Bihar State
Eelectricity Board Vs. M/S.Pulak Enterprises & Ors. [2009] INSC 739 (15
April 2009)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 7220-7239 OF 2000 Bihar
State Electricity Board ...Appellant Versus M/s Pulak Enterprises and Ors.
...Respondents WITH
Civil Appeal No. 7219 of 2000 Civil Appeal Nos. 2555-2559 of 2009 (Arising out
of SLP (C) Nos.456-460/2001) Civil Appeal 2560 of 2009 (Arising out of SLP (C)
No.12624/2001) Civil Appeal 2561 of 2009 (Arising out of SLP (C) No.12625/2001)
Dr. ARIJIT PASAYAT,
J.
1.
Leave
granted in Special Leave Petitions.
2.
These
appeals are directed against the common judgment of the Patna High Court
allowing the batch of writ petitions. The dispute relates to fuel surcharge.
The validity of levy has been upheld by this Court in Bihar State Electricity
Board and Anr. v. Bihar 440 Volt Vidyut Upbhokta Sangh and Ors. (1997 (11) SCC
380). Therefore, the dispute before the High Court related to method of
calculation and in substance the rate of fuel surcharge.
3.
The
Board has its own power generation units namely, Patratu Thermal Power Station,
Barauni Thermal Power Station and Muzaffarpur Thermal Power Station. The power
generating from these units is not sufficient and, therefore the Board
purchased from other sources in order to meet the requirements of power supply
to its consumers. The sources from which the Board purchases power are Damodar
Valley Corporation, National Thermal Power Corporation, Tenughat Vidyut Nigam
Ltd., Uttar Pradesh Electricity Board, Orissa State Electricity Board, Power
Grid Corporation of India Ltd. According to the Board, the power purchased from
outside sources forms the bulk of the total power supplied by the Board. In
other words, power generated by the generating units of the Board is much less
in comparison to the purchased power from outside sources.
4.
The
Tariff framed by the Board in exercise of its powers conferred upon it under
the provisions of Section 49 of the Electricity (Supply) Act, 1948 (in short
the `Act') vide Tariff Notification dated 21.6.1993 published in the Bihar
Gazette on 23.6.1993 which came into effect from 1.7.1993 prescribes rates for
supply of power to the consumers of the Board. Because of infrequent revision
of tariffs and in order to neutralize increase in the cost of generation and
purchase of power, the 1993 Tariff provides for levy and collection of fuel
surcharge from the consumers of the Board.
5.
It
is submitted that fuel surcharge is a part of tariff and, in reality, a
surcharge levied to meet the increased cost of generation and purchase of
electricity. This Court in a number of decisions has upheld levy of fuel
surcharge.
6.
The
1993 Tariff provides for a formula for levy and collection of fuel surcharge
from the consumers of the Board from time to time. The validity of the formula
for levy of fuel surcharge has been upheld by this Court in Bihar State
Electricity Board's case (supra).
7.
Section
49 of the Act empowers the Electricity Board to frame tariff and lay down the
terms and conditions of supply of electricity as it thinks fit. In exercise of the
said power the Bihar State Electricity Board (hereinafter referred to as the
`Board') framed tariff vide notification dated 21.6.1993, published in the
Bihar Gazette on 23.6.1993 superseding the earlier tariff notifications dated
26.8.1991 and 3.7.1992. The tariff notification dated 21.6.1993 is effective
from 1.7.1993. Under clause 16.10.1 of the said tariff the consumers of the
categories specified therein are required to pay operational surcharge at a
rate to be determined every year in accordance with the formula prescribed, in
addition to other charges as laid down in the tariff schedule. In terms of
clause 16.10.2 the operational surcharge consists of two elements (i) fuel
surcharge and (ii) other operational surcharge. Clause 16.10.3 lays down the
formula for determining fuel surcharge applicable during the financial year in
terms of paise per unit. Clause 16.10.4 prescribes the formula for
determination of 'other operational surcharge'. It may be mentioned here itself
that the provision regarding 'other operational surcharge' has been held to be
arbitrary and struck down. Clause 16.10.5 provides that the operational
surcharge for a financial year shall be calculated by the Board after the
expiry of the financial year. Till actual calculation of the operational surcharge
for a financial year is made, operational surcharge during the financial year
may be levied at a rate provisionally calculated on monthly or quarterly or
half-yearly basis as the Board may decide. In case of short or excess realisation
the amount is to be adjusted in the next bill be served on the consumers.
Clause 17 lays down that the existing rate of fuel surcharge notified in letter
no.A/CS/Costing-44/92-93/397 dated 29.3.1993 amounting to 32 paise per unit has
been merged in the tariff. Any increase in the operational surcharge thereafter
only shall be levied.
8.
In
order to appreciate the facts to be stated hereinafter it would be appropriate
to notice the formula for computation of the fuel surcharge laid down in clause
16.10.3 as under:
S1 =
A1xA3+B1xB3+C1xC3+D1xD3+E1xE3xF1xF3+G1xG3+H1xH3 (A2+B2+C2+D2+E2+F2+G2+H2)....
Whereas, S1 = Average
Fuel Surcharge per unit in paise applicable during the financial year.
5 A1 , B1 ,C1 =.
Unit generated from PTPS, BTPS & MTPS respectively.
D1,E1,F1,G1,H1 = Unit
purchased from DVC, UPSEB,OSEB,NTPS,PGCL and any other source respectively.
A2,B2,C2 = Unit sold
out of sent out from PTPS, BTPS & MTPS on which fuel surcharge is leviable.
D2,E2,F2,G2,H2 = Unit
sold, out of purchased from DVC, UPSEB, OSEB, NTPC, PGCL and any other source
respectively during the year on which Fuel Surcharge is leviable.
A3,B3,C3 = Increase
in average cost of Fuel Surcharge in paise per unit computed for Board's
Generation at PTPS, BTPS and MTPS D3, E3,F3,G3,H3 = Increase in average unit
rate of purchase of energy from DVC, UPSEB, OSEB, NTPC, PGCL & any 6 other
source respectively during the year for which the surcharge is to be
calculated.
