| SooperKanoon Citation | sooperkanoon.com/1179860 |
| Court | Andhra Pradesh High Court |
| Decided On | Oct-08-2015 |
| Case Number | W.P. No. 23037 of 2012 |
| Judge | C.V. Nagarjuna Reddy |
| Appellant | Hindustan Petroleum Corporation Ltd., represented by its Chief Manager Operations, Visakha-Vijayawada Secunderabad Pipeline (VVSPL), B. Ramakrishna |
| Respondent | The Andhra Pradesh Southern Power Distribution Company Ltd., represented by its Vice Chairman and Managing Director and Others |
This Writ Petition is filed for a mandamus to declare the proceedings of respondent No.3 in reference No.S.E/O/VJA/SAO/JAO-HT/R2.A3/D.No.616/12, dated 1-7-2012, whereby he has recategorised the electrical connection of the Unit of the petitioner at Vijayawada bearing Consumer Service No.VJA 557 from HT Category-I to HT Category-II, as illegal and arbitrary.
Evolution of the petitioner company:
The petitioner averred that the Government of India has taken over M/s. Esso Standard Eastern Inc., (a foreign company) under Esso (Acquisition of Undertakings in India) Act 1974, to cater to the needs of public in the country of petroleum products; that in September 1974 the name of the said company was changed to Hindustan Petroleum Corporation Limited (HPCL); that thereafter some more oil companies, including M/s. Caltex Oil Refiding (India) Limited, were taken over and merged with HPCL by the Government of India; and that HPCL is a Government of India Company under Section 617 of the Companies Act, 1956. It was further averred that the petitioner and its predecessor, apart from certain other units in other parts of the country, has established a huge Petroleum Refinery Unit in an extent of Ac.511-00 at Malkapuram, Gullalapalem and Kancharapalem villages of the erstwhile Visakhapatnam Mandal, Visakhapatnam District. That the said Refinery which was originally established with a capacity of 0.675 Million Metric Tonnes (67.5 crore Kgs.) per annum has been expanded from time to time to its present capacity of 7.5 MMTs (750 crore Kgs) per annum at a cost of Rs.1000 crore, making it the largest Refinery on the East coast; that the petitioner has also spent Rs.700 crores towards environmental friendly measures; and that the upgradation of the petitioner-company has resulted in huge revenue earnings to the Government at the Centre, State and Visakhapatnam Port in terms of port and wharfage charges on crude imports and product dispatches. The petitioner has given certain details regarding the quantum of Sales Tax, Excise Duty, Customs Duty, Income Tax etc., paid for the year ending 31-3-2007, the number of persons employed by it either directly or indirectly and its contribution towards development of the areas surrounding its Refinery at Visakhapatnam Port.
Products, Retail Regional offices and Transportation
The petitioner further averred that the basic products of its Refinery are (i) Petroleum Oils and Lubricants (POL) and (ii) Liquefied Petroleum Gas (LPG). That with an object to distribute the products of POL to various parts of the State of Andhra Pradesh, the petitioner has established three marketing divisions, namely, (i) Visakha Retail Regional office; (ii) Vijayawada Retail Regioinal Office; and (iii) Secunderabad Retail Regional Office; that the supplies of POL with respect to the area under the control of the Visakha Retail Regional office were being made from the Unit called Visakha Terminal, which is appurtenant to the Refinery; that the supplies to the area covered by the Vijayawada Retail Regional Office were being made from the Unit located at Tadepalli, Vijayawada Rural, Krishna District and the supplies to the area covered by the Secunderabad Retail Regional Office were being made from the Unit located at Sanathnagar, Hyderabad. That the supplies of POL to the Visakha Terminal were being made from the Refinery through a Pipe Line; that the supplies to the Units at Tadepalli and Sanathnagar were being made from the Visakha Terminal by Tank Wagons (Railway Wagons with mounted Tanks); and that at the said three locations, POL is stored in huge tanks and further distributed by Tank Trucks (Tanker lorries) to the various retail outlets for further distribution to the consumers.
Handling of products and statutory compliances
It was further averred that in view of the highly inflammable and volatile nature of the products (Hydro Carbons), sophisticated equipment is required to be deployed at every stage starting from the Refinery to the end user; that huge quantities of POL are being handled by way of transport, storage, addition or blending, and packing in special containers so as to make it feasible for the Retail Dealers and the customers; and that all the Units of the petitioner-company are required to comply with the various provisions of both the Central and State enactments viz., The Factories Act, 1948, The Environment (Protection) Act, 1986, The Explosives Act, 1884, The Petroleum Act 1934, The Industrial Disputes Act 1947, The Bureau of Indian Standards Act, and various Rules and Regulations framed thereunder. That the Units of the petitioner-company are classified as Most Accident and Hazardous Units under the Manufacture, Storage and Import of Hazardous Chemical Rules 1989 and as involving Hazardous Process under the Factories Act 1948. It was further averred that the Units of Visakha Terminal, Tadepalli and Sanathnagar were originally established in about 1965 and they were planned and designed for catering to the demand existing at that time; and that the electrical connection of the said three Units were categorized as HT Category-I (Industrial).
