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2019 (2) TMI 1473 - SC - Indian LawsSEZ Unit - Goods imported/procured by the respondent for authorized operations - Withdrawal of exemption of all duties under the Customs Act, Customs Tariff Act, Central Excise Act, etc. vide notification dated 06.04.2015 - PPAs dated 07.08.2008 and 02.02.2007 - inclusion of cost by way of payment of tax consequent to withdrawal of the exemption notifications - Held that - A reading of Article 13 of PPA as a whole leads to the position that subject to restitutionary principles contained in Article 13.2, the adjustment in monthly tariff payment, in the facts of the present case, has to be from the date of the withdrawal of exemption which was done by administrative orders dated 06.04.2015 and 16.02.2016. The present case, therefore, falls within Article 13.4.1(i). This being the case, it is clear that the adjustment in monthly tariff payment has to be effected from the date on which the exemptions given were withdrawn. This being the case, monthly invoices to be raised by the seller after such change in tariff are to appropriately reflect the changed tariff. On the facts of the present case, it is clear that the respondents were entitled to adjustment in their monthly tariff payment from the date on which the exemption notifications became effective. This being the case, the restitutionary principle contained in Article 13.2 would kick in for the simple reason that it is only after the order dated 04.05.2017 that the CERC held that the respondents were entitled to claim added costs on account of change in law w.e.f. 01.04.2015. This being the case, it would be fallacious to say that the respondents would be claiming this restitutionary amount on some general principle of equity outside the PPA. Since it is clear that this amount of carrying cost is only relatable to Article 13 of the PPA, we find no reason to interfere with the judgment of the Appellate Tribunal. The restitutionary principle contained in Clause 13.2 must always be kept in mind even when compensation for increase/decrease in cost is determined by the CERC. Appeal dismissed.
Issues Involved:
1. Entitlement to compensation for change in law under Article 13 of the PPAs. 2. Entitlement to carrying cost due to the withdrawal of exemption notifications. 3. Interpretation of Article 13 of the PPAs regarding restitutionary principles. 4. Applicability of previous judgments to the current case. Detailed Analysis: 1. Entitlement to Compensation for Change in Law: The appellants, distribution licensees in Haryana and Gujarat, entered into Power Purchase Agreements (PPAs) with the respondent, a generating company. The respondent sought compensation under Article 13 of the PPAs due to the withdrawal of exemptions by the Ministry of Commerce and Industry on duties and taxes, which were initially granted under the SEZ Act. The Central Electricity Regulatory Commission (CERC) allowed the respondent's claim for added costs due to the withdrawal of exemptions, recognizing it as a change in law. 2. Entitlement to Carrying Cost: The CERC initially denied the respondent's claim for carrying cost, stating that there was no provision in the PPAs for such payment from the date of change in law until the Commission's approval. However, the Appellate Tribunal for Electricity overturned this decision, stating that the principle of restitution under Article 13.2 of the PPAs entitled the respondent to carrying cost from the effective date of change in law until the approval by the appropriate authority. 3. Interpretation of Article 13 of the PPAs: Article 13.2 of the PPAs embodies a restitutionary principle, aiming to restore the affected party to the same economic position as if the change in law had not occurred. This principle was divided into two periods: the construction period and the operation period. During the operation period, compensation for any increase/decrease in revenues or costs to the seller is determined by the appropriate Commission and is payable only if it exceeds a specified threshold. The Supreme Court held that the adjustment in monthly tariff payments should be effective from the date the exemptions were withdrawn, thus supporting the respondent's claim for carrying costs under Article 13. 4. Applicability of Previous Judgments: The Supreme Court reviewed several previous judgments cited by the appellants and respondents. It was concluded that: - The judgment in South Eastern Coalfields Ltd. v. State of Madhya Pradesh and Ors. did not apply as the claim for carrying costs was under Article 13 of the PPAs, not a general principle of equity. - The judgment in National Thermal Power Corporation Ltd. v. Madhya Pradesh State Electricity Board was distinguished as it dealt with a different regulatory framework. - The judgment in Indian Council for Enviro-Legal Action v. Union of India and Ors. was not applicable as it dealt with restitutionary principles in the context of environmental pollution. - The judgment in All India Power Engineer Federation and Ors. v. Sasan Power Ltd. and Ors. was irrelevant as it pertained to Section 63 of the Electricity Act. - The judgment in Energy Watchdog v. Central Electricity Regulatory Commission and Ors. reinforced the restitutionary principle in Clause 13.2 of the PPAs. Conclusion: The Supreme Court upheld the Appellate Tribunal's decision, affirming that the respondent was entitled to carrying costs due to the change in law under Article 13 of the PPAs. The appeals were dismissed, and the restitutionary principle was emphasized as central to compensating the affected party for changes in law.
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