Indo Swiss Synthetic Gem Manufacturing Co. Ltd., and etc. vs Government of Tamil Nadu and others

Kanakaraj, J.—These writ appeals and the writ petitions relate to a common question as to whether the appellants and the writ petitioners

are entitled to claim certain concessional electricity tariff rate applicable to certain power intensive factories and units and for that purpose they

seek to quash certain Government orders denying such concessions issued under the Tamil Nadu Revision of Tariff Rates on Supply of Elec trical

Energy Act, 1979 (Act I of 1979) (hereinafter referred to as Act 1 of 1979). To appreciate the grounds on which the relief is sought for, it is

essential that we should know the facts of the case.

The appellants in W.A Nos. 2 to 10 of 1988 were the writ petitioners in W. P. Nos. 2211 of 1987,1146 of 1982,4948 of 1985, 5426 of

1982, 5427 of 1982, 5428 of 1982, 1147 of 1982, 4949 of 1985 and 7186 of 1985 respectively. They are engaged in the production of rough

synthetic gems which are subsequently cut and polished by skilled manual labour into synthetic gems of various colours, shapes and sizes used for

personal ornaments in gold, silver etc. and also for certain industrial uses. We do not propose to set out the prayer in each of the writ petitions at

this stage and we will refer to the prayer after setting out the history relating to the imposition of electricity tariff rate in the State of Tamil Nadu. The

Electricity (Supply) Act, 1948 contained provision namely, Section 49 of the Act. enabling the Board to supply electricity to any person not being

a licensee upon such terms and conditions as the Board thinks fit. Sub-section''(2) of (Section 49 of the Act enjoins the Board to have regard to all

Or any of the factors set out therein. Sub-section (3) of Section 49 enables the Board to fix different tariff rates for the supply of electricity to any

person not being a licensee having regard to the geographical situation, the nature of the supply and purpose for which supply is required and other

relevant factors. Sub-section (4) of Section 49 imposes a duty on the Board not to show undue preference to any person. We have referred to the

above provisions of law only for purpose of appreciating the arguments and for the purpose of cautioning ourselves that the impugned Government

Orders and the action of the Board were not under the said provisions of law, but had been passed under the said Act 1 of 1979. It transpires that

prior to exercise of the power of the Government under Act I of 1979, The Government was exercising the powers under the Tamil Nadu

Essential Articles Control and Requisitioning Act, 1949 which defined essential article as including electrical energy. After the Act I of 1979 came

to be enacted the Government has been fixing the tariff rates payable to the Tamil Nadu Electricty Board by any consumer on the electrical energy

supplied by the Board in accordance with Section 3 of the Act and as specified in the Schedule to the Act, Act 1 of 1970 itself contained the

Schedule to the Act prescribing the tariff rates applicable with effect from 1-3-1979. Section 4 of the Act 1 of 1979 enabled the State

Government after taking into account the cost of production of energy and such other matters as may be prescribed, by notification, to amend the

provisions of the Schedule to the Act. It is not disputed ""the other matters"" mentioned above was never prescribed by the State Government. But

they had been amending the Schedule from time to time by exercising the said power and issuing various Government orders.

The appellants in W.A. Nos. 2 to 10 of 1988 had entered into an agreement with the State Electricity Board on 15-4-1968 in relation to the

supply of electrical energy in bulk at its factory at Chikkadasampalayam, Avanasi Taluk. The tariff rates and the minimum guarantees are

prescribed in the agreement itself. There was, of course, a clause which says that the tariff r4ates are subject to revision that may be decided on by

the Board from time to time. It is not disputed that the tariff rates applicable to the appellants will be in accordance with the reates prescribed

under the said Act 1 of 1979 which came into force on 1-3-1978. The Schedule to the Act contained the rate per K.W.H. in respect of H.T.

Power supply, Special Tariffs, under Part V of the Schedule. The industries which were clubbed together for the application of special tariff are set

out below: -

(See Table on next page)

The significant point to be noticed is that ""Synthetic gem is classified along with certain other industries for the purpose of application of special

tarifis."" Before proceeding to the subsequent Government orders revising the Schedule to the Act it is necessary to refer to a note on special loads

which was available well before the Tamil Nadu Act 1 of 1979 was introduced on 23-2-1979 with effect from 1-3-1978. The note proceeds on

the basis that industries like aluminium, Caustic Soda, Calcium Carbide, Synthetic Gem, Fertiliser and Cement are treated as special loads by the

Tamil Nadu Electricity Board. It is pointed out that the policy of treating certain industries as special loads dates back to the year 1933. In this note

it is expressed that the cement industry is not an energy intensive industry in the strict sense and it was felt that the tariff rates applicable to special

loads should not be extended to the cement industry. Similarly, the other industries like Caustic Soda, Aluminium, Fertilisers are considered and

tariff rates are suggested for each industry. Coming to Synthetic Gems it is observed as follows :-

Indo Swiss Synthetic Gem Manufacturing Company.

It cannot be said that this is on the same footing as other Chemical loads. The product can be classified as a luxury item and this can bear a higher

Tarif rate and mean effective rate of 21 paise is recommended and the rates suggested are as below :-

Entire demand at Rs. 25 /- per KVA. per month.

Energy charges

Entire Consumption. 17 pasie.

V. H. T. POWER SUPPLY SPECIAL TARIFFS

Industry. Rate per K.V.A. of maximum demand Rate per K..W.H.in paise.

per month

2. 3.

Rs. Rs.

