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Supreme Court of India
Maharashtra State Electricity … vs M/S Jsw Steel Limited on 10 December, 2021Author: M.R. Shah
Bench: M.R. Shah, B.V. Nagarathna
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 5074-5075 OF 2019
Maharashtra State Electricity
Distribution Co. Ltd. …Appellant(s)
Versus
M/s. JSW Steel Limited & Ors. …Respondent(s)
JUDGMENT
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the Appellate Tribunal for Electricity, Delhi in Appeal
Nos. 311 and 315 of 2018 whereby the Appellate Tribunal has allowed
the said appeals preferred by the respondents herein – the ‘captive
consumers’ and has set aside the order passed by the Maharashtra
Electricity Regulatory Commission (hereinafter referred to as the “State
Commission”) in Petition No.195 of 2017 by which the State Commission
has held that the group of ‘captive consumers’ are liable to pay
additional surcharge, Maharashtra State Electricity Distribution Company
Signature Not Verified
Limited (hereinafter referred to as the “distribution licensee”), has
Digitally signed by R
Natarajan
Date: 2021.12.10
16:00:38 IST
Reason:
preferred the present appeals.
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2. That the appellant as distribution licensee filed a petition before the
State Commission for MYT approval for FY 2014-2015, provisional truing
up of ARR for FY 2015-2016 and Multi Year Tariff for 3 rd Control Period
FY 2016-2017 to FY 2019-2020. The said petition was numbered as
Case No.48 of 2016. The State Commission held that the additional
surcharge leviable under Section 42(4) of the Electricity Act, 2003
(hereinafter referred to as the “Act, 2003”) is not applicable to captive
users to the extent of their self-consumption from such plants. The State
Commission also held that the additional surcharge shall be applicable
to all consumers who have availed open access to receive supply from
sources other than the distribution licensee to which they are connected.
3. The appellant – distribution licensee submitted its revised Review
Petition being Case No.195 of 2017, for approval of final true up of ARR
for FY 2015-2016 and 2016-2017, provisional true up of ARR for FY
2017-2018 and approval for revised forecast of ARR for FY 2018-2019
and 2019-2020, inter alia, including the prayer “to approve additional
surcharge for all open access consumers including those sourcing power
from CPPS as proposed for FY 2018-2019 to FY 2019-2020”. The
Captive Power Producers Association filed their objections including the
objections with respect to levy of additional surcharge on such captive
users. That by order dated 12.09.2018, the State Commission passed
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the order holding that additional surcharge is leviable under Section
42(4) of the Act, 2003 on the captive consumers/captive users.
4. Feeling aggrieved and dissatisfied with the order passed by the
State Commission allowing the levy of additional surcharge from the
captive consumers/captive users, the respondents herein – captive
users/captive consumers approached the Appellate Tribunal. By
impugned order dated 27.03.2019, the Appellate Tribunal has allowed
the said appeals and has set aside the order passed by the State
Commission ordering/permitting to levy the additional surcharge leviable
under Section 42(4) of the Act, 2003 and has held that the group of
captive consumers are not liable to pay additional surcharge to the
distribution licensee.
5. Feeling aggrieved and dissatisfied with the impugned order passed
by the Appellate Tribunal holding that the group of captive
consumers/captive users are not liable to pay the additional surcharge
leviable under section 42(4) of the Act, 2003, appellant – distribution
licensee.
6. We have heard the learned counsel appearing for the appellant –
distribution licensee as well as learned counsel appearing on behalf of
the respective respondents – intervenors – the captive
consumers/captive users at length.
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7. The short question which is posed for the consideration of this
Court is :
“Whether the captive consumers/captive users are liable to pay the
additional surcharge leviable under Section 42(4) of the Electricity
Act, 2003?
8. While deciding the aforesaid issue/question, the relevant
provisions of Electricity Act, 2003 namely Sections 9 and 42 are required
to be noted/visited, which reads as under:-
“9. Captive generation.- (1) Notwithstanding anything
contained in this Act, a person may construct, maintain or
operate a captive generating plant and dedicated
transmission lines:
Provided that the supply of electricity from the
captive generating plant through the grid shall be
regulated in the same manner as the generating station of
a generating company:
Provided further that no licence shall be required
under this Act for supply of electricity generated from a
captive generating plant to any licencee in accordance
with the provisions of this Act and the rules and
regulations made thereunder and to any consumer
subject to the regulations made under sub-section (2) of
section 42.
(2) Every person, who has constructed a captive
generating plant and maintains and operates such plant,
shall have the right to open access for the purposes of
carrying electricity from his captive generating plant to the
destination of his use:
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Provided that such open access shall be subject to
availability of adequate transmission facility and such
availability of transmission facility shall be determined by
the Central Transmission Utility or the State Transmission
Utility, as the case may be:
Provided further that any dispute regarding the
availability of transmission facility shall be adjudicated
upon by the Appropriate Commission.
