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Madhya Pradesh High Court · body

2002 DIGILAW 507 (MP)

BHARAT HEAVY ELECTRICALS LTD. v. STATE OF M. P.

2002-05-09

ARUN MISHRA

body2002
ARUN MISHRA, J. ( 1 ) THE petitioner by way of instant writ petition seeks a writ of certiorari for quashment of the Annexure M dated 9-8-1991 passed by the Government of M. P. Energy Department and consequent demand raised by the M. P. Electricity Board, Bhopal as per memo dated 18-11-1991 (Annexure O ). The petitioner also prays for quashing letter Annexure J dated 27-12-1991 issued by the M. P. Electricity Board. ( 2 ) PETITIONER Bharat Heavy Electricals Limited is a public limited company duly incorporated under the Companies Act and its entire share capital is substantially held by the President of India and is a fully owned Government Company within the meaning of Section 617 of the Companies Act, 1956 having its registered office at New Delhi. The company has a manufacturing unit at Bhopal which was established in the year 1956. The petitioner avers that the State of M. P. has been saddled with the responsibility of providing water supply to the inhabitants of the State as well the statutory authority who can collect electricity duty under the relevant statute. Petitioner submits that prior to the selection of Bhopal as the location for Heavy Electricals Plant, the Government of India had inspected alternate sites and held protracted discussions with the concerned State Government and in selecting Bhopal, an agreement was reached between the representatives of the Government of India and the then Government of Bhopal about the provision of various infrastructural facilities required for setting up the plant. ( 3 ) PETITIONER further avers that the State Government had assured and guaranteed that requisite quantity of water would be supplied to the factory and it would be charged after taking into account the cost of pumping which would include operation, maintenance, depreciation and interest and not capital cost. As per minutes (Annexure A) of the meeting held in the office of the Chief Commissioner, Bhopal on 4th and 5/03/1956 under the heading - Requirement of Water for the Factory, it provides understanding between the State Government and Government of India as to supply of water. The relevant portion is quoted below :-"1. Requirement of water for the Factory it was stated by the Technical Advisor that the requirement of water for the factory would be about 25 cu/secs which works out to 800 million cubic feet per year. The relevant portion is quoted below :-"1. Requirement of water for the Factory it was stated by the Technical Advisor that the requirement of water for the factory would be about 25 cu/secs which works out to 800 million cubic feet per year. However during the first five years from now the annual requirement of water is not likely to exceed 400 million cubic feet at the end of the fifth year. This supply may be guaranteed by the State Govt. with the assurance that for subsequent period an additional quantity of 400 million cubic feet to make up the total of 25 cu/secs will be provided sufficiently in advance of the actual requirement. The Govt. of India desiring that out of the water supplied to the Factory should be charged after taking into account the cost of pumping which would include operation, maintenance, depreciation and interest and not capital cost. And the factory would not be involved in any expenditure on capital cost. The required quantity of water will be made available by the State authorities at the Factory compound. The State Govt. guaranteed to supply the required quantity of water for the factory and the township and to charge for it as proposed above. " ( 4 ) THE petitioner avers that in respect of supply of electricity it was assured that the State Government would make available at the factory site the required quantum of electricity of high tension and the establishment of receiving station and internal distribution network inside B. H. E. L. area will be handled by the company. The petitioner further submits that the upper lake in the city is the source of water supply for Bhopal city and the water requirement for the factory and township was also to be met from the same source. The upper lake is at a distance of 10 kms away from the B. H. E. L. boundary. Hence a pumping station was built at Kamla Park which pumps raw water from upper lake to the water filteration Plant at Jail Hill. Respondent No. 1 State Government had built the Kamla Park Pumping Station which is being manned and maintained by the respondent No. 6, the Public Health Engineering Department. Hence a pumping station was built at Kamla Park which pumps raw water from upper lake to the water filteration Plant at Jail Hill. Respondent No. 1 State Government had built the Kamla Park Pumping Station which is being manned and maintained by the respondent No. 6, the Public Health Engineering Department. The entire