Cement 15 8.50

Caustic Soda (i) Supply of 15 4.5

110 K.V.

(ii) Supplies of 11 K.V. 15 15

Calcium carbide 15 4.5

Synthetic Gem 15 4.0

Aluminium 15 3.5

Fertiliser 15

(i) Supply of 110 K.V. 15 10

(ii) Supply of 33 K.V. 1510

(plus five per cent of both demand and

unit rates).

Railway traction 10.00

Salem Steel Plant 5.00

Heavy Steel Project 5.25

A tarifff review Committee as constituted by G.O.Ms. No. 301, P.W.D. dated 2-3-1975 to examined the tariff structure of the Board and to

make suitable recommendations. The Committee submitted its report in December, 1977. Even in this report it was suggested that the cement''

load industry, Indo Swiss Synthetic Gem manufacturing Company Limited and Railway Traction were proposed to be brought under H.T. Tariff.-I

that is on par with H.T. industrial loads, reasons have been given why Cement industry is not treated as power intensive industry and why Synthetic

Gem being a product of luxury item, it was considered to deny the treatment of this industry as a Special Load consumer. Even at that time it was

proposed to levy H.T. Industrial Tariff for the said company which is the appellant herein. Notwithstanding the above report of the Tariff Review

Committee and the detailed note on the various power intensive units like Aluminium, Caustic Soda, Calcium Carbide and Fertiliser, the

Government had thought it fit to extend the appellants the benefit of Special Tariff under the Head V in the Schedule to the Tamil Nadu Act 1 of

1979.

In G.O.Ms. No. 787, dated 30-4-1979, the Government amended the Schedule by substituting a new Schedule under the Head IV Special

Loads, the following changes were made:--

IV Special Loads :

Basic Rates Basic rates per KVA of Central Excise Metropolitan levy per KWH in paise

per -KWH maximum demand per surcharge (per (in re-spect of consumers in Madras

(in paise) month (in Rs.) KWH in paise) Metropolitan areas only)

Caustic Soda. 17 25 3. 5

Calcium Carbide 37 25 3 5

Aluminium 10 25 3

Fertiliser 19 25 3 5

Railway traction

(Madras-Vijayawada) 14 .. 3 5

Salem Steel Plant 5 .. 3

Heavy Water Project 9 .. 3

The significant aspect of this change in the tariff rates is that ""synthetic gem has been excluded from special loads."" Consequently, the rates

applicable to the normal industrial establishment under High Tension Supply Part A-I will apply to the petitioners'' industry manufacturing synthetic

gem.

The next Government Order, Chronologically, is G.O.Ms. No. 861 dated 30-4-1982. In this Government order, the report of the Tariff Review

Committee is considered suggesting ways and means of meeting the additional financial burdens accrued to the Tamil Nadu Electricity Board on

accqunt of increase in cost of coal, oil, Railway freight and the increased cost of, power purchased from Neyveli and Kerala. The entire

classification and concessional tariff extended to certain Special load is taken away, except maintaining a distinction between Madras Metropolitan

areas and non-Nletropolitan areas. The next revision came by way of G.O.Ms.No. 1033dated 16-5-1983 which was based on a report of one C.

V. R. Panikar with reference to the share of cost of power in the production cost of various industrial consumers and other relevant factors. Under

this Government order Part A relating to High Tension Supply is as follows :--

High Tension Tariff-I:

Industrial establishments other than Caustic Soda, Calcium Carbide, Aluminium and Potassium Chlorate, registered factories, tea estates,

textiles, oilway tractions and fertilisers.

Rate per KWH (in paise) Rate per KVA of maximum demand per month (in rupees).

2. 3.

Madras Metropolitan areas 48 40

Non-metropolitan areas 43 40

Caustic Soda, Calcium Carbide, Aluminium and Potassium Chlorate.

Rate per KWH (in paise) Rate per KVA of maximum demand per month (in rupees).

2. 3.

Madras Metropolitan areas 43 35

Non-metropolitan areas 38 35

It will thus, be seen certain industries which were originally under the classification of Special loads are given a special treatment and Synthetic Gem

is not included for the purpose of special treatment.

The next in line of revision of tariff under the said Act 1 of 1979 was by way of G.O.Ms. No. 793 dated 25-5-1985. This Government order

after referring to the plea of the Electricity Board complaining overall cost of supply having gone up rapidly and the consequent loss suffered by the

Board, substituted a new Schedule. For the purpose of our case, it is only relevant to note that the distinction maintained in the earlier G.O.Ms.

No. 1033 is maintained and only industries manufacturing Caustic Soda, Calcium Carbide, Aluminium and Potassium Cholorate are given a slightly

lower tariff than the other industries, classified under the High Tension tariff. The same was the position when G.O.Ms. No. 1181 was issued on

12-6-1984 and a slightly lesser tariff rate was made applicable only to Caustic Soda, Calcium Carbide, Aluminium and Potassium Chlorate. The

last of the Government orders with which we are concerned is G.O.Ms. No, 3042 dated 23-12-1986. This order was also issued at the instance

of the Board and the concession of lower tariff rate even to industries manufacturing Caustic Soda, Calcium Carbide, Aluminium and Potassium

Chlorate was taken away.

In the context of the above Government orders it will be convenient to notice the prayer sought for in the various writ petitions. W.P. No. 1146

of 1982 (W. A. No. 3 of 1988) seeks to quash G.O.Ms. No. 787, dated 30-4-1979 because it was removed Synthetic Gem from the category

of the Special loads. W.P. No. 1147 of 1982 (W.A. No. 8 of 1988) is to quash a letter dated 10-5-1979, winch is but consequential to G.O.Ms.