42. Duties of distribution licensees and open access.-
(1) It shall be the duty of a distribution licensee to develop
and maintain an efficient, co-ordinated and economical
distribution system in his area of supply and to supply
electricity in accordance with the provisions contained in
this Act.
(2) The State Commission shall introduce open
access in such phases and subject to such conditions,
(including the cross subsidies, and other operational
constraints) as may be specified within one year of the
appointed date by it and in specifying the extent of open
access in successive phases and in determining the
charges for wheeling, it shall have due regard to all
relevant factors including such cross subsidies, and other
operational constraints:
Provided that such open access shall be allowed on
payment of a surcharge in addition to the charges for
wheeling as may be determined by the State
Commission:
Provided further that such surcharge shall be
utilised to meet the requirements of current level of cross
subsidy within the area of supply of the distribution
licensee:
Provided also that such surcharge and cross
subsidies shall be progressively reduced in the manner as
may be specified by the State Commission:
Provided also that such surcharge shall not be
leviable in case open access is provided to a person who
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has established a captive generating plant for carrying the
electricity to the destination of his own use:
Provided also that the State Commission shall, not
later than five years from the date of commencement of
the Electricity (Amendment) Act, 2003 (57 of 2003) by
regulations, provide such open access to all consumers
who require a supply of electricity where the maximum
power to be made available at any time exceeds one
megawatt.
(3) Where any person, whose premises are situated
within the area of supply of a distribution licensee, (not
being a local authority engaged in the business of
distribution of electricity before the appointed date)
requires a supply of electricity from a generating company
or any licensee other than such distribution licensee, such
person may, by notice, require the distribution licensee for
wheeling such electricity in accordance with regulations
made by the State Commission and the duties of the
distribution licensee with respect to such supply shall be
of a common carrier providing non-discriminatory open
access.
(4) Where the State Commission permits a
consumer or class of consumers to receive supply of
electricity from a person other than the distribution
licensee of his area of supply, such consumer shall be
liable to pay an additional surcharge on the charges of
wheeling, as may be specified by the State Commission,
to meet the fixed cost of such distribution licensee arising
out of his obligation to supply.
(5) Every distribution licensee shall, within six
months from the appointed date or date of grant of
licence, whichever is earlier, establish a forum for
redressal of grievances of the consumers in accordance
with the guidelines as may be specified by the State
Commission.
(6) Any consumer, who is aggrieved by non-
redressal of his grievances under sub-section (5), may
make a representation for the redressal of his grievance
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to an authority to be known as Ombudsman to be
appointed or designated by the State Commission.
(7) The Ombudsman shall settle the grievance of
the consumer within such time and in such manner as
may be specified by the State Commission.
(8) The provisions of sub-sections (5), (6) and (7)
shall be without prejudice to right which the consumer
may have apart from the rights conferred upon him by
those sub-sections.”
9. On a fair reading of Section 9, it can be seen that captive
generation is permitted under sub-section (1) of Section 9. As per sub-
section (2), every person, who has constructed a captive generating
plant and maintains and operates such plant, shall have the right to open
access for the purposes of carrying electricity from his captive
generating plant to the destination of his use, but of-course subject to
availability of adequate transmission facility determined by the Central
Transmission Utility or the State Transmission Utility, as the case may
be. So, the captive generation / captive use is statutorily provided /
available and for which a permission of the State Commission is not
required. The submission on behalf of the appellant that the captive
generation under Section 9 is subject to the regulations as per first
proviso to sub-section (1) of Section 9 and that even open access for the
purpose of carrying electricity from his captive generating plant to the
destination of his use shall be subject to availability of the adequate
transmission facility determined by the Central Transmission Utility or the
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State Transmission Utility, as the case may be, sub-section (4) of
Section 42 shall be applicable and such captive users are liable to pay
the additional surcharge leviable under sub-section (4) of section 42,
has no substance and has to be rejected outright. Construction and/or
maintenance and operation of a captive generating plant and dedicated
transmission lines is not subjected to any permission by the State
Commission. As provided under Section 9 of the Act, 2003, any person
may construct, maintain or operate a captive generating plant and
dedicated transmission lines. Merely because the supply of electricity
from the captive generating plant through the grid shall be regulated in
the same manner as the generating station of a generating company or
the open access for the purpose of carrying electricity from the captive
generating plant to the destination of his use shall be subject to
availability of the adequate transmission facility determined by the
Central Transmission Utility or the State Transmission Utility, it cannot be
said that for captive generation plant, the State Commission’s
permission is required. Right to open access to transmit/carry electricity
to the captive user is granted by the Act, and is not subject to and does
not require the Sate Commission’s permission. The right is conditioned
by availability of transmission facility, which aspect can be determined by
the Central or State transmission utility. Only in case of dispute, the
State Commission may adjudicate.
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10. In light of the above observations and findings, the issue whether
such captive users are subject to levy of additional surcharge leviable
under sub-section (4) of Section 42 is required to be considered.
