IMPORTANT POINTS
1st Tariff Order does not apply to projects not choosing to be governed by the scheme u/s 32.
Section 32 of IT Act does not relieve the power producer from its contractual obligation under PPA.

Headnote:(a) Electricity Act, 2003 – Sections 61(h), 62(1)(a) and 86(1)(e) r/w Section 32(1)(i), Income Tax Act, 1961 and Rule 5(1A), Income Tax Rules, 1962 – 1st Tariff Order – Stipulation of “benefit of accelerated depreciation” u/s 32(1)(i) – An undertaking has an option to claim depreciation u/s 32(1)(i) – 1st Tariff Order does not apply to projects not choosing to be governed by the scheme u/s 32. (Para 16, 18)
       (b) Electricity Act, 2003 – Sections 61(h), 62(1)(a) and 86(1)(e) r/w Section 32(1)(i), Income Tax Act, 1961 and Rule 5(1A), Income Tax Rules, 1962 – 1st and 2nd Tariff Order – Stipulation of “benefit of accelerated depreciation” u/s 32(1)(i) – Power Purchase Agreement (PPA) – Power producer may opt not to avail benefits of section 32(1)(i) entitling it to wriggle out of 1st Tariff Order – However option u/s 32 does not relieve it from its contractual obligation under PPA – PPA not making any reference to “benefits of accelerated depreciation” – PPA does not ‘entitle’ the 1st respondent to 2nd Tariff Order – PPA stipulating 2nd Tariff Order to apply only to projects commissioned within control period – Failing that Appellant to pay tariff as determined by GERC on date of commissioning or as per 2nd Tariff Order whichever is lower. (Para 26, 28, 29)
       (c) Electricity Act, 2003 – Section 125 – Appeal to Supreme Court – Maintainability – Requirement of substantial question of law – Instant appeal held maintainable. (Para 35)
       Facts of the case:
       Under the said order, tariff for procurement of electricity generated by PROJECTS employing Solar Photovoltaic (SPV) Technology was fixed at Rs.15 per kWh for the initial 12 years starting from the date of commercial operation of the project and Rs.5 per kWh from the 13th year to 25th year. The said order was declared to have had come into force w.e.f. 29.01.2010.
       The appellant and 1st respondent entered into a Power Purchase Agreement (PPA) dated 09.12.2010 for sale and purchase of electricity from the 5 MW project to be established by the 1st respondent in Surendra Nagar district of Gujarat. The provisions relevant for the dispute in the present appeal are Clauses 5.1 & 5.2.
       The 1st respondent commissioned its PROJECT only on 2.3.2012, i.e., beyond the “control period”.
       The 1st respondent, therefore, filed a petition no.1270 of 2012 before the State Commission praying for declaration that the it is entitled to claim the tariff applicable to megawatt scale solar photovoltaic projects not availing of accelerated depreciation as per tariff order dated 27.1.2012.
       The 2nd respondent held that the 1st respondent is entitled for the benefit of the tariff specified in the 2nd Tariff Order dated 27.01.2012.
       The appellant preferred an appeal before the Appellate Tribunal for Electricity. By the impugned order dated 20.11.2014, the Appellate Tribunal confirmed the order of the 2nd respondent.
       Finding of the Court:
       Impugned judgment is not sustainable.
       Result: Appeal allowed with cost.

JUDGMENT

Chelameswar, J.

1. The 2nd respondent herein, the Gujarat Electricity Regulatory Commission is a body constituted under Section 82 of the Electricity Act, 2003 (hereinafter referred to as “the Act”). In exercise of its statutory powers under Sections 61(h), 62(1)(a) and 86(1)(e) of the Act the 2nd respondent issued Order No.2 of 2010 dated 29.01.2010 (hereinafter referred to as the 1st Tariff Order”) determining the tariff for procurement of power by the Distribution Licensees in Gujarat from Solar Energy Projects[The Tariff Order uses the term ‘Solar Energy Projects’ and the PPA uses the term ‘Solar Power Projects’. The terms ‘Solar Power Projects’ and ‘Solar Energy Projects’ are identical. Hereinafter, we use the term ‘PROJECTS’ to denote them.]. The said order was issued after an elaborate consideration of the various relevant factors including the policy guidelines of the State of Gujarat and Union of India. Under the said order, tariff for procurement of electricity generated by PROJECTS employing Solar Photovoltaic (SPV) Technology was fixed at Rs.15 per kWh for the initial 12 years starting from the date of commercial operation of the project and Rs.5 per kWh from the 13th year to 25th year. The said order was declared to have had come into force w.e.f. 29.01.2010. Various financial and operational parameters taken into consideration for determining the tariff are mentioned at para 4 of the said Order. [Para 4. Components of Tariff