No. 787 dated 30-4-1979. W.P. No. 5426 of 1982 (W.A. No. 5 of 1988) is to declare Section 4 of the Act 1 of 1979 as unconstitutional and

ultra vires. W.P. No. 5427 of 1982 (W.A. No. 6 of 1988) is to quash G.O.Ms. No. 861 dated 30-4-1982 and seek the tariff rate of 4 paise per

KWH in respect of the petitioner''s industry. W.P. No. 5428 of 1988 (W.A. No. 7 of 1988) relates to the letter dated 19-5-1982 which is but a

demand based on G.O.Ms. No. 861 dated 30-4-1982. W.P. No. 4948 of 1985 (W.A. No. 4 of 1988) is to quash G.O.Ms. No. 1033 dated

16-5-1983 as illegal and unjust in denying the rate of 4 paise per KWH in respect of the petitioners'' industry. W.P. No. 4949 of 1985 (W.A. No.

9 of 1988) is to quash G.O.Ms.No. 1181 dated 12-6-1984 and claiming tariff rate of 4 paise per KWH. W.P. No. 7186 of 1995 (W. No. 10 of

1988 is to quash G.O.Ms. No. 793) dated 25-5-1985 and again claiming a tariff rate of 4 paise per KWH. W.P. No. 2211 of 1987 (W.A. No. 2

of 1988 is to quash G.O.Ms. No. 3042 dated 23-12-1986 and again claiming a tariff rate of 4 paise per KWH. All the writ petitions were

dismissed by the learned single Judge and the Writ Appeals are against the common judg-, ment.

Writ Petition, W.P. No. 6961 of 1984 j has been filed by an industry, engaged in the production of Silicon Carbide which is also a power

intensive industry, to quash G.O.Ms. No. 1181 dated 12-6-1984 and seeking the application of the same tariff rate extended to Caustic Soda,

Calcium Carbide, Aluminium and Potassium Chlorate. W.P. No. 6962 of 1984 is by the very same industry seeking the very same relief on the

ground that G.O.Ms. No. 1033 dated 16-5-1983 gives a Special tariff to Caustic Soda, Calcium Carbide, Aluminium and Potassium Chlorate.

W.P. No. 6963 of 1984 is by the very same industry to injunct the third respondent-Superintending Engineer to claim any amount in excess of 48

paise per KWH and any amount in excess of Rs.40/-per KVA maximum load from the petitioners.

The sum and substance of the plea of the appellants as well as the petitioners in W.P. Nos. 6961 to 6963 of 1984 is that they should be

charged at a concessional tariff rate and at any rate, they cannot be discriminated against from other power intensive industries., Mr. Habibulla

Badsha, learned Senior Counsel, representing the appellants and the writ petitioners has projected the case of the parties in the form of the

following legal contentions.

(i) Section 4 of Act 1 of 1979 only enables the State Government to amend the tariff rates as contained in the schedule to the Act. It does not give

power to change the classification. According to the appellants the classification has been made in the Act itself and by such classification the

Special Load consumers had been categorised by including the Synthetic Gem along with Cement, Caustic Soda. Calcium Carbide, Aluminium

and fertilisers. Therefore, it is contended that the Government orders which seek to remove Synthetic Gem from the above classification and deny

the industry the treatment meted out to the industries mentioned above is illegal because Section 4 does not give such a power to the State

Government.

(ii) Section 4 does not contain the necessary guidelines while authorising the State Government to amend the provisions to the Schedule to the Act.

To this extent, Section 4 is liable to be struck down violating the Article 14 of the Constitution of India.

(iii) The appellants had been treated on par with Caustic Soda, Calcium Carbide, Aluminium and fertilisers and all those industries had been treated

as equal and power intensive industries and it would be wholly illegal and discriminatory to remove Synthetic Gem from the classification and treat

the industry in a different manner. In other words, equals cannot be treated as unefluals.

(iv) In some of the impugned Government orders the appellants and the writ petitioners have been trcated as coming under the general category of

industrial establishments and the same basic rate per KWH namely, 20 paise per KWH is charged.

Thus the appellants and the writ petitioners who are power intensive industries have been treated along with non-power intensive indus-tries which

again is illegal under Article 14 of the Constitution of India because the Con--titution prohibits the treatment unequals as equals.

It has so be remembered that some of the legal arguments enumerated above may not apply to the petitioners in W.P.Nos. 6961 to 6963 of

1984 because Silicon Carbide was never given any racial treatment in the Act 1 of 197) or the other Government orders.

For the first time, they are claiming to be treated as a Special load consumer.

Contention No. (i):--

While considering the acceptability of the above, arguments w,e. Will also refer to the answer of the respondents and decide each issue

accordingly. Taking up the first submission namely, that Section 4 does not enable the Government to change the classification, but only permits the

revision of tariff rates, we will first quote the section itself.

Power of the State Government to amend the Schedule: The State Government may after taking into account the cost of production of energy

and such other matters as may be prescribed by notification, amend the provisions of the Schedule to this Act.

While referring to the various Government orders revising the tariff rates, we have already noticed that in some cases the entire Schedule has been

substituted by a new Schedule. Seclion 4 abovequoted does enable the Government to amend the provisions of the Schedule to the Act.