The said increase to
be calculated with respect to the year 1992-93 (after amendment, read 1991-92)
(In the above, PTPS stands for Patratu Thermal Power Station, BTPS for Barauni
Thermal Power Station, MTPS for Muzaffarpur Thermal Power Station. They are
Board's own generating stations. Likewise, DVC stands for Damodar Valley
Corporation, UPSEB for Uttar Pradesh State Electricity Board, OSEB for Orissa
State Electricity Board, NTPC for National Thermal Power Station and PGCL for
Power Grid Corporation of India Limited. They are external sources of supply of
electricity to the Board.)
9.
The
manner of calculation of increase in average cost of fuel in Board's own
generating stations i.e. A3, B3 and C3, and increase in average unit rate of
purchase from outside sources i.e. D3; E3 etc. is laid down in clause
16.10.3.1. As regards the former, the calculation is to be made in the
following manner:
"(a) Patratu
Thermal Power Station:- The rate in paise per unit shall be based on the
average cost of 9270.08 paise per 10,00,000 K.Cal. of fuel delivered at the
bunkers of the Board's generating station at Patratu. In the event of rise or
fall in the aforesaid cost, at any time, the rate per unit will be increased or
decreased as the case may be, by 0.3537 paise for each one per cent variation
in the cost of fuel per 10,00,000 K.Cal. In the cost of fuel per 10,00,000
K.Cal. In calculating the above variation, percentage variation of 0.5 and
above will be treated as next higher percentage and percentage variation, below
0.5 will be ignored.
(b) Barauni Thermal
Power Station:- The rate in paise per unit shall be based on an average cost of
17407.97 paise per 10,00,000 K.Cal. of fuel delivered at the bunkers of the
'Board's generating station at Barauni. In the event of rise or fall in the aforesaid
cost, at any time, the rate per unit will be increased or decreased, as the
case may be by 0.8539 paise for each one per cent variation in the cost of fuel
per 10,00,000 K.Cal. In calculating the above variation, percentage variation
of
0.5 and above will be
treated as next higher percentage and percentage variation below 0.5 will be
ignored.
(c) Muzaffarpur
Thermal Power Station:- The rate in paise per unit shall be based on an average
cost of 18166.04 paise per 10,00,000 K.Cal. of fuel delivered at: the bunkers
of the Board's generating station at Muzaffarpur. In the event of rise or fall
in the aforesaid cost , at airy time, the rate per unit will be increased or
decreased, as the case may be by 0.7368 paise for each one percent variation in
the cost of fuel per 10,00,000 K.Cal. In calculating the above variation,
percentage variation of 0.5 and above, will be treated as next higher
percentage and percentage variation below 0.5 will be ignored."
As, regards the
latter :i.e. electricity purchased from external sources the clause says that
the actual increase in the average unit rate of purchase will apply, that is to
say, will be the basis.
10.
On
4.4.1994 the Board issued circular stating that on final calculation the fuel
surcharge for the period 1992-1993 had been determined as 26.14 paise per Kwh.
On 5.1.95 the Board issued another circular calculating the fuel surcharge for
the period July 1993 ( i.e. after coming into force of the new tariff) to March
1994 to be 25.98 paise per Kwh. I am not referring to the rate of other
operational surcharge under clause 16.10.4 which was also notified by the same
circular because that has already been struck down.
The consumers were
billed accordingly. Writ Petitions were filed challenging the rates in CWJC
No.2771 of 1995(R) and analogous cases. During the pendency of the said writ
petitions the Board proposed certain amendments in clauses 16.10.3, 16.10.3.1
and 17, vide letter no.135 dated 28.12.1995. I shall refer to the salient
features of the proposed amendment later. The implementation of the circular
dated 5.1.1995 was kept pending vide circular dated 8.2.1995 in the meantime.
On 8.3.1995 and 17.4.1995 circulars were issued directing payment @ 15
paise/Kwh from 1.7.1993 to 31.3.1995 instead of 25.98 paise per Kwh as fuel
surcharge as stipulated in circular dated 5.1.1995. However, by circular dated
20.9.1995 the said circulars dated 8.3.1995 and 17.4.1995 were withdrawn and
the earlier circular dated 5.1.1995 by which fuel surcharge @ 25.98 paise/Kwh
had been fixed was restored.
11.
The
writ petitions, CWJC No.2771 of 1995(R) and analogous came up for hearing in
October 1996. With the consent of the Board, on 17.10.1996 the High Court
constituted a High Level Committee consisting of two nominees each of the
consumers and the Board and two independent members. The Committee was directed
to calculate the fuel surcharge in terms of 1993 tariff, particularly taking
into account clause 17, and submit report by 31.1.1997 to the Chairman of the
Board, The writ petitions, were thus disposed of. The High Court made it clear
that after submission of such report, anybody feeling aggrieved may move the
appropriate forum or court of law. From the records of the case it appears that
an interlocutory application was made by the concerned petitioners of the case
making a grievance that certain vital documents had not been made available by
the Board to the Committee vide order dated 29.1.1997 the High Court recorded
the submission of the counsel for the Board that the documents required shall
be furnished within two weeks. Time for submission of the report was accordingly
extended to 31.3.1997 and the earlier order dated 17.10.1997 was modified to
this extent.
12.
At
this stage the Board issued circular dated 5.2.1997 notifying the provisional
rates of fuel surcharge as 43.89 paise/Kwh for 1994-95, 72.12 paise/Kwh for
1995-96 and 102 paise/Kwh from 1.4.1996 onwards. This led to fresh writ
petitions being CWJC Nos.1632 of 1997 and analogous cases.
On 12.3.1997 when the
cases came up for preliminary hearing dispute again arose as to circumstances
in which the aforesaid Committee had not finalised the report. After hearing
counsel for the parties, however, a consent order was passed to the effect that
the Committee shall finalise its report on 14.3.1997 when it was scheduled to
meet next, on the basis of documents already on record and submit the report to
the High Court on 17.3.1997. On 16.3.1997 the Committee submitted its report.
