Jurisdiction U/S 126 Electricity Act Cannot Be Enlarged By Other Violations: Telangana High Court Quashes ₹81L Assessment Against ITC
The Bench held that the utilisation of captive power by an EPC contractor for the company's own expansion project does not amount to "unauthorised use of electricity".
The Telangana High Court has held that the jurisdiction of an Assessing Officer under Section 126 of the Electricity Act, 2003, dealing specifically with unauthorised use of electricity, cannot be stretched to cover every alleged non-compliance with other statutory provisions such as Sections 9 or 42 governing captive generation and open access, and on this basis quashed a provisional assessment of over Rs. 81 lakh raised against ITC Limited.
The Court held that electricity generated from the company's own captive power plant and used to run construction activity for its own upcoming paper machine and co-generation plant did not become "unauthorised use" merely because the physical construction work was carried out through an independent EPC contractor, since corporate personality of the contractor alone cannot determine consumption of electricity.
A Bench of Justice Nagesh Bheemapaka observed, “…According to respondents, their allegation essentially is that petitioner failed to comply with the statutory mechanism governing open access and supply of electricity to another entity. Such alleged non-compliance may, if otherwise established, attract consequences contemplated under those statutory provisions. However, respondents have not demonstrated how every alleged breach of Sections 9 or 42 automatically becomes ‘unauthorised use of electricity’ under Section 126. The jurisdiction under Section 126 cannot be enlarged by importing alleged violations of other provisions of the Act or Regulations”.
Senior Advocate K. Gopal Choudary appeared for the petitioner and A. Chandra Shaker, Standing Counsel appeared for the petitioner.
ITC operates a paper and paperboard manufacturing unit at Sarapaka, Khammam District, along with several captive co-generation plants generating far in excess of its own requirement. While expanding its facility with a new paper machine and a 25 MW co-generation plant, it engaged M/s Shapoorji Pallonji & Co. Ltd. as EPC contractor and supplied electricity free of cost for the construction work, drawn entirely from its captive plants. Following an inspection on November 5 2011, the distribution company issued a provisional assessment dated November 29, 2011 under Section 126, alleging unauthorised use and re-sale of electricity to the contractor, and treating the absence of prior permission for the extension project as amounting to theft of energy.
The respondents resisted the petition on maintainability, contending that an efficacious alternative remedy existed under Section 42(5) of the Act, relying on the Supreme Court's ruling in Executive Engineer v. Sri Seetharama Rice Mill.
On merits, they argued that supply to Shapoorji Pallonji, a separate legal entity, amounted to "supply" under Section 2(70), attracting compliance with Sections 9 and 42, Open Access Regulation 2 of 2005, and the Interim Balancing Settlement Code, Regulation 2 of 2006, relying on A.P. Gas Power Corporation Ltd. v. A.P. State Regulatory Commission. ITC maintained that the electricity never left its own premises, that the contractor merely executed ITC's own project, and that Seetharama Rice Mill was distinguishable since it concerned excess supply by a licensee, not captive generation.
The Court found that the foundational fact that the electricity originated from ITC's own captive plant remained undisputed, and that the real question was the nature and purpose of consumption rather than the contractor's separate corporate status.
It observed that alleged non-compliance with Sections 9 or 42 could attract consequences under those provisions but did not automatically constitute "unauthorised use" under Section 126, and noted that the respondents had themselves not invoked Section 135, dealing with theft, despite using that language in the impugned order.
Accordingly, the Court allowed the writ petition and set aside the provisional assessment dated November 29 2011, with no order as to costs.
Cause Title: ITC Limited v. Northern Power Distribution Company of Andhra Pradesh Ltd. & Ors., Writ Petition No. 32607 of 2011
Appearances:
Petitioner: K. Gopal Choudary, Senior Counsel.
Respondents: A. Chandra Shaker, Standing Counsel.