Demand for products and surface transportation-disadvantages
The petitioner has given certain details of the facilities and the infrastructure at the Tadepalli and Sanathnagar locations. It was averred that the Visakha Terminal serves the area of the Visakha Retail Regional Office and it is equipped for loading of Tank Wagons and Tank Trucks. That the said three Units were not in a position to cater to the increased demand and the projected demand in future; that the equipment has become old and outdated and more sophisticated equipment and technology has come into vogue; that conveyance of the product from Visakha Terminal to Sanathnagar and Tadepalli Depots was by Tank Wagons; that the supply from these two Units to the retail outlets was again by Tank Trucks; that the distances to be covered by the Tank Trucks to various retail outlets was also considerable; that the surface transport by Tank Wagons or by Tank Trucks was leading to considerable cost, delay, pollution, risk of accidents, adulteration, pilferages etc., that due to strikes, bandhs, floods, cyclones etc., the supply was getting interrupted; and that the surface transport mode was also not meeting the sudden spurt in demand for the products;
Opening of new Units
That keeping in view the above mentioned disadvantages in surface transport and various other reasons, the petitioner-company has conceived a proposal and forwarded the same to the Government of India for approval prior to the year 1997; that as per the said proposal, the Units at Tadepalli and Sanathnagar were to be closed and four new Units have been planned at Rajahmundry, Vijayawada, Suryapet and Ghatkesar to cater to the needs of the areas covered partly by Visakha Retail Regional Office and the whole of the Vijayawada and Secunderabad Retail Regional Offices.
Pipe Line and activities
That the said proposal included laying of a Pipeline spanning 572 KMs. connecting Visakha Refinery with the proposed four new Units at Rajahmundry, Vijayawada, Suryapet and Ghatkesar; that as per the proposal the activities involved at each of the said terminals include drawing the products for further distribution in bulk or wholesale; storage (preservation for future deliveries), tapping the products in bulk and packaging in special containers convenient for distribution in bulk to the retail dealers and also for usage of the consumers; blending of certain other products with POL; and doping Kerosene oil for differentiating the same for domestic and commercial uses. That the entire process involved in pumping and movement of the products from Visakhapatnam to Ghatkesar is a highly technical process. That Motor Spirit (Petrol), High Speed Diesel (Diesel) and Superior Kerosene Oil (SKO) are proposed to be pumped through the same Pipe Line, which is a highly technical operation and requires continuous monitoring; that any variation in the procedure may lead to disastrous effects and that the entire pumping activity is being undertaken by the internationally recognized and accepted procedures. That the said proposal was approved in the years 1995 and 2000 at a combined estimated cost of Rs.899 crores, which was provided by the Government of India as a developmental fund and that the approval of the said proposal by the Government of India is a step towards upgradation as it has more advantages than the conventional mode of transport.
That the said project was taken up in two phases; that the first phase consisted of Visakha Dispatch Unit, Rajahmundry and Vijayawada Terminals and the pipe line connecting Vizag Dispatch Unit with the Vijayawada Terminal; and the second phase involved establishment of Terminals at Suryapet and Ghatkesar with a Pipe Line connecting them with the Vijayawada Terminal, eliminating the need for loading and movement of Tank Wagons in the State of Andhra Pradesh in respect of POL; that the first phase was completed in the year 1998 and the second phase in 2002; that the Unit at Vijayawada ( the subject Unit ?) has been established in Ac.207-00 with a total investment of Rs.164 crores; that it employs 45 direct employees and 161 contract labourers; and that its storage capacity is 2,19,400 Kilo Litres (21.94 Crore Litres) and the average volume of stock dealt per day is 9000 Kilo Litres (90.0 Lakh Litres).
Electricity connection, billing and the dispute:
It was further averred that upon establishing the subject Unit in April 1998, the petitioner made an application to respondent No.2 for electrical connection; that respondent No.3 categorised the subject Unit as H.T. Category II (Non-Industry) without considering the process involved therein and the tariff notification of the erstwhile A.P. State Electricity Board (APSEB) in vogue then and commenced supply of power on 24-8-1998. Realising that the said categorization as H.T. Category-II is not correct, the subject Unit of the petitioner submitted a representation dated 6-8-1999. That respondent No.3 considered the said representation vis- -vis the process involved in the subject Unit and the then Tariff notification and issued proceedings re-categorising the same as H.T. Category-I (Industrial) from September 1999 and that since then the subject Unit has been functioning and was regularly paying the consumption charges under the said category.
That inasmuch as the pumping activity requires coordination between the Refinery, Visakha Unit and all other terminals, and for other administrative reasons, the manning of pumping equipment starting from Visakha Unit ending with Ghatkesar Unit, has been formed into one administrative unit called Visakha-Vijayawada-Secunderabad Pipe Line (VVSPL).
It was further averred that the provision governing the H.T. Category-I (Industrial) remained the same during the regime of the erstwhile APSEB and there was no change even after the A.P. Electricity Regulatory Commission (APERC) came into existence in the year 1999; that subsequently, the APERC issued Tariff Orders for the years 2000-01 to 2004-05 and the Tariff Order 2004-05, which governs the present case, was issued on 23-3-2004.