pipeline from the Pumping Station up to the factory of B. H. E. L. was also laid and is being maintained by respondent No. 6, the Public Health Engineering Department. The water so pumped from the Pumping Station is brought to the Water Filteration Plant set up by the petitioner where it is chemically treated and processed so as to make it fit for consumption. Out of the water so made available, 20% is consumed in the factory and the balance is supplied to the residents, schools, markets, hospital, colleges, temples etc. in the township of the petitioner and Central India Flour Mill, Permali Wallace, population of satellite colonies in Shakti Nagar, Saket Nagar, M. P. E. B. Colony etc. Thus it is amply demonstrated that the lion's share of consumption is for domestic purposes which is the burden of the State Govt. of M. P. , M. P. Electricity Board and Public Health Engineering Department, Government of M. P. Bhopal. ( 5 ) THE petitioner further reiterates that Public Health Engineering Department which owns and maintains the Pumping Station enters into periodical agreement with the respondent No. 5 M. P. Electricity Board with regard to supply of electricity for pumping purposes. The last such agreement was entered into on 1-5-1986 for a period of five years with effect from 1-10-1985. Copy of the said agreement is Annexure-B. The relevant portion of the said agreement is clause 19 which provides as under :-"clause 19 : The consumer shall pay to the Board every month, charges for the electrical energy supplied to the consumer during the preceding month at the Board's tariff applicable to the class of service and in force from time to time. A copy of the current H. T. tariff No. II (a) of notification No. 3/ga/175/c-I dated 1-5-85 as amended applicable to the consumer is set out in the schedule attached to this agreement. A copy of the current H. T. tariff No. II (a) of notification No. 3/ga/175/c-I dated 1-5-85 as amended applicable to the consumer is set out in the schedule attached to this agreement. "the petitioner submits that from the aforesaid clause it is clear that the Pumping Station at Kamla Park is placed in the same category as the other water and sewerage pumping installation of Government, Municipalities, Corporations and other local bodies as 'public Utility Water Supply Schemes'. This was in continuation to the earlier agreements on the matter. The petitioner submits that the respondent No. 5 was charging the respondent No. 6 P. H. E. department on the basis of above quoted clause at the rate of 3 paise per unit. Public Health Engineering Department was passing on the bills to the petitioner as electricity was entirely consumed for supply to the petitioner and it was making the payment directly to the M. P. Electricity Board on behalf of the Public Health Engineering Department as per understanding between the three agencies. ( 6 ) THE petitioner further avers that on 1-6-1986, M. P. Electricity Board informed to the petitioner about the revised tariff for public utility water supply scheme in respect of Pumping stations. A copy of letter is Annexure-C. The petitioner submits that the electricity duty was charged on the pumping station for the first time in 1972. The State Government had sent the bill for the purpose to the M. P. Electricity Board who in turn passed it on to the respondent No. 6 and respondent No. 6 Public Health Engineering Department in its turn passed it on to the petitioner as was the practise in the case of tariff. The petitioner was called upon to pay electricity duty for the first time in May, 1972 as per Section 3 of the M. P. Electricity Duty Act, 1949 and it was changed from time to time. However, the amendment was made vide the M. P. Electricity Duty (Amendment) Act, 1986. The petitioner was called upon to pay electricity duty for the first time in May, 1972 as per Section 3 of the M. P. Electricity Duty Act, 1949 and it was changed from time to time. However, the amendment was made vide the M. P. Electricity Duty (Amendment) Act, 1986. The rate of electricity duty was charged under the head (1) (8) for non-industrial purpose not included under any of the other categories at the rate of 15 paise per unit and it was subsequently changed to 18 paise per unit with effect from December, 1987, 19 paise per unit with effect from June, 1988 and presently electricity duty is payable at the rate of 24 paise per unit with effect from 1988. The payment of electricity duty was made for the electricity consumed at the Pumping Station at the revised rate of 3 paise per unit from October, 198 4/12/1987 uninterruptedly. On 9-12-1987 the Superintending Engineer (Electricity Duty) and Deputy Chief Electrical Inspector, Government of M. P. who are the sub-ordinate authority to the Chief Engineer (Electricity Duty) asked the M. P. Electricity Board to levy the electricity duty at the original rate of 9/11/13 paise and to charge the difference from October, 198 4/12/1987. The petitioner submitted