IMPORTANT POINTS
1. Under no circumstances, can the Court lay down what should be the proper price and direct the Electricity Board to reduce its tariff fixed u/s 49 of the Electricity (Supply) Act, as it is for the Board and the State to decide the rate at which electricity will be supplied.
2. On abolition of the central excise duty, the Electricity Board cannot be compelled to reduce the tariff regardless of the economic factors and the losses incurred by it.

Headnote:(i) Electricity-Electricity (Supply) Act, 1948-Section 49-Pricing of electricity-Charge levied by Electricity Board to respondents challenged as excessive-Whether Court is empowered to direct the Board to reduce its tariff fixed u/s 49 ?-(No)-Pricing being a matter of policy-It is for the Board and the State to decide the rate at which electricity will be supplied-High Court should not have interfered with pricing of electricity sold by Board on ground that liability to pay central excise duty had come to an end.
       Held : that the High Court was clearly in error in coming to this decision. Electricity has to be supplied by the Board to persons other than licensees at a price fixed by the Board. In fixing the price, the Board has to take into consideration various factors laid down in Section 49 of the Electricity (Supply) Act, 1948. The Board is also under a statutory mandate to charge price from its customers in such a way that the total revenue received by it in a year is more than its expenditure. Section 59 enjoins the Board to generate profit of at least 3 per cent of the value of the fixed assets of the Board. The State Government may direct the Board to generate even larger profits. (Para 2)
       Pricing is a matter of policy. It is for the Board and the State to decide the rate at which electricity will be supplied. Under no circumstances, can the Court lay down what should be the proper price and direct the Board to reduce its tariff fixed under Section 49. In effect, what the High Court has done is to direct a loss-making public undertaking to incur further losses by lowering its tariff. By giving this direction, the High Court clearly exceeded its jurisdiction and lost sight of the statutory provisions. (Para 3)
       (ii) Electricity (Supply) Act, 1948 -Section 49-Tariff fixed under-Principles on basis of which uniform tariff for supply of electricity has to be fixed-Abolition of any duty payable by Board-Board cannot be compelled to reduce the tariff regardless of economic factors and losses incurred by it-Applicability of Section 64-A of Sale of Goods Act.
       Held that the uniform tariff was fixed in conformity with the principles 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. It is not the case of the respondent-Company that the Board is making excessive profit or any profit at all. The excise duty is only one small item in the total expenditure incurred by the Board for generation of electricity. There is no law which requires the Board to reduce the tariff, if any one of the items of expenditure incurred by the Board has been reduced. (Para 23)
       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. The mechanics of price fixation has to be left to the judgment of the executive. (Para 25)
       Further held : The applicability of Section 64-A will depend upon the agreement between the parties. No evidence was led before the authorities below to show that the parties intended that the relief of excise duty if abolished or reduced would be passed on to the consumers. It was specifically stated in Clause 16.4, one of the clauses of Tariff Notification, that if the excise duty was enhanced, the tariff would be raised. No provision was made for reduction of tariff under any circumstance. The specific provision for raising tariff in case of enhancement of excise duty and absence of any such provision for reduction of tariff in case of lowering or abolition of excise duty go to show that there was no intention on the part of the Board to reduce the tariff in case of lowering or abolition of the excise duty. The provision of Section 64-A can only apply if intention to the contrary did not appear from the terms of the contract. (Para 16)

Judgement Key Points

The ratio in the context of Section 64A pertains to the principle that the fixation and adjustment of tariffs or prices are primarily matters of policy, discretion, and statutory authority vested in the relevant administrative or statutory bodies. Specifically, Section 64A emphasizes that such decisions are not automatically subject to judicial intervention solely because of changes in external factors like taxes or costs, unless there is a clear statutory obligation or contractual provision requiring such adjustments (!) .