The petitioner specifically averred that without issuing any notice to it, respondent No.3 issued letter dated 1-2-2005 re-categorising the subject Unit as H.T. Category-II (Non-Industrial) w.e.f. 22-12-2004 and issued bills from January 2005 by applying the tariff pertaining to the said category. On receipt of the said letter and the bill for the month of January 2005, the petitioner submitted a representation dated 7-2-2005 requesting respondent No.3 to treat the subject Unit under H.T. Category-I explaining the reasons therefor. That when no action was taken pursuant to the said representations, the petitioner submitted another representation dated 24-2-2005 to the Chairman and Managing Director of respondent No.1 for considering its grievances and passing necessary orders retaining the subject Unit under HT Category-I. That when the respondents have not considered the representations of the petitioner, another representation dated 27-6-2005 was submitted to respondent No.2; that the petitioner learnt that respondent No.2 addressed letter dated 1-7-2005 to the APERC and that the latter has not responded to the same; that the petitioner made another representation dated 4-10-2005 to respondent Nos.2 and 3 for redressal of its grievance; that as there was no response the petitioner lodged a complaint dated 18-2-2006 with the Forum for Redressal of Consumer Grievances of Southern Power Distribution Company of A.P. Ltd., Tirupati, which was registered as C.G.No.72 of 2006-2007 and that the said complaint was rejected by proceedings dated 11-5-2006. That respondent No.3 by letter dated 29-5-2006 informed the petitioner that respondent No.2 issued orders to bill the Gas Filling and Oil Filling Stations under HT Category-II instead of HT Category-I and instructed to back bill the services and sent a bill for Rs.1,02,62,722-42 for the period from March 2000 to December 2004; that thereupon the petitioner by letter dated 23-6-2006 protested the arbitrary recategorisation and back-billing by the respondents; that questioning the same, the petitioner preferred an appeal to the Vidyuth Ombudsman which was registered as Appeal No.16 of 2006; that the said appeal was disposed of by order dated 14-12-2006 confirming the action of respondent No.3 in so far as recategorisation is concerned, but however setting aside the back billing; that in the said circumstances the petitioner was constrained to file W.P.No.2468 of 2008 questioning the proceedings of respondent No.3 in Lr.No.SE/O/VJA/SAO/JAO/HT(R)/R2/D.No.147/2005, dated 1-2-2005; that this Court by order dated 16-4-2008 allowed the said Writ Petition to the effect that respondent No.3 shall give notice to the petitioner against the proposed change of classification within four weeks from the date of receipt of the order; that within two weeks thereafter, the petitioner was permitted to file its objections; that on receipt of objections, respondent No.3 shall dispose of the same before taking a final decision on the proposed reclassification; and that since the action of reclassification is declared void, the respondents shall adjust the excess amount paid by the petitioner towards differential tariff in the immediate future electricity bills. That pursuant to the said order, respondent No.3 issued notice dated 23-8-2008 to the petitioner seeking explanation within two weeks with regard to change of category from HT-I to HT-II from September 1999 consumption month and for collecting the tariff difference amount of Rs.1,02,67,722-42 from February 2000 to December 2004. That the petitioner submitted its explanation dated 11-9-2008 to the said notice; that on 17-3-2012 personal hearing was held in the office of respondent No.3; and that respondent No.3 vide proceedings dated 1-7-2012 rejected the contentions of the petitioner and decided to bill the subject Unit under HT Category-II from the date of issue of notice i.e., 23-8-2008 and withdrawn the proposal to back bill the service under HT Category-II from March 2000 to December 2004.
The petitioner further averred that the activity of the subject Unit falls within each of the expressions used under HT Category-I of the Tariff Order issued by the APERC viz., Industry ?, Process ?, Process and Preserving ?, Preserving for sale and also Manufacturing ?; and that therefore respondent No.3 has wrongly reclassified the subject Unit by misconstruing the said definition. That the supply under HT Category-I (Industry) covers only industrial consumers and the definition of industrial consumersused therein is inclusive in nature and not an exhaustive one; that the word industryin the expression Industrial consumers should be undisputedly the true and natural meaning keeping in view the context and especially in comparison with other categories, more so HT Category-II (Non Industry). That any organized mode of activity by spending considerable money, employing men and equipment and the nature and volume of the products being dealt with, is sufficient to bring the same within the fold of the expression industry'. The petitioner specifically averred that consumers with much simpler activity than that of the subject Unit and with no manufacturing activity, have been included by the respondents under HT Category-I (Industry), viz., Cold Storage Units, Rice Mills, Effluent Treatment Plants etc.; that respondent No.3 ought to have noticed that HT Category-II (Non Industrial) is purely for the consumers whose activities are non-industrial in nature and when the subject Unit is an industryit can never be placed under HT Category-II (Non Industrial); and that even under the scheme of classification of consumers for the purpose of tariffs chargeable either under the Tariff Notifications issued by the erstwhile APSEB or under the Tariff Orders issued by the APERC, the activities being undertaken by the subject Unit are categorized only as industrial activity. That apart from the process of preserving and storing very large quantities of highly volatile petroleum products like Motor Spirit, High Speed Diesel and Kerosene Oil, the subject Unit also manufactures and produces Gasohol', which is a blend of Motor Spirit and Ethanol; Power', which is a variant of Motor Spirit; and Turbojet', which is a variant of High Speed Diesel; and that the subject Unit also undertakes the activity of doping of Kerosene Oil to detect adulteration of petrol and diesel.
The petitioner further averred that the physical and chemical properties of the products handled in the subject Unit requires highly sophisticated equipment; that the sub Unit is termed as Most Accident and Hazardous Unit under the Manufacture, Storage and Import of Hazardous Chemicals Rules 1989 and as Hazardous Process under the Factories Act 1948; that the Deputy Chief Inspector of Factories, Visakhapatnam District, has placed the subject Unit under Most Hazardous Units in the area under his jurisdiction; and that therefore there is no other alternative description or nomenclature which can be assigned to the activity or process undertaken by the subject Unit, except Industry ?.
That the activities of the subject Unit squarely fall within the definition of preserving for sale contained the description of HT Category-I (Industry); that the Divisional Engineer/DPE/Vijayawada inspected the Units of the petitioner at Sanathnagar and Kondapalli which are involved in handling of Liquefied Petroleum Gas (LPG) and requested the Superintending Engineers to classify the same into HT Category-II (Non Industrial) on the only ground that there is no production activity being carried on therein; that in pursuance of the said request, the Superintending Engineers sought clarification of the erstwhile APSEB; that the APSEB examined the whole issue and held that the activity of the petitioner's Units amounts to preserving of goods for saleand distribution to various places in bulk loads and hence fall under HT Category-I (Industry) as per the then Tariff Notification i.e., B.P.Ms.No.32, dated 29-7-1996; that the APSEB has also advised the Superintending Engineers not to reclassify the Units of the petitioner as Category-II (Non Industrial) and directed them to continue the said Units in HT Category-I (Industry); and that the said decision was communicated to the Superintending Engineers by the Member Secretary of the APSEB vide proceedings dated 22-6-1998.
