June 11, 1984, the Law Officer of the Board wrote to the appellant requesting it to give in writing the points which they wanted to urge before the rates were approved by the State Government. According to the appellant, this was not sufficient compliance with the court's order and it moved the High Court for amending its petition and made further applications to the Court. It may be mentioned that the stand taken up by the Board in the writ petition was that the writ petition was premature as the State's approval had not been obtained and no injury had been caused to the appellant. But, suddenly, on 31.1.85, the Board wrote to the appellant informing it that the State Government had approved the levy of rates as per Schedule HV-2 (as defined in the U.P. Gazette Notification dated 29th October, 1982) applicable to heavy power consumers in substitution of the rates mentioned in the agreement of 20th September, 1963. It was stated-curiously enough-that the approval of the State Government had been given....
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....rd showed that the factors enumerated in Section 60(5) had not been taken into account by the Board before fixing the rates or by the State Government in according its approval to the same. The Board and the Government appeared to have acted upon a consideration of the factors mentioned in Section 49(2) of the Act of 1948 while framing a uniform tariff but this was not sufficient compliance with the provisions of Section 60(5). On the other hand, Mathur. J. was of the opinion that the move for amendment of the Act and enforcement of HV-2 tariff was initiated by the Board and that the notings contained a detailed justification for enforcing the said tariff. It also appeared from the statement of objects and reasons of the amending bill that the supply of electricity at concessional rates despite losses and the desirability of replacing the said rate by uniform tariff came up for discussion in the State Legislature and that the Board did not act wrongly or illegally if it felt that it had no option but to apply uniform rates in view of the statement contained in the objects and reasons of the bill and the discussion in the State Legislature. He was also of the opinion that the factor....
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....as pronounced the State Electricity Board and the State Government sought a certificate of fitness for preferring an appeal to this Court and the High Court granted the certificate, as prayed for. This appeal has not been numbered on account of delay. Though the High Court had quashed the revision of the rates, it had left it to the Board and State to fix revised rates afresh. That apart, the appellant had also a grievance that, in applying the HV-2 rates which were applicable to other consumers, the Board and the State had not taken into account the special factors relevant to the supplies made to it. The appellant also, therefore, filed S.L.P. No. 13967 of 1987 for leave to appeal from the judgment dated 2.4.1987. Leave has been granted by this Court on 8.4.1988 and the appeal of the company has been registered as C.A. 1306 of 1988. 16. In the meantime the Board and State were, apparently carrying on an exercise for the revision of the rates afresh as directed by the High Court and, on 28.3.1988, the Board purported to fix the following revised rates for the supply from 20th May, 1983. Period Rate (Paise per unit) 20.5.1983 to 31.3.1984 71.21 1.4.1984 to 31.3.19....
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.... 2. The State Electricity Board will consider this representation and make appropriate recommendations to the State Government However, before doing so, and particularly if the Board intends to take into account any factors other than those mentioned in the appellants' representation, they should indicate the factors which they so wish to take into account, in their recommendations to the State Government A copy of the recommendations should be forwarded to the appellants within seven weeks from today. 3. On receipt of the recommendations made by the Board, the appellants may submit to the State Government, if they so desire, any representation which they wish to make regarding the recommendations within a period of three weeks thereafter. 4. The State Government will consider the recommendations of the State Board as well as the representations made by the appellants to the Board as well as to themselves and approve of the rates which they consider proper in the circumstances of the case by a reasoned order, giving a broad indication of the factors which they have taken into account in fixing the rates. This decision should be arrived at within a period of f....
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....this, the State Electricity Board while fixing the rates in March 88 has kept in mind the decision of Hon. High Court of Allahabad and complied with the provisions of Section 60(5)(a) of the Electricity (Supply) Act, 1948. Since keeping in view the factors enumerated in Section 60(5)(a) of the Electricity (Supply) Act, 1948, the Rules were revised in March, 1988 in the following manner, hence there appears no necessity to change these rates: S. No. Period Rate 1. 20.5.83 to 31.3.84 70.21 paise/unit 2. 1.4.84 to 31.3.85 74.93 paise/unit 3. 1.4.85 to 31.3.86 85.14 paise/unit 4. 1.4.86 to 31.3.87 88.60 paise/unit 20. In other words, the State and Board adhere to the rates fixed on 28.3.88. 21. It may be interesting to set out a comparative table of the revisions Effected by the Board originally (which was quashed by the High Court) and the rates now approved: Period HV-2 rate Paise/unit Revised rate paise/unit 20.5.83 to 31.3.84 55.71 71.21 1984-85 59.86 74.93 1985-86 63.89 85.14 1986-87 80.88 88.60 *1987-88 84.64 88.60 *1988-89 93.39 88.60 * The revised rat....