Therefore, it is certainly open to the Government to substitute a new Schedule for the Schedule which was appended to the Act I of 1979. So far

as the argument that there was a classification in Act 1 of 1979 and it is not open to the State Government to change such classification, it is rightly

pointed out by learned Counsel for the respondents that there was no classification at all in Act I of 1979. It only contained a Schedule in

accordance with Section 3 of the Act which says that tariff rates payable to the Tamilnadu Electricity Board by any consumer on the electrical

energy supplied by the Board shall be specified in the Schedule to the Act. Therefore, the Schedule only contains the tariff rates applicable to

various types of consumers. Different rates are prescribed for different types of consumers. It so happens that under the Head ""Power Supply

Special tariffs"", certain industries were grouped together for prescribing the tariff rates. That does not mean that those industries were in fact

classified as forming part of a class. In fact, even under the said Heading V while the rate per KVA of maximum demand per month is uniform, the

rate per KWH in paise is different for each of the industries. It would thus, be seen that there is no classification under Act 1 of 1979 and only

different rates are prescribed for different industries while maintaining a broad distinction of High Tension and Low Tension supply. When Section

4 gives the power to change the Schedule, it goes without saying that the Government has the power to prescribe the rates different from what was

prescribed under Act 1 of 1979 and in so doing they can equally prescribe a different rate for the industries which had been grouped, under

Heading V Special Tariff. Therefore, when the Tariff Schedule Act was first amended by G.O.Ms. No. 787 dated 30-4-1979, the fact that the

Synthetic Gem industry was levied at the rate of 20 paise per KWH whereas Caustic Soda, Calcium Carbide, Aluminium, Fertiliser etc. were

charged at the rate of 17 paise, 10 paise, 19 paise respectively per KWH, cannot be faulted on the ground that a different classification had been

adopted. We are clearly of the opinion that only tariff rates as applicable to certain industries have been prescribed and this is perfectly legitimate

and within the power of the Government u/s 4 of the Act. In other words, Section 4 does give the power to the Government to prescribe different

tariff rates for different industries by amending the Schedule and this is precisely what has been done in the various Government orders. The first

contention of the appellants therefore, fails.

CONTENTION No. (ii):

The Section contends that Section 4 is ultra vires the Constitution of India because it does not provide the _ delines for revising the tariff rates,

has to be rejected as being without any substance. The argument was that the Section enjoins the Government to take into account (i) the cost of

production of energy and (ii) such other matters as may be prescribed. Inasmuch as the ''other matters'' not having been prescribed, the body

consideration is the cost of production of energy. According to learned Counsel for the appellants giving a wide power to the State Government is

likely to be misused. In other words, it is an uncanalised power without any guidelines. This is effectively met by the respondents by arguing that the

cost of production of energy is a sufficient guideline to enable the Government to fix the tariff rates in accordance with law without any

discrimination of arbitrariness. Learned Government Pleader has brought to our notice the judgment of the Supreme Court in Premium Granites

and Another Vs. State of Tamil Nadu and Others, . The Apex Court was considering the validity of Rule 39 of the Tamil Nadu Minor Mineral

Concessions Rules. The said Rule stated that the State Government in the interest of mineral development and in the public interest grant or renew

quarry licence etc. The argument was that the Rule did not contain the necessary guidelines. Observed the Supreme Court (Para 46):

It cannot also be disputed that mineral development is not a vague expression and the MMRD Act and the Rules framed under it, clearly furnish

the scope and purport of the word ""mineral development"". It has been very reasonably contended that scientific exploitation of minerals without

waste is undoubtedly a part of mineral development as envisaged by the MMRD Act and the rules framed thereunder. The expression ''Public

interest'' finds place in the Constitution and in many enactments which have since been noted and considered by this Court in various decisions.

The said expression is, therefore, a word of definite concept. There is also force in the contention of the appellants that the guidelines need not be

expressly found in the impugned provisions but such guidelines can be gathered from the setting of the Act and rules framed thereunder. Such

contention gets support from the decisions of this Court in P.J. Irani Vs. The State of Madras, ; S. Kandaswamy Chettiar Vs. State of Tamil Nadu

and Another, ; Jalan Trading Co. (Private Ltd.) Vs. Mill Mazdoor Union, ; Workmen of Meenakshi Mills Ltd. 1992 AIR SCW 1378 (supra).

In the instant case, the supply of power by Electricity Board is governed by the provisions of the Electricity (Supply) Act, 1948 and for the

purpose of finding out the cost of production of energy u/s 4 of the Act 1 of 1979, one can certainly take into account the various provisions of the

Electricity (Supply) Act, the duties and obligations of Board, can easily determine the cost of production of energy and fix the electricity tariff rales.

It would therefore, be idle to contend that Section 4 does nut contain the guidelines for fixing the tariff rates. We therefore, reject the second

contention as well.

CONTENTION Nos. (iii) and (iv):

Much of the argument advanced on behalf of the appellants and the writ petitioners was on third and fourth points relating to the equals being

treated unequally and unequals being treated equally for the purpose of levying tariff rates. The third and fourth points are really two facets of the

same principles adumbrated in Article 14 of the Constitution of India. Therefore, it will be convenient to deal with both the points together and

refer to the authorities on the question. The argument is, that right from the beginning certain industries were being treated as Special loads and

Synthetic Gem was one of them. The Tariff Committee report dated December 1977, refers to this aspect of the case. The agreement dated 15-4-

1968 entered into by the appellants with the Electricity Board of itself suggests that a lower basic rate was adopted only because the industry uses

a large amount of power and it was considered as a promotional industry. Mr. Badsha further argues that whatever may be the past practice, the

fact remains that Act 1 of 1979 did recognise Synthetic Gem as a Special load and classified the same along with Cement, Caustic Soda, Calcium