The petitioner specifically averred that a similar activity pertaining to M/s. Indian Oil Corporation fell for consideration before the Tamil Nadu Electricity Regulatory Commission, Chennai, which, by its order dated 23-8-2005 categorically held that the activity of the said Unit is industrial activityand squarely falls under H.T. Industrial Tariff and not under H.T. Commercial Tariff ?.
That respondent No.3 ought to have noticed that in order to fall under HT Category-I, what is required to be considered is whether the pumping activity undertaken by the subject Unit is part of industrial activity or not, and not the product/substance being pumped; that the pumping of petroleum products over a long distance is for the purpose of storage before sale and the expression preserving for sale used in the HT Category-I of the Tariff Order takes the petitioner's activity into its fold; that the classification of Municipality under HT-I Category (Industry) is because of its activity of pumping of water/sewerage and the same is recognized as industrial activity though the same is unconnected with industry ?; that all the expressions viz., manufacture goods for sale', processing goods for sale', manufacturing, processing and storing the goods for saleand preserving goods for saleemphasize the main purpose as saleand therefore the process of transporting, storing and ultimately selling the LOP will definitely come within the definition of HT Category-I of the Tariff Order; and that the exclusion of certain consumers from HT Category-I is based on the fact that the activities of such consumers have not even remote connection with the definition of industry'.
It was further averred that though the activity of pumping is integral part of the entire scheme of manufacturing process of the subject Unit, it falls under HT Category-I (industry) category and that the process involves (i) boosting the pumping of the manufactured product; (ii) preserving the product for sale by storage; (iii) adding or blending so as to produce new products; (iv) whole sale distribution of the product by special packaging to the retailers apart from sale to other oil companies; (v) maintaining variable pressures to see that different products pumped do not get mixed up and (vi) constant monitoring of the entire system process with hydraulics like Downstream/back pressure control at dispatch/receiving end in order to have a Title Line operation, which helps to minimize the inter-mixing of products and keep inter-phase to the minimum. That the Tight Line operation also helps to prevent hydraulic surging by minimizing the vapourization of products in the Line. That the following are the minimum back pressures (station inlets) maintained at each of the locations based on the elevation and to have Tight Line operation in VVSPL:
Vizag Dispatch end “ 65 Kg/cm2 (in parallel)
Rajahmundry (inlet) “ 4.0 Kg/cm2
Rajahmundry (outlet) “ 65 Kg/cm2 (in parallel)
Vijayawada (inlet) “ 6.5 Kg/cm2
Vijayawada (outlet) “ 65 Kg/cm2 (single pump)
Suryapet (inlet) “ 4.0 Kg/cm2 (when pump is on)
Suryapet (outlet) “ 60 Kg/cm2 (when pump is on)
Secunderabad “ 2.0 Kg./cm2 etc.
The petitioner further averred that electricity is consumed for the processes of (i) pumping or boosting the pumping of petroleum products; (ii) tapping or drawing them from the said Pipe Line; (iii) adding or blending; (iv) doping, (v) storing and (vi) packing the petroleum products in special containers or vessels; that the product tapped or drawn from the said Pipe Line is stored, is further processed and sold to the retailers and other oil companies in wholesale and that therefore the said activities fall within the expressions process for saleor preserving for saleor processing and preserving for saleused in the definition/clause in HT Category-I (Industry) in the Tariff Order. It was further averred that it is not necessary that there should be some new product coming out of the said process; that the interpretation given by respondent No.3 to the expression preservationis without any basis; that terming the movement of the petroleum products as transportand to treat the same as transport activity on the ground that there is no separate classification for the same is arbitrary and illegal; that respondent No.3 has approached the issue in general terms without any reference to the exact activity of the subject Unit; that respondent No.3 has relied on the order of the Vidyut Ombudsman which has merged in the order dated 16-4-2008 of this Court in W.P.No.2468 of 2008 and hence the impugned action of respondent No.3 is violative of principles of natural justice as he is required to consider the issue and decide the same independently. That the present Writ Petition is filed despite the availability of alternative remedy of appeal against the impugned action of respondent No.3 to the Fourm for Redressal of Consumer Grievances of Southern Power Distribution Company of A.P. Ltd., at Tirupati and a further appeal to the Vidyut Ombudsman, as respondent No.3 has not considered the issue independently and has rejected the contention of the petitioner by taking irrelevant factors into consideration and referring to the findings of the Vidyut Ombudsman in Appeal No.16 of 2006, which this Court has set-aside vide order dated 16-4-2008 in W.P.No.2468 of 2008; that with respect to a similar issue of another Unit of the petitioner at Visakhapatnam, the Forum has decided against the claims of the petitioner; that in W.P.No.19496 of 2008 filed against the said decision, the categorization of the petitioner Unit under HT Category-II was suspended and the said Writ Petition is pending adjudication; and that a similar issue with respect to Rajahmundry Unit is pending in W.P.No.13821 of 2008 and the categorization of the said Unit under HT Category-II has been suspended. The petitioner claimed that it is entitled to refund of an amount of Rs.80 lakhs from respondent No.3.
The respondentspleading:
On behalf of the respondents, respondent No.3 has filed a counter affidavit, wherein it was averred that the category of the subject Unit has been changed from HT Category-I to HT Category-II taking into consideration the guidelines issued by the APERC for the financial year 2007-08 as the activities of oil filling and gas filling at Vijayawada Retail Regional office are for commercial use and not for industrial use; that the impugned proceedings is valid as the HT supply to the subject Unit at Kattubadipalem, is for transport of POL over long distances through Pipe Line for marketing purposes, bulk storage and filling of tanker lorries and the same cannot be considered as industrial activity. It was further averred that according to the petitioner's case, the activity at Vijayawada Retail Regional Office is for distribution and marketing; that the said activities are commercial activities and that as per the Tariff Order of the APERC, electricity supply will be extended to the refining point of the petitioner's Unit under HT Category-I and to the marketing point under HT Category-II; and that the fact that the petitioner's Refinery is located at Visakhapatnam from where the POL is supplied, cannot form the basis for classification of the category. It was further averred that electricity consumer classification and categorization for the purpose of levy of electricity charges are made on the basis of the purpose of the use of electricity and the same are not related to the classification made by various Governments for the purposes such as the products being hazardous in nature, safety precautions etc; and that as per the Tariff conditions, there is neither manufacturing activity nor the activity of processing of material in the subject Unit. That usage of sophisticated imported machinery or maintenance of stringent standards may be required for storing the petroleum products, but the same is not relevant for classification of category for the purpose of usage of electricity; that the activity undertaken by a producer or a manufacturer for movement of goods for marketing purposes assumes the character of transport activity and not manufacturing, or processing, or preservation and hence such activity deserves to be treated on par with transport activity and as no separate classification exists for such activity, the same falls under HT Category-II as per Tariff conditions.
