1997 (5) TMI 410 - SC - Central Excise

Can can the Court lay down what should be the proper price and direct the Board to reduce its tariff fixed under Section 49? Held that - In the instant case, after imposition of Central Excise Duty on production of electricity at the rate of 0.02 paise per unit, the Board did not revise the uniform tariff, but decided to levy a surcharge of 0.03 paise per unit even though the duty payable was only 2 paise per unit. Reasons have been given in justification for surcharge of 3 paise per unit even though the duty levied was only 2 paise per unit which were found valid by the Division Bench of the Patna High Court. On and from 2.6.1979, the surcharge was merged in uniform tariff by a notification issued by the Board. There is no dispute that the uniform tariff was fixed in conformity with the principle contained in section 49 of the Act. Along with other costs incurred by it, the Board also took into account the excise duty payable by the Board. The Central Excise Duty has been merged in the uniform tariff. The petitioner, in effect, is seeking a reduction of the uniform tariff fixed by the Board. It is not the case of the petitioner that the tariff has been fixed regardless of considerations which have to be taken into account under section 49.Thus the High Court was clearly in error in directing modification of the tariff fixed by the Board. Appeal allowed.

Issues Involved:
1. Excessive charge levied by Bihar State Electricity Board.
2. Jurisdiction of the High Court in interfering with the tariff fixed by the Board.
3. Obligation of the Board to reduce tariff post-abolition of Central Excise Duty.
4. Applicability of Section 64-A of the Sale of Goods Act, 1930.
5. Statutory power of the Board in fixing tariff.

Issue-wise Detailed Analysis:

1. Excessive Charge Levied by Bihar State Electricity Board:
The Patna High Court, Ranchi Bench, held that the charge levied by Bihar State Electricity Board for the supply of electricity to the respondent was excessive as the uniform tariff was not reduced even when Excise Duty on electricity was abolished. The Supreme Court found this decision erroneous. The Board is mandated to fix prices considering various factors laid down in Section 49 of the Electricity (Supply) Act, 1948, and to ensure that the total revenue exceeds its expenditure as per Section 59, which requires generating a profit of at least 3% of the value of the fixed assets.

2. Jurisdiction of the High Court in Interfering with the Tariff Fixed by the Board:
The Supreme Court held that pricing is a matter of policy for the Board and the State to decide. The Court cannot lay down what should be the proper price and direct the Board to reduce its tariff fixed under Section 49. The High Court exceeded its jurisdiction by directing a loss-making public undertaking to incur further losses by lowering its tariff.

3. Obligation of the Board to Reduce Tariff Post-Abolition of Central Excise Duty:
The respondent contended that the tariff fixed by the Board was inclusive of excise duty, and thus, the Board was under a legal obligation to reduce the tariff when the duty was withdrawn. The Supreme Court found no provision in the Electricity (Supply) Act, 1948, that mandates the Board to reduce the tariff merely because any tax payable by the Board has been reduced or withdrawn. The tariff fixed in consultation with the State Government does not have to be reduced if the costs estimated to be incurred by the Board stand reduced.

4. Applicability of Section 64-A of the Sale of Goods Act, 1930:
The respondent argued that Section 64-A of the Sale of Goods Act recognizes the right of the purchaser to claim the relief of abolition of Central Excise Duty by decreasing the rate of tariff. The Supreme Court noted that this argument was not raised before the lower authorities and that the applicability of Section 64-A depends on the agreement between the parties, which was not evidenced. Clause 16.4 of the Tariff Notification specifically provided for raising the tariff in case of enhancement of excise duty but made no provision for its reduction, indicating no intention to reduce the tariff upon the abolition of excise duty.

5. Statutory Power of the Board in Fixing Tariff:
The Supreme Court emphasized that the tariff is fixed by the Board through the exercise of statutory power, not through bargaining between the Board and the consumer. The price fixed included Central Excise Duty, which was merged in the tariff from April 6, 1979. The general principle of law, as stated in Love v. Norman Right (Builders) Ltd. and applied in Hindustan Sugar Mills v. State of Rajasthan, is that the purchaser pays the entire price inclusive of taxes, which forms the consideration for the sale. The Board's uniform tariff, which included the excise duty, was fixed in conformity with Section 49 of the Act, and there is no law requiring the Board to reduce the tariff if any item of expenditure is reduced.

Conclusion:
The Supreme Court concluded that the High Court was in error in directing the modification of the tariff fixed by the Board. The appeal was allowed, and the impugned judgment of the High Court was set aside, with no order as to costs.

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