representation on which the order Annexure-I was passed that levy of duty does not depend on whether the scheme is for public utility or water supply and since only the local bodies of the respondent No. 1 were to be charged at the reduced rate of 3 paise per unit, the Pumping Station is inelligible for the reduced tariff. As the electricity duty was ultimately payable to the respondent No. 1 Government of M. P. the matter was placed before the Chief Secretary to arbitrate on the dispute regarding the liability to pay electricity duty at the enhanced rates. Annexure K application was filed on 28-1-1988. It was emphasised that water supply to the residents of the township was one of the duties of the State Government and that of the Bhopal Municipal Corporation on its assumption of jurisdiction of the area in question and if for historical reasons the petitioner had made arrangements for the purpose, it cannot be taxed unnecessarily. It was emphasised that water supply to the residents of the township was one of the duties of the State Government and that of the Bhopal Municipal Corporation on its assumption of jurisdiction of the area in question and if for historical reasons the petitioner had made arrangements for the purpose, it cannot be taxed unnecessarily. The issues which were framed for disposal of the matter are as under :- i. Whether P. H. E. or B. H. E. L. is the actual consumer of the electricity for the Pumping Station? ii. Does the Pumping Station come within the industrial consumer category or not? iii. Is electricity duty payable for the pumping station or not? iv. If payable, what is the rate at which duty is payable. Annexure-M order dated 9-8-1991 has been passed by the respondent No. 1 mentioning that after due consideration, it has been found that the electricity consumed by the Kamla Park Pumping Station could not be treated as consumed by the State Government under Section 3-A (iii) of the M. P. Electricity Duty Act, 1949 nor the pumping station is entitled for the benefit of notification No. 4012/4999/13/84 dated 9-10-1984. Thus, there was no question for giving exemption from payment of electricity duty. The electricity is consumed mainly for the domestic purposes and as such the electricity duty should be charged at the rate admissible to non-industrial purposes. M. P. Electricity Board on 27-12-1991 issued a letter Annexure-J intimating the petitioner that with effect from May, 1979, the bills shall be recast with 20% of the supply being used shall be billed at Industrial tariff and balance at water works tariff. With the recasting of bills as aforesaid, the B. H. E. L. shall be required to pay 50% of the surcharge that becomes due. ( 7 ) IN the return filed by the respondent Nos. 1 to 4 and 6, it has been contended that the factory was to pay the operational charges, maintenance charges, depreciation and interest but not capital cost. The electricity supplied or sold by the M. P. Electricity Board to consumers, be it State Government, a public body, company, a factory or an individual. The Public Health Engineering Department of the State of M. P. has got a pumping station at Kamla Park, Bhopal. The electricity supplied or sold by the M. P. Electricity Board to consumers, be it State Government, a public body, company, a factory or an individual. The Public Health Engineering Department of the State of M. P. has got a pumping station at Kamla Park, Bhopal. The electricity energy is required for pumping purposes and for which there is a separate meter at Kamla Park which keeps on account of the electrical energy supplied to Public Health Engineering Department for pumping of water and onward supply to the petitioner. M. P. Electricity Board while preparing the bills for cost of electrical energy also includes the electricity duty payable on such sale or supply in its bill and the electricity duty is recovered by the State of M. P. Energy Department from M. P. E. B. The M. P. Electricity Board submits periodical returns, disclosing the amount of electricity charged/recovered and paid to the Energy Department of the State Government. The energy department of the State Government collects duty from the petitioner who pays the same after collecting it from the consumers. The State Government issued a notification dated 9-10-1984 reducing the rate of duty to 3 paise per unit over the electricity duty consumed by the local bodies in operating the pumping station. Copy of the notification dated 9-10-1984 is Annexure-R/3= Annexure-F. As per said notification, it appears that the electrical energy must have been sold or supplied either by the producer or the distributor to a local body, such as Municipal Corporation, Municipality, Notified Area, Janpad Panchayat or Gram Panchayat etc. The electrical energy must have been consumed in operation of the Pumping Station. The pumping sets must be operated by the local bodies and the consumer of the electrical energy should also be a local body. It is