Case: Bihar State Electricity Board Vs. M/s. Usha Martin Industries

This is an appeal from an order passed by the Patna High Court, Ranchi Bench, holding that the charge levied by Bihar State Electricity Board for supply of electricity to M/s. Usha Martin Industries, the respondents herein, was excessive as the uniform tariff was not reduced even when Excise Duty on electricity was abolished.On April 6, 1979, the Board revised the electricity charges and framed a fresh uniform tariff by another Notification in exercise of the powers conferred by Sections 46 and 49 of the Electricity (Supply) Act. The energy charges for HTS-II i.e. High Tension Service consumers ranged between 22 paise to 26 paise per unit. By Clause 16.4 of the said Tariff Notification, it was provided that duty that had already been levied by the Government of India on generation of power stood merged in the rates of tariff provided in the Schedule to the said tariff. The surcharge of 0.03 paise per unit was abolished.7. In the Schedule to the tariff applicable to the respondent-Company, no separate charge was shown on account of duty of Central Excise.8. Thereafter, electricity charges were revised from time to time. For this purpose further Tariff Notifications were issued in the year 1981 and again in the year 1983.9. The Tariff Notification dated 18th September, 1981 starts with the recital that "the State Government hereby frames revised tariff for all categories of consumers served or to be served by the Board and lays down the terms and conditions for supply of electricity to its consumers." The revised tariff was to come into effect from 1st October, 1981. A tariff Schedule was annexed to the Notification. Clause 16.4 of the Notification providedCentral Excise Duty. - The Central Excise Duty already levied by the Government of India on generation of power has been merged in the above mentioned rates where applicable. The impact of any subsequent increase notified by the Government of India in the existing rate of Central Excise Duty will be computed and realised from the consumers.In the Tariff Schedule the rates payable by the consumers were stated. There was no surcharge or separate charge on account of Central Excise Duty.11. Similarly, in the Tariff Notification dated 17th June, 1983 it was stated that by virtue of the powers conferred under Sections 46 and 49 ofthe Electricity (Supply) Act, 1948, the Bihar State Electricity Board with the approval of the State Government framed the revised tariff for all categories of consumers served or to be served by the Board and laid down the terms and conditions for supply of electricity to its consumers. It was repeated in Clause 16.4 that Central Excise Duty on generation of power had been merged "in the above mentioned rates where applicable". It was specified that the impact of any subsequent increase notified by the Government of India in the existing rates would be computed and realised from the consumers.12. The charge of Central Excise on electricity was withdrawn with effect from 1st October, 1984.

Reasoning:
2. We are of the view that the High Court was clearly in error in coming to this decision. Electricity has to be supplied by the Board to persons other than licensees at a price fixed by the Board. In fixing the price, the Board has to take into consideration various factors laid down in Section 49 ofthe Electricity (Supply) Act, 1948. The Board is also under a statutory mandate to charge price from its customers in such a way that the total revenue received by it in a year is more than its expenditure. Section 59 enjoins the Board to generate profit of at least 3 per cent of the value of the fixed assets of the Board. The State Government may direct the Board to generate even larger profits.We are of the view that the High Court should not have interfered with the pricing of the electricity sold by the Board on the ground that the liability to pay central excise duty had come to an end on and from 1st October,first and foremost is that this contention was not taken before the lower authorities including the Tribunal. The applicability of Section 64-A will depend upon the agreement between the parties. No evidence was led before the authorities below to show that the parties intended that the relief of excise duty if abolished or reduced would be passed on to the consumers. It was specifically stated in Clause 16.4, one of the clauses of Tariff Notification, that if the excise duty was enhanced, the tariff would be raised. No provision was made for reduction of tariff under any circumstance. The specific provision for raising tariff in case of enhancement of excise duty and absence of any such provision for reduction of tariff in case of lowering or abolition of excise duty go to show that there was no intention on the part of the Board to reduce the tariff in case of lowering or abolition of the excise duty. The provision of Section 64-A can only apply if intention to the contrary did not appear from the terms of the contract.17. Moreover, the tariff is fixed by exercise of statutory power. It is not fixed as a result of any bargaining by and between the Board and the consumers. It is a uniform tariff which every consumer will have to pay for the electricity consumed by him. In fact, the consumer has no option but to pay the tariff fixed by the Board in exercise of power conferred by Section 49.This argument overlooks the fact that the price in the instant case was fixed in exercise of statutory power. It included Central Excise Duty on electricity with effect from 1-3-1978. On 6-4-1979, the Central Excise Duty payable on generation of electricity was merged in the tariff. The result was that the excise duty was included in the price for supply of electricity charged by the Board and lost its separate identity.In the instant case, after imposition of Central Excise Duty on production of electricity at the rate of 0.02 paise per unit, the Board did not revise the uniform tariff, but decided to levy a surcharge of 0.03 paise per unit even though the duty payable was only 2 paise per unit. Reasons have been given in justification for surcharge of 3 paise per unit even though the duty levied was only 2 paise per unit which were found valid by the Division Bench of the Patna High Court. On and from 2-6-1979, the surcharge was merged in uniform tariff by a notification issued by the Board. There is no dispute that the uniform tariff was fixed in conformity with the principles contained in Section 49 of the Act. Along with other costs incurred by it, the Board also took into account the excise duty payable by the Board. It is not the case of the respondent-Company that the Board is making excessive profit or any profit at all. The excise duty is only one small item in the total expenditure incurred by the Board for generation of electricity. There is no law which requires the Board to reduce the tarrif, if any one of the items of expenditure incurred by the Board has beenis not the case of the petitioner that the tariff has been fixed regardless of considerations which have to be taken into account under Section 49. The mechanics of price fixation has to be left to the judgment of the executive.27. We are of the view, the High Court was clearly in error in directing modification of the tariff fixed by the Board.