This principle underscores that tariff fixation involves considerations of revenue sufficiency, cost recovery, and policy objectives, rather than merely reflecting fluctuations in specific components such as taxes. The section reinforces the idea that the decision-making process in tariff setting is within the domain of the authorized administrative authorities and is not automatically mandated to change in response to external fiscal changes unless explicitly provided for by law or contractual terms (!) .

Therefore, the core ratio derived from the legal principles surrounding Section 64A is that administrative discretion in tariff fixation is protected, and courts do not have the jurisdiction to compel reductions or adjustments based solely on changes in taxes or costs unless there is an explicit legal or contractual requirement to do so. This preserves the policy-making authority of the relevant bodies and maintains the separation of judicial review from policy decisions unless procedural or statutory violations occur (!) .

JUDGMENT

Sen, J.-This is an appeal from an order passed by the Patna High Court, Ranchi Bench, holding that the charge levied by Bihar State Electricity Board for supply of electricity to M/s. Usha Martin Industries, the respondents herein, was excessive as the uniform tariff was not reduced even when Excise Duty on electricity was abolished.

2. We are of the view that the High Court was clearly in error in coming to this decision. Electricity has to be supplied by the Board to persons other than licensees at a price fixed by the Board. In fixing the price, the Board has to take into consideration various factors laid down in Section 49 of the Electricity (Supply) Act, 1948. The Board is also under a statutory mandate to charge price from its customers in such a way that the total revenue received by it in a year is more than its expenditure. Section 59 enjoins the Board to generate profit of at least 3 per cent of the value of the fixed assets of the Board. The State Government may direct the Board to generate even larger profits.

3. Pricing is a matter of policy. It is for the Board and the State to decide the rate at which electricity will be supplied. Under no circumstances, can the Court lay down what should be the proper price and direct the Board to reduce its tariff fixed under Section 49. In effect, what the High Court has done is to direct a loss-making public undertaking to incur further losses by lowering its tariff. By giving this direction, the High Court clearly exceeded its jurisdiction and lost sight of the statutory provisions.

4. We are of the view that the High Court should not have interfered with the pricing of the electricity sold by the Board on the ground that the liability to pay central excise duty had come to an end on and from 1st October, 1984. Mr. Dave, appearing on behalf of the respondent-Company, has contended that the tariff fixed by the Board was inclusive of excise duty. Therefore, when the duty was withdrawn, the Board was under a legal obligation to reduce the tariff. There is nothing in the Electricity (Supply) Act, 1948 which casts upon the Board a duty to reduce the tariff which has been fixed by it in consultation with the State Government merely because any tax payable by the Board has been reduced or withdrawn. The Electricity (Supply) Act, 1948 lays down the principles on the basis of which uniform tariff for supply of electricity has to be fixed. It does not lay down anywhere in the Act that the tariff fixed by the Board in consultation with the State Government must be reduced, if for any reason the costs estimated to be incurred by the Board stands reduced on any account. Reduction of costs may take place for very many reasons including lowering or abolition of any duty payable by the Board. As a result of abolition of the central excise duty, the Board could have decided to reduce the uniform tariff. But having regard to the economic realities, the Board chose not to do so. The Board cannot be compelled to reduce the tariff regardless of the economic factors and the losses incurred by it.

5. Mr. Dave contended that, to start with, central excise duty was charged separately by the Board. It was not treated as part of the uniform tariff. But that practice was abandoned by the Board on and from the 6th April, 1979. Central excise duty was imposed on generation of electricity at the rate of 0.02 paise per unit for the first time in 1978. The Board thereupon levied a surcharge at the rate of 0.03 paise per unit on consumption of electricity by a Notification which was as under :-

"Bihar State Electricity

Board, Patna

Notification

No. Com/TAR-1003/78/265/Patna

the 13th May, 1978

In partial modification of notification No. Com/IAR/ 1037/75/315 dated the 12th July, 1975, it is hereby notified for general information that consequent upon imposition of Central Excise Duty by the Govt. of India on electricity generation and by virtue of the powers conferred under Sections 46 and 49 of the Electricit

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1997 Supreme(SC) 855

Cases Referred (2)