State of H.P. vs Gujarat Ambuja Cements Ltd.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2652 OF 2006

THE STATE OF HIMACHAL PRADESH & ORS. ...APPELLANTS

VERSUS

M/S GUJARAT AMBUJA CEMENTS LTD. & ORS. ...RESPONDENTS

JUDGMENT

RANJAN GOGOI, J.

1. The State of Himachal Pradesh is in

appeal before this court challenging an

order of the High Court of Himachal

Pradesh dated 5th September, 2003 allowing

the writ petition filed by the respondents

– M/s Gujarat Ambuja Cements Ltd. and

holding that the respondents - writ

petitioners’ entitlement to the benefit Signature Not Verified Digitally signed by

of power tariff freeze, would include the NEETU KHAJURIA Date: 2017.10.05 17:42:54 IST Reason:

right to reimbursement of all the amounts 2

paid by it on account of Peak Load

Exemption Charge (hereinafter referred to

as “PLEC”).

2. The core facts that will be necessary

to be noticed are as follows:

The respondent – writ petitioner no.1

– M/s Gujarat Ambuja Cements Ltd. set up

an industrial unit for manufacture of

portland cement in Darlaghat, District

Solan, Himachal Pradesh. The approval of

the State Government for establishment of

the said unit was accorded on 23rd January,

1990. The cement manufacturing unit of

the respondents – writ petitioners was

accorded the “prestigious status” to avail

of incentives in accordance with the

Revised Rules Regarding Grant of Incentive

to Industrial Units in Himachal Pradesh,

1991 (hereinafter referred to as

“Incentive Rules”), as amended from time

to time. To be entitled to the incentives 3

under the aforesaid Incentive Rules the

respondents – writ petitioners had to and

infact had satisfied the stipulated

requirement of capital investment at least

of Rs. 50 crores and guaranteed employment

of minimum of 200 persons on

permanent/regular basis who are bona fide

residents of Himachal Pradesh. The cement

manufacturing unit of the respondents –

writ petitioners commenced commercial

production on 26th September, 1995. At that

point of time, under the Incentive Rules,

the respondents – writ petitioners were

entitled, inter alia, to a 'power tariff

freeze' for a period of four years from

the date of commencement of commercial

production. Specifically, the tariff

freeze was to be worked out by granting to

the respondents – writ petitioners

reimbursement of any increase in

industrial power tariff after the date of

commencement of commercial production for 4

a period of four years. The formula for

calculating the increase in power tariff

to be reimbursed was the rate of

electricity per unit billed minus the rate

of electricity as on date of commercial

production.

3. On 28th January, 1994 (before

commencement of commercial production) the

respondent – writ petitioner was informed

by the Chief Engineer (Commercial) of the

Himachal Pradesh State Electricity Board

(hereinafter referred to as “the Board”)

that the power required by its cement unit

(i.e. 21000 KW) can be made available

subject to certain terms and conditions

mentioned in the aforesaid letter (dated

28th January, 1994). By the said letter

the respondent – writ petitioner was

informed that Peak Load hours restrictions

will be imposed between 6 p.m. to 9 p.m.

for the summer months (April to October) 5

and 5 p.m. to 9 p.m. for the winter months

(November to March). Thereafter, it

appears that in exercise of powers under

Sections 49 and 59 of the Electricity

(Supply) Act, 1948, the Board brought into

force a schedule of electricity tariff

known as “Himachal Pradesh State

Electricity Board Schedule of Electricity

Tariff, 1994 w.e.f. 31st May, 1994. Clause

(m) of the said Schedule which deals with

“Peak Load Hour Supply” is as follows:

“m) PEAK LOAD HOUR SUPLY

Supplies under Schedule Agriculture pumping (A.P.), Small Industrial Power (S.P), Medium Industrial Power Supply (Schedule M.S.), Large Industrial Power Supply for Mini Steel Mills etc. and for others (Schedule L.S.-1 and L.S.-2) and Water and Irrigation pumping (Schedule W.I.P.) shall not be available during the peak load hours as may be notified by the Board from time to time.