11. Sub-section (4) of Section 42 shall be applicable only in a case
where the State Commission permits a consumer or class of consumers
to receive supply of electricity from a person other than the distribution
licensee of his area of supply and only such consumer shall be liable to
pay additional surcharge on the charges of wheeling, as may be
specified by the State Commission. Captive user requires no such
permission, as he has statutory right. At this stage, it is required to be
noted that as per the Scheme of the Act, there can be two classes of
consumers, (i) the ordinary consumer or class of consumers who is
supplied with electricity for his own use by a distribution licensee /
licensee and; (ii) captive consumers, who are permitted to generate for
their own use as per Section 9 of the Act, 2003.
12. The term “consumer” is defined in Section 2(15), which reads as
under:-
“(15) “consumer” means any person who is supplied with
electricity for his own use by a licensee or the
Government or by any other person engaged in the
business of supplying electricity to the public under this
Act or any other law for the time being in force and
includes any person whose premises are for the time
being connected for the purpose of receiving electricity
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with the works of a licensee, the Government or such
other person, as the case may be;”
13. Ordinarily, a consumer or class of consumers has to receive supply
of electricity from the distribution licensee of his area of supply.
However, with the permission of the State Commission such a consumer
or class of consumers may receive supply of electricity from the person
other than the distribution licensee of his area of supply, however,
subject to payment of additional surcharge on the charges of wheeling
as may be specified by the State Commission to meet the fixed cost of
such distribution licensee arising out of his obligation to supply. There is
a logic behind the levy of additional surcharge on the charges of
wheeling in such a situation and/or eventuality, because the distribution
licensee has already incurred the expenditure, entered into purchase
agreements and has invested the money for supply of electricity to the
consumers or class of consumers of the area of his supply for which the
distribution license is issued. Therefore, if a consumer or class of
consumers want to receive the supply of electricity from a person other
than the distribution licensee of his area of supply, he has to compensate
for the fixed cost and expenses of such distribution licensee arising out
of his obligation to supply. Therefore, the levy of additional surcharge
under sub-section (4) of Section 42 can be said to be justified and can
be imposed and also can be said to be compensatory in nature.
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However, as observed hereinabove, sub-section (4) of Section 42 shall
be applicable only in a case where the State Commission permits a
consumer or class of consumers to receive supply of electricity from a
person other than the person – distribution licensee of his area of supply.
So far as captive consumers/captive users are concerned, no such
permission of the State Commission is required and by operation of law
namely Section 9 captive generation and distribution to captive users is
permitted. Therefore, so far as the captive consumers / captive users
are concerned, they are not liable to pay the additional surcharge under
Section 42(4) of the Act, 2003. In the case of the captive
consumers/captive users, they have also to incur the expenditure and/or
invest the money for constructing, maintaining or operating a captive
generating plant and dedicated transmission lines. Therefore, as such
the Appellate Tribunal has rightly held that so far as the captive
consumers/captive users are concerned, the additional surcharge under
sub-section (4) of Section 42 of the Act, 2003 shall not be leviable.
14. Even otherwise, it is required to be noted that the consumers
defined under Section 2(15) and the captive consumers are different and
distinct and they form a separate class by themselves. So far as captive
consumers are concerned, they incur a huge expenditure/invest a huge
amount for the purpose of construction, maintenance or operation of a
captive generating plant and dedicated transmission lines. However, so
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far as the consumers defined under Section 2(15) are concerned, they
as such are not to incur any expenditure and/or invest any amount at all.
Therefore, if the appellant is held to be right in submitting that even the
captive consumers, who are a separate class by themselves are
subjected to levy of additional surcharge under Section 42(4), in that
case, it will be discriminatory and it can be said that unequals are treated
equally. Therefore, it is to be held that such captive consumers/captive
users, who form a separate class other than the consumers defined
under Section 2(15) of the Act, 2003, shall not be subjected to and/or
liable to pay additional surcharge leviable under Section 42(4) of the Act,
2003.
15. In view of the above and for the reasons stated above, the present
appeals fail and deserve to be dismissed and are accordingly dismissed.
However, in the facts and circumstances of the case there shall be no
order as to costs.
16. It is reported that pursuant to the interim order passed by this
Court dated 01.07.2019, staying the operation and implementation of the
impugned order passed by the Appellate Tribunal, the appellant –
distribution licensee has recovered the additional surcharge. Therefore,
as such once it is held that the captive consumers/captive users are not
liable to pay the additional surcharge leviable under Section 42(4) of the
Act, 2003, the appellant – distribution licensee has to refund the same.
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However, considering the fact that there shall be huge liability on the
appellant – distribution license if they have to now refund the amount of
additional surcharge recovered at a stretch, we direct that the additional
surcharge already recovered from the captive consumers/captive users
shall be adjusted in the future wheeling charges bills.
17. Present appeals are accordingly dismissed with the above
observations.
………………………………….J. [M.R. SHAH]
NEW DELHI; ………………………………….J.
DECEMBER 10, 2021. [SANJIV KHANNA]
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