JAYASHREE CHEMICALS LTD Vs. STATE

JUDGEMENT

(1.) The petitioner No. 1 is a public limited company and petitioner No. 2 is one of the shareholders of the company. They assail the demand of electricity duty on "delayed payment surcharge" as well as levy and collection of the said duty on "imported power" generated outside the State of Orissa under the Orissa Electricity (Duty) Act, 1961, and have prayed for refund of the duty paid.

(2.) The petitioners assert that the company is engaged in the business of manufacture and sale of caustic soda, chlorine, hydrochloric acid, sodium hydrosulphite, sulphuric acid and sulphur dioxide and has its manufacturing unit at village Ganjam in the district of Ganjam in Orissa. Necessary licence has been issued to the petitioner-company under the Industries (Development and Regulation) Act, 1951, and it has a licensed capacity of production of 16,764 metric tonnes of caustic soda, 13,411 metric tonnes of chlorine, 15,000 metric tonnes of hydrochloric acid, 3,000 metric tonnes of sodium hydrosulphite, 8,400 metric tonnes of sulphuric acid and 5,000 metric tonnes of sulphur dioxide per annum. Electricity is an essential ingredient for the manufacturing activities of the company, which is, in fact, a power-intensive industry. The company has entered into two agreements with the Orissa State Electricity Board (opposite party No. 3) for supply of power, one relating to the caustic soda unit of the company and the other relating to the sodium hydrosulphite unit of the company. The contract demand of the company's caustic soda plant is 11,110 KVA / 10,000 KW equivalent to 10 M.W. The contract demand for the other factory is 3,890 KVA / 3500KW equivalent to 3.5 M.W. The agreement for supply of power is subject to the Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981. The agreement between the parties provides that if the duty for the comsumption of electricity is not paid within fifteen days from the date of the bill, then an amount described as "surcharge" will be collected from the company for the period of delay in payment of the bill. The relevant clause of the agreement is clause 13(vi) which is extracted hereinbelow in extenso :--- "13.The consumer shall (subject to the provisions hereinafter contained) pay to the Engineer every month for the power demand and electrical energy supplied under this agreement, the charges to be ascertained as mentioned below (viz. as per Board's prescribed tariff) for:- Power Intensive Industries : xx xx xx (vi) The monthly charges as above together with other charges and surcharges, if any, shall be paid within 15 days from the date of bill. If payment is not made within the said period of 15 days, a surcharge of one-fifteenth part of one per cent per day of delay from the due date, namely from the sixteenth day of the bill shall be levied on the amount remaining unpaid. Payments made by the consumer shall be first adjusted towards such delayed payment surcharge, if any, the balance being adjusted towards arrear miscellaneous charges, arrear charges for supply and current charges respectively. Provided that the above tariff, rates are exclusive of fuel surcharge and / or any other surcharge that may be imported by the supplier from time to time with or without notice. Provided further that the aforesaid tariff rates are also exclusive of Electricity Duty and / or any other levy, tax, cost, toll or duty that may be levied by the State of Orissa and / or any other competent authority from time to time." A similar clause was there in the agreement dated 19-2-1983 which was clause 7(vi) which is quoted below in extenso :- "Clause 7(vi) The monthly charges as calculated above together with other charges and surcharges on account of late payments, if any, shall be payable within 15 days from the date of the bill. If payment is not made within the said period of 15 days, late payment surcharge at 2 per cent per month shall be levied pro rata for the period of delay from the due date, namely, from the 16th day of the bill on the amount remaining unpaid, excluding arrears on account of late payment surcharge, if any. Payments made by the consumer shall be first adjusted towards such late payment surcharges, if any, balance being adjusted towards arrear miscellaneous charges, arrear charges for supply and current charges, respectively. Provided that the tariff mentioned above are exclusive of fuel surcharge and / or any other surcharge that may be imposed by the supplier from time to time. Provided further that the aforesaid tariff rates are also exclusive of Electricity Duty and / or any other levy, tax or duty that may be levied under law from time to time. " An identical provision is there in the Orissa State Electricity Board (General Conditions of Supply) Regulations, 1981. The petitioners assert that in accordance with the aforesaid provisions in the agreement as well as in the General Conditions of Supply Regulations, the Board collects the purported delayed payment surcharge if any bill remains unpaid for a period of 15 days from the date of submission of the bill. But the challenge is that no duty is leviable on the said delayed payment surcharge. It is the further case of the petitioner that on account of shortage of power in the State, the Board has been importing power from the neighbouring States and has been offering the same to the different consumers including the petitioner-company and since the petitioner-company was not getting the normal supply of power generated in Orissa, it was constrained to consume the imported power at a prohibitively high rate, thereby suffering a huge loss. The petitioners' case is that the electricity duty is levied under the authority of the Orissa Electricity (Duty) Act, 1961, and the said Act was amended by Orissa Ordinance 1 of 1986 which was replaced by Orissa Act 9 of 1986. Prior to its amendment, the State of Orissa was collecting electricity duty under the Orissa Electricity (Duty) Act, 1961, both in respect of delayed payment surcharge as well as in respect of the power supplied to the company by the Board after procurring the same from sources outside the State. Under the 1961 Act, the rate of duty on imported power was much higher and though there was no statutory backing for charging such higher rate, but it was by an executive action of the State or its delegated authority of the Board. The Act was amended by an Ordinance which was later on replaced by Orissa Act 9 of 1986. The amended Act conferred power retrospectively on the State to levy and collect electricity duty on the power imported from outside with effect from 17-1-1986 and, therefore, the petitioners' case in a nutshell is that the State had no power to levy duty in respect of the imported power until December, 1985, and consequently, such levy is ultra vires Article 265 of the Constitution. It is alleged that even though the State had no power to levy on such imported power, but the levy was being made since 1984 and such levy according to the petitioners up to December, 1985 is without jurisdiction. The petitioners assert that during the said period a total sum of Rs. 36,58,491.49 paise had been paid towards duty on the imported power. So far as the delayed payment surcharge is concerned, the petitioner's case is that though it is described as surcharge, but in substance, it partakes the character of an interest. The petitioners further aver that the agreement between the parties contained an arbitration clause and disputes with regard to delayed payment surcharge have been referred to arbitration for the period 5th of July, 1967 to 31st of March, 1981. According to the petitioners such levy of delayed payment surcharge is ultra vires Section 3 of the Orissa Electricity (Duty) Act and Article 265 of the Constitution. The petitioners aver that the purported levy of electricity duty made by the State Government as delayed payment surcharge is without jurisdiction and ab initio void. On the aforesaid averments, the petitioners assail the legality of the demand made and collected on both the counts in the present writ application.