also stated in the return that the electricity duty was levied at the rate of 3 paise per unit in the bill for the period 1-10-1984 to 1-5-1987. The error was detected and the M. P. Electricity Board was directed to recover the duty from the petitioner in accordance with the duty rates as in force from time to time. The State Government looking to the financial conditions of the local bodies granted total exemption from payment of duty with effect from 1-1-1988. Copy of the notification issued by the State Government is Annexure-A/4. The State Government looking to the financial conditions of the local bodies granted total exemption from payment of duty with effect from 1-1-1988. Copy of the notification issued by the State Government is Annexure-A/4. The respondents submits that the petitioner is not a local body and therefore, bill has been rightly raised by the M. P. Electricity Board. The petitioner, although had paid the electricity duty on 12-1-1988, without claiming exemption has now come forward with a petition just to avoid payment of electricity duty to the State Government on flimsy, imaginary and incorrect grounds. The petitioner has not been created by a statute but is a company registered under the statute, i. e. Indian Companies Act, 1956 and it is a trading Corporation and therefore, it is not entitled for any exemption or concession under the notification dated 9-10-1984. In the instant case, the electricity energy was not sold or supplied to the State Government for consumption but was supplied to a pumping station at Kamla Park which is being operated by the Public Health Engineering Department for the purposes of pumping of water and supplying the same to the petitioner. The consumer is the petitioner and not the State Government. The consumption of electricity was by the petitioner and the Public Health Department was only responsible for maintenance, depreciation and operation of the pumping house. The State Government has no responsibility to supply the water to any statutory authority or the inhabitants in general but is duty bound to supply water to the petitioner in terms of the agreement/understanding arrived between the Government of India and Government of Bhopal in the year 1956. Payment for electricity duty forms necessary part of operational charges. No operation is possible without energy/power. The energy was consumed by the petitioner and not by the State Government or Public Health Engineering Department. ( 8 ) IT is further averred on behalf of the respondent Nos. 1 to 4 and 6 that the Public Health Engineering Department carries on pumping operation for and on behalf of the petitioner. The petitioner is free to have their own pumping station. The State Government is only carrying on its obligation under the agreement/understanding arrived at between the Government of India and the State of Bhopal in the year 1956. 1 to 4 and 6 that the Public Health Engineering Department carries on pumping operation for and on behalf of the petitioner. The petitioner is free to have their own pumping station. The State Government is only carrying on its obligation under the agreement/understanding arrived at between the Government of India and the State of Bhopal in the year 1956. It is not the duty of the P. H. E. Department to operate a pumping house for the petitioner but the same is being done in view of the terms of the agreement arrived at in the year 1956 under the condition that operational charges shall be paid by the petitioner. ( 9 ) RESPONDENT No. 5 M. P. Electricity Board in its return contends that 20% of the water is consumed in the factory and the balance is supplied to residents, schools, colleges, hospitals, temples and to others. As the purpose in the agreement was wrongly mentioned as water works installation, the tariff notification of Public Water Works was inadvertently incorporated in the said agreement. The use of water for factory purpose was an industrial purpose. Kamla Park Pumping Station was supplying water to factory and township of Bharat Heavy Electricals Ltd. and the electricity supplied to the said Kamla Park Pumping Station was thus being made available for industrial purpose and as such it was decided to bill the power supply availed for the said pumping station, 20% at industrial tariff and the balance 80% on water works tariff as the water being supplied to the B. H. E. L. was consumed in factory and township. The demand raised is proper. Public Health Engineering Department is not a local body. The consumer is the petitioner and it is also not local body. The energy was not sold to a local body. The Board's tariff for electricity consumption are distinct and different from the duty imposed under the M. P. Electricity Duty Act. The principle of one cannot be applied to the other. ( 10 ) SHRI A. G. Dhande, learned Sr. Counsel for the petitioner submits that in the agreement it was mentioned that tariff shall be realised as per rate of the Public Water Works