On 21.3.1997 when the matter came up for further hearing the High Court noted
that the findings reached by the members of the committee were not unanimous.
While four members of
the Committee had worked out the fuel surcharge @ 12.38 paise/Kwh for the
period from July 1993 to March 1994, 21.33 Paise/Kwh for the period 1994-95 and
44.00 paise/Kwh (provisional) for the period 1995-96, the other two members who
were Board's nominees, had worked out the same @ 25.98 paise, 43.98 paise and
72.12 (provisional) paise per Kwh for the aforesaid periods respectively. As an
interim measure the High Court directed the petitioners to pay fuel surcharge
for the periods July 1993 to March 1994 and 1994-95 at the rates worked out by
four members of the committee, which were in their favour, and for the periods-
1995-96 and 1996-97 @ 46.37 paise/Kwh and 56.37 paise/kwh offered by them. CWJC
Nos. 1632 of 1997 and analogous cases were finally heard and decided by
judgment dated 30.6.1998.
13.
At
this stage it may be relevant to advert to the Board's letter dated 28.12.95,
referred to above, suggesting certain amendments in clauses 16.10.3, 16.10.3.1
and 17. The substance of the proposed amendment was that instead of calculating
the increase in the average unit rate of purchase of energy from DVC, UPSEB, OSEB,
NTPC, PGCL and any other source with respect to the year 1992-93, as prescribed
in clause 16.10.3 the same should be calculated with respect to the year
1991-92, and similarly with respect to the year 1991-92, and similarly in
clause 16.10.3.1 the average cost of fuel in respect of energy generated at
Board's own generating stations be computed on the base rate of 1991-92 and not
1992-93. In other words, the base year with respect to these two sets of
components was sought to be changed from 1992-93 to 1991-92. Clause 17 was also
proposed to be amended by that in accordance with the instructions issued by
the Government of Bihar to the Board, the increase in the rate of fuel
surcharge between January 1992 and June 1993 which came to 20 paise (12 paise
as in January 1992 and 32 paise as in June 1993) had been merged in the tariff
and thus any increase in the fuel surcharge thereafter only shall be levied
after accounting for the increase already merged in the tariff.
14.
From
the judgment dated 30.6.1998 disposing of CWJC Nos.1632 of 1997 and analogous
case, it appears that the validity of the rates of fuel surcharge was
challenged mainly on two grounds:- (a) the cost of:
generation at the
Board's own generating stations, namely, Patratu, Barauni and Muzaffarpur
Thermal Power Stations had been worked out treating 1991-92 as the base year
but the cost of the unit purchased from DVC, NTPC etc. had been calculated on
the basis of 1992-93 rates. According to the writ petitioners in working out
the rate the values to be taken into account must correspond to the same year
lest determination could become irrational and arbitrary: (b) the merger of
fuel surcharge as on 1.7.93 in terms of c1ause 17 of the tariff was not
correct. The High Court noted that the objections of the petitioners were in
consonance with the Board's own decision vide letter dated 28.12.1995 (supra)
by which the Board had suggested certain amendments in the relevant clauses of
the tariff to the State Government. The High Court, however, took the view that
in terms of the order dated 17.10.1996 passed in CWJC No.2771 of 1995(R) the
Committee was required to submit its report to the Chairman of the Board and
not to the High Court. Observing that the report of the committee would assist the
Board in coming to fair and just decision, and if the Board was satisfied that
the tariff modification requires any modification it was open to it to modify
the tariff in accordance with law, the High Court instead of finally deciding
the issues itself directed the Board to consider the report of the committee
submitted before the High Court on 16.3.1997, and in consultation with the
State Government, take a final decision, by reasoned order, on the points:- (i)
Whether any modification of clause 16.10.3 of the tariff notification published
on 23.6.93 is required so that the increase in the average unit rate of
purchase of energy from DVC, NTPC etc. should be calculated with respect to the
year 1991-92 instead of the year 1992-93.
(ii) Whether in terms
of clause 17 of the aforesaid tariff notification, 20 paise per Kwh the
increase in fuel surcharge which has been merged in the basis tariff should be
considered for adjustment, instead of 32 paise, in terms of clause 17 of the
aforesaid notification. If so, whether the impugned circular dated 5.2.97 be
not withdrawn and the consumers 14 be given the benefit of discredit to the
period July 1993 to March 1994 and thereafter, and clause 17 of the tariff
notification under section 93 be amended appropriately.
15.
The
High Court directed that till the Board takes a final decision in the matter,
the interim order passed by the Court on 21.3.1997, referred to above, shall
operate. Thereafter, the petitioners shall be liable to pay fuel surcharge in
accordance with the decision that may be taken by the Board.
Any person aggrieved
by the decision of the Board will be at liberty to challenge the same in
accordance with law.
16.
The
submission of the writ petitioners that the Board has not passed a 'reasoned
order' or otherwise failed to implement the direction of the High Court was
rejected. It was observed that the High Court had directed the Board to decide
whether any modification in clause 16.10.3 of the tariff notification was
required so as to make the base year with respect to average unit rate of
purchase of energy from DVC, NTPC etc. at par with the increase in cost of
generation at Board's own generating stations and to adjust the merger of the
existing fuel surcharge of 20 paise/Kwh, by a reasoned order. A favourable
decision having been taken and the aforesaid clauses suitably amended, the High
Court felt that there is no scope for further argument in this regard. As far
as the requirement of passing a "reasoned order" is concerned, the
facts and figures contained in the agenda notes dated 26.11.1998 and 6.1.1999
which were the basis of the proposed amendments and revision in the rates, can
be treated as reasons for the same.
The direction of the
High Court to pass a reasoned order cannot be interpreted as a direction to set
out reasons for fixing the particular rates of fuel surcharge which is merely
an arithmetical exercise to be worked out in accordance with the prescribed
formula. The Board is a body corporate and it takes its decision on the basis of
the facts and figures furnished to it in the agenda notes supported by
materials. It is apparent that after the decision of the High Court the matter
was examined at different levels and finally the said agenda notes dated
26.11.1998 and 6.1.1999 were put up for consideration which were approved
respectively on 14.12.1998 and 21.1.1999. High Court did not find any substance
whatsoever in the contention that the Board failed to implement the direction
of the High Court, by not passing a reasoned order or otherwise.
