Madras High Court
The Tamil Nadu Generation And vs The Ministry Of Power on 9 April, 2025
Author: S.M.Subramaniam
Bench: S.M.Subramaniam
2025:MHC:942
W.A.No.3699 of 2024
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 07.04.2025
DATE OF DECISION : 09.04.2025
CORAM :
THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAM
AND
THE HON'BLE MR.JUSTICE K.RAJASEKAR
W.A.No.3699 of 2024
The Tamil Nadu Generation and
Distribution Corporation Limited (TANGEDCO)
represented by the Chief Financial Controller
Regulatory Cell, 7th Floor
NPKRR Maaligai,
144, Anna Salai
Chennai 600 002 .. Appellant
v.
1. The Ministry of Power
rep. by its Secretary
Union of India
Shram Shakti Bhawan
Rafi Marg, New Delhi 110 001
2. N.L.C. India Limited
rep. by its Chairman and Managing Director
No.135, E.V.R.Periyar High Road
Kilpauk
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W.A.No.3699 of 2024
Chennai 600 010
3. N.L.C. India Limited
rep. by its General Manager/Commercial
No.135, E.V.R.Periyar High Road
Kilpauk
Chennai 600 010 .. Respondents
Memorandum of Grounds of Writ Appeal filed under Clause 15 of the
Letters Patent against the order dated 11.09.2024 passed in W.P.No.7519 of
2023.
For Appellant :: Mr.P.Chidambaram
Senior Counsel assisted by
Mr.D.R.Arun Kumar
Standing Counsel for TANGEDCO
For Respondents :: Mr.Arvind P.Datar
Senior Counsel for
Mrs.Janane G
Ms.Krishna Laasya
and Mr.Abhinov Vaidhyanathan
for R2 & R3
JUDGMENT
S.M.SUBRAMANIAM,J.
Under assail is the writ order dated 11.09.2024 passed in
W.P.No.7519 of 2023.
2. The Tamil Nadu Generation and Distribution Corporation Limited
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(TANGEDCO)/writ petitioner is the appellant before this Court. The writ
petition came to be instituted challenging the demand uploaded in the
PRAAPTI Portal asking the appellant to pay income tax to the tune of
around Rs.184 Crores.
3. The learned Senior Counsel Mr.P.Chidambaram appearing on
behalf of the appellant would mainly contend that the TANGEDCO is the
major beneficiary with procurement of power from the second respondent to
the tune of around 2,200 MW of thermal power, by virtue of various Power
Purchase Agreements entered between the TANGEDCO and N.L.C. India
Limited. It is mainly contended that the writ Court has relegated the
appellant to approach the Central Electricity Regulatory Commission (for
short, “the CERC”) for adjudication of issues. The CERC has no
jurisdiction to adjudicate the income tax related issues and therefore the writ
Court ought to have adjudicated the merits of the case. The appellant is
paying the admitted arrears of several thousand crores of rupees and the
DISCOMS like TANGEDCO have to face serious consequences towards
regulation of power supply in case of non-payment of the disputed dues.
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The debit note raised by the second respondent through PRAAPTI Portal is
unsustainable, on the ground that it is a time barred claim, no prior
intimation or consultation or consent of the appellant has been made nor the
details regarding the income tax arrears have been stated. The unilateral
debit note raised in the PRAAPTI Portal is not only bereft of details, but the
justification of the claim also is unknown to the appellant. In the absence of
any such details, the liability cannot be fastened on the appellant and
therefore the rules of natural justice also have been violated. The writ Court
has not considered these aspects, but relegated the appellant to approach the
CERC.
4. Mr.P.Chidambaram, learned Senior Counsel would submit that
determination or re-determination of income tax now claimed after several
years is unsustainable, in view of the fact that the appellant is paying the
tariffs as per the debit note raised in lieu of the agreement. The sudden
raising of debit note asking the appellant to pay income tax to the tune of
around Rs.184 Crores is unsustainable and therefore the issues ought to have
been adjudicated on merits by the writ Court.
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5. To substantiate the said claim, the appellant relied on Section
79(1)(a) & (f) of the Electricity Act, 2003. Accordingly, the functions of
Central Commission under clause (a) of sub-section (1) of Section 79 is to
regulate the tariff of generating companies owned or controlled by the
Central Government. Clause (f) of sub-section (1) of Section 79 stipulates
that the Central Commission shall adjudicate upon issues involving
generating companies or transmission licensee in regard to matters
connected with clauses (a) to (d) and to refer any dispute for arbitration.