Carbide, Aluminium and fertilisers. In other words, the argument proceeds on the basis that Synthetic Gem was treated as an industry which was

equivalent to the other named industries. Such equals, says Mr. Badsha, cannot suddenly be treated as unequals by removing Synthetic Gem alone,

from the above classification levying different and highest rate to the Synthetic Gem industry in the subsequent Government orders. This argument is

effectively opposed by the second and third respondents by contending that the Tariff Review Committee as well as the subsequent Panikar

Committee had given good and valid reasons for treating Synthetic Gem as different from the other types of industries. On behalf of the first

respondent, learned Government Pleader argues that there was no classification at all, as contended by Mr. Badsha and it was only prescribing of

different rates for different industries. He points out that all power intensive industries were not classified for different treatment. In ;he grouping

referred to in the Schedule to the Act 1 of 1979, there are ever so many other power intensive units which had not been considered for

concessional tariffs. Even the petitioners in W.P. Nos. 6961 to 6963 of 1984 who manufacture Silicon Carbide claim to be power intensive

industry, but they were not, admittedly, classified along with the other industries. Therefore, according to the learned Government Pleader there

was no classification at all, for the appellants now to contend that they had been treated differently and classified differently.

Before adverting to the various decisions cited by both sides, we will first advert to certain factual aspects of the case. In each of the

Government orders that are challenged by the appellants, there is a preamble which gives reason for the revision of tariffs in the manner undertaken

in the Schedule to Act 1 of 1979. For instance, in G.O.Ms. No. 787, dated 30-4-1979, reference is made to the report of the Tariff Review

Committee and it is observed as follows:--

At present, levies like surcharge, special surcharge, metropolitan levy (in Madras Metropolitan area) and electricity tax under the Tamil Nadu

Electricity (Taxation on Consumption) Act, 1962 wherever applicable depending upon the class of consumers, and Central Excise surcharge are

added to current consumption charges. The Government have now decided to simplify and rationalise the tariff structure by merging these

additional levies, except the metropolitan levy and the Central Excise surcharge.

We have already referred to the fact that under the Heading IV-Special loads different basic rates for KWH had been prescribed for Caustic

Soda, Calcium Carbide, Aluminium and fertilisers and Synthetic Gem had been omitted from this category. Consequently, Synthetic Gem came to

be levied a basic rate of 20 paise per KWH along with other industrial establishments receiving High Tension supply. A careful perusal of the said

Government order shows that there is no classification at all as contended by learned Government Pleader because if we refer to the basic rate as

applicable to the above industries it is as follows:--

Synthetic Gem .. 20 paise

(along with other

industrial establisments).

Caustic Soda 17 paise

Calcium Carbide 17 paise

Aluminimum 10 paise

Fertiliser 19 paise

It is thus, seen that it is only a prescription of certain rates for industries and there is no classification at all and Section 4 of Act 1 of 1979 thus

enable the Government to fix tariff rate for different industries. What is more, a careful perusal of Tariff Committee Report suggests that reasons

are given for the prescription of different rates for the above industries and we have already extracted portions of the Tariff Committee Report.

Coming to G.O. Ms. No. 861, dated 30-1-1982, it is seen that aTariff Review Committee was constituted under the Chairmanship of Chairman,

Tamil Nadu Electricity Board. There is reference to additional financial burdens that have accrued to the Electricity Board on account of increase in

cost of coal, oil, Railway freight and the increase in the cost of power purchased from Neyveli and Kerala. It is interesting to note that all industrial

establishments have been treated alike in this Government order except for maintaining distinction between Madras Metropolitan area and non-

Metropolitan area. It is thus seen that the Government have always been acting only with reference to the cost of production of energy as

determined on actual particulars from time to time. In this connection, it is worthwhile to mention that the Board is purchasing electrical energy from

Neyveli Thermal Unit and the prices are changing from time to time. Similarly, the cost of coal, oil, and Railway freight have always shown a

tendency to register an upward trend and Consequently, the Government had necessarily to exercise the power u/s 4 of the Act which is available

to them.

With reference to G.O.Ms. No. 1033, dated 16-5-1983, it is seen that the Government had appointed Thiru C.V.R. Panikar to study and

report on the cost of generation/ power purchase of Tamil Nadu Electricity Board, the share of cost that ought to be passed on to the various

categories of consumers, the distribution pattern of power rate increases that can be levied on different industrial and commercial consumers, the

industrial consumers to be categorised with reference to the share of cost of power in the product cost etc. On the basis of the said report from

Mr. C.V.R. Panikar, the Government though it fit to introduce a slightly lower rate to Caustic Soda, Calcium Carbide, Aluminium and Potassium

Chlorate, than the other industrial establishments. Since this difference in rates is maintained in some of the subsequent Government orders like

G.O.Ms. No. 1181 dated 12-64984 and G.O.Ms. No. 793 dated 25-5-1985, it is necessary to look into the report of Thiru C.V.R. Panikar.

In a portion of the report relating to the ''approach'' to the problem, reference is made to the increase in the cost of energy, the manner of

passing on the increase in cost of energy to the consumers in line with subsidisation patterns indicated in the earlier decisions of the Government,

the possibility of categorising industrial consumers with reference to the proportion cost of power bears to their production cost. It is well-known

that in Tamil Nadu, the Board does not charge for the electricity supplied to agricultural consumers and heavily subsidised electricity supplied to

domestic consumers. Mr. Panikar had received about 150 petitions by way of representations from various types of consumers. Reference is

made to the representations made by power intensive industries and in particular industries manufacturing Aluminium, Calcium Carbide, Caustic

Soda, and Potassium Chlorate MR. Panikar recognises the fact that having regard to the patterns of consumption of electrical energy by such

industries and the economics of such industries, it is extremely complex and it will be difficult to make any rigid classification. He recognises that in

respect of Aluminium, Caustic Soda, Calcium Carbide and Potassium Chlorate, the proportions of power costs to total costs are quite substantial.