17.
The
submission that the dispute should be referred to a Committee of experts was
rejected by the High Court considering the nature of the dispute. It was of the
view that such a course should be taken only when the Court cannot decide the
dispute. There may be justification to constitute a committee and refer the
dispute to it when the relevant data have to be gathered or facts have to be
ascertained without which the dispute cannot be resolved. This normally is done
in public interest litigation. In adversary litigation it is for the parties to
produce materials in support of their respective claim. The Court is not
supposed to make a roving enquiry for allowing or disallowing the claim of one
or the other party. It is true that on the previous occasion in CWJC No.2771 of
1995 ., the High Court did constitute a Committee but that was with the consent
of the Board. Counsel for the Board pointed out in course of his submission
that the Board wanted to be assured itself that the stand taken by it in letter
dated 28.12.95 to the State Government suggesting amendments in clauses 16.10.3
and 17 was correct.
18.
As
the aforesaid pleas were taken for the first time in course of argument, the
Board was allowed opportunity to file written submission. In its written
submission the Board took the stand that T & D losses do not form part of
calculation of fuel surcharge and the reason for the difference of 8655.78 MU
is the existence of large number of defective meters and meterless supply of
electricity to consumers belonging to different categories, particularly,
agriculture and domestic categories. The statement in paragraph 3.7 of Chapter
III of the CAG report actually represents the T&D losses based on units
actually metered and does not include power sold to the consumers having
unmetered supply or the consumers having defective or burnt meters. That is why
in the accounts, the units sold were worked out by dividing the assessed
revenue by the tariff rates including fuel surcharge. It has been stated that
in the case of defective meters and meterless consumers, though bills are
raised, the corresponding quantum of power sold cannot be determined. Hence the
assessed revenue (in accordance with the Board's tariff) is treated as the
basis for computation of power sold. The CAG, it has been stated, has approved
this procedure and granted its statutory certificate to the effect that the
accounts of the Board give a "true and fair view of the state of affairs
of the Board".
19.
The
Board further took the stand that if the rates of fuel surcharge were to be
determined only on the basis of metered sales the rates would be considerably
higher than already determined by the Board. This would be evident from the
following chart:
Sl. Particulars July
93 1994-95 1995-96 1996-97 March 94
1. Amount recove-
rable as fuel 9536.09 16328.20 28431.10 53385.22 surcharge (Rs.in lakhs)
1. Units on which
Fuel surcharge 2645.76 3437.95 3822.96 3834.04 is leviable (in MKwh)
3. Rate of fuel 36.04
47.49 74.37 139.24 surcharge (in P/Kwh)
4. Less (20 P/Kwh) As
per the Hon'ble High Court's Order dated 30.6.98 Passed in CWJC No.1632 of 99
20.00 20.00 20.00 20.00
4. Net rate (P/Kwh)
If T&D losses as Per serial No.6 Of table at para 3.7 Of CAG report at page
80 is taken into account (3-4) 16.04 27.49 54.37 119.24
4. Present rates of
fuel Surcharge as per the Impugned notification Dated 31.5.1999 23.38 21.33
48.54 99.34
20.
The
above calculation has been explained by pointing out that while A1, B1, C1 etc.
and A3, B3, C3 etc. components of the Formula indicating the power pumped into
the Board's system for transmission or distribution to different points in the
State and the incremental rise in the average cost of fuel at the Board's
Thermal Power Stations or power purchased from NTPC, DVC etc. are not affected
by the T&D losses, A2, B2, C2 etc. component of the Formula representing
the quantum of power sold to categories from whom fuel surcharge is leviable
would be reduced if power supplied to the consumers having defective meters
etc. is excluded from the total quantum of power sold. Thus, while the
numerators would remain unchanged, the denominators would get reduced resulting
in higher rates of fuel surcharge.
In the above view of
the matter, it was stated that keeping in view the meterless and defective
meter supply of the electricity the Board has made its own realistic
calculation of T&D losses as reflected in the table in para
3.7 of the CAG report
which has been accepted by the CAG. The Board has accordingly asserted that the
table shown in para 3.7 of the report regarding "percentage of actual loss
of energy available for sale" has no nexus with the computation of rates
of fuel surcharge under the formula in clause 16.10.3.
21.
The
significance of the question as to whether fixing the rate of fuel surcharge is
a legislative function or a non-legislative function is that if the function is
held to be legislative, in the absence of any provision in that regard the
principles of natural justice would not be applicable and the scope of judicial
review would also be limited to plea of discrimination i.e. violation of
Article 14 of the Constitution of India, 1950 (in short the `Constitution'). As
a general proposition, the law on the point is settled. In Prag Ice and Oil
Mills v. Union of India (AIR 1978 SC 1296), a Seven- Judge Bench of this Court
by majority observed:
"In the ultimate
analysis the mechanics of price fixation has necessarily to be left to the
Judgment of the executive and unless it is patent that there is hostile
discrimination against a class of persons, the processural basis of price
fixation has to be accepted in the generality of cases as valid."
22.
The
legal position was reiterated in Rohtas Industries v. Bihar State Electricity
Board, (AIR 1984 SC 657) and Kerala State Electricity Board v. M/s S.N.Govind
Prabhu & Brothers (AIR 1986 Supreme Court 1999), wherein it was observed,
"Price fixation is neither the forte nor the function of the Court".
23.
As
regards the nature of the function, in Saraswati Industrial Syndicate Limited
v. Union of India (AIR 1975 SC 460), the Court had observed that the price
fixation is more in the nature of a legislative measure even though it may be
based upon objective criteria found in a report or other material. It should
not, therefore, give rise to a complaint that rule of natural justice has not
been followed in fixing the price. In Prag Ice and Oil Mills v. Union of India
(supra) the Court observed:
"We think that
unless by the terms of particular statute or order, price fixation is made a
quasi judicial function for specified purposes or cases it is really
legislative in character .....the legislative measure does not concern itself
to the facts of an individual case. It is meant to lay down a general rule
applicable to all persons or objects or transactions of a particular kind of
class."