Income tax disputes are not falling under any of the subject under Section 79
of the Electricity Act and therefore the CERC lacks jurisdiction. Since the
CERC has no jurisdiction, the writ petition under Article 226 of the
Constitution is maintainable and thus the finding of the writ Court that the
writ petition is not entertainable is perverse. In support of the said
contention, the judgment of the Hon'ble Supreme Court in the case of
Andhra Pradesh Power Coordination Committee and others v. Lanco
Kondapalli Power Limited and others, (2016) 3 SCC 468 has been relied
upon. In paragraph-30, the Apex Court observed that “In the absence of any
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provision in the Electricity Act creating a new right upon a claimant to claim
even monies barred by law or limitation, or taking away a right of the other
side to take a lawful defence of limitation, the Court was persuaded to hold
that in the light of nature of judicial power conferred on the Commission,
claims coming for adjudication before it cannot be entertained or allowed if
it is found legally not recoverable in a regular suit or any other regular
proceeding such as arbitration, on account of law of limitation.”
6. The learned Senior Counsel Mr.Arvind P.Datar appearing on behalf
of the N.L.C. India Limited would oppose by stating that the powers of the
Central Commission is traceable. Thus the writ Court is right in relegating
the appellant to approach the CERC. The Central Electricity Regulatory
Commission (Terms and Conditions of Tariff) Regulations, 2001 was
notified on 26.03.2001 and came into force with effect from 01.04.2001. As
per clause 2.12 of the said Regulations, tax on income from core activity of
the generating company, if any, is to be computed as an expense and shall be
recoverable by the generating company from the beneficiaries. Thus the
second respondent is well within its powers to claim income tax paid by it.
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In the present case, the N.L.C. India Limited availed the beneficial one time
scheme announced by the Income Tax Department and settled the income
tax demands to the Department and thereafter raised the said income tax
claim by uploading the same in the PRAAPTI Portal. Thus there is no
infirmity. As per the agreement between the appellant and the second
respondent, the appellant is liable to pay income tax and on account of
pendency of disputes, delay occurred and therefore the appellant cannot raise
a ground relating to limitation. Several cases were pending before the
Courts disputing the income tax claim made by the Department and the
Board of Directors of the second respondent company has taken a decision
to settle the income tax by availing the beneficial one time scheme and
thereafter the income tax paid is claimed from the beneficiaries as per the
agreement and thus the present writ appeal is to be rejected.
7. It is also contended that the CERC notified the Central Electricity
Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004
on 26.03.2004. As per clause 10 of the 2004 Regulations also, the appellant
is liable to pay income tax and the second respondent is entitled to recover
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the same. Therefore, the CERC is empowered to adjudicate the income tax
dispute also, as tax is a component of tariff and thus it cannot be separated.
Thus the writ Court is right in relegating the appellant to approach the
CERC for adjudication of issues.
8. Heard the rival submissions made between the parties to the lis on
hand.
9. The only issue to be considered is whether the CERC has
jurisdiction to adjudicate upon the income tax related issues under the head
of 'tariff' under Section 79 of the Electricity Act, 2003 or not?
10. To trace out the jurisdiction, Section 79(1)(a) of the Electricity Act
stipulates that the Central Commission shall regulate the tariff of generating
companies owned or controlled by the Central Government. Section 178 of
the Electricity Act confers power of Central Commission to make
regulations. The CERC, in exercise of the powers conferred under Section
178 of the Electricity Act, notified the Central Electricity Regulatory
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Commission (Terms and Conditions of Tariff) Regulations, 2004 on
26.03.2004 and the said Regulations came into force on 01.04.2004. Clause
10 of the said Regulations reads as under:-
“10.Recovery of Income-tax and Foreign Exchange Rate
Variation: Recovery of Income-tax and Foreign Exchange
Rate Variation shall be done directly by the generating
company or the transmission licensee, as the case may be,
from the beneficiaries without making any application
before the Commission.
Provided that in case of any objections by the
beneficiaries to the amounts claimed on account of
income-tax or Foreign Exchange Rate Variation, the
generating company or the transmission licensee, as the
case may be, may make an appropriate application before
the Commission for its decision.”
11. As per the above provision, the second respondent is entitled to
recover income tax and foreign exchange rate variation from the
beneficiaries, without making any application before the Commission.
However, in case of any objection by the beneficiaries to the amounts
claimed on account of income tax, the generating company or the
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transmission licensee, as the case may be, may make an appropriate
application before the Commission for its decision.