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....y the Board to the State Government in March 1988 but, admittedly, no facts, data or basis had been placed before this Court at the time of the original writ petition on the basis of which the State Government had fixed the rates in March, 1988 compelling this Court to remand the matter for fresh consideration. Suddenly the Board, while concluding its recommendation to the State Government on 26.9.91 reminded the State Government that prior approval of the State Government for the rates had already been obtained in March 88 and persuaded the State Government to mechanically uphold the pre-determined rates. Finally, it is contended that even in this process of re-fixation of the rates there was no genuine exercise to consider relevant factors in determining the rate under Section 60(5Xa). 25. We do not think that there is any force in these contentions. By the time the matter came up before us for hearing in the first instance the State Government had already passed its order of revision dated March 28,1988. The rates which had been recommended by the State Electricity Board and approved by the State Government were within the knowledge of the appellant. It was of course necessar....
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....t this was rendered infructuous because of the terms of Section 60(5)(a) which, it was said, were different from those of Section 49. If the factors under Section 49 were alone to be taken into account then the consumers, one and all, would have been liable to pay for the electricity at the tariff rates. The claim of the appellant was that in applying these rates certain factors individual to it had not been taken into account. If one compares the two provisions, one will find that most of the elements are common to the two provisions. Both under Section 49 and Section 60 the authorities have to take into account the geographical position of any area, the nature of supply and purpose for which supply is required and any other relevant factor. The only difference between the two provisions is that since Section 49 deals with a general fixation while Section 60(5) deals with a fixation for a particular individual case, there may be some special factors to be taken into account which may or may not be germane while fixing the general tariff under Section 49, Hence the only point which needed to be considered, when the matter was reexamined pursuant to our directions, was whether, havi....
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....t entered into at a time when conditions were totally different. It confers an absolute and unrestricted enabling power to revise the rates in an appropriate manner and contains no restriction of the nature suggested for the appellant. In doing this, the only limitation which the statute requires the authorities to keep in mind are the factors mentioned in the section. Whether the revised rates for the consumer governed earlier by the contract should be higher or lower than, or equal to, the tariff rates would depend on a large number of considerations, in particular, the basis on which, and the point of time at which, those general rates were fixed. In principle, it is quite conceivable that, in an appropriate case, a consideration of the relevant factors may justify even a rate higher than the general tariff rates intended for the particular category of consumers. We shall examine later whether this was justified in the present case. At the moment, all we are concerned with is the legality of fixing such higher rates and we see no difficulty in this either on the language of the Statute or on other considerations. 28. A retrospective effect to the revision also seems to be cle....
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....fixation will be read with the contract. Only the Board cannot revise the rates in respect of supplies for which payment under the contract, fell due before 20.5.83. The second objection, which is a follow up of the first, is that if the power u/s 60 is held exercisable more than once, the interpretation will permit successive revisions, each superseding the earlier one, a position that could lead to immense harassment. We have no doubt the power u/s 60 is exercisable more than once. All the same, the answer to the appellant's objection is that, while this could be a basis of substantial harassment if repeated revisions are automatically dated back to 20.5.83 (as argued, on the first point, for the assessee), it loses all force on our interpretation leaving it open to the Board and State to fix the dates with effect from which revisions will be effective. In view of this, one can take it that, while making a subsequent revision, the authorities will not normally tamper with an earlier revision (s) or alter the dates of effectiveness fixed for the earlier revision (s) without a valid reason to do so. If this is done, it will be open to a court to examine the basis thereof and su....
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.... two raw materials needed for its business. On the other hand, for the Electricity Board, it is contended that the appellant should be called upon to pay higher than HV-2 rates for the following reasons: (i) The appellant has been having substantial supplies of electricity at nominal rates of 2.5 paise and 2.75 paise per unit between 1963 and 1983. (ii) The supply to the assessee is being made only from the State Grid and there is no reason why it should draw the supply at lower rates than others: (iii) The Board had been incurring heavy losses over the years. This is to a considerable extent due to the spiraling demand for electricity, the Board's responsibilities under the statute to co-ordinate development of the supply of energy throughout the State and the necessity to supply energy at concessional rates to certain sectors such as the agricultural sector. (iv) The Board is also entitled, under Section 59 of the 1948 Act, to take into account the necessity of building up a surplus, statutorily fixed, in the fixation of rates of supply to all or any of its consumers. 31. We have given careful thought to the considerations urged before u....