24.
In
Union of India v. Cynamide India Ltd. (AIR 1987 SC 1802) this Court held that
except in cases where it becomes necessary to fix the price separately in
relation to individuals, price fixation is generally a legislative act, the
performance of which does not require giving opportunity of hearing. Following
passage from the judgment may usefully be noticed:
"Legislative
action, plenary or subordinate, is not subject to rules of natural justice. In
the case of Parliamentary legislation the proposition is self-evident.
In the case of
subordinate legislation, it may happen that Parliament may itself provide for a
notice and for a hearing - there are several instance of the legislature
requiring the subordinate legislating authority to give public notice and a
public hearing before say, for example, levying a municipal rate - in which
case the substantial non-observance of the statutorily prescribed mode of
observing natural justice may have the effect of invalidating the subordinate
legislation, but where the legislature has chosen not to provide for any notice
or hearing, no one can insist on it and it will not permissible to read natural
justice into such legislative activity."
25.
Reference
may also be made to a Constitution Bench decision in Shri Sitaram Sugar Company
Ltd. v. Union of India (1990 (3) SCC 223).
26.
In
a sense, fixing rate of fuel surcharge under clause 16.10 of the Tariff
notification is different from fixing the tariff under Section 49 of the Act.
Fuel surcharge is undoubtedly a part of tariff. But fixing rates of consumption
charges or the guaranteed charges or the fixed charges or the delayed payment
surcharge etc. and fixing rates of fuel surcharge do not stand on par. Though
rates of consumption charges etc. are based on objective materials, there is
enough scope for flexibility in fixing the rates.
It also involves
policy to fix different fates for different categories of consumers. Such is
not the position with the fuel surcharge. Clause 16.10.1 specifies the
categories coning in the net of the levy and clause 16.10.3 provides the
formula. In simple words, the formula envisages addition of units generated or
purchased and increased average cost of fuel and average unit rate of purchase
rates and division of the total by the quotient is the average fuel surcharge
per unit (expressed in terms of paise) described by denominator S1 in the
formula. The whole exercise, it would appear, involves arithmetical accounting.
There is no scope for exercise of any discretion or flexibility. This
distinction, however, does not help the petitioners. It rather goes against
them because if fixing rate of fuel surcharge is just an arithmetical exercise,
giving opportunity of hearing would hardly serve any useful purpose. How
mathematical in nature is the process of computation is clearly illustrated in
a chart which is part of Annexure E series at page 290 of the Paper Book as
under:
CALCULATION OF FUEL
SURCHARGE RATE FOR THE YEAR 1996-97 24 FUEL SURCHARGE =
(A1xA3)+(B1xB3)+(C1xC3)+(D1xD3)+(E1xE3)+(F1xF3)+(G1xG3)
----------------------------------------------------------------------------
(A2+B2+C2+D2+E2+F2+G2)
1. A1 = Generation of
PTPS (MKWH) = 1116.54 A3 = Increase in Average cost of PTPS (Paise/Kwh) = 17.33
= 1934.96 A1 x A3 (Rs. in lakhs)
2. B1 = Generation of
BTPS (MKWH) = 387.37 B3 = Increase in Average cost of BTPS (Paise/kwh) = 69.17
B1xB3 (Rs. In lakhs) = 2679.44
3. C1 = Generation of
MTPS (MKWH) = 213.52 C3 = Increase in Average cost of MTPS (Paise/Kwh) = 53.05
C1xC3 = 1132.72 25
4. D1 = Power
purchase from DVC (MKWH) = 2153.00 D3 = Increase in Average rate of DVC
(Paise/Kwh) = 57.87 D1xD3 = 12459.41
5. E1 = Power
purchase from NTPC(MKwh) = 4047.70 E3 = Increase in Average rate of NTPC
(paise/kwh) = 69.50 E1xE3 (Rs. In lakhs) =28131.52
6. F1 = Power
purchase from PGCIL(MKwh) = 507.22 F3 = Increase in Average rate of PGCIL
(Paise/kwh) = 18.12 F1xF3 (Rs.in lakhs) = 919.08
7. G1 = Power
purchase from others(MKwh) = 737.82 G3 = Increase in Average rate of others
(Paise/kwh) = 60.57 G1xG3 (Rs. In lakhs) =4468.98 26 Excluding prior period
expenditure
8. Admissible prior
period expenditure (Rs. In lakhs) =1659.11 (This is on the basis of
recommendation made by the Committee constituted by the Hon'ble High Court) (I)
Incremental cost of the year (A1xA3)+(B1xB3)+......(G1xG3)(Rs.in Lakhs) = 53
385.22 9. Mer.
A2=B2+..................G2(MKwh)
= 4473.47 Hence, Rate of fuel surcharge for the year (paise/Kwh) = 119.34 Less
20.00 ___________ Net rate of fuel surcharge for the year (Paise/Kwh) = 99.34
27.
Where
the fixation of rate or determination of the amount is made individually,
depending on the context in which this is to be done, there may be
justification or necessity to give opportunity of hearing to the person or persons
concerned. But where the rate is fixed for persons at large the only way by
which such opportunity can be given is to notify the rates and then invite
objections. There is no such provision. In the absence of any mechanism
provided in the Tariff notification, it would not be feasible at all. Whenever
the statute contemplates giving such an opportunity a mechanism, such as, for
fixing rates of municipal Taxes, while it is not so in the case of Income tax
or other taxes.
28.