It was further averred that the activity at the subject Unit at Kattubadipalem is not preservation of goods for sale, but it is only transportation of goods for sale as the main activity of the plant is transport of POL through Pipe Line and storage in huge tanks for onward filling in Tanker lorries and their dispatch to various petrol bunks for sale to consumers; that mere mixing of doping agent for distinguishing the Kerosene Oil meant for commercial use and domestic use does not amount to processing; and that though there is some process, where the main activity is marketing, all the processing Units cannot be categorized under HT-I by the APERC. That in the Circular issued in 1998 by the erstwhile APSEB, where the activity is preservation of goods, instructions were issued to categorise the services under industrial category; that as utilization of the supply by the subject Unit is not for preservation of goods and the same is for bulk storage of POL and filling of Tankers like petrol bunks without involving any process and only through Pipe Line operation, the said Circular does not support the cause of the petitioner and that the said position is clarified by the Vidyut Ombudsman, who is appointed considering his specialized knowledge, experience and qualifications in the field, in Appeal No.16 of 2006.
It was further averred that the supply under HT Category-I is applicable to all H.T. industrial consumers. That industrial purposeshall mean manufacturing, processing and/or preserving goods for sale, but the same is not applicable to shops, business houses and other similar premises notwithstanding any such activities undertaken therein; that the word preservationis commonly understood as the activity of protecting any material from perishing/decay/damage and that the storage of POL or LPG in the depots will not come under the activity of preservationlaid down in the Tariff condition. That no manufacturing, processing and/or preservation activity takes place at the subject Unit at Kattubadipalem, but it is only a storage and sale point. It was specifically averred that the pumping activity undertaken by the petitioner for movement of petroleum products over long distances across the State for marketing purpose does not find place in the description of HT Category-I.
That in December 2004, the CMD, SPDCL, Tirupathi has reviewed all the H.T. services engaged in oil/gas filling activity and issued instructions vide D.No.520, dated 28-12-2004 to reclassify them under HT Category-II from HT Category-I immediately as the said activities are commercial in nature and the same cannot be interpreted as industrial activities; and that accordingly respondent No.3 has issued C.C. bill for January 2005 for the period from 22-12-2004 to 21-5-2005 under HT Category-II duly informing the petitioner vide letter D.No.147, dated 1-2-2005 about the change of category. The respondents have referred to the proceedings before the Consumer Grievance Redressal Forum vide C.G.No.72/2006-2007/Vijayawada Circle, wherein the request of the petitioner to consider its case for conversion of the subject Unit from HT Category-II to Category-I was negatived. The respondents have also referred to the order dated 14-12-2006 of the Vidyut Ombudsman in Appeal No.16 of 2006 wherein it was held that the electricity consumption by the subject Unit falls under HT Category-II.
As regards Cold Storages, the counter affidavit averred that though there is no manufacturing activity involved in Cold Storage Units, the same are classified under HT Category-I since activity undertaken therein involves preservation of goods'. Adverting to Rice Mills, the respondents averred that processis taking place i.e., the input to the machinery is rice grain and the output being rice. The counter affidavit further averred that as the activity of the subject Unit is only transportation of petroleum products through Pipe Line over long distances for marketing purpose, the same cannot be compared to Cold Storage Units and Rice Mills. The respondents sought to justify the classification of Effluent or Sewerage Treatment Plants maintained by Government or local bodies into HT Category-I on the ground that the electricity supply is for pumping of sewerage; that the pumping activities directly meant for civic amenities are charged with lesser tariff as there is no activity relating to business or sale involved therein; and that therefore the activities of the subject Unit stand on a different plane vis- -vis the activities undertaken by effluent and sewerage treatment plants. It was further averred that though there is some process taking place in Photo studios, Printing Press Units etc., the same are not categorized under HT-I category since the main activity undertaken by such Units is marketing, which deals with encouraging people to buy a product or a service.
It was further averred that the under Clauses 219 and 220 of the Retail Supply Tariffs 2007-08, the APERC has given clarification very clearly on classification of Oil Depots and Bottling Plants by observing that the activities of the said consumers have to be treated as commercial activities and classified as such. That as per the classification made, M/s. Gas Authority of India Limited, G. Konduru village, Krishna District, whose activity is to transport of gas through Pipe Line similar to the petitioner's Unit, is also paying C.C. charges under H.T. Category-II.
It was averred that in W.P.No.2468 of 2008, this Court has set aside the order passed by the Vidyut Ombudsman only on the ground that no notice was issued to the petitioner; that respondent No.3 has considered the issues independently and as per the provisions of the Regulation in vogue; and that respondent No.3 has given due consideration to the principles of audi alteram partem and passed orders in accordance with the Rules.