He recognised the fact that such industries cannot be classified merely on the basis of percentage of power consumed by them and such exercise

would render several anomalies to crop up. We are only trying to point out that this is an area which requires expert knowledge and Courts should

be slow to trespass into such an area.

However, Mr. Habibullah Badsha, learned Senior Counsel has taken us through certain portions of the report which relate to the problem in

question. Learned Counsel for the respondents referred to certain explanatory note to the conclusion of Mr. Panikar. We therefore, extract the

entire portion which is relied on by both parties.

High Tension Tariff I:

This tariff category covers power supply to almost all major industries in our State. The present tariff of 33 to 38 paise per unit levied in Tamil

Nadu compares favourably with such tariffs in other States, with only Karna-taka, Kerala and Punjab being appreciably lower. The number of

consumers in this category is 1366 but together they consume about 35 per cent of the total power consumption in the State, some ''Electro

intensive'' industries in this group of consumers have claimed that electric power is almost as essential raw material for them and absorbs a very

high percentage of their input costs. Comparisons on the basis of total costs of production or selling prices can be misleading because of several

varieties. Power costs as percentage of direct material cost may be more relevant. A quick scrutiny would indi- cate that industries producing

Aluminium, Calcium, Carbide, Caustic Soda, Potassium Chlorate, Silicon Carbide, Synthetic abrasives and Oxygen do require relatively large

inputs of power. For these users power costs as percentage of direct costs can very from 30 to SO per cent. A similar, but less dependable,

exercise, shows that compared to selling prices, power costs range from about 12 to 35 per cent depending on the industry. These two series of

percentage figures are not readily reconcilable. For example, in producing oxygen, power forms almost 80 per cent of the material costs, as the

other main materials is air, which fortunately, is still free. For the same industry, power cost in relation to selling price is only about 12 per cent. The

dangers of a purely arithmetical approach in this context are only too clear. The relevant point is that these industries would like to avoid any steep

increase in their power costs, because this would substantially reduce their working margins and also make their products difficult to sell in a

competitive market.

Perhaps, a detailed industry by industry examination would reveal noteworthy variations in the relevant circumstances of each industry. Pending

such a review, however, there seem to be some of the cases, which can clearly be described as ""Most Seriously Affected"", to borrow a phrase

currently used in another context. These industries could well be brought under a separate Tariff Category called H.T. Tariff I(s). For the present, I

would recommend for inclusion in this category the following industries:--Aluminium, Calcium Carbide, Caustic Soda and Potassium Chlorate.

These are all big units with large connected loads.

In the case of Calcium Carbide and Potassium Chlorate which are industrial products of wide use and which are produced by less than 50 small

scale industries in our State, I would recommend that such smaller units also be included in this category without reference to their connected

loads. For this category H.T.I(a), I recommend a 15 percent increase on present tariff rates.

The remaining industries coming under the present H.T. Tariff-I should be grouped and covered by a separate classification. H.T. Tariff-I(b). For

this category, I recommend an increase of 30 per cent over the present rate.

In our opinion, the above report completely explains the policy of the Government, in levying different rates for different industries and in fixing a

slightly lesser rate for Aluminium, Calcium Carbide, Caustic Soda and Potassium Chlorate. But Mr. Badsha refers to the fact that those industries

had been classified together only because ""these are big units with large connected loads"". In other words, the argument is that the classification has

been made by Mr. Panikar not on account of an industry producing a luxury item, but (Only because certain industries are big units with large

connected loads. In our opinion the above complaint of Mr. Badsha is not acceptable because the report refers to several other circumstances

which are not immediately possible of solution. Therefore, on the available materials Mr. Panikar thought that those industries alone are eligible for

slightly a lower rate. In the matter of fixation of tariff rates, like in the matter of fixation of prices under Control Orders, the Government has always

a wide power and one cannot make a micro-analytical study of the reasons given for application of different rates. Apart from that the very

problem has been studied by experts and were considered by the Govern-ment, before the rates are fixed. That in our opinion, satisfied all the

legal requirements.

Our conclusion as above is supported by various decisions cited at the Bar. For the appellants reliance is placed on a decision of Joint Council

of Bus Syndicate and Others Vs. Union of India (UOI) and Others and National Insurance Co. Ltd. and Others, . That judgment related to the

escalation in the Insurance tariff as applicable to operators of passenger buses, Taxi Cars and goods vehicles. The apex Court upheld the plea of a

hearing being given to the operators at least on a group-wise basis. The apex Court did not disturb the escalation already made, but only suggested

that the Advisory Committee may give a representative hearing before finalising the Insurance Tariff. In our opinion, the above decision relating to

Insurance Tariff will not certainly apply to the electricity energy which is an essential article. What is more, representations had been received from

power intensive industries before the Government had undertaken the change in the tariff rates. Reference, in this connection has been made by

Mr. C.V.R. Panikar, in his report.

Western M.P. Electric Power and Supply Company Ltd. Vs. State of U.P. and Another, , related to adispute between a licensee u/s 3(1) of

the Indian Electricity Act and a consumer under the State Electricity Board and the argument was that the rates charged to the consumer was

lower than the rate applicable to the licensee. The apex Court rejected the contention in the following words (Para 9):--

There is also no evidence that the rates charged by the State Electricity Board to Hindu Lamps were lower than rates charged to the Company.

The Company and Hindu Lamps again do not belong to the same class. The company is a distributor of electrical energy, whereas Hindu Lamps is

a consumer.