and the pumping station in question was treated as Public Water Works. The principle of one cannot be applied to the other. ( 10 ) SHRI A. G. Dhande, learned Sr. Counsel for the petitioner submits that in the agreement it was mentioned that tariff shall be realised as per rate of the Public Water Works and the pumping station in question was treated as Public Water Works. The M. P. Electricity Board and the other respondents cannot wriggle out of the legal agreement by saying that it was advertantly mentioned in the agreement. Learned counsel further submits that aspect of dominant purpose has been completely ignored and overlooked by the respondents while deciding the dispute as per Annexure-J. It is not disputed that the pumping station is controlled by Public Health Engineering Department and simply for the reason that the petitioner was provided with the facility of establishing the pumping station initially, it cannot be said that the petitioner is pumping water from Kamla Park Pumping Station. It is the P. H. E. Department who as a matter of fact is pumping the water from Kamla Park Pumping Station. Thus, no electricity duty can be raised on the petitioner. The petitioner is not at all liable to make the payment of electricity duty. Alternatively, learned counsel for the petitioner has submitted that in the present case since the Public Health Engineering Department is operating the pumping station, it is controlling the pumping station and not the petitioner and as such it has to be treated as Pumping Station. The petitioner is not at all liable to make the payment of electricity duty. Alternatively, learned counsel for the petitioner has submitted that in the present case since the Public Health Engineering Department is operating the pumping station, it is controlling the pumping station and not the petitioner and as such it has to be treated as Pumping Station. Learned counsel has placed reliance on Section 3-A of the M. P. Electricity Duty Act, 1949 which provides as under :-"3-A Exceptions :- Notwithstanding in Section 3, no duty shall be payable in respect of electricity energy - (i) sold or supplied to the Government of India for consumption by that Government; (ii) sold or supplied to the Government of India or a railway company for consumption in the construction, maintenance or operation of any railway administered by the Government of India; (iii) sold or supplied to the State Government for consumption by that Government; (iv) sold or supplied to any local authority for consumption in public street lamps or lamps in any market places or other places of public resort maintained by such authority; and (v) sold to or used by an agriculturist for consumption in pumping of water for irrigation of his land or in chaff cutting or in crushing or treating the produce of his land. Learned Senior Counsel for the petitioner submits that there is further power of the State Government to exempt under Section 3-B of the M. P. Electricity Duty Act, 1949 where the State Government is of the opinion that in order to encourage the establishment of any particular industry or class of industries in the State. The learned Sr. counsel further relies on Annexure-F notification issued in the year 1984 and contends that the electricity duty has to be charged at the concessional rate of 3 paise per unit. He further relies on the exemption granted as per notification dated 14-1-1997 Annexure R/4 by which water and sewage pumping installations of Municipalities, Corporations and other local bodies used for public utility water schemes have been granted full exemption. Counsel further submits that pumping is made by the P. H. E. department not only for B. H. E. L. but for also other adjoining areas. The benefit of the notification has to be extended to the petitioner also and it should be fully exempted with effect from 14-1-1988. Counsel further submits that pumping is made by the P. H. E. department not only for B. H. E. L. but for also other adjoining areas. The benefit of the notification has to be extended to the petitioner also and it should be fully exempted with effect from 14-1-1988. Learned counsel further submits that it cannot be denied that water is supplied for the public utility and supply to the extent of 20% can be said to be for the purpose of industrial use and remaining is for public utility such as hospitals and other slum areas and industrial township which is outside of B. H. E. L. Thus by no stretch of fair play in action, it can be said that supply of water by pumping by P. H. E. department is not only to petitioner B. H. E. L. but also to the other adjoining areas outside township and there is absolutely no jurisdiction vested with the respondents to act in such an arbitrary manner. ( 11 ) SHRI B. N. Mishra, learned Govt. Advocate appearing for the respondent Nos. 1 to 4 and 6 submits that the petitioner cannot be treated to be local authority. Industrial township area has to be constituted as per