On
behalf of the writ petitioners endeavour was made to question the very basis of
fixation of fuel surcharge. It was submitted that though it is open to the
Board to levy fuel surcharge on certain specified categories of consumers alone
or even supply electricity free to certain categories of consumers the unit
rate should be worked out taking into account the entire units sold as is being
done by the U.P. State Electricity Board, Damodar Valley Corporation or even in
Delhi. Fixing the rates of fuel surcharge on the basis of units sold to only
specified categories of consumers, it was submitted, is arbitrary and
discriminatory. The High Court noted that the submission was in the teeth of
formula contained in Clause 16.10. Relevant part of the formula was re-stated:
A2,B2,C2- Units sold,
out of sent out from PTPS, BTPS and MTPS on which fuel surcharge is leviable.
D2 to H2- Units sold,
out of purchased from DVC, UPSEB, OSEB, NTPC, PGCL and any other source during
the year on which fuel surcharge is leviable.
29.
The
High Court that A2,B2,C2,D2 etc. component of the Formula represents the extent
of units generated i.e. sent out from the three generating stations or
purchased from the external sources. Counsel for the writ petitioners referred
to 'comma' occurring prior to the words "out of".
Though sometimes
presence or absence of comma has been taken aid of in interpreting the
particular provision, the ordinary rule is that punctuation mark is a minor
element in the interpretation of Statute (See Aswini Kumar Ghose v. Arbinda
Bose, AIR 1952 Supreme Court 369). More so, in the case of subordinate
legislation. The words "out of" according to the High Court have to
be understood in the sense of "to the extent of", and so read;
the formula
postulates that so much of units out of, the units generated or purchased on
which fuel surcharge is leviable only is to be taken into account for
determining the value of A2 to C2 or D2 to H2. Omitting the part "out
of...." the formula would read as follows, "units sold .... on which
fuel surcharge is leviable". In terms of clause 16.10.1, fuel surcharge is
leviable only on consumers in CS II and III, L.T. Industrial Service, High
Tension Service, Extra High Tension (EHT) arid Railways Traction Service
categories, the units sold to other categories, of consumers cannot, therefore,
be taken into account for determining the value of either A2 to C2 or D2 to H2.
The validity of the formula had been upheld earlier. High Court noted that
though by the impugned circular dated 31.5.1999 the rates of fuel surcharge
have been fixed for the years 1993-94 (July 1993 to March 1994) to 1997-98, the
correctness of the rates fixed for the years 1993-94 (July 1994 to March 1994)
to 1995-96 were not challenged. The correctness of the rates for the subsequent
years only was under challenge.
30.
In
Maharashtra State Electricity Board v. Kalyan Borough Municipality, (AIR 1968
SC 991), this Court upheld the constitutional validity of Section 49(3) of the
Act. In M/s Robtas Industries Limited v. Chairman, Bihar State Electricity
Board, (AIR 1984.SC 657), this Court held that Section 49(3) expressly
authorises the Board to fix different tariffs for the supply of electricity
classifying the consumers into different categories and fixing different
tariffs. Thus, the Electricity Board is entitled to levy fuel surcharge on the
consumers receiving high tension supply leaving out the consumers coming in
other categories. While considering the validity of similar provisions of the
1979 Tariff of the Bihar State Electricity Board relating to Fuel surcharge,
the Court observed, "Though the nomenclature given to the surcharge is
"fuel surcharge" it is really a surcharge levied to meet the
increased cost of generation and purchase of electricity.... We see no force in
the contention that the words "increase in the average unit rate of
purchase of energy" used in C1 below paragraph 16.7.2 should be
interpreted as taking their colour from the contents of paragraph 16.7.3. From
a reading of these provisions it is abundantly clear that the entire increase in
cost incurred in the purchase of energy from DVC and UPSEB has to go into the
.compensation of the surcharge leviable under paragraph 16.7"
31.
In
Kerala State Electricity Board v. S.N.Govind Prabhu & Brothers, (AIR 1986
SC 1999), the Court noticed the amendments in section 59 of the Act and held
that a plain reading of section 59, as amended, plainly indicates that it is
the mandate of Parliament that the Board should adjust its tariff so that after
meeting the various expenses properly required to be met, a surplus is left. It
will not be out of place to mention here that in terms of section 59, as it
stood prior to 1978, the Board was supposed to adjust its tariff in such a way
as not to incur loss. By amendment made in 1978, the Board was supposed to
adjust its tariff so as to ensure that the total revenues in any year of
account should after meeting expenses "leave such surplus as State
Government may, from time to time, specify". The section was amended again
in 1983 and as per the 1983 amendment the Board is supposed to adjust its
tariff in a manner so as to ensure that the total revenues in any year of
account after meeting all expenses shall leave such surplus as is "not
less than three per cent or such higher percentage as State Government may by
notification specify". After noticing the said amendments this Court
observed:
"The original
negative approach of functioning so as not to suffer a loss is replaced by the
positive approach of requiring a surplus to be created. The quantum of surplus is
to be specified by the State Government. What the State Government is to
specify is the minimum surplus.
This is made clear by
the 1983 amendment which stipulates a minimum of 3 per cent surplus in the
absence of specification by the State Government which has the liberty "to
specify a higher percentage than three. The failure of the government to
specify the surplus which may be generated by the Board cannot prevent the
Board from generating a surplus after meeting the expenses required to be met.
Perhaps, the quantum of surplus may not exceed what a prudent public service
undertaking may be expected to generate without sacrificing the interests it is
expected to serve and without being obsessed by the pure profit motive of the
private 32 entrepreneur. When that happens the court may strike down the
revision of tariffs as plainly arbitrary. But not until then. Not merely
because surplus has been generated, a supply which can by no means to be said
to be extravagant."
32.
High
Court noted that the purchase of electricity from Tenughat Vidyut Nigam Limited
(TVNL) has been treated as a component of H3 i.e. "any other source",
but as the TVNL came into existence only in the year 1996- 97 it could. not be
treated as a relevant factor having regard to the fact that in computing the
fuel surcharge, increase in the average unit rate of purchase of electricity
has to be calculated treating 1991-92 as the base year. Secondly, it was
contended that the Board has treated the supply of electricity by the DVC to
the TISCO as "deemed supply" by the Board to TISCO at a different
rate which is not in accordance with the formula. As noted above the High Court
found the objections to be well founded.
33.