In Indian Aluminium Company Limited and another Vs. Karnataka Electricity Board and others, , it as"" indeed held in favour of the Board,

while considering the, power u/s 49 of the Electricity (Supply) Act, 1948 and seeking to classify or alter plant in the general group of power

intensive Industrie''s, the apex Court observed (Para 35 of AIR):

It is true that the smelter plant has distinctive features in its manufacturing mechanism and in the process of electrolytic operation. It also appears to

us that the smelter plant is not only power intensive industry but the power assumes a very significant role and constitutes one of the important raw

materials in the productive process. But it does not appear to us that categorisation of the smelter plant as high power intensive industry by itself is

illegal or perverse, or without any basis and wholly unjustified.

and concluded (Para 35 of AIR):

In the circumstances, we are unable to accept the contention that the broader categorisation of the smelter plant is arbitrary, capricious and

unreasonable resulting in treating the unequal as equal thereby offending Article 14 of the Constitution.

Another decision relied on by the appellants is Gauri Shanker and others Vs. Union of India and others, . In that case the parties being legal

heirs of ""Statutory tenants"" assailed sub-section(l), clause (iii) of Section 2 of the Delhi Rent Control Act as ultra vires the Constitution of India. The

challenge was on the ground that the Act made a distinction between statutory tenants and contractual tenants in the matter of heritability of

statutory tenancy between residential premises and non-residential premises was not based on any reasonable classification and that it had no

rationle to the objects sought to be achieved by the Act and therefore, discriminatory. The apex Court held that a commercial tenancy was

invaluable and had got distinct features and characteristics of its own different from that of a residential tenancy. The apex Court followed an earlier

decision in Sakhawat Ali Vs. The State of Orissa, and the passage relied on was as follows (at p. 170, Para 10):

.........legislation enacted for the achievement of a particular object or purpose need not be all embracing. It is for the legislature to determine what

categories it would embrace within the scope of legislation and merely because certain categories which would stand on the same looting as those

which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of

the fundamental right guaranteed by Article 14 of the Constitution.

The above decision was arrived at notwithstanding the fact that the Supreme Court took note of the argument that unequals cannot be treated as

equals. To other proposition of law found favour with the apex Court are as follows: --

that it must be presumed that the Legislature understands and correctly appreciates the need of its own people, that its laws are directed to

problems made manifest by experience and that its discriminations are are based on adequate grounds; that the Legislature is free to recognise

degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest.

A number of decisions have been cited by Mr. R. Thiagarajan, learned Senior Counsel, appearing for the Board. In Maharashtra State

Electricity Board Vs. Kalyan Borough Municipality and Another, , while interpreting Section 49 of the Electricity (Supply) Act, the apex Court

found that consumers in compact areas can be treated as on par with consumers in spare area for the purpose of levy of tariff. In Kerala State

Electricity Board Vs. S.N. Govinda Prabhu and Bros. and Others, , reference was made to the provisions of Section 59 of the Electricity (Supply)

Act casting as obligation on the Board to adjust its tariff so that after meeting the various expenditure properly required to be met, a surplus is left.

We have no doubt in our mind that decisions based on the Electricity (Supply) Act and the necessity to build the surplus are not relevant for the

purpose of understanding the scope of Section 4 of the Tamil Nadu Act 1 of 1979. Similarly, the judgment in Ferro Alloys Corpn. Ltd. Vs. A.P.

State Electricity Board and another, also relates to Section 59 of the Electricity (Supply) Act. The judgment in M/s. Hindustan Zinc Ltd. etc. Vs.

Andhra Pradesh State Electricity Board and others, , also relates to the generation of surplus by the Board u/s 59 of the Electricity (Supply) Act

and the emphasis laid on the following passage can only be taken for general guidance and not with particular reference to the facts of the present

case:--

In other words, if the profit is made not merely for the sale profit, but for the purpose of better discharge of its obligations by the Board, it cannot

be said that the public enterprise has acted beyond its authority. The Board in the present case shows that the surplus resulting from upward

revision of tariffs applicable to the H.T. consumers made in the present case, was for the purpose of better discharge of its other obligations, under

the (Supply) Act and in effect, it has merely resulted in a gradual withdrawal of the concessional tariffs any longer. In fact, no material has been

placed before us to indicate that this assertion of the Board is incorrect or �there is any reasonable basis to hold that the upward revision of

tariffs applicable to H.T. consumers is merely with a desire to earn more profits like a private trader and not to generate surplus for utilisation of the

funds to discharge other obligations of the Board towards more needy consumers, such as agriculturists, or to meet the needs of expansion of the

supply to deserving areas. The argument with reference to statistics that the upward revision of tariffs for the H.T. consumers results in earning

amounts in excess of the cost of generation does not, therefore, merit a more detailed consideration.

However, reliance placed on a decision in Shri Sitaram Sugar Co. Ltd. v. Union of India AIR 1970 SC 1277 for the proposition that price

fixation is in the nature of a legislative action even when it is based on objective criteria founded on relevant material, is of useful guidance for the

consideration of the present case. The apex Court also went further and pointed out that no rule of natural justice is applicable to any such order

fixing the prices. To the same effect is the ratio of a decision in Prag Ice and Oil Mills and Another Vs. Union of India (UOI), . In that case the

argument was that the Price Control Order was ultra vires on the ground that the impugned order treats the entire country as one unit, regardless of

regional variations relating to factors like the cost of procurement of raw material and freight. The apex Court observed that fixation of different

prices for different regions will frustrate the very object of the exercise that an essential commodity should be made available to the consumer at a

fair price. The Supreme Court also made it clear that in the ultimate analysis, the mechanics of price fixation has necessarily to be left to the

judgment of the executive and .unless it is patent that there is hostile discrimination against a class of operators, the procedural basis of price

fixation has to be accepted in the generality of cases as valid.