12. In the present case, the second respondent-N.L.C. India Limited
filed Petition No.135/MP/2023 under Section 79(1)(a) and (f) of the
Electricity Act, 2003 and the CERC disposed of the petition on 10.07.2023
observing as follows:-
“8. The interim orders of the Hon’ble High Courts, as
aforesaid, are still continuing. Further, the main prayer of the
Writ Petitioners, for a declaration that the debit notes
generated by the Petitioner (pertaining to income tax paid
under the Scheme) are illegal and contrary to the 2014 Tariff
Regulations, and to set aside the same, are pending
consideration by the Hon’ble High Courts, as stated above. In
this background, the prayer of the Petitioner, in the present
Petition, seeking directions on the Respondent Discoms, to
pay the respective income tax liability (raised as per debit
notes), is, in our view, presently not maintainable, since the
prayers in the petition cannot be adjudicated at this stage.
Accordingly, we are inclined to dispose of the present
petition. We, however, grant liberty to the Petitioner to
approach this Commission for appropriate reliefs(s), on this
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count, after disposal of or any decision by the Hon’ble High
Courts, in the writ petitions, as aforesaid, and the same will
be considered in accordance with law. We also direct that the
filing fees paid in respect of this Petition shall be adjusted
against the Petition, if any, to be filed by the Petitioner, in
terms of the liberty granted above.”
The CERC has neither adjudicated the issues on merits nor decided the
same. The petition was disposed of at the admission stage granting liberty to
the second respondent-N.L.C. India Limited to approach the CERC after
disposal of or any decision in the writ petitions which are all pending before
various High Courts. Therefore, the CERC has held that the petition though
maintainable, granted liberty to the second respondent to file the petition
after disposal of the writ petitions pending before various High Courts.
13. Pertinently, Appeal No.49 of 2010 filed between the Tamil Nadu
Electricity Board and N.L.C. Limited has been decided by the Appellate
Tribunal for Electricity on 10.09.2010. Since it is between the same parties,
it is useful to extract the relevant findings of the Appellate Tribunal, as
follows:-
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“26. The first issue is relating to the jurisdiction to go
into the money claims. The question is whether the
Central Commission has the inherent jurisdiction to
adjudicate upon the money claim. According to the
Appellant, the Central Commission being a creation of
a statute is bound by the provisions of the Electricity
Act, 2003 and its jurisdiction is limited to the extent
spelt out in section 79 of the Electricity Act, 2003 and
the present dispute which falls outside the purview of
the section 79 of the Electricity Act could be
adjudicated upon only by the civil court and not by the
Central Commission.
29. As per these decisions, where an Act confers a
jurisdiction, it impliedly also grants the power of doing
all such acts, or employing such means, as are
essentially necessary to its execution. In fact, clause 1.7
of the Regulations 2001 empowers the generating
company for recovery of Income Tax from the
beneficiaries even without filing a petition before the
Central Commission. If any objection is raised by the
beneficiary with regard to quantum of the amount by
way of reimbursement of income tax, the generating
utility may file an appropriate petition before the
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Central Commission for recovery. Thus, the right of the
Corporation to file a petition for reimbursement of
income tax before the Central Commission where the
beneficiary omitted to make a reimbursement of income
tax as due, is a statutory right available to the
Corporation under Regulations. It, therefore, follows
that the Central Commission possesses the right not
only to entertain such an application but also dispose
the same in accordance with law by doing such acts
which are necessary for is execution.”
In paragraph-31, the Appellate Tribunal reiterated that the reimbursement
of income tax by the beneficiary is a part of the power tariff. Clause 1.7 of
the 2001 Regulations and clause 10 of the 2004 Regulations are also relied
upon for the purpose of arriving at a conclusion that the generating company
may file an appropriate application before the CERC if the generating
company is unable to recover the income tax from the beneficiary.
14. In the present case, the appellant has not challenged the
Regulations as ultra vires. Therefore, the agreement entered into between the
appellant and the second respondent based on the above Regulations are
binding. The Constitution Bench of the Hon'ble Supreme Court in the case
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of PTC India Limited v. CERC, JT 2010 (3) SC 1 held that the Commission
has the competence and jurisdiction to enforce the regulation duly
promulgated by the Central Commission and also to adjudicate upon the
dispute involving a generating company and the transmission licensee.
