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Hindustan Petroleum ... v. Karnataka Electricit...
Structured Summary of Judgment — Appellate Tribunal for Electricity (Appeal No.83 of 2019)
Factual and Procedural Background
This appeal was filed by Hindustan Petroleum Corporation Limited (HPCL) against an order dated 14.05.2018 passed by the Karnataka Electricity Regulatory Commission (KERC). The KERC order arose from a petition filed by Respondent Chamundeshwari Electricity Supply Corporation Ltd. (CESCOM) concerning annual performance review for FY 2017-18, revision of annual revenue requirement for FY 2019-20 and revision of retail supply tariff for FY 2019-20.
HPCL challenged the portion of the KERC order whereby the activity at HPCL's petrol/diesel storage plant (terminal) was categorized as tariff category HT-2(b) (commercial), whereas HPCL contended it ought to have been classified under HT-2(a) (industrial). HPCL had submitted an objection to the public notice during CESCOM's proceedings explaining the operational and processing activities carried out at its terminal.
The Appellate Tribunal heard the matter by video conference due to pandemic conditions and delivered an oral judgment on 07 April 2022.
Legal Issues Presented
- Whether the KERC was correct in categorizing HPCL's petrol/diesel terminal as tariff category HT-2(b) (petrol/diesel and oil storage plants — commercial) for FY 2019-20 rather than HT-2(a) (industrial).
- Whether the impugned KERC order adequately considered and reasoned upon the submissions and objections made by HPCL regarding the nature of the activity at its terminal.
- Whether, if the Commission were to re-categorize HPCL in the HT-Industrial category, such re-categorization should be applied retrospectively or prospectively (given that payments may already have been made under the impugned order).
Arguments of the Parties
Appellant's (HPCL) Arguments
- HPCL described the operational stages at its terminal as including: drawing products for further distribution in bulk/wholesale, storage (short duration), packing/distribution, and blending/doping of products (e.g., for domestic vs commercial kerosene distinctions).
- HPCL emphasized that its tanks are not used for long-term storage; products are received via pipeline and typically remain only a few hours for quantification before onward dispatch — the product "comes and goes" continuously.
- HPCL characterized the Hassan terminal as a processing plant linked to a petroleum pipeline project rather than a mere petrol/diesel storage plant.
- HPCL detailed specific industrial processes performed at the terminal, including blending operations to produce:
- Gasohol (10% ethanol blended into petrol) — receipt of motor spirit via pipeline and procurement/storage/blending of additives such as Ethanol, Erganite and Anti-oxidants;
- Power Fuel — receipt of motor spirit and procurement/storage/blending of additives ("Petrol Plus B+");
- Turbojet Fuel — receipt of high speed diesel and procurement/storage/blending of additive ("Diesel Plus A").
- HPCL's submission included diagrammatic annexures (annexure-1 series) illustrating the processes before the Commission.
Respondent(s) — CESCOM / KERC
- The record indicates that CESCOM's counsel did not contest the factual account advanced by HPCL in the proceedings before the Tribunal (the learned counsel for CESCOM "did not plead to the contrary").
- CESCOM's counsel pointed out before the Tribunal that the impugned KERC order had, in any event, "run its course" and been taken over by subsequent tariff orders (i.e., subsequent tariff orders had superseded it).
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Tribunal's reasoning followed these steps, based strictly on the material in the opinion:
- Mode of Hearing: The matter was heard by video conference because in-person hearings were not advisable during the pandemic.
- Narrow Focus of the Appeal: The Tribunal identified the specific grievance — that KERC's impugned order categorized HPCL's terminal as HT-2(b) (commercial) instead of HT-2(a) (industrial), contrary to HPCL's contention that its terminal carries out industrial processing activities.
- Review of Submissions: The Tribunal noted that HPCL had filed a detailed objection during CESCOM's tariff proceedings describing operational processes (receipt by pipeline, blending, short-term storage, production of specialised fuels), and had provided annexures illustrating those processes.
