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New Kalkura, Rep. By... v. A.P State Electricit...

Andhra Pradesh High Court

Feb 3, 1988

Judgment

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Judgment Summary — Jeevan Keddy, J.

Factual and Procedural Background

This opinion disposes a batch of writ appeals and writ petitions raising common questions. The court framed the factual matrix chiefly from writ appeal No. 761/1986 arising from W.P. No. 12008/84.

The petitioners were hoteliers supplied with electricity by the Andhra Pradesh State Electricity Board (APSEB). They used electricity for, among other things, preparation, processing and preservation of food. Under an earlier board proceeding (B.P. Ms. No. 418 dated 2-6-1981) low-tension consumers were classified into categories including Category II (non-domestic and commercial) and Category III (industrial). That proceeding defined industrial supply as supply for purposes of manufacturing, processing and/or preserving goods.

Some hoteliers challenged their classification as Category II (commercial) and the higher tariff charged to them in W.P. No. 4921/1982 and batch. A learned single judge held that electricity consumed in preparation and preservation of food articles amounted to "industrial supply" under B.P. Ms. No. 418 and directed charging under L.T. Category III at the lower rate.

The board thereafter issued revised tariffs (B.P. Ms. No. 1014 (Commercial), dated 13-12-1983) altering the definitions of Category II and Category III and explicitly listing hotels and restaurants within Category II notwithstanding any manufacturing, processing or preserving of goods for sale. The board sought to charge hoteliers under Category II rates and contended the earlier single-judge directions were no longer enforceable. Some petitions were heard and dismissed by a single judge (Ramanujulu Naidu, J.), and the hoteliers appealed — leading to the present consolidated hearing and judgment.

Legal Issues Presented

Whether the notification revising tariffs (B.P. Ms. No. 1014 dated 13-12-1983) and reclassifying the entire consumption of hoteliers as "commercial supply" was invalid or illegal, and whether the petitioners should be charged under L.T. Category III (industrial) for energy consumed in manufacturing, processing and preserving eatables.
Whether the electricity board, by issuing revised tariffs, could lawfully remove or alter the basis of an earlier judicial decision that classified certain hotel energy consumption as "industrial supply".
Whether the board's action in treating such consumption as commercial and charging a higher commercial tariff amounted to unlawful discrimination in contravention of the duties under Section 49 of the Electricity (Supply) Act, 1948.

Arguments of the Parties

Appellants' (Hoteliers') Arguments

The revised tariffs in B.P. Ms. No. 1014 seeking to treat the entire consumption of energy by hotels as "commercial supply" are illegal and incompetent because the court had already declared energy used for manufacturing, processing and preserving eatables to be "industrial supply". The board cannot by notification overturn a judicial decision.
Under Section 49 of the Electricity (Supply) Act, 1948, the board must prescribe uniform tariffs and therefore treating such consumption as commercial (at a higher rate) while other industrial users are charged a lower rate is discriminatory. The earlier single-judge judgment in W.P. No. 4921/82 and batch had become final and was not appealed by the board.

Respondent's (APSEB) Arguments

The board's revised tariffs in B.P. Ms. No. 1014 removed the factual and legal basis of the earlier single-judge judgment in W.P. No. 4921/82 and batch; consequently, the revised classification and charging are valid and within the board's competence.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
W.P. No. 4921/1982 and batch (single-judge decision by Chennakesav Reddy, J.)	Held that electricity consumed in preparation and preservation of food in hotels constituted "industrial supply" under the earlier tariff notification (B.P. Ms. No. 418) and directed charging under L.T. Category III at the lower rate.	The court acknowledged this earlier decision but held that the board's subsequent revision (B.P. Ms. No. 1014) altered the categorisation by expressly including hotels within Category II. Because the tariff definitions are creatures of the board's notifications, the court found that the revised notification removed the basis for applying the earlier ruling and concluded the reclassification was not ex facie unreasonable.

Court's Reasoning and Analysis

The court structured its analysis around the statutory power of the electricity board under Section 49 of the Electricity (Supply) Act, 1948 and the content of the board's tariff notifications.