15. On behalf of the appellant, it is contended that after the 2004
Regulations, there are some changes in the subsequent Regulations notified
on expiry of five years period. Since changes have been made in the
subsequent Regulations, these changes are also to be taken into
consideration. However, it is not in dispute that the claim for recovery of
income tax to be done directly by the generating company from the
beneficiaries, is not taken away by the subsequent Regulations. Therefore,
the second respondent is empowered to raise the demand through PRAAPTI
Portal and in the event of any objection by the TANGEDCO, then the
generating company has to approach the CERC for adjudication of issues.
Therefore, the rules of natural justice have no role to play at this juncture,
since the appellant would get an opportunity to adjudicate all the issues
including limitation, re-determination of tax etc., before the CERC in the
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petition, if any, filed by the generating company.
16. In the present case, the generating company raised the claim of
income tax to the tune of around Rs.184 Crores in the PRAAPTI Portal and
the learned Senior Counsel Mr.Arvind P.Datar would submit that liberty has
already been granted by the CERC to the generating company to file a fresh
petition after disposal of the writ petitions pending before various High
Courts. In the event of filing any such petition by the generating company
before the CERC, the appellant would get ample opportunity to adjudicate
all the issues including the issues relating to re-determination of tax,
limitation, etc. Therefore, the appellant will be getting an opportunity to
defend their case before the CERC and thus the writ Court has rightly
relegated the parties to approach the CERC.
17. Further it is stated that on account of raising of debit note/invoice
to the tune of Rs.184 Crores towards income tax, the Power Grid
connectivity of TANGEDCO would not be disturbed and rather the
generating company would approach the CERC for adjudication of issues in
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order to determine the liability. In view of the said submission, the
apprehension of the appellant that there is a possibility of electricity crisis on
account of disconnection throughout the State need not be considered. Since
the income tax demand is relating to several assessment years, the issues are
to be determined and merely on the ground of non-payment of income tax
arrears to the tune of Rs.184 Crores, the respondents cannot effect
disconnection of electricity, which would cause great prejudice to the
appellant.
18. Moreover, the power of CERC is traceable, in view of Sections 79
and 178 of the Electricity Act and under the Central Electricity Regulatory
Commission (Terms and Conditions of Tariff) Regulations. Income tax
claim is a component of tariff and therefore the CERC is empowered to
adjudicate the tax related issues, which is falling under Section 79(1)(a) of
the Electricity Act. Thus the power of CERC is traceable and the petition
already filed by the N.L.C. India Limited was disposed of merely on the
ground that the writ petitions are pending before various High Courts.
Pertinently, liberty was granted to the second respondent to file a fresh
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petition. That being so, the apprehension of the appellant is unnecessary and
the TANGEDCO is at liberty to participate in the process of adjudication, if
any petition has been instituted by the generating company and resolve the
issues in the manner known to law.
19. Beyond the grounds, disputed facts of this nature require elaborate
adjudication by the CERC. The High Court may not be in a position to
conduct roving enquiry, since it requires adjudication of facts with reference
to the documents and evidences. Even under the scheme of the Electricity
Act and the Regulations framed by the CERC, tax related claims are the
components of tariffs and thus the writ Court is right in relegating the parties
to approach the CERC for effective adjudication and to resolve the issues in
the manner known to law. In the event of filing any petition by the
generating company, the CERC is requested to dispose of the same by
affording opportunity to the parties, as expeditiously as possible, considering
the fact that the income tax claim is relating to several assessment years and
the claim is pending for long period.
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20. With the aforesaid observations, the writ appeal stands disposed
of. Consequently, C.M.P.Nos.29242, 29247 of 2024, 214 and 4088 of 2025
are closed. No costs.
Index : yes (S.M.S.,J.) (K.R.S.,J.)
Neutral citation : yes 09.04.2025
ss
To
1. The Secretary to Union of India
Ministry of Power
Shram Shakti Bhawan
Rafi Marg, New Delhi 110 001
2. The Chief Financial Controller
Tamil Nadu Generation and
Distribution Corporation Limited (TANGEDCO)
Regulatory Cell, 7th Floor
NPKRR Maaligai,
144, Anna Salai
Chennai 600 002
3. The Chairman and Managing Director
N.L.C. India Limited
No.135, E.V.R.Periyar High Road
Kilpauk
Chennai 600 010
4. The General Manager/Commercial
N.L.C. India Limited
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No.135, E.V.R.Periyar High Road
Kilpauk
Chennai 600 010
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S.M.SUBRAMANIAM,J.
AND
K.RAJASEKAR,J.
ss
Judgment in
09.04.2025
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