The following financial and operational parameters have been considered while determining the tariff.

1. Capital cost

2. Evacuation cost

3. Operations & Maintenance charges

4. Debt – Equity Ratio

5. Loan Tenure

6. Interest rate on loan

7. Return on equity

8. Rate of Depreciation

9. Interest on Working Capital

10. Capacity Utilization Factor

11. Duration of Tariff

12. Auxiliary Consumption].

One of the factors taken into consideration is the ‘Rate of Depreciation’. It is specified at para 5 of the Order that the tariff fixed under the said Order “took into account the benefit of accelerated depreciation under the Income Tax Act and Rules”. It is further declared that “for a project that does not get such benefit, the Commission would, on a petition in that respect, determine a separate tariff taking into account all the relevant facts.”

2. The 1st respondent produces electric energy (power) from one of the PROJECTS. The appellant and 1st respondent [Described as power producer in the PPA] entered into a Power Purchase Agreement (PPA) dated 09.12.2010 for sale and purchase of electricity from the 5 MW project to be established by the 1st respondent in Surendra Nagar district of Gujarat. The provisions relevant for the dispute in the present appeal are Clauses 5.1 & 5.2,

“Article 5: Rates and Charges

5.1 Monthly Energy Charges: GUVNL shall pay to the Power Producer every month for Scheduled Energy/Energy injected as certified in the monthly SEA by SLDC the amounts (the “Tariff”) set forth in Article 5.2.

5.2 GUVNL shall pay the fixed tariff mentioned hereunder for the period of 25 years for all the Scheduled Energy/Energy injected as certified in the monthly SEA by SLDC. The tariff is determined by Hon’ble Commission vide Tariff Order for Solar based power project dated 29.01.2010.

Tariff for Photovoltaic Project: Rs.15/kWh for First 12 years and Thereafter Rs.5/kWh from 13th Year To 25th Year.

Above tariff shall apply for solar projects commissioned on or before 31st December 2011. In case, commissioning of Solar Power Project is delayed beyond 31st December 2011, GUVNL shall pay the tariff as determined by Hon’ble GERC for Solar Projects effective on the date of commissioning of solar power project or above mentioned tariff, whichever is lower.” and Clauses 12.8 [12.8 Amendments:

This Agreement shall not be amended, changed, altered, or modified except by a written instrument duly executed by an authorized representative of both Parties. However, GUVNL may consider any amendment or ch

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2016 Supreme(SC) 95

SUPREME COURT OF INDIAJ. Chelameswar, Abhay Manohar Sapre, JJ.Gujarat Urja Vikas Nigam Limited – AppellantVersus EMCO Limited & Another – RespondentsCIVIL APPEAL NO.1220 OF 2015Decided On : 02-02-2016

IMPORTANT POINTS1st Tariff Order does not apply to projects not choosing to be governed by the scheme u/s 32. Section 32 of IT Act does not relieve the power producer from its contractual obligation under PPA.

SUPREME COURT OF INDIA
J. Chelameswar, Abhay Manohar Sapre, JJ.
Gujarat Urja Vikas Nigam Limited – Appellant
Versus
EMCO Limited & Another – Respondents
CIVIL APPEAL NO.1220 OF 2015
Decided On : 02-02-2016

IMPORTANT POINTS
1st Tariff Order does not apply to projects not choosing to be governed by the scheme u/s 32.
Section 32 of IT Act does not relieve the power producer from its contractual obligation under PPA.