However, in the case of continuous process industries, or where a particular industrial consumer wants to run his industry during the peak load hours for any special reasons, a 6

separate agreement shall have to be entered into with the Board.”

4. On 23rd August,1995, the Chief Engineer

(Commercial) of the Board issued an Office

Order according sanction in favour of the

respondent – writ petitioner for running

of its cement manufacturing unit during

the evening peak load hours subject to the

conditions enumerated in the said Office

Order (dated 23rd August, 1995)

5. After the respondent – writ

petitioner's unit went into commercial

production, on 30th October, 1995 the Board

issued another Notification in exercise of

power under Sections 49 and 59 of the

Electricity (Supply) Act, 1948 publishing

another schedule of tariff and general

conditions for supply of electricity to

various categories of consumers in

Himachal Pradesh with effect from 1st

November, 1995. The aforesaid Notification 7

(dated 30th October, 1995) dealing with the

“Peak Load Hour Supply” which is relevant

to the present case is as follows:

“1) PEAK LOAD HOUR SUPLY

Supplies under Schedule Agriculture pumping (A.P.), Small Industrial Power (S.P), Medium Industrial Power Supply (Schedule M.S.), Large Industrial Power Supply for Mini Steel Mills etc. and for others (Schedule L.S.-1 and L.S.-2) and Water and Irrigation pumping (Schedule W.I.P.) shall not be available during the peak load hours. The duration of peak load hours in summer and winter shall be as under:

i) Summer (April to Oct) 6 PM to 9 PM

ii) Winter (Nov. to March) 5.30PM TO 8.30PM

However, in the case of continuous process industries, or where a particular industrial consumer wants to run his industry during the peak load hours for any special reasons, a separate agreement shall have to be entered into with the Board.

Such consumers shall be billed for additional charge as specified in the relevant schedules of tariff”

In part II of the aforesaid 8

Notification (dated 30th October, 1995)

under the “Schedule of Tariffs” the

provision with regard to “Peak Load

Exemption Charge (PLEC)” were stated in

the following terms:

“5. Peak Load Exemption Charge (PLEC)

The consumers availing special dispensation or exemption during evening peak load hours stipulated under Part-I General of this notification shall be billed at extra charges of Rs.1/- per unit over and above the normal tariff. For this purpose, time of the day (T.O.D.) meters shall be provided. Till such time, these meters are provided, the monthly peak load exemption charges shall be Rs.70/- per KVA of exemption/relaxation sought.”

6. After the commencement of the

commercial production by the cement

manufacturing unit of the respondent –

writ petitioner, in the year 1996, the

Incentive Rules were revised and the

incentive of power tariff freeze, though

continued, underwent certain 9

modifications. While the said notification

may not be strictly relevant for the

present what was clearly provided in the

revised Incentive Rules is that the power

tariff to be reimbursed will not include

any other charge/surcharge/peak load

charge/fuel adjustment charge etc. as may

be levied by the competent authority. It

may be noticed, at this stage, that the

aforesaid revised Incentive Rules were

made applicable to new industrial units

which fact is borne out from clause 1.2(a)

of the Revised Incentive Rules (which came

into force with effect from 1st October,

1996) dealing with eligibility which is in

the following terms.

“1.2 Eligibility

(a) New Industrial units as defined in these rules, shall be eligible for grant of incentives as provided for under these rules. Units which have commenced commercial production before the appointed day will continue to be governed for grant of all incentives under 10

the Revised Rules regarding Grant of Incentives to Industrial Units in HP-1991 as amended from time to time, unless otherwise provided in these rules. Such industrial units will be eligible for incentives, concessions and facilities only if they meet the minimum employment criteria as laid down under these rules.”

The definition of 'New Industrial

Unit” contained in clause 2(s) of the

aforesaid Revised Incentive Rules (of

1996) may also be extracted below for

convenience.

“2(s) “New industrial unit” means a registered SSSBE, tiny, small, ancillary, medium or large scale industrial unit as defined in clauses 2(x) and 2(za) of these rules, located within the State of Himachal Pradesh which commences commercial production on or after the appointed day and includes any existing unit which is eligible to get fresh registration as per the guidelines provided by the Development Commissioner, Small Scale Industries, Govt. of India, from time to time.”

