Jalan Ispat Castings Limited Vs. M.P.E.B. and anr. - Court Judgment

Excerpt:
- section 2(f): [dipak misra, k.k. lahoti & rajendra menon, jj] service tax - packaging and bottling of liquor whether amounts to manufacture within meaning of section 2(f) of central excise act 1944? finance act 932 of 1994), section 65 (76 b) (as amended on 16.6.2005) - held, the first limb of the inclusive definition of the manufacture under section 2(f) of central excise act has a very wide connotation. as the definition clause lays down an inclusive facet, the term manufacture has to be construed in a natural and plain manner and would include any process incidental or ancillary to the completion of a manufactured product. keeping in view the context in which the term manufacture has been used, it would take in its fold incidental and ancillary process in the manufacture or finishing of any manufactured product. it does not leave any room for doubt that an allied process should be integral and inextricable part of manufacture of completeness and presentability of the manufactured product. section 65(76b) of finance act used the words but it does not include. thus it is a definition which has the inclusive as well as exclusive facet. by virtue of the same it may include certain things and exclude others. it is well settled principle of law that a definition is not to be read in isolation and has to read in context of phrase which it defines, releasing that function of a definition is to give precision and certainty to the word or phrase which would otherwise be vague and uncertain. regard being had to the exclusionary fact in the finance act, though a limited one it would exclude the manufacturing process as defined under section 2(f) of the 1944 act. keeping in view the aforesaid dictionary clauses and circulars issued by the c.b.e.c. it is quite luminescent that would manufacture has to be understood in a broader sense and not to be confined or restricted to the excisable product in the act. it would include all processes which amount to manufacture whether or not the final product is an excisable product. in the process of manufacturing of country spirit, the over proof spirit which is not potable is reduced to issuable strength, which is potable. colouring and flavouring agents are added at the time of maturation. thereafter the liquor is supplied in sealed bottles to the retail contractors. this is the process of treatment given to over proof spirit in order to render it fit for human consumption in the form of country liquor. if the process is analysed there cannot be any scintilla of doubt that the process involves the manufacturing one under the provisions of section 2(f) of central excise act, 1944. as per the m.p. country spirits rules as well as clause 6 of the tender conditions it is mandatory for a distiller to supply country liquor in sealed bottles and not otherwise. therefore, packaging and bottling of liquor come within the ambit and sweep of manufacture within the meaning of clause (f) of section 2 central excise act, 1944 in view of the definition contained in section 65(76b) of the finance act especially keeping in view the exclusionary facet and further regard being had to the circular issued by central board of excise and customs. - according to petitioners the merger of these two charges in one is contrary to agreement and/or to tarrif pattern and hence, bad in law. hence the terms and conditions of supply have to provide for compensation as well as immediate disconnection. the courts jurisdiction is not to examine the formula of fixing the tarrif like an expert but the court is concerned as to whether it violates any provision of electricity act or rules/regulation or whether it affects any of the provision of constitution.ordera.m. sapre, j.1. the decision rendered in this writ shall also govern the disposal of other three connected writ petitions being wp nos. 195, 123 and 161 of 1995, as in all these four writ petitions the challenge is to one action of the respondent board.2. in substance, the challenge in these petitions is to impugned circulars dated 30-09-1992, 30-09-1993 and 12-02-1994 (annexure p2) whereby levy of two charges by what is called as fca (fuel cost adjustment) charges and ntpc rate adjustment charges which were being charged separately prior to issuance of the impugned circulars, are now merged into one in the electricity tarrif by the m.p.e.b. according to petitioners the merger of these two charges in one is contrary to agreement and/or to tarrif pattern and hence, bad in law. it was initially challenged in one petition being m.p. no. 1789/92. when this court by its order dated 22-10-1994 simply asked the board to decide first the representation of petitioners wherein they had objected to the impugned merger. pursuant to aforesaid directions issued by this court, the board decided the representation by their letter/communication dated 20-12-1994 (annexure p-5) whereby the board while rejecting the representation upheld the merger with reasoned justification. it is now essentially this communication which has the effect of upholding the aforementioned circulars in so far as they seek to merge these two charges, which is impugned in these writs.3. the board has in substance defended the impugned circulars in so far as they relate to merger of the two charges as also defend the impugned communication and the reasons contained therein in support of the merger.4. heard shri b. pandya, learned counsel for the petitioner and shri surjeet singh, learned counsel for the respondents.5. having heard the learned counsel for the parties and having perused the impugned communication (annexure p-5) in the context of the electricity laws. i find no merit in these writs.6. the power to fix the tarrif eminets from section 49 of the electricity (supply) act 1948. sub-section (2) of section 49 provides for certain criteria to be taken note of by the