With regard to the claim of the petitioner that it is due in an amount Rs.80 lakhs from respondent No.3, the respondents denied the same on the ground that as per the available records, there is no proof of such demand from the petitioner and that therefore the said claim is not supported by proper basis. The counter-affidavit reiterated that the electricity consumer classification and categorization for the purpose of levy of electricity charges are made on the basis of the purpose of the use of electricity and that the same are not related to the classification made by various Governments; that though subject Unit may be classified as industryby some Government Departments from hazardous and safety point of view, usage of supply is the only criteria for categorization; that there is neither manufacturing activity nor the activity of processing of material etc., undertaken in the subject Unit traceable to the Tariff conditions; that the activity at the subject Unit is not preservation for sale, but only storage for sale; and that the staff strength and investment for establishment of the subject Unit will not alter the purpose of usage of electricity supply and the consequential classification/categorization. The counter affidavit further averred that without assailing the guidelines fixed by the APERC, the petitioner cannot question the consequential action of the respondents in fixing the rates/charges under HT Category-II.
CONSIDERATION:
The issue that requires to be considered is whether the activity being carried on by the petitioner in the subject Unit falls within the phraseology contained in the Tariff notification issued by the APERC for the years 2001-02 to 2004-05 for HT Category-I. For deciding this issue, it is useful to reproduce the extant tariff condition pertaining to HT Category-I, which reads as under :
This tariff is applicable for supply to all H.T. Industrial Consumers. Industrial purpose shall mean manufacturing, processing and/or preserving goods for sale, but shall not include shops, business houses, public buildings, hospitals, hotels, hostels, choultries, restaurants, clubs, theatres, cinemas, railway stations and other similar premises notwithstanding any manufacturing, processing or preserving goods for sale. The Water Works of Municipalities and Corporations and any other Government organizations come under this category. Information Technology units identified and approved by the Consultative Committee on IT industry (CCITI) constituted by Govt. of A.P. also falls under this category ?.
For deriving the benefit of the charges leviable under HT Category-I, it is not necessary that a consumer must involve itself in all of the three activities conjunctively, viz., manufacturing, processing or preserving goods for sale. It will suffice if a consumer proves that it undertakes any of the three of the aforementioned activities.
It needs to be noted that respondent No.3 has discussed in detail as to whether the activity undertaken by the subject Unit constitutes preservation of goods'. However, he has not dealt with in detail as to whether the petitioner undertakes the activity of processing of goods for sale'. On the contrary, respondent No.3 made the following observations in para-8 of the order:
Though there is some process, all the processing units are not categorized under HT-I by the APERC, like Photo studios, Printing Press units etc., since their main activity is marketing ?.
As the petitioner's claim for inclusion under HT-I Category is based on the activities of processingand preservation of goods for sale', let me discuss these two aspects.
As regards processing', as noted above, the petitioner has explained in detail the activities being undertaken by it in the subject Unit. Hence, it is unnecessary to repeat the same. From the pleadings of the petitioner, it is evident that it is undertaking the following activities as explained in Annexure-III of the writ affidavit.
(i) Advance planning for the availability of the product at the Master Control Station based on the anticipated product requirements at receiving locations.
(ii) Planning the product cycles and sequence to ensure uninterrupted supply to the receiving locations.
(iii) Operating the pumps.
(iv) Round the clock monitoring of the critical flow and pressure parameters at the Master Control Installation and intermediate installations.
(v) Facilitating product receipt at receiving terminals in designated tanks.
(vi) Detection and management of interfaces and also pipeline shutdowns for carrying out maintenance etc.
(vii) SCADA system is provided to ensure effective and reliable control, management and supervision of the pipeline. Leak detection system is provided for alarm in case of a pipeline leak.
The petitioner has also given a flow chart indicating the Multi Product Petroleum Pipeline System. It has also given out the details of infrastructure facilities and summary of operations.
From a reading of these details, I feel that batch sequencing and sizing of product dispatches deserve a little elaboration. Under this process, the petitioner undertakes operation of Multi Product Pipe Line based on a technical principle called Tight Line principle ?. As per the said principle, the Pipeline is always kept under high pressure by implementation of sophisticated techniques to avoid mixing of any two different adjacent POL products viz., Petrol, Diesel and Kerosene Oil, moving in the pipeline simultaneously. The Pipeline receives products from the Visakha Refinery at the initial station at Visakhapatnam and transfers the same to the terminals at Rajahmundry, Vijayawada, Suryapet and Ghatkesar. The products are pumped in sequential batches depending on the following criteria:
(i) Product compatibility and ability to blend with successive products.
(ii) The minimum batch volume necessary to absorb the interface quantity of the adjacent products without compromising on the product specifications.
(iii) Tankage/Ullage availability at the point of receipt and point of delivery.
Typical batch sequencing is given as follows:
HSD “ SKO “ MS “ SKO “ LAN “ SKO “ HSD
The receipt of delivery of products is made under strict quality control following BIS, ISO-9001-2000 and API/ASTM and OISD specifications.
It is explained that the above mentioned arrangement is to ensure that any product is preceded or succeeded by Superior Kerosene Oil (SKO) which has to be delivered as a pure product to the Units. Various other technical details forming part of the process taking place during conveyance of POL through the Pipeline are referred to by the petitioner, detailed reference to which is unnecessary.
In its explanation submitted to the show cause notice dated 23-8-2008, the petitioner has graphically described the activities undertaken by the subject Unit requiring consumption of electricity, before respondent No.3 as under :
It is submitted that the electricity is consumed for the process of (i) Pumping or Boosting the pumping of petroleum products; (ii) Tapping or Drawing them from the said pipe line; (iii) Adding or blending; (iv) Doping; (v) Storing and (vi) Packing them in special containers or vessels and then sold in whole sale and therefore the said activity of the said unit of the HPCL falls within the expressions of process for sale or Preserving for sale or Processing and Preserving for sale used in the said definition/clause provided in the said Category-I (Industry) in the Tariff Order.