The “appointed day” was notified as 1st 11

day of October, 1996.

7. It is in the above backdrop of the

core facts that the issue arising in the

case, namely, the entitlement of the

respondent – writ petitioner to

reimbursement of the PLEC will have to be

decided.

8. The argument advanced by Shri Anoop

George Chaudhari, learned Senior Counsel

appearing for the appellant State of

Himachal Pradesh centres around two

principal issues. The first is that on

the date when the cement unit was set up

and had commenced its commercial

production i.e. 26th September, 1995 the

PLEC had not come into force. The promise

of reimbursement of increased power tariff

did not and, in fact, could not have,

therefore, cover/covered reimbursement of

PLEC. Additionally, it has been contended 12

that even before the cement manufacturing

unit had commenced commercial production

the respondent – writ petitioner was

informed by letter dated 28th January, 1994

that there will be restrictions on

availability of power during the peak load

hours which hours also were specifically

mentioned in the said letter (dated 28th

January, 1994). It has been contended on

behalf of the State that in the

Notification dated 30th October, 1995 it is

clearly and categorically reiterated that

electricity supply during the peak load

hours would not be available except as a

matter of special dispensation to a

industry that needed a continuous supply

of power. In the said Notification (dated

30th October, 1995) it was also mentioned

that supply of power during the peak load

hours would entail an additional charge of

Rs.1/- per unit over and above the normal

tariff and further that a separate meter 13

for reading of electricity consumed during

the peak load hours would be installed.

All these facts, according to the learned

Senior counsel, would go to show that PLEC

is a special/additional charge over and

above the normal tariff in cases where the

power is made available during the peak

load hours as a special dispensation. In

this regard, Shri Chaudhari has also drawn

the attention of the Court to the

affidavit filed before this Court by the

Board wherein it has been, inter alia,

stated that the power for supply during

peak load hours had to be procured by the

Board from other sources. Therefore, it is

contended that PLEC is not a part of the

normal/regular tariff in respect of which

alone there is a promise of reimbursement

by way of an incentive in the event of

increase of such tariff during the

eligibility period i.e. four years from

the date of commencement of commercial 14

production. According to the learned

Senior Counsel, in the present case there

is no dispute with regard to the issue of

reimbursement of charges on account of

hike/increase of normal tariff.

9. In reply, Shri Arvind P. Datar,

learned Senior Counsel appearing for the

respondents – writ petitioners has

submitted that tariff is not a defined

expression either under the Electricity

(Supply) Act, 1948 which would govern the

parties or even in the succeeding statute

i.e. the Electricity Act, 2003. The

dictionary meaning of tariff is not very

helpful either; tariff has been conveyed

to mean a charge or list of charges either

for services or on goods entering a

country. Shri Datar has pointed out that

the object and effect test must, therefore

be applied to hold that PLEC is included

within the meaning of electricity tariff. 15

Exclusion of such charges from an

understanding of the expression “tariff”

would be counter-productive in a situation

where incentive has been offered under the

industrial policy of the State to attract

investments. Shri Datar has submitted that

any exclusion of PLEC from the meaning of

the expression 'tariff' in the present

context would be to permit the appellant

to destroy the very purpose of the

incentive scheme. Such an interpretation

would enable the appellant to load the

normal tariff with various other

additional charges and surcharges by

giving such additions different

nomenclatures with a view to distinguish

the same from the expression 'tariff'.

Shri Datar has also pointed out to the

very language of the Notification dated

30th October, 1995 and the provisions of

Sections 49 and 59 of the Electricity

(Supply) Act, 1948 to contend that PLEC is 16

nothing but tariff inasmuch as it is by

revision of the schedule of tariff made by

the said Notification that PLEC had been

introduced. Shri Datar has further

submitted that even under the Notification

of 1992 granting the incentive of “tariff

freeze” the method of calculation

prescribed is a simple one, namely,

difference between the amount actually

billed and the amount that would have been

billed as per the tariff in force on the

date of commercial production. The said

formula, if applied, would definitely

include reimbursement of PLEC within the

ambit of the incentive granted. Lastly,

Shri Datar has submitted that the Revised

Rules of 1996 which specifically excludes

PLEC from the power tariff to be

reimbursed makes the position amply clear

that PLEC had always been and is a part of

the tariff.