board while fixing the uniform tarrif. sub clause (c) lay emphasis in simplification and standardization of methods and rates of charges for supply. section 49 was subject matter of scrutiny in various judicial pronouncement not only be different high courts but also by apex court. recently, the apex court in the case of hydrabad vanaspati limited v. a.p. state electricity board, (1998) 4 scc 470 had an occasion to examine the scope and ambit of section 49 ibid. after analysing the various earlier decisions their lordships ruled as follows interpreting the extent and scope of section 49 :-'sec. 49- section 49 empowers the board to supply electricity on 'such terms and conditions as it thinks fit'. it may also frame uniform tariffs. the terms and conditions of supply are statutory in character. they can be invalidated only if they are in conflict with any provision of the act or the constitution. the only limitation in that section is that the terms and conditions of supply should be subject to the provisions of the act. clause 39 does not violate any provision in the supply act. it is the statutory duty of the board to arrange for the supply of electricity throughout the state and for transmission and distribution of the same in the most efficient and economical manner. for that purpose it has necessarily got to prevent unauthorised user, pilferage or malpractices by the consumers. hence the necessary safeguards have to be provided as part of the conditions of supply so that the consumers will be bound by them. while on the one hand, the board has to recoup the loss suffered by such pilferage or other malpractices, it has also on the other got to stop immediately the continuation thereof. hence the terms and conditions of supply have to provide for compensation as well as immediate disconnection. for ascertaining the loss and fixing the compensation, a uniform procedure has to be framed and a machinery constituted. clause 39 is only doing that. every consumer is made fully aware of the said terms and he signs the contract only on that basis. he gives an undertaking in that contract that if he is found indulging in any malpractice etc, he shall pay additional charges as may be levied by the board and that the board have the right to disconnect supply of electricity to his premises for such period as may be decided by the board.7. in my opinion, it can not be disputed that board has a wide power under section 49(2) while fixing the tarrif. indeed, it is a complex formula which the board has to evolve taking into consideration several aspects so as to make the tarrif in conformity with the requirement of section 49 ibid. the courts jurisdiction is not to examine the formula of fixing the tarrif like an expert but the court is concerned as to whether it violates any provision of electricity act or rules/regulation or whether it affects any of the provision of constitution. in other words, the sphere of inquiry on such matter is very limited.8. what is challenged in this writ is merger of two charges into one. earlier they were separate and now have become one consequent upon merger. as held supra, it can not be disputed that board does have a power to impose these charges separately and equally does possess the power to club them. according to board these two charges are part of tarrif and is one of the important factor to be taken note of in fixing the tarrif. according to board, they have actually incurred these two charges by way of expenditure, while generating the electricity and while procuring the energy from ntpc.9. the submission of learned counsel for the petitioners that the impugned merger is contrary to terms of agreement entered into by the board with the petitioners has no substance. indeed this issue was dealt with by the apex court in hydrabad vanaspati case supra, and answered against the petitioners by holding as under :-'section 49 does not require the board to enter into a contract with individual consumer. even in the absence of an individual contract, the terms and conditions of supply notified by the board will be applicable to the consumer and he will be bound by them. probably in order to avoid any possible plea by the consumer that he had no knowledge of the terms and conditions of supply, agreements in writing were entered into with each consumer. that will not make the terms purely contractual. the board in performance of a statutory duty supplied energy on certain specific terms and conditions framed in exercise of a statutory power. undoubtedly the terms and conditions are statutory in character and they cannot be said to be purely contractual.'10. once, i hold that board does possess the power to impose the impugned charges then, it is difficult to accept that the board does not have power to merge them or by merging these two charges in one adversely affect consumer's any of the rights flowing from the agreement or that it results in infringement of any of the provisions of supply act. the exercise undertaken by the board in merging these two charges seems more for simplification and standardization of methods and rates of charges of tarrif. as observed supra, it neither affects any of the clauses of section 49 nor affects any of the fundamental or/and legal rights of consumer. it rather falls within the net of section 49 ibid.11. mere perusal of impugned communication (annexure p-5) would indicate the necessity of this merger. the petitioners were unable to show or point out any illegality or irrational or unreasonableness in the reasoning of the board.12. i, therefore, do not find any illegality and/or arbitrariness in the merger of these two charges in one which can always be done by the board taking resort to sub-section 49(2)(c) of the act.13. in view of aforesaid discussion, i do not find any merit in the writ. it is accordingly dismissed.no costs. security amount, if deposited by the petitioner, be refunded as per rules.