Section 7 (1) of the Municipal Corporation Act, 1956 by issuing public notification by the Governor and there is no notification issued as provided under sub-section (1) of Section 7 of the Municipal Corporation Act, 1956. It cannot be said that the Bharat Heavy Electricals Limited is a local authority. Thus, Bharat Heavy Electricals Limited is not entitled for taking benefit of the notification Annexure-F= Annexure R/iii and Annexure R/iv issued in the year 1988. The action is proper. The dispute has been properly decided as 20% of the water is used by the factory and on remaining the electricity duty has been ordered to be realised on the basis of the entry in domestic purposes. Thus no interference is called for in the present writ petition. ( 12 ) AFTER hearing the learned counsel for the parties and also perusing the various documents, following facts have become clear :- 1. The pumping station at Kamla Park was built by the State Government but it is fully managed and controlled by the Public Health Engineering Department. The capital costs was provided by the State Government. 2. ( 12 ) AFTER hearing the learned counsel for the parties and also perusing the various documents, following facts have become clear :- 1. The pumping station at Kamla Park was built by the State Government but it is fully managed and controlled by the Public Health Engineering Department. The capital costs was provided by the State Government. 2. It is also not in dispute that up to the year 1972, no bills were raised charging electricity duty. 3. In the agreement it has been mentioned that the electricity duty shall be charged as per tariff of the Public Water Works and for which concessional rate admissible at the relevant time was 3 paise per unit and later on Public Water Works was fully exempted from the year 1988. ( 13 ) EVEN the M. P. Electricity Board admits the fact that pumping is made by the Public Health Engineering Department which is a department of the State Government of M. P. In substance it appears that the electricity is consumed by Public Health Engineering Department and not by the petitioner. ( 14 ) IT can also not be denied that the Municipal Corporation and the State Government owe duty to supply water to citizens. Obviously when the water is pumped for the public utility purpose, the dominant purpose ought to have been seen by the respondents for determining the tariff of electricity duty. ( 15 ) IT appears that the respondents have proceeded on technical consideration and they have not gone into the obligations cast on the State Government as well as the Corporation to provide water to the township, particularly when the industrial area in question has not been declared as industrial township. This is an obligation of the Corporation/state Government to provide essential civil commodity such as supply of water. This aspect has been completely ignored and overlooked while imposing huge demands on the petitioner and particularly when supply is made by PHE, electricity is consumed by PHE, department of Government of M. P. what is the rate chargeable. This is an obligation of the Corporation/state Government to provide essential civil commodity such as supply of water. This aspect has been completely ignored and overlooked while imposing huge demands on the petitioner and particularly when supply is made by PHE, electricity is consumed by PHE, department of Government of M. P. what is the rate chargeable. ( 16 ) ON the one hand, industrial township has not been declared by which the petitioner would have been treated as local authority outrightly without any hitch but at the same time the respondents cannot wriggle out of their obligation to supply water, particularly when the Public Health Engineering Department is pumping it from its own installation rate of electricity duty can only be which is permissible for such bodies. ( 17 ) IN my opinion it is not open to the respondents to levy electricity duty on the basis of non-public utility purpose. Agreement was entered into between the Government of India and erstwhile Government of Bhopal considering the nature of industry and when civil commodity is provided and supply is being made to the inhabitants of the outside township, it is not open for the respondent to realise electricity duty differently than the rate admissible to a local authority. All these aspects have not been gone into in proper perspective while raising demand as per Annexures M. O. and J. These orders are quashed. The respondents are directed to re-hear the petitioner and determine the dispute afresh in the light of the observations made hereinabove. ( 18 ) THUS, writ petition is allowed. No demand shall be raised with respect to electricity duty for consumption of electricity for supply of water from Kamla Park Pumping Station, Bhopal till the fresh orders are passed by the respondents in the matter. In the facts and circumstances of the case, parties to bear their own costs. Petition allowed. .