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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 of power tariff  freeze, would include the right to reimbursement of all the amounts

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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

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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

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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)

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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

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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

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(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

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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

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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

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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

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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

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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

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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

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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.

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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

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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.

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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

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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

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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

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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

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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

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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

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