Statutory framework: The court cited sub-section (1) of Section 49 empowering the board to supply electricity on such terms as it thinks fit and to frame uniform tariffs. Sub-section (2) lists factors to consider, including "the nature of the supply and the purposes for which it is required." Sub-section (3) permits the board to fix different tariffs having regard to, inter alia, the nature of the supply and purposes for which the supply is required. Sub-section (4) forbids undue preference in fixing tariffs.
Nature of tariff categorisation: The court emphasized that terms like "domestic", "commercial" and "industrial" are defined by the board's tariff notifications — not by either the Electricity (Supply) Act or the Indian Electricity Act. The categorisation and different rates are therefore “creatures of tariffs issued by the board under Section 49.”
Effect of revised notification: The earlier tariff (B.P. Ms. No. 418 dated 2-6-1981) restricted Category II to supply for lights and fans for non-domestic/commercial purposes and described Category III as industrial supply for manufacturing, processing and/or preserving. The single-judge decision drew on that definition to classify certain hotel consumption as industrial. The board's revised tariff (B.P. Ms. No. 1014 dated 13-12-1983) materially broadened Category II to include "supply of energy for lighting, fans, heating and power appliances in commercial and non-domestic premises such as ... hotels, restaurants ..." and added a proviso excluding such premises from Category III "notwithstanding any manufacturing, processing or preserving goods for sale."
Evaluation of reasonableness and arbitrariness: The court observed that the board legitimately altered the scope of categories in the tariff notification and found this change not ex facie unreasonable or arbitrary. The court specifically noted absence of any material from the petitioners quantifying the percentage of electricity used by hotels for manufacturing/processing/preservation versus other uses; it also observed that hotels commonly have significant non-manufacturing electricity uses (e.g., lighting, air-conditioning, fans, appliances). Given this lack of material and the variation between establishments, the court concluded the board's broader classification of hotels as commercial could not be struck down as unreasonable.
Discrimination argument considered and rejected: The court treated the appellants' discrimination argument as dependent on the premise that preparation/processing/preservation must remain industrial and therefore should receive the industrial rate. Because the court found the board's categorizations to be valid tariff classifications (made pursuant to Section 49) and not arbitrary, it rejected the contention of unlawful discrimination. The court also noted that no complaint was made that prescribing a higher rate for commercial supply than industrial supply, as such, was discriminatory.
Ancillary observations: The court stated it was unnecessary to consider authorities cited on whether the legislature (or board, in context) can override a judgment, because the classification issue could be resolved by reference to the board's power to define tariff categories and the absence of evidence showing the revised classification to be unreasonable.

Holding and Implications

HOLDING: The writ appeals and writ petitions were dismissed. The court rejected the hoteliers' challenge to B.P. Ms. No. 1014 and upheld the board's revised classification and tariff structure as not being ex facie unreasonable or arbitrary.

Direct consequences for the parties:

The hoteliers' petitions seeking a declaration that the board's notification was invalid and that they must be charged under L.T. Category III were unsuccessful.
The board is entitled to charge hotels under the revised Category II classification and corresponding tariff; the appeals and petitions were dismissed without costs.

The opinion itself does not elaborate broader legal implications or purport to lay down a novel precedent beyond its decision to uphold the board's reclassification; it resolves the matter by reference to the board's statutory tariff-making power and the facts and materials before the court.

Show all summary ...

Jeevan Keddy, J.:-

(1) Common questions arise in this batch of writ appeals and writ petitions. Accordingly, they are disposed of under a common order. It would be sufficient if we state the facts in writ appeal no. 761/1986 arising from w. P. No. 12008/84. This writ petition was filed by a number of hoteliers for issuance of a writ of mandamus or any other appropriate writ, order or direction, declaring the notification issued by the a. P. State electricity board in b. P. Ms. No. 1014 (commercial) , dated 13 - 12 - 1983 as invalid and illegal, and for a further direction to the respondents to charge the petitioners under low tension - category iii (industrial) for the energy consumed by the petitioners in manufacturing, processing and preserving the eatables. The writ petition came to be filed in the following circumstances: -

(2) The petitioners are hoteliers who receive energy to their premises supplied by the apseb. They consume electricity, inter alia, for preparation of various articles of food, and for their processing and preservation. The tariff rates for consumption of energy are notified by the board from time to time. In bp. Ms. No. 418 (commercial) dated 2 - 6 - 1981 the consumers of low tension energy were classified into seven categories. Category - i related to domestic consumers; category - 11 to non - domestic and commercial consumers, and category - ill to industrial consumers. In so far as it is relevant, part - b of the said proceeding read thus:

"l. T. Category ii: non - domestic and commercial: applicable to supply of energy for lights, fans for non - domestic and commercial purposes excluding the loads falling under l. T. Categories i, iii, vii l. T. Category iii: industrial: applicable for supply of energy for industrial purposes, where contracted load is not less than 3 h. P. Or 2. 238 k. W. And not more than 75 h. P. Or 56 kw. Industrial supply shall mean suply for purposes of manufacturing, processing and/or preserving goods."