17

10. We have considered the submissions

advanced on behalf of the rival parties.

The sequence of facts recited in the

preceding paragraphs makes it abundantly

clear that what was provided for by way of

an incentive under the Incentive Rules

framed under the Industrial Policy of the

State is 'power tariff freeze' for a

period of four years from the date of

commercial production by reimbursement of

the amount of increase in tariff during

the aforesaid period of four years. It

cannot be lost sight of that even before

the cement manufacturing unit had gone

into the commercial production, by letter

dated 28th January, 1994 the respondents –

writ petitioners were clearly informed

that the State is going through a phase of

acute shortage of power affecting peak

load hour supply. The schedule of tariff

published by the Board by Notification

dated 31st May, 1994 made an unequivocal 18

reiteration on the part of the Board that

power supply during peak load hours, as

may be notified by the Board from time to

time, shall not be available and in case

of continuous process and like industries

electricity supply during peak load hours

would be provided only for special reasons

and by means of a separate agreement to

be entered into with the Board. In fact,

an Office order dated 23rd August, 1995 was

passed by the Chief Engineer (Commercial)

of the Board according sanction for supply

of electricity during peak load hours to

the respondents – writ petitioners’ unit

subject to the terms and conditions

mentioned therein. Finally by notification

dated 30th October, 1995 another schedule

of tariff was published levying peak load

exemption charge (PLEC) at the rate of

Rs.1/- per unit over and above the normal

tariff. Power during peak hours was to be

provided as a special dispensation for 19

industries which could not afford to

remain without continuous

power/electricity. The mode of making

available the power was also different

inasmuch as the Notification dated 30th

October, 1995 contemplated installation of

separate meters for the said purpose. As

already noticed, in the counter affidavit

filed by the Board before this Court it

has been stated that power, to make

electricity supply available during the

peak load hours, was obtained from other

sources. The normal supply of electricity

for which there was a normal tariff was

infact discontinued during the peak hours.

Normal supply of electricity therefore has

to be distinguished from the supply of

electricity during peak load hours which

was an act of special dispensation and

upon payment of PLEC which change, in the

facts noted, would assume the character of

a surcharge. The question is not one 20

whether PLEC is a part of the tariff

having regard to the dictionary and the

natural meaning of the word 'tariff'. The

question is how the word/expression

'tariff' is to be understood in the

context in which such meaning is required

to be determined. The meaning that has to

be assigned must, naturally, be contextual

having regard to what was promised i.e.

tariff freeze. The nature of the charge

imposed i.e. PLEC has to be understood

keeping in mind that supply of power

during the peak load hours was an

exception; a special dispensation

involving a special arrangement i.e.

procurement from other sources.

11. If the matter is to be viewed from the

aforesaid perspective we have to arrive at

the conclusion that the incentive provided

under the Incentive Rules would not

include PLEC and the respondents – writ 21

petitioners would not be entitled to

reimbursement towards the PLEC paid for

availing power supply by way of special

dispensation in force. The fact that in

the revised Incentive Rules of 1996 PLEC

has been specifically excluded from the

scope of reimbursement made on account of

power tariff will not fundamentally alter

the situation. The said declaration can be

reasonably understood to be clarificatory

and intended to clear all doubts, queries

and issues raised on the aforesaid score.

12. For the aforesaid reasons, we hold

that the respondents – writ petitioners

are not entitled to reimbursement towards

PLEC paid by it during the period of four

years commencing from the date of

commercial production i.e. 26th September,

1995. We order accordingly and direct that

in the event any reimbursement had been 22

made the same be returned forthwith by the

respondents – writ petitioners to the

appellants with interest thereon at the

rate of 6% per annum.

13. Consequently and in the light of the

above, the order of the High Court is set

aside and the appeal is allowed in the

above terms.

...................,J.

(RANJAN GOGOI)

....................,J.

(NAVIN SINHA)

NEW DELHI OCTOBER 4, 2017 23