Judgment:
ORDER

A.M. Sapre, J.

1. The decision rendered in this writ shall also govern the disposal of other three connected writ petitions being WP Nos. 195, 123 and 161 of 1995, as in all these four writ petitions the challenge is to one action of the respondent Board.

2. In substance, the challenge in these petitions is to impugned circulars dated 30-09-1992, 30-09-1993 and 12-02-1994 (Annexure P2) whereby levy of two charges by what is called as FCA (Fuel Cost Adjustment) charges and NTPC rate adjustment charges which were being charged separately prior to issuance of the impugned circulars, are now merged into one in the electricity tarrif by the M.P.E.B. According to petitioners the merger of these two charges in one is contrary to agreement and/or to tarrif pattern and hence, bad in law. It was initially challenged in one petition being M.P. No. 1789/92. When this Court by its order dated 22-10-1994 simply asked the Board to decide first the representation of petitioners wherein they had objected to the impugned merger. Pursuant to aforesaid directions issued by this Court, the Board decided the representation by their letter/communication dated 20-12-1994 (Annexure P-5) whereby the Board while rejecting the representation upheld the merger with reasoned justification. It is now essentially this communication which has the effect of upholding the aforementioned circulars in so far as they seek to merge these two charges, which is impugned in these writs.

3. The Board has in substance defended the impugned circulars in so far as they relate to merger of the two charges as also defend the impugned communication and the reasons contained therein in support of the merger.

4. Heard Shri B. Pandya, learned counsel for the petitioner and Shri Surjeet Singh, learned counsel for the respondents.

5. Having heard the learned counsel for the parties and having perused the impugned communication (Annexure P-5) in the context of the electricity laws. I find no merit in these writs.

6. The power to fix the tarrif eminets from Section 49 of the Electricity (Supply) Act 1948. Sub-section (2) of Section 49 provides for certain criteria to be taken note of by the Board while fixing the uniform tarrif. Sub Clause (c) lay emphasis in simplification and standardization of methods and rates of charges for supply. Section 49 was subject matter of scrutiny in various judicial pronouncement not only be different High Courts but also by Apex Court. Recently, the Apex Court in the case of Hydrabad Vanaspati Limited v. A.P. State Electricity Board, (1998) 4 SCC 470 had an occasion to examine the scope and ambit of Section 49 ibid. After analysing the various earlier decisions their Lordships ruled as follows interpreting the extent and scope of Section 49 :-