(3) The rate charged for category - ii consumers was 0 - 95 paise per unit, while the rate charged for industrial consumers was 0 - 50 paise per unit, the electricity board was treating all the hoteliers as non - domestic and commercial consumers, i. E. , category - ii consumers, and charging them at the rate of 0 - 95 paise per unit for the energy consumed by them. Some of the hoteliers challenged the said categorisation and the levy in a batch of writ petitions, being w. P. No. 4921/1982 and batch. Their contention was that they consume energy for manufacturing food articles and for processing and preserving them, and hence they fall within the definition of "industrial supply" as contained in b. P. Ms. No. 418, dated 2 - 6 - 1981. It was contended that treating them as 'non - domestic and commercial consumers' and charging them at the higher rate is illegal and unreasonable. The said writ petitions were heard by a learned single judge of this court who agreed with the petitioners that the consumption of energy by them for the purpose of preparation of food articles and for their processing and preservation must be treated as 'industrial supply' within the meaning of b. P. Ms. No. 418. The learned judge, accordingly, directed that "electricity consumed in the preparation of food and food articles and their preservation can only be charged under l. T. Category iii (ii) at 50 ps. Kw'. The board then contended that all the electricity consumed by the petitioners is not consumed for the purpose of preparation of eatables, but that it is used for other purposes as well. Indeed, the board's contention was that the dominant feature of the services provided by the hoteliers and the major portion of the energy consumed by them is for purposes other than manufacturing, processing and preservation of eatables, and since the energy consumed by them for both the purposes cannot be dissociated, their categorisation as nondomestic and commercial consumers is proper. This argument was dealt with by the learned single judge in the following words: -

"it is neither possible nor desirable for this court to enquire or investigate into the percentage of electricity consumed in a hotel for the purpose of manufacturing, processing and preserving food and food articles for sale. The petitioners shall furnish all particulars relating to the consumption of electricity for the purpose of preparation and preservation of food in the hotels and segregate the load and on such particulars being furnished, and the load segregated, the petitioners are liable to be charged for the energy consumed for the preparation and preservation of food under the l. T. Category iii (ii). In respect of the energy consumed for all other purposes, the board is entitled to charge the hoteliers under l. T. Category ii."

(4) Finding that the implementation of the said judgment would involve installation of two separate meters in the premises of each hotelier and would also involve charging the energy consumed by hoteliers at two different rates, the electricity board while issuing revised tariffs in december 1983, tried to get over the situation created by the judgment. The revised tariffs were notified in b. P. Ms. No. 1014 (commercial) , dated 13 - 12 - 1983. So far as low tension consumers were concerned, the classification into seven categories was retained, but the meaning and definition of "non - domestic and commercial supply" and "industrial supply" was changed. Categories ii and iii now read as follows: -

"l. T. Category ii: non - domestic and commercial: applicability: applicable for supply of energy for lights and fans, for non - domestic and commercial purposes excluding loads falling under l. T. Categories i, iii to vii and shall include supply of energy for lighting, fans, heating and power appliances in commercial and non - domestic premises such as shops, business houses, offices, public buildings, hotels, hostels,choultries, restaurants, clubs, theatres, cinemas, railway stations and other similar premises."

L. T. Category iii: industrial: applicable for supply of energy for industrial purposes where contract load is not less than 3 h. P. Or 2. 238 kw and not more than 75 h. P. Or 56 kw. Industrial supply shall mean supply for purposes of manufacturing, processing and/or preserving goods for sale. However, shops, business houses, offices public buildings, hotels, hostels, choultries, restuarants, clubs, theatres, cinemas, railway stations, and other similar premises, notwithstanding any manufacturing, processing or preserving goods for sale shall be classified under l. T. Category ii, non - domestic and commercial" the rate prescribed under this board proceeding for category - ii was 95 paise per unit, and for category - iii 0 - 55 paise per unit

(5) After issuance of the revised tariffs in b. P. Ms. No. 1014, the board sought to charge the entire energy consumed by the hoteliers at the rate applicable to category - ii (non - domestic and commercial). The board took the stand that the directions given by this court in w. P. No. 4921/82 and batch, disposed of on 28 - 6 - 83 are no longer applicable, or enforceable,after the issuance of the said revised tariffs. This stand of the board impelled the hoteliers to approach this court again in this batch of writ petitions. Some of the writ petitions filed by the hoteliers were heard and dismissed by a learned single judge of this court, ramanujulu naidu, j, against which the writ appeals in this batch are preferred.