- Comparison with KERC's Tariff Descriptions: The impugned order had itself set out the descriptions of the HT-2(a) and HT-2(b) tariff schedules. HT-2(a) included items applicable to "Industries" and listed "petroleum pipeline projects" among other industry-type entries. HT-2(b) expressly listed "Petrol / Diesel and Oil storage plants" among commercial-type entries.
- Failure to Address Submissions: The Tribunal found that the KERC's impugned order did not address the appellant's specific contentions about the true nature of activities at the terminal — there was no discussion of HPCL's submissions in the impugned order, not even a remote engagement with the arguments presented.
- Consequent Inability to Uphold: Given the absence of a reasoned response by the Commission to the appellant's submissions on categorization, the Tribunal stated it could not uphold that part of the impugned order.
- Remittal and Direction: The Tribunal directed that the issue be remitted to the respondent Commission (KERC) with instructions to pass a fresh, detailed order on the subject after hearing HPCL and any other stakeholders who may have an interest. The Tribunal left open the question whether, if HPCL is placed in the HT-Industrial category, the change should be retrospective or prospective, since payments may already have been made under the impugned order — that determination was left to the Commission.
- Time Expectation: The Tribunal observed the matter had lingered and directed that the Commission resolve the issue preferably within three months.
Holding and Implications
Core Holding: The appeal was disposed of by remitting the categorization issue back to the Karnataka Electricity Regulatory Commission with a direction to pass a fresh and detailed reasoned order after hearing the appellant and other interested parties.
Direct Consequences for the Parties
- The Tribunal did not uphold the impugned order to the extent it categorized HPCL's terminal as HT-2(b) without addressing HPCL's submissions.
- The KERC is required to conduct a fresh consideration and provide a reasoned order addressing HPCL's contentions about the nature of activities at its terminal (including processing and blending operations) and determine the appropriate tariff classification.
- The KERC must also determine whether any re-classification (if granted) should apply retrospectively or from a future date; the Tribunal left this specific remedial question for the Commission to decide in view of payments already made under the impugned order.
- The Tribunal requested the Commission to take up and decide the matter preferably within three months of the Tribunal's order.
Wider Legal Implications
The opinion does not articulate broader precedent-setting legal principles beyond directing that a regulatory order must engage with and reason upon material submissions made by affected parties. The Tribunal's remedial step was a factual and procedural remand to obtain a reasoned decision from the Commission; the opinion contains no citation of precedent or formulation of a novel legal rule.
Disposition: The appeal is disposed of in the terms set out above (as pronounced on 07 April 2022).
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
NEW DELHI
(APPELLATE JURISDICTION)
APPEAL NO.83 OF 2019
Dated: 07.04.2022 Present: Hon'ble Mr. Justice R.K. Gauba, Officiating Chairperson Hon'ble Mr. Sandesh Kumar Sharma, Technical Member In the matter of:
HINDUSTAN PETROLEUM CORPORATION LIMITED
Through The Dy.General Manager Mangalore Terminal
Village Bala, Via Katipala,
Mangalore - 575 030 …. Appellant(s)
VERSUS
1. KARNATAKA ELECTRICITY REGULATORY COMMISSION
[Through its Secretary] No.16, C-1, Millers Tank Bed Area, Vasanth Nagar, Bengalure-560052
Karnataka, India
2. CHAMUNDESHWARI ELECTRICITY SUPPLY
CORPORATION LTD.
[Through its Managing Director] No.29, Kaveri Grameena Bank Road, Hinkal, Vijaynagar, 2nd Stage,
Mysore-570 017
… Respondent(s)
Counsel for the Appellant (s) : Mr. Anand K. Ganesan Counsel for the Respondent (s) : Mr. Darpan K.M. Ms. Amrita Sharma
Mr. Rajat Jonathan Shaw for R-1
Mr. Sriranga Subbanna, Sr. Adv.