It
is not in dispute that TVNL came into existence in 1996-97 whereas while
calculating the electricity 1991-92 is to be treated as the base year. As a
matter of fact, as seen above, it was on that ground, namely, that a different
base year i.e. 1992-93 was provided for computing the increase in the average
unit rate of purchase of electricity from external sources, that the High Court
directed the Board to consider amending clause 16.10.3 so as to provide for the
same base year i.e. 1991-92 with respect to both the increase in the average
cost of generation and increase in the rates of purchase, and accepting the
verdict of the High Court the Board amended the last part of clause 16.10.3.
Purchase of electricity from TVNL which admittedly came into existence in the
year 1996-97, therefore, cannot be treated as component of H3 i.e. increase in
the average unit rate of purchase of electricity from "any other
source". As a matter of fact, the case of writ petitioners was that the
TVNL is nothing but a unit of the Board in disguise of a subsidiary company
and, therefore, could not be treated as a component of 113. It may not be
necessary to go behind the veil of the separate legal character of the TVNL.
The fact that TVNL did not exist in the year 1991-92 and came into existence
only in the year 1996-97 is sufficient to justify its deletion as component of
H3. Counsel for the Board accepted that if TVNL is to be treated as a source,
some mechanism has to be worked out, and the Court has then to see whether it
is rational. The Board submitted that if the High Court comes to the conclusion
that the supply from TVNL, cannot be included, the consequence will be that the
units purchased from TVNL would have to be kept out, which is not the intention
underlying levy of fuel surcharge. It is like `escalation' clause, and the
additional cost has to be reimbursed. The High Court did not accept the same
submissions as it will result in creating a different base year. The relevant
clause of the formula, after amendment, reads, "the said increase to be
calculated with respect to the year 1991-92"
(vide last para of
clause 16.10.3). The amendment has been made in the light of the decision of
the High Court. In the rejoinder affidavit the Board had taken the stand that
the incremental rise in 1996-97 over the 1991-92 base year from other sources
including TVNL was less compared to DVC or NTPC. High Court did not appreciate
this logic. Increase in the unit rate has been similarly worked out in the case
of TVNL, but the relevant Base year column has been shown as blank though in
the counter affidavit, para 37, it had been stated that the same base year i.e.
1991-92 has been applied, even when TVNL admittedly did not exist prior to
1996-97. High Court held that it is not possible to allow the Board to include
purchase of electricity as a component of H3 without suitably" amending
the formula in accordance with law.
34.
As
regards "deemed supply" by the Board to TISCO High Court noticed that
under a tripartite agreement between the Board, the DVC and the TISCO, with the
consent of the State Government, the electricity is being supplied directly by
the DVC to the TISCO but such supply is treated as made-by the Board to the
TISCO. It seems to be an admitted position that the tariff rates of the Board
are higher than the tariff rates of the DVC. But since legally the TISCO cannot
directly but electricity from the DVC it has entered into agreement with the
Board to buy electricity directly from DVC but pay the amount at the Board's
rates. Though the amount is paid to DVC, such payment is adjusted against the
amount due from the Board to it i.e. DVC. As seen above, DVC is one of the
external sources, represented by D1. The Board buys the electricity from DVC,
amongst others, and pays to it for the same. The increase in the average unit
rate of purchase from it is reflected by D3. However, so far as the supply made
by DVC to TISCO is concerned, it is treated as a "deemed supply" by
the Board. While it may be permissible to charge the TISCO at the rates
prescribed by the Board, i.e, at rates higher than the DVC rates, and it may
also be permissible to treat sale of such electricity sold by DVC to TISCO as
deemed supply/sale by the Board to TISCO. High Court held that two rates of
supply/sale cannot be permitted for the purpose of computing D3 in the ordinary
course, in the absence of any tripartite agreement referred to above, the Board
would have supplied/sold electricity to TISCO and charged at its rates. Such
supply would have been made from the electricity either generated by it at its
own generating station or purchased from external sources including DVC.
Clause 16.10.3.1
provides for computation of the cost of generation at the Board's own
generating station; as regards purchase of energy from other sources, the said
clause lays down that the actual increase in average unit rate of purchase will
apply. If the Board is purchasing electricity from different sources for the
purpose of D3, E3, F3 etc. the actual increase in the average unit rate of
purchase so far as the particular source is concerned, is to be taken into
consideration. DVC has thus to be treated as one source.
The source being one
there cannot be two rates of purchase or increase in the average unit rate of
purchase. It may be mentioned here that NTPC sells electricity generated different
power stations, namely, Farakka, Kahalgaon Talchar or Anta and though the
increase in the average unit rate is not the same, it charges the Board at a
uniform rate. It is an admitted position that though the DVC has revised its
tariff from year to year the Board so far has not recognised the revision and
has been paying it at the rates applicable in the year 1991-92. In the agenda
note dated 26.11.98 it has been clearly mentioned "that during the 1996-97
the DVC rates for the purchase remained unchanged but the rates applicable to
deemed supply to TISCO rose upto 13P/kwh. High Court held that the Board cannot
treat the sale of electricity by the DVC to the TISCO as a separate class or
category for the purpose of computing D3. The computation of D3 to this extent,
was held to be not correct.
35.
The
computation of the rates of fuel surcharge by the impugned circular for the
years 1996-97 and onwards so far as it relates to the purchase of electricity
from TVNL and "deemed supply" by the Board to TISCO thus does not
appear to be in accordance with the formula. Fuel surcharge has to be
calculated strictly within the framework of the formula.
If any extraneous
element has crept in the computation to that extent must be held to be not in
accordance with law and accordingly modified.
36.