(6) Sri j. Eswara prasad, the learned counsel for the appeallants (petitioners) urged the following contentions: (1) the revised tariffs notified in b. P. Ms. , no. 1014 seeking to treat the entire consumption of energy by hotels as 'commercial supply' is illegal and incompetent. Once the court had declared that the energy consumed by hoteliers for the prupose of manufacturing, processing and preserving the eatables is' industrial supply', it is not open to the board to notify that it is commercial supply. Such a course amounts to an attempt to overrule the judgement, which is beyond the competence of the board. No attempt has been made by the board to remove the basis of the judgement. While not doing that, it cannot just declare an industrial supply to be a commercial supply. (2) secondly, the board is under a duty cast upon it by section 49 of the electricity (supply) act, 1948, to prescribe uniform tariffs. Once the energy consumed by hoteliers for manufacturing, processing, and preserving eatables is declared to be 'industrial supply', charging it at a higher rate, giving it a table of commerical supply, amounts to discriminating it against other industrial users who are charged at a lower rate. Counsel pointed out that the judgment of chennakesav reddy. J. In w. P. No. 4921/82 and batch has become final, not having been appealed against by the board.

(7) Mr. V. R. Reddy, the learned standing counsel for the board, however, disputed the correctness of the said contentions and submitted that the revised traiffs do, in fact, remove the basis of the judgement of this court in w. P. No. 4921/82 and batch and, therefore, what has been done is perfectly valid and competent.

(8) sub - section (1) of section 49 of the electricity (supply) act, 1948, empowers the board to supply electricity to any person, not being a licensee, upon such terms and conditions as it thinks fit. It empowers the board to frame uniform traiffs for the purpose of such supply. This power is, of course, subject to the provisions of the act and the rgulations, if any, made thereunder. Sub - section (2) specifies the factors which the board should keep in mind while fixing the uniform tariffs. One of the factors so specified in sub - section (2) is:

" (a) the nature of the supply and the purposes for which it is required".

(9) Sub - section (3) declares that notwithstanding anything in sub - sections (1) and (2) , the board shall be entitled, if it considers the same necessary or expedient, to fix different tariffs for the supply of electricity to any person, having regard to the geographical position of any area, the nature of the supply,and the purposes for which the supply is required, and any other relevant factors. Sub - sec. (4) , however obliges the board not to show undue preference to any person in fixing the tariffs and terms and conditions for the supply of electricity. It is in pursuance of the power conferred by sub - section (1) of section 49 that the board has been fixing and notifying the tariffs from time to time. Over the last several decades the board has been classifying the consumers into several categories, like 'domestic consumers', 'commercial consumers', and 'industrial consumers', even among the low tension consumers. Since the cost of generating electricity, and other fixed charges are going up from time to time, the board has been revising the tariffs from time to time. While fixing the tariffs, the board is obliged to have regard to the factors specified in sub - section (2) , one of which, as stated above, is the nature of the supply and the purposes for which it is required.

" it is for this reason that the board has been fixing different tariffs for energy used for different purposes, subject to the overall obligation of fixing a uniform tariff for each purpose. Commercial purpose, and industrial purpose are two such purposes. At all points of time over the last several decades different rates have been fixed for this purpose. No complaint of any discrimination is made in these cases for prescribing a higher rate of tariff for commercial purpose, than for industrial purpose. The main grievance is that the revised tariffs notified in b. P. Ms. No. 1014 seek to over rule and nullify a judgement of this court which the board is not competent to do. Let us examine this complaint: 'domestic purpose', 'commercial purpose', 'industrial purpose', and so on, are the expressions defined in the tariffs issued by the board from time to time. These expressions are not defined either in the electricity (supply) act, or in the indian electricity act. The said categorisation has been made only by the tariffs, and for the limited' purpose of applying the appropriate rate of tariff. There is no inherent right in a consumer using energy for industrial purposes to insist upon, or demand a lesser rate than the rate prescribed for commercial supply. The categorisation, as well as the application of different rates is the creature of tariffs issued by the board under sec. 49 of the act. With this background, let us now look to the earlier tariffs notified in b. P. Ms. No. 418, dated 2 - 6 - 1981."

(10) L. T. Category - ii, as defined in the said board proceeding, read as follows: -

"l. T. Category ii: non - domestic and commercial: applicable to supply of energy for lights, fans, for non - domestic and commercial purposes excluding the loads falling under l. T. Categories i, iii to vii."

Category - ill was set out in the following words: -

"l. T. Category - iii: industrial: applicable for supply of energy for industrial purposes, contracted load is not less than 3 h. P. Or 2. 238 kw, and not more than 75 h. P. Or 56 kw. Industrial supply shall mean supply for purposes of manufacturing, processing and/or preserving."