Ms. Sumana Nagand
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Ms. Medha M. Puranik Ms. GayathriSriram Mr. Sanjay Reddyfor R-2
J U D G M E N T (Oral) PER HON'BLE MR. JUSTICE R.K. GAUBA, OFFICIATING CHAIRPERSON
1. This matter has been taken up by video conference mode on account of pandemic conditions, it being not advisable to hold physical hearing.
2. The Appeal is by Hindustan Petroleum Corporation Limited (HPCL), a public sector company, engaged in the business of marketing petroleum and petroleum products. It seeks to question the correctness, legality and propriety of the order dated 14.05.2018 passed by the Karnataka Electricity Regulatory Commission (KERC) on the petition for annual performance review for financial year (FY) 2017-18, revision of annual revenue requirement for FY 2019-20 and revision of retail supply tariff for FY 2019-20 of Respondent Chamundenshwari Electricity Supply Corporation Limited (CESCOM) to the extent thereby the activity in the nature of the petrol/diesel storage plant operated by the appellant was categorized as HT-2(b) for FY 2019-20, the result being that the appellant's activities have been treated as commercial as against its claim that it should have been subjected to tariff for industrial category - HT-2(a).
3. It appears when the petition of CESCOM was under consideration in response to the public notice that would have been issued and published, the appellant had submitted its objection on the above issue. It is appropriate to extract the following portion of the submission made by the appellant in the said objection petition:
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"8. It is submitted that the activity involved at each stage includes the following:
a) Drawing the products for further distribution in bulk or wholesale;
b) Storage;
c) Packing in special containers or distribution in bulk or wholesale and also for usage of the consumers;
d) Blending of certain other products and doping of Kerosene oil for differentiating the same for domestic and commercial uses;
9. The tank at HPCL's terminal are not meant for "storing"
petrol/diesel products for days but for receiving the product from the pipeline and keep it their only for a few hours i.e. the time required for quantification of the product received. The product comes and goes out on a continuous basis and there is hardly any time left for the product to remain in the stored condition beyond a few hours.
10. I state that Hassan Terminal of HPCL is not a Petrol/Diesel and Oil storage plant rather it is a processing plant with petroleum pipeline project. The nature of activity carried at the Petitioner Corporation is purely an industrial activity which involves various processes detailed below as per the requirement of the Retailer:
I.Gasohol Product:As per Government of India norms, HPCL is required to blend 10% ethanol in petrol as a measure to reduce carbon emissions. Industrial Process involved for processing of Gasohol is Receipt of Motor Spirit thru Petroleum Pipe Line and procurement of following addictives:
A. Ethanol,
B. Erganite
C. Anti Oxidents
These addictives are procured from outside agencies. These different addictives are stored in different Tanks and are pumped to blending unit where the proper blending of all these addictives takes places with Motor Spirit and the blended product is called Gasohol which is directly supplied to Retailers as per requirement.
II. Power Fuel: Power Fuel is a speciality petrol produced and marketed by HPC Industrial Process involved for processing of Power Fuel is Receipt of Motor Spirit thru Petroleum Pipe Line and procurement of addictives "Petrol Plus B +" from outside agencies.
Storing the same in different Tanks and pumping to blending unit where the proper blending of addictive takes place with Motor Spirit, changing the characteristics of the parent product and the
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blended product is called Power Fuel which is directly supplied to Retailer as per requirement.
III. Turbojet Fuel: Turbojet fuel is a speciality diesel product produced and marketed by HPCL. Industrial process involved for processing of Turbojet fuel is receipt of High Speed Diesel thru Petroleum Pipe Line and procurement of addictive called "Diesel Plus A" from outside agencies.
These products are pumped to blending unit where the proper blending of both the products takes place, which changes the characteristics of the parent product and the blended product is called Turbojet Fuel which is directly supplied to Retailer as per requirement.
The diagrams of the said process are annexed as annexure-1 series for the kind reference of the Commission".