'Sec. 49- Section 49 empowers the Board to supply electricity on 'such terms and conditions as it thinks fit'. It may also frame uniform tariffs. The terms and conditions of supply are statutory in character. They can be invalidated only if they are in conflict with any provision of the Act or the Constitution. The only limitation in that section is that the Terms and Conditions of Supply should be subject to the provisions of the Act. Clause 39 does not violate any provision in the Supply Act. It is the statutory duty of the Board to arrange for the supply of electricity throughout the State and for transmission and distribution of the same in the most efficient and economical manner. For that purpose it has necessarily got to prevent unauthorised user, pilferage or malpractices by the consumers. Hence the necessary safeguards have to be provided as part of the conditions of supply so that the consumers will be bound by them. While on the one hand, the Board has to recoup the loss suffered by such pilferage or other malpractices, it has also on the other got to stop immediately the continuation thereof. Hence the Terms and Conditions of Supply have to provide for compensation as well as immediate disconnection. For ascertaining the loss and fixing the compensation, a uniform procedure has to be framed and a machinery constituted. Clause 39 is only doing that. Every consumer is made fully aware of the said terms and he signs the contract only on that basis. He gives an undertaking in that contract that if he is found indulging in any malpractice etc, he shall pay additional charges as may be levied by the Board and that the Board have the right to disconnect supply of electricity to his premises for such period as may be decided by the Board.

7. In my opinion, it can not be disputed that Board has a wide power under Section 49(2) while fixing the tarrif. Indeed, it is a complex formula which the Board has to evolve taking into consideration several aspects so as to make the tarrif in conformity with the requirement of Section 49 ibid. The Courts jurisdiction is not to examine the formula of fixing the tarrif like an expert but the Court is concerned as to whether it violates any provision of Electricity Act or Rules/Regulation or whether it affects any of the provision of Constitution. In other words, the sphere of inquiry on such matter is very limited.

8. What is challenged in this writ is merger of two charges into one. Earlier they were separate and now have become one consequent upon merger. As held supra, it can not be disputed that board does have a power to impose these charges separately and equally does possess the power to club them. According to Board these two charges are part of tarrif and is one of the important factor to be taken note of in fixing the tarrif. According to Board, they have actually incurred these two charges by way of expenditure, while generating the electricity and while procuring the energy from NTPC.

9. The submission of learned counsel for the petitioners that the impugned merger is contrary to terms of agreement entered into by the Board with the petitioners has no substance. Indeed this issue was dealt with by the Apex Court in Hydrabad Vanaspati case supra, and answered against the petitioners by holding as under :-

'Section 49 does not require the Board to enter into a contract with individual consumer. Even in the absence of an individual contract, the Terms and Conditions of supply notified by the Board will be applicable to the consumer and he will be bound by them. Probably in order to avoid any possible plea by the consumer that he had no knowledge of the Terms and Conditions of Supply, agreements in writing were entered into with each consumer. That will not make the terms purely contractual. The Board in performance of a statutory duty supplied energy on certain specific terms and conditions framed in exercise of a statutory power. Undoubtedly the terms and conditions are statutory in character and they cannot be said to be purely contractual.'

10. Once, I hold that Board does possess the power to impose the impugned charges then, it is difficult to accept that the Board does not have power to merge them or by merging these two charges in one adversely affect consumer's any of the rights flowing from the agreement or that it results in infringement of any of the provisions of Supply Act. The exercise undertaken by the Board in merging these two charges seems more for simplification and standardization of methods and rates of charges of tarrif. As observed supra, it neither affects any of the clauses of Section 49 nor affects any of the fundamental or/and legal rights of consumer. It rather falls within the net of Section 49 ibid.

11. Mere perusal of impugned communication (Annexure P-5) would indicate the necessity of this merger. The petitioners were unable to show or point out any illegality or irrational or unreasonableness in the reasoning of the Board.

12. I, therefore, do not find any illegality and/or arbitrariness in the merger of these two charges in one which can always be done by the Board taking resort to Sub-section 49(2)(C) of the Act.

13. In view of aforesaid discussion, I do not find any merit in the writ. It is accordingly dismissed.

No costs. Security amount, if deposited by the petitioner, be refunded as per rules.