(11) It would be immediately evident that the energy consumed by the hoteliers for purposes of manufacturing, processing, and preserving eatables could never have fallen under l. T. Category - ii. Category - ii contemplates only the energy used for lights and fans for non - domestic and commercial purposes. Energy used in electrical appliances, grinders, refrigerators, etc. Could never have fallen under l. T. Category ii. It is for this reason that a learned single judge of this court felt in w. P. No. 4921/82 and batch that energy consumed by hoteliers for the purpose of manufacturing, processing, and preserving eatables cannot, and does not fall under cagtegory - ii, but must be made to fall under category - ill i. E. , 'industrial supply'. It was held that preparation and preservation of eatables amounts to manufacturing, processing and/or preserving, within the meaning of the expression 'industrial supply' contained in b. P. Ms. No. 418. But, after this judgement, the board has changed the very basis and the method of categorisation of consumers in its revised tariffs issued in b. P. Ms. No. 1014, dt. 13. 12. 1983. Now, category - ii takes in not only the energy used for lights and fans for non - domestic and commercial purposes, but also includes

"supply of energy for lights, fans, heating and power appliances in commercial and non - domestic premises, such as shops, business houses, offices, public buildings, hospitals, hotels, hostels, choultries, restaurants, clubs. And other similar purposes"

. It is clear that the category of non - domestic and commercial consumers has been very much enlarged and broadened. Similarly, the definition of 'industrial supply' has also undergone a change. While saying that 'industrial supply' shall mean supply for purposes of manufacturing, processing, and/or preserving goods for sale, a proviso has been added in the following words:

"however, shops, business houses, offices, public buildings, hotels, hospitals, hostels, choultries, restaurants,. And,other similar premises, notwithstanding any manufacturing, processing or preserving goods for sale, shall be classified under l. T. Category ii, non - domestic and commercial"

Indubitably, the definition of "industrial purpose" has been qualified and its scope restricted. Certain purposes, which would otherwise have fallen within "industrial purpose", have - been taken out from its ambit, and are categorized as commercial supply. We are unable to see any lack of competence, or lack of legal authority in doing this. To repeat, the said categorisation has been made by the board under the tariffs notified by it, and for the purpose of the said tariffs, i. E. , for the purposes of applying different rates for different purposes of supply. It cannot also be ignored that the predominant purpose for which hotels use electricity is not for manufacturing, processing or preserving eatables, but for other purposes. Of course, there are hotels and hostels. There are hotels which have got air conditioned blocks, or air - conditioned rooms, which provide fans, lights, and several other electrical gadgets in their rooms, halls, and other places. There are other hotels where the number of rooms may be less. There are mere restaurents too. But the use of energy for purposes of preparing and preserving food is a phenomenon now coming into vogue. All these days, because of availability of cheap labour, major work in the kitchen was being done by humanbeings. It is only now, it appears, that on account of rising cost of human labour and also because of the alleged problems arising from labour laws, the hotels are turning to electrical gadgets and energy for preparation of eatables. Be that as it may, no material or data has been placed before us by the petitioners to show what percentage of energy consumed by them is consumed for the purpose of manufacturing, processing and preserving eatables, and what percentage for other purposes. Apart from the fact that the percentage may vary from hotel to hotel, no material has been supplied to know the said percentage on an aggregate basis. In the circumstances, categorizing the hotels and restaurants as 'commercial supply' cannot be said to be ex facie unreasonable, nor can it be said to be an arbitrary classification. The first contention is, accordingly, rejected.

(12) In this view of the matter, it is unnecessary for us to consider the decisions cited by mr. J. Eswara prasad in support of his proposition that the legislature has no power to overrule a judgement, though it is open to it to change the dasis of the judgement and thereby get over the judgement.

(13) The second contention of mr. Eswara prasad is more - or - less connected with the first contention. The second contention proceeds on the assumption that the purpose of manufacturing, processing and preserving food is 'industrial supply', and then it proceeds to complain that treating the said purpose as commercial purpose and charging a higher rate for it while continuing to charge other industrial users at a lesser rate, is discriminatory. But, once we remember that the said categorization is by, and for the purpose of tariffs issued by the electricity board, and that the said categorization cannot be said to be unreasonable or arbitrary, this contention is bound to fail. We may repeat that no complaint has been made before us that prescribing a higher rate for commercial supply than the rate for industrial supply is discriminatory, or arbitrary.

(14) For the above reasons, the writ appeals and the writ peitions fail and are, accordingly, dismissed; but, in the circumstances, without costs.