4. The Commission by the impugned order has described the activities covered by tariff schedule for HT-2(a) in the impugned order as under:
"TARIFF SCHEDULE HT-2(a)
Applicable to Industries, Factories, Workshops, Research & Development Centres, Industrial Estates, Milk dairies, Rice Mills, Phova Mills, Roller Flour Mills, News Papers, Printing Press, Railway Workshops/KSRTC Workshops/ Depots, Crematoriums, Cold Storage, Ice & Ice-cream mfg. Units, Swimming Pools of local bodies, Water Supply Installations of KIADB and other industries, all Defence Establishments. Hatcheries, Poultry Farm, Museum, Floriculture, Green House, Bio Technical Laboratory, Hybrid Seeds processing Units, Stone Crushers, Stone cutting, Bakery Product Manufacturing Units, Mysore Palace illumination, Film Studios, Dubbing Theatres, Processing, Printing, Developing and Recording Theaters, Tissue Culture, Aqua Culture, Prawn Culture, Information Technology Industries engaged in development of Hardware & Software, Information Technology (IT) enabled Services / Start-ups (As defined in GOI notification dated 17.04.2015)/ Animation / Gaming / Computer Graphics as certified by the IT & BT Department of GOK/GOI, Drug Mfg. Units, Garment Mfg. Units, Tyre retreading units, Nuclear Power Projects, Stadiums maintained by Government and local bodies, Railway Traction, Effluent treatment plants and Drainage water treatment plants owned other than by the local bodies independently serviced outside the premises of industries/ Buildings for which the HT power supply is availed, LPG bottling plants, petroleum pipeline projects, Piggery farms, Analytical Lab for analysis of ore metals, Saw Mills, Toy/wood industries, Satellite
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communication centres, Mineral water processing plants / drinking water bottling plants and Solid Waste Processing Plant."
(Emphasis supplied)
5. In contrast, the activities covered by the tariff schedule for HT-2(b) category has been described and set out in the impugned order as under:
"TARIFF SCHEDULE HT-2(b)
Applicable to Commercial Complexes, Cinemas, Hotels, Boarding & Lodging, Amusement Parks, Telephone Exchanges, Race Course, All Clubs, T.V. Station, All India Radio, Railway Stations, Air Port, KSRTC bus stations, All offices, Banks, Commercial Multi-storied buildings. APMC Yards, Stadiums other than those maintained by Government and Local Bodies, Construction power for irrigation, Power Projects and Konkan Railway Project, Petrol / Diesel and Oil storage plants, I.T. based medical transcription centers, telecom, call centers, BPO/KPO, Diagnostic centres, concrete mixture (Ready Mix Concrete) units and Private Guest Houses / Travelers Bungalows.
(Emphasis supplied)
6. The learned counsel for the appellant submitted, and the learned counsel for respondent/CESCOM did not plead to the contrary, that the impugned order of KERC does not dwell at all on the contentions raised by the appellant in the objection petition glossing them over. There is no discussion, not even a remote one, on the submissions made by the appellant before the Commission on the subject of categorization.
7. In these circumstances, we are unable to uphold the order to the said extent questioned. The learned counsel for the second respondent (CESCOM), however, pointed out that the impugned order has since run its course, it having been taken over by subsequent tariff orders. Be that as it may, the question of appropriate categorization by a reasoned order is still required so that error, if any committed, does not perpetuate. In these
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circumstances, we direct a remit of the issue to the respondent Commission which shall pass a fresh detailed order on the subject after hearing the appellant and other such parties as may have a stake in the matter. Since payments would have been made in terms of the impugned order, we leave the issue as to whether the inclusion of the appellant in the HT-Industrial Category, if so granted by the Commission, should be applied retrospectively or from a future date.
8. Needless to add, given the fact that the issue has lingered all these years, it is desirable that the Commission takes a fresh call at the earliest, preferably within three months hereof. We order accordingly.
9. The appeal is disposed of in above terms.
PRONOUNCED IN THE VIRTUAL COURT THROUGH VIDEO CONFERENCING
ON THIS 07th DAY OF APRIL, 2022.
(Sandesh Kumar Sharma) (Justice R.K. Gauba) Technical Member Officiating Chairperson
pr/tp
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