It is submitted that the activities involved in each of the said terminals are for drawing the products for further distribution in bulk or whole sale storage, at the same time the products at these units are tapped in bulk and packed in special containers making it convenient for distributing in bulk to the retail dealers and also for the usage of the ultimate consumers. Further, blending of certain other products with this POL is undertaken in these units to produce new products. The process of mixing of the doping agent is also undertaken in these Units to differentiate the kerosene meant for domestic use and commercial use. At the cost of repetition, because of highly combustible and volatile nature of the product these units are equipped with highly sophisticated and technically complicated equipment and process either for drawing from the pipe, handling, blending, doping, storing, further loading and packing the said products . ?
It has further pleaded as under :
It is submitted that apart from the process of preserving and storing very large quantities of highly volatile Petroleum Products (Essential Commodities) like Motor Spirit, High Speed Diesel and Kerosene, there is also manufacturing activity involved in the Unit in question. Petroleum products, namely, (i) Gasohol (which is a blend between Motor Spirit and Ethanol), (ii) Power (which is Motor Spirit variant) and (iii) Turbojet (which is a variant of High Speed Diesel) are produced in the said Unit of the HPCL. Marker doped in Kerosene to detect adulteration of petroleum products i.e., Petrol and Diesel. ?
The above pleadings have been reproduced by the petitioner in para-51 of the affidavit filed in the present Writ Petition. In para-63 of the affidavit, the petitioner further pleaded :
I submit that the electricity is consumed for the process of (i) Pumping or Boosting the pumping of petroleum products, (ii) Tapping or Drawing them from the said pipe line, (iii) Adding or blending (iv) Doping, (v) Storing and (vi) Packing them in special containers or vessels and then sold in whole sale and therefore the said activity of the said unit of the petitioner falls within the expressions of Process for sale or Preserving for sale or Processing and Preserving for sale used I the said definition/clause provided in the said Category-I (Industry) in theTariff Order. ?
In Chowgule and Co. Pvt. Ltd. and another Vs. Union of India and others(AIR 1981 S.C. 1014), a three Judge Bench of the Supreme Court has discussed the word processingunder Rule 13 of the Central Sales Tax Rules 1957. That was a case where the assessee company was carrying on business of mining iron ore and selling it in the export market after dressing, washing, screening and blending. The process involved therein was conveyance of mined ore from the mine site to the river side, carrying it by barges to the Marmagoa harbour, and then blending and loading it into the ship through mechanical ore handling plant. The Supreme Court held that blending of diverse qualities of ore possessing different chemical and physical composition so as to produce the ore of the contractual specifications amounted to processing. It has referred to the Webster's Dictionary for the meaning of the word processas to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market etc., to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurizing, fruits and vegetables by sorting and repacking ?. The Supreme Court further held:
Where therefore any commodity is subjected to a process or treatment with a view to its development or preparation for the market, as for example, by sorting and repacking fruits and vegetables, it would amount to processing of the commodity within the meaning of Section 8(3)(b) and Rule 13; the nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive; but with each process suffered, the commodity would experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The nature and extent of the change is not material. It may be that camphor powder may just be compressed into camphor cubes by application of mechanical force or pressure without addition or admixture of any other material and yet the operation would amount to processing of camphor powder as held by the Calcutta High Court in Om Prakash Gupta Vs. Commissioner of Commercial Taxes (1965) 16 STC 935. What is necessary in order to characterize an operation as processing is that the commodity must, as a result of the operation, experience some change . ?
As noted hereinbefore, the petitioner has specifically pleaded before respondent No.3 that apart from the process of preserving and storing very large quantities of highly volatile petroleum products like Motor Spirit, High Speed Diesel and Kerosene Oil, it is also manufacturing petroleum products, namely, Gasohol ?, which is a blend of Motor Spirit and Ethanol; Power which is a Motor spirit variant, and Turbojet ?, which is a variant of High Speed Diesel.
Thus, through the processes undertaken such as mixing, blending and doping, the petroleum oils are undergoing some change', thereby satisfying the test applied by the Supreme Court in Chowgule and Co. Pvt. Ltd. (1-supra) and the Calcutta High Court in Om Prakash Gupta Vs. Commissioner of Commercial Taxes ((1965) 16 STC 935 (Cal.)).
Thus, I have no doubt in my mind that the entire process of conveyance of POL from Visakhapatnam to Hyderabad involves deployment and usage of sophisticated technology, for which purpose the petitioner has been using electricity in order to maintain proper pressure in the Pipe Line. Hence, I am of the opinion that one of the activities undertaken by the petitioner in conveying petroleum products from its storage points at Visakhapatnam and Vijayawada involves processing'.
On a careful consideration of the nature of operations, I have no doubt in my mind that the subject Unit of the petitioner is undertaking processing of petroleum products during their conveyance from storage points to the end destinations before they are sold to its bulk customers.
The next question that needs to be considered is whether the petitioner is involved in the activity of preserving the goods for sale'.
Respondent No.3 has elaborately dealt with this aspect and observed that the activity undertaken by the subject Unit does not amount to preservationand it only amounts to storage of goods and that therefore it will not fall under HT-I category. In arriving at this conclusion, respondent No.3 has heavily relied upon the order of the Vidyut Ombudsman in Appeal No.16 of 2006. The learned Counsel for the petitioner submitted that by setting aside proceedings dated 1-2-2005 of respondent No.3, which was confirmed in the above mentioned appeal by the Vidyut Ombudsman, this Court has impliedly set aside the Vidyut Ombudman's order also and that therefore placing reliance on the said order by respondent No.3 is not correct. It is unnecessary to render any finding on this aspect for the reason that this Court is independently examining this issue and the opinion of the Vidyut Ombudsman expressed in the previous round of litigation has no relevance in the present case.