The
computation of fuel surcharge was also assailed before the High Court on the
ground of non-disclosure of details to A2, B2 etc. It was submitted that as the
incremental rise in the cost of generation at the Board's own generating
stations and the average unit rate of purchase of electricity from external
sources represented by different denominators in the formula is not the same,
the Board ought to have given the details of the quantum of units sold
respectively out of the units generated and purchased from the external
sources. The High Court considered the plea to be of academic value. It is true
that in the matter of calculation of Fuel surcharge the units sold from out of
units generated at the Board's power stations and units purchased from external
sources are shown by separate denominators i.e. A2, B2, C2 and D2, E2, F2 etc.
respectively, but it would appear that after the electricity generated at the
Board's stations or purchased from external sources are fed into transmission
lines, they lose their separate identity as electricity generated at the
Board's own power stations or purchased from other sources. It is difficult
thereafter to find out as to how much of electricity fed in the transmission lines
came from the Board's own power stations and how much of it from external
sources.
37.
Board's
stand was that it pays large amounts as delayed payment surcharge (DPS) to the
DVC, NTPC etc. contributing to further increase in the average unit rate of purchase
of electricity resulting in higher fuel surcharge and causing thus additional
burden on the consumers. The fact that the Board has had to pay large amounts
as DPS to the external agencies from which it has been purchasing electricity
is more or less an admitted position. The case of the Board, however, is that
the default in payment was mainly on account of defaults committed by the
consumers themselves. It is said that as much as 3,200 crores of rupees are due
from the consumers as a result of which the Board is not in a position to pay
to the agencies resulting in additional burden by way of DPS. High Court found
substance in the stand of the Board. The fact that the consumers at large have
not been paying the dues on time and many of them have been making only part
payment on the strength of interim orders of Courts are facts which are not
disputed. If the consumers do not pay the dues to the Board, they cannot be
heard to make any complaint against payment of DPS by the Board to the external
agencies.
38.
We
have referred in extenso reasonings of the High Court.
39.
It
is stand of Board that while arriving at the average cost of purchase where the
purchase prices vary weighted average is taken into account. This can be
explained by illustration of electricity purchased from different units of
NTPC. The Board purchases electricity normally from generating units of NTPC at
Farakka, Kahalgaon and Talcher at different rates. During 1996-97 the Board
purchased electricity from Farakka unit at the rate of 147.28 paise/Kwh
(inclusive of trans. Ch.) from Kahalgaon at the rate of of 179.20 paise/Kwh and
Talcher at the rate of 70.33 paise/Kwh. The total power purchased from NTPC
during the said year was 4047.70 Mkwh for Rs.61,989.32 lacs. For the purposes of
calculating per unit rate during the said year weighted average of the
different rates was taken which comes to 153.15 paise/Kwh. The difference in
cost of purchase of electricity from NTPC during 1996-97 with reference to the
base year 1991-92 comes to 153.15 minus 83.65 = 69.50 paise/Kwh (the average
rate during 1991-92 was 83.65 paise/Kwh). Similarly, in the case of purchase of
power from `other source', there is more than one source for such purchase and
the rates of supply also vary. In such cases average incremental cost is
arrived at by the method of weighted average.
40.
There
is no dispute with regard to levy of fuel surcharge in respect of power
generated by the generating stations of the Board. The dispute in the writ
petitions was with regard to only the method of calculation of fuel surcharge
in respect of power purchased by the Board, i.e. the rates of fuel surcharge in
respect of the years 1996-97 and 1997-98.
41.
The
Board by its Circular dated 31.5.1999 fixed the rate of fuel surcharge by
applying formula for the years 1993-94 to 1996-97. During the year 1996-97 the
Board started purchasing electricity from generating unit of TVNL established
in 1996. By treating TVNL as a source falling under the category of other
source, the Board calculated weighted average cost of power as Rs.60.57
paise/Kwh.
42.
Stand
of the writ petitioners was that since TVNL came into existence in the year
1996-97 there cannot be any incremental cost in respect of electricity
purchased from TVNL inasmuch increase in the average unit rate of purchase of
electricity has to be calculated treating 1991-92 as the base year. The other
stand of the writ petitioners was that the Board has treated the supply of
electricity by DVC to TISCO as deemed supply by the Board to TISCO at a
different rate which is not in accordance with the formula.
The stand of the writ
petitioners was accepted by the High Court. So far as TVNL and deemed supply to
TISCO are concerned, the High Court held that there is no infirmity in the
fixing of rates of fuel surcharge except on the aforesaid two grounds. All
other stands taken in the writ petition was rejected.
43.
Judgment
of the High Court is under challenge in these appeals by the Board. An appeal
has been filed by the private companies so far as the conclusions of the High
Court relating to non accounting of Rupees 100 crores paid by the private
companies to the Board. According to the appellant-Board, the High Court was
not right in directing to re-work out the rates of fuel surcharge for the years
1996-97 onwards after deleting the purchase of electricity from TVNL as a
component of H3 in the formula. It is also submitted that the direction of the
High Court to re-work out the rates of fuel for the year 1996-97 onwards after
treating the deemed supply i.e. supply of electricity by DVC to TISCO as
supplied by DVS to the Board as an element of D3 in the formula was erroneous.
44.
Though
learned counsel for the appellant Board questioned correctness of High Court's
conclusions, nothing material could be highlighted as to how the reasonings
suffer from any infirmity. We are in agreement with the conclusions of the High
Court. The appeals filed by the Board are accordingly dismissed.
45.
In
the other appeals challenge is to non-accounting of Rs.100 crores paid by the
Coal Companies to the Board. According to the writ petitioners, if the said
amount has been shown in the accounts the rate of fuel surcharge would have
been different. The High Court noticed that this aspect of the matter has been
dealt with by the Board in its rejoinder affidavit wherein it has been stated
that as against the total claim of Rs.356.20 crores on account of loss due to
grade slippage, short supply of coal, supply of stones etc. the Coal Companies
have agreed to pay Rs.100 crores in full and final settlement of the claim. But
though such decision was taken on 30.8.1998 actual payment has not been made
till date. High Court observed that payment of the amount would be relevant
consideration while calculating the rate of fuel surcharge for the year 1998-99
and not 1997-98.
46.
We
direct that the actuals be worked out within three months from today. The
adjustment of Rs.100 crores be worked out accordingly. The appeals are
accordingly disposed of.
................................J.
(Dr. ARIJIT PASAYAT)
................................J.
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