(3.) Opposite parties 1 and 2 have filed a counter affidavit being sworn to by the Deputy Secretary to Government, Department of Energy. The stand taken in the counter affidavit is that the delayed payment surcharge had in fact been provided in the agreement between the parties and the manner of its realisation has been notified in exercise of power conferred in Ss. 49 and 59 of the Electricity (Supply) Act. So far as the duty on imported power is concerned, the case of the State is that when the appropriate authority in exercise of powers under S. 22-B of the Indian Electricity Act restricted the supply of power to different industries including the petitioner-company, it is the petitioner-company which approached the Board to supply power by importing it from the neighbouring State on payment of charges fixed for such supply. The acceptance of the rate for supply of imported power is done through exchange of letters. The Board supplied power to the petitioner-company on the request of the petitioner. It has been further averred that the petitioners' contention that there is no authority to collect duty on consumption of "outside power" is not correct, inasmuch as Section 3(1) of the Orissa Electricity (Duty) Act, 1961 clearly contemplates that the duty should be levied for and paid to the State Government on the energy consumed by a consumer computed on the basis of the rate charged therefor by the licensee, by the Board or by any Government referred to in clause (c) of Section 2 at the rate specified. Therefore, if a consumer consumes energy he has to pay electricity duty irrespective of source of generation of power or its availability. According to the opposite parties, the subsequent amendment merely amplifies or clarifies the power to levy of the duty and it is not correct that for the first time only by the amended Act, the State Government was conferred with the power for levy of duty on imported power. So far as the delayed payment surcharge is concerned, the stand of the State Government is that Regulation 4(x) of the O. S. E. B. General Tariff Regulations, 1973, and the clarification of the State Government clearly provide for collection of such delayed payment surcharge and the dispute relating to levy of such duty on delayed payment surcharge had been referred to the Special Arbitration Tribunal in respect of the period 5-7-1967 to 31-3-1981 and the matter has been finalised. For the period subsequent to 31-3-1981 namely commencing from 1-4-1981, the petitioner-company has not raised any dispute before any arbitrator. The Government in the Irrigation and Power Department have also issued a clarification indicating that the delayed payment surcharge levied by the Board is within the ambit of surcharge defined in Section 2(g)(v) of the Orissa Electricity (Duty) Act. In this view of the matter, it is contended that the duty levied and collected on delayed payment surcharge is within the competence and authority of the State Government and, therefore, there has been no infirmity in raising the demand and making the collection.