Respondent No.3 opined that like any petrol pump, the petitioner's subject Unit is involved in bulk storage and that such bulk storage does not constitute preservation of goods'. He has further held that the word preservationis commonly understood as the activity of protecting any material from perishing/decay/damage and that the pumping activity undertaken for movement of POL over long distances across the State for marketing purpose does not find place in HT Category-I. While referring to the clarification issued by the erstwhile APSEB in 1998 in Memo No.CE/Comml)/ADE-2/Misc.Tariffs/D.No.511/98, dated 22-6-1998, on which heavy reliance was placed by the petitioner, respondent No.3 has observed that supply is not being utilized for preservation of goodsbut for bulk storage of POL and filling of tankers just like petrol pumps and only through pipeline operation without there being any process involved and that therefore the said Memo is not applicable to the subject Unit of the petitioner.
The phrase preserve is not defined in the extant Tariff Order. Undoubtedly, between the acts of storingand preservation', the latter requires an extra effort than the one required for mere storage. For example, goods which are not perishable in nature are those which do not require any extra effort in storing them. In contrast, goods which are subject to natural decay and those which are inflammable, volatile etc., require observance of extra precautions in storing them. The activity of applying these precautions may be called preservation of goods'. In the context of Section 2(c) of the Industrial Finance Corporation Act, 1948 and Section 16(2)(a) of Salarjung Museum Act 1961, in Ramanatha Aiyar's Advanced Law Lexicon, 3rd Edition, the following meaning is ascribed to the word preservation ?:
The act of keeping safe from injury, harm or destruction ?.
Another meaning explained by the same author to the word preserve is:
The word preserve means to keep; to secure; to uphold; and when used in a statute intended to preserve the public peace it means to secure that quiet order and freedom from agitation or disturbance which is guaranteed by the laws.
To maintain; to manage or retain for the rightful owner, to keep safe from harm or injury ?.
The measures undertaken by the petitioner for bulk storage of POL in its Units in various locations involve sophisticated technology because of the highly combustible and volatile nature of the products. The said Units are equipped with technically complicated equipment.
Admittedly, cold storage Units are included in HT Category-I by the respondents even though neither manufacturing nor processing activity is undertaken by those Units. When the petitioner made a reference to cold storage Units, respondent No.3 has drawn a distinction in the following manner:
The appellant has quoted the classification of Cold storages, Rice mills and Effluent treatment plants under HT Category-I. Though there is no manufacturing activity involved in cold storage units they are classified under HT Cat-I since their activity is preservation of goods .. ?
In my opinion, respondent No.3 has over-simplified the activity undertaken by the petitioner in preserving the POL products. Indeed, compared to the efforts required by the petitioner to preserve the highly inflammable and combustible POL products, the efforts involved in preserving goods in cold storages are negligible. In the latter case, all that is required is maintenance of low temperatures to prevent goods such as vegetables, fruits etc., from perishing and being subjected to natural decay. On examining the true nature of the petitioner's activity, the erstwhile APSEB issued the above mentioned Memo dated 22-6-1998, which reads as under :
Sub:- HT Supply to M/s. I.O.C. Limited and M/s. HPCL, Kondapally and Sanathnagar “ Classification under Category-I “ Regarding.
Assistant Divisional Engineer/DPE/Vijayawada and Divisional Engineer/DPE/Hyderabad have inspected the HT services of M/s. I. Operation Circle (sic: IOC) Limited and M/s. HPCL Kondapally and Sanathnagar, respectively and have requested the concerned Superintending Engineer Operation (Vijayawada and Hyderabad North Circle) to classify the above service under H.T. Category-II on the plea that no production activity is involved in their premises and advised to issue back bills from 11/90 onwards. The Superintending Engineer, Operation, Vijayawada and North Circle/Hyderabad have sought clarification from Board on this matter.
The subject has been examined in detail. The above companies are engaged in the activity of preservation of petroleum products for sale and distributing to various places in bulk loads. This activity falls under HT Category-I as per the tariff notifications issued from time to time and even as per the latest notification issued in B.P.Ms.No.32, dt.29-7-96.
The Superintending Engineer, Operation, Vijayawada and North/Hyderabad Circle and Superintending Engineer, DPE, Vijayawada, Hyderabad are advised not to re-classify M/s. I.O.C. Limited and HPCL under HT Category-II, but continued to classify under HT Category-I only. ?
The above reproduced contents of the Memo clearly show that the APSEB has recognized the storage of POL by the petitioner as constituting preservation of goods'. While accepting existence of the said clarification, respondent No.3 was however not prepared to follow the decision of the predecessor organization by making an artificial distinction between preservation and bulk storage of POL. The petitioner has also referred to and relied upon order dated 23-8-2005 of the TNERC, Chennai pertaining to storage of LPG of M/s. Indian Oil Corporation wherein it has held that the activity of the said Unit is nothing but an industrial activity falling under HT Industrial tariff.
CONCLUSION:
The question whether an activity which does not involve manufactureof goods can still be considered as an industrial activity or not, depends upon the interpretation of the extant statutory provisions/notifications. Going by the language of the Tariff Order, it is clear that even if no manufacturing activity is undertaken, it is enough if a consumer carries on the activity of processing and/or preserving of goods for sale. From the undisputed facts pleaded by the petitioner and in the light of the discussion undertaken above, this Court has no hesitation to hold that the petitioner has been utilizing power from the respondents for the activity of both processing and preservation of goods for sale and therefore it is entitled to be classified as a consumer falling under HT Category-I. The order of respondent No.3 cannot therefore be sustained and the same is accordingly set-aside.
RESULT:
The Writ Petition is allowed. The respondents are directed to reclassify the petitioner's Unit at Kattubadipalem, Vijayawada, under HT Category-I and revise the bills w.e.f. 1-2-2005 when the respondents have changed its category from HT Category-I to HT Category-II, and adjust the excess tariff collected from the petitioner in future bills.
As a sequel to the disposal of the Writ Petition, WPMP No.29422 of 2012 and WVMP No.3266 of 2012 are disposed of.