Mr. Habibullah Badsha, learned Senior Counsel for the appellants and the writ petitioners, submitted in his reply argument that he was not

challenging the right of the Government or the Board to increase the tariff rates based on the cost of production of electrical energy. He also says

that the decisions based on Section 59 of the Electricity (Supply) Act do not at all, help the respondents in sustaining the impugned Government

orders because these Government orders have been passed only under Tamil Nadu Act 1 of 1979. He invited our attention to the fact that there is

no price control for the industries like Caustic Soda, Calcium Carbide and Potassium Chlorate. Therefore, those industries cannot be treated in a

manner different from the appellants'' industry. He insisted that Synthetic Gem is not a luxury item and the averments to the contrary are without

any basis or evidence. He emphasised the fact that the guidelines which are applicable for the application of Section 47 of the Electricity (Supply)

Act are not available in Tamil Nadu Act I of 1979.

For the purpose of establishing the contention of the appellants, that their industry is also an energy intensive industry along with Aluminium,

Calcium Carbide, Caustic Soda etc., reliance is placed on the provisions of Tamil Nadu Electricity (Taxation on Consumption) Act, 1962. There is

no quarrel with this proposition that the appellants'' industry, and the petitioners'' industry are power intensive industries. But that does not give

them any special right to be charged at the same tariff rate as was charged in respect of Caustic Soda, Calcium Carbide, Aluminium etc. We have

already pointed out that all power intensive Units do not enjoy the same rate as was chargeable in respect of industries manufacturing Caustic

Soda, Calcium Carbide, Aluminium etc. We have already referred to the report of Mr. Panikar as well as the report of Tariff Review Committee

wherein reasons have been given why a lesser rate is prescribed for those industries. We therefore, reject the contention that all power intensive

industries should be charged at the same rate irrespective of the nature and size of the factory and the use to which the products are put to. The

interest of the public has to be- considered while fixing the tariff rates and that is precisely the reason why the Electricity Board is not charging the

agricultural consumers and giving a lesser rate to the domestic consumers by subsidising those supplies.

We are of the opinion that having considered the above arguments of learned counsel for the appellants as well as the arguments advanced on

behalf of respondents, it cannot be said that there has been any hostile discrimination in denying the appellants the same treatment that was given to

the industries manufacturing Caustic"" Soda, Calcium Carbide, Aluminium and Potassium Chlorate. During certain periods in some of the

Government orders like G.O. Ms. No. 787 dated 30-4-1979, G. O. Ms. No. 1033 dated 16-5-1983,G.O.Ms.No.ll81 dated 12-6-1984 and

G.O.Ms. No. 793 dated 25-5-1985. It is sufficient to note that as and from G.O.Ms. No. 3042 dated 23-12-1986 even those industries are

levied the same rates like the appellants'' industry. We are impressed by the argument of learned counsel for the ''respondents that at no time

industries which were grouped together in the Schedule to the Tamil Nadu Act 1 of 1979 are treated as a Special class because even among them

the basic rate per KWH was different from one industry to another. It is a case of prescribing the tariff, rates for each industry and not the question

of granting concession to a group of industries. No doubt, the board was treating certain industries as Special loads which are promotional

industries in the eye of the Board. But later reports, on the basis of which, the Government changed the tariff rates have given ample materials to

change the tariff rates and impose a higher tariff rates so far as the appellants are concerned in comparison to the industries which are coming under

the head of Special loads. At the risk of repetition we point out once again that all power intensive industries were not grouped together at any time

for the grant of a concessional tariff. We have already illustrated this point by referring to the petitioner in W.P. Nos. 6961 to 6963 of 1984 who

manufacture Silicon Carbide and it is admittedly a power intensive industry, but it was never granted any concessional tariff. The various judgments

of the apex Court above cited clearly show that the fixation of tariff rates is a legislative'' function and it cannot be easily tampered with by the

Courts without adequate materials. We have referred to Mr. Panikar''s report to show that the decisions were based on expert knowledge and the

complicated questions which were involved in the price structure vis-a-vis the cost of electricity and how it would be imprudent in our part to tinker

or tamper with the recommendations of such experts. It is not improper for the authorities to prescribe a lesser rate for industries which are most

useful for the public and impose slightly higher tariff rates in respect of industries which are not so useful to the common man. It is in this

comparative sense that synthetic gem is treated as a luxury item. We do not find anything in the order of the Government which can be equated to

hostile discrimination as against the manufacturers of Synthetic gem of Silicon Carbide. We only see the prescription of different rates at different

times based on recommendations of the Tariff Review Committee or the Electricity Board or experts like Mr. C.V.R. Manikar.

27(1) Contentions (iii) and (iv) are answered in the negative.

In fine, for all the above reasons we confirm the view of learned single Judge and hold that there is no scope for interference of the judgment of

learned single Judge in these Werit appeals and they are accordingly, dismissed.

A fortiori the case of the petitioner in W.P. Nos. 6961 to 6963 of 1984 has to be rejected because they never had the benefit of being treated

as Special loads and it is for the first time they are claiming that they should be given the same tariff rate as those applicable to industries

manufacturing caustic Soda, Calcium Carbide, Aluminium, Fertiliser etc. These writ petitions therefore, fail and are dismissed. No costs.

Consequently, the connected W.M.Ps. are also closed.

Order accordingly.