Tariff benefits, cement & electricity

Written by Indu Bhan | Indu Bhan | Updated: Jun 30 2010, 03:09am hrs
SC upholds withdrawal of power tariff benefits

Setting aside the Uttaranchal High Court ruling, the Supreme Court has upheld the withdrawal of certain tariff benefits in electricity charges to industrial units in the state. While the units enjoyed tariff benefits in the undivided UP state, these were withdrawn after Uttaranchal came into being in 2001. The erstwhile Uttar Pradesh Power Corp (UPPC) had granted exemption to M/s Kashi Vishwanath Steels Ltd, a steel rolling mill, from payment of 15% surcharge. However, after the Allahabad High Court, in another case, upheld the levy of surcharge, the Uttarakhand Power Corp also withdrew exemption granted by the erstwhile UPPC to the mill.

The firm challenged the government action in the Uttaranchal High Court, which ruled in its favour. The Uttaranchal Power Corp moved the Supreme Court, arguing that it had not made any promise to the industry that the benefits given by UP would continue in the new state. The Supreme Court accepted the contention and allowed the appeal. Uttaranchal Power Corp senior counsel Shanti Bhushan contended that there was no question of any promise having made either by the UPPC or the Uttarakhand Power Corp.

The circular issued by the UP authorities modifying the tariff prescribed by the regulatory commission was without jurisdiction and could be recalled by the Uttarakhand Power Corp with effect from the date of issue. Kashi Vishwanath Steels argued that since a promise was found to have been made by UPPC to other consumers and since the promise was enforceable, there was no justification for taking a different view as far as it was concerned. It submitted that once UPPC was held to be bound by the promise made by it, the Uttaranchal Corp had no option but to make the promise good and it could not retrospectively withdraw the same to recover money that even UPPC would not have been entitled to recover.

Madras Cement claim for Modvat credit dismissed

The Supreme Court has rejected the plea of Madras Cements Ltd, which manufactures cement and clinker, claiming Modvat credit during 1999 on certain goods that it maintained were capital goods eligible for the benefit. The department had issued a showcause notice in 2000 asking the assessee to show cause as to why the amount of Modvat credit of around Rs 8.43 lakh should not be disallowed and recovered with penalty and interest at 20% rate per annum under the Central Excise Rules 1944 as the same was availed on ineligible capital goods.

The Customs, Excise and Service Tax Appellate Tribunal had upheld the order of the Commissioner (Appeals) that disallowed Modvat credit of around Rs 4.32 lakh on some of the items saying the items were not capital goods. Senior counsel AK Ganguli, appearing for the assessee, asserted that the parts of the bucket elevator and wagon loaders belonged to the machinery embedded in the mining complex and were an integral part of the factory, and therefore, entitled to Modvat credit under Rule 57-Q of the Central Excise Rules.

Opposing Madras Cements plea, Additional Solicitor General Gaurav Banerjee contended that the assessee was not able to identify the machinery for which the goods in the form of components, spares and accessories had been used. In the absence of such identification, it was not possible for the authorities to come to a decision as to whether benefit would be given with respect to the goods in question, he added.

Kanpur Electric Supply Cos plea turned down

In a dispute between Kanpur Electric Supply Co Ltd and LML Ltd over power dues, the Supreme Court has dismissed the formers appeal against the Allahabad High Court judgement that gave relief to the latter. Two-wheeler company LML had asked the power supply company to reduce the load from 8 MVA to 1.2 MVA, as it was facing a financial crunch.

After the supplier granted relief, LML was declared a sick unit under the Sick Industrial Companies Act and a relief undertaking under the UP Industrial Undertaking (Special Provisions for Prevention of Unemployment) Act in June 2004.

However, Kanpur Electric Supply had sent bills at the rate of the old consumption and the bills were challenged in the high court, which ruled in favour of the two-wheeler manufacturer. Even the apex court dismissed Kanpur Electric Supplys plea while observing that this case is an example of how a positive decision taken to help a struggling industry to find its feet can be scuttled by legalese, although an agreement had been reached between the parties regarding payment of the arrears in instalments along with the dues, and despite the same being duly followed by the company.

However, the court clarified that this would not prevent the power company from taking appropriate steps against LML if the latter commits default in paying the instalments as directed by the BIFR towards the arrears or in respect of the current electricity bills. It further said that what is difficult to comprehend is the inscrutable manner in which decisions arrived at in common are sought to be negated on account of bureaucratic lethargy. While additional solicitor general Parag Tripathy argued for the power company, LML was represented by counsel ML Lahoty.