REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3940          OF 2008 [Arising out of  SLP (Civil) No. 23809 of 2005]

Tamil Nadu Electricity Board & Anr. …Appellants

Versus

Status Spinning Mills Ltd. & Anr. …Respondents WITH

CIVIL APPEAL NOs. 3941,3942,3943,3944,3945,3946,3947,3948,3949,3950,3951,3952,3953, 3954,3955,3956,3957,3958,3959,3960,3961,3962,3963,3964,3965,3966, 3967,3968,3969,3970,3971,3972,3973,3974,3975,3976,3978,3979,3980, 3981,3982,3983,3984,3985,3986,3987,3988,3989,3990,3990,3991,3992, 3993,3994,3995,3996,3997,3998,3999,4000,4001,4002,4003,4004,4005, 4006,4007,4008,4009,4010,4011,4012,4013,4014,4015,4017,4018,4019, 4020,4021,4023,4024-4033,4036,4035,4034,4037,4038-4041,4042, 4043,4044-51, 4052,4054,4055,4056,4057,4058,4060,4061, 4062,4063, 4064,4065,4066,4067-71,4072,4073,4075,4076,4077,4078,4080, 4081,4083,4084  OF 2008 [Arising  out  of   SLP (Civil)  Nos.   26309,  26387,  26382,  26368,  26345, 26355, 26372, 26366, 26378 of 2005, SLP(Civil) Nos. 2026, 1942, 1941, 1954, 1949, 1951, 1953, 1944, 1930, 1946, 1938, 1947, 1950, 1932, 1945, 1428, 1952, 1935, 1927, 1937, 1955, 1948, 1940,  1919, 1925, 1933, 2242, 2246, 2287, 2286, 2285, 2282, 2279, 2276, 2273, 2274, 2249, 2253, 2255, 2281, 2252, 2254, 2257, 2258, 2268, 2264, 2269, 4278, 4280, 4281, 4282, 4283, 4284, 4285, 4286, 4287, 4288, 4289, 4290, 4291, 4292, 6660, 6724, 6757, 6763, 6761, 6767, 6765, 18803, 18804 to 18818, 21338, 21340 to 21343,  21347,  21348,  21350  to  21357,  16509,  16510,   21723,  21600, 21604, 21602, 21605, 21616, 21613, 21631, 21633, 21608, 5299, 5300 to 5303, 4108, 4109, 4111, 21681, 21682, 21683 of 2006, SLP (Civil) Nos. 2385, 2387, 2388, 2391 of 2007)  

J U D G M E N T  S.B. SINHA, J :

1. Leave granted.

2. These appeals at the instance of the Tamil Nadu Electricity Board (for

short “the Board”) and State of Tamil Nadu are directed against a judgment

and order dated 19.07.2005 passed by a Division Bench of the Madras High

Court dismissing the writ appeals filed by the appellants herein arising out

of a judgment and order dated 23.04.1999 passed by a learned Single Judge

of the said Court.   

3. The basic fact of the matter is not in dispute.

4. The State of Tamil Nadu despite the Parliamentary enactment of the

Electricity (Supply) Act, 1948 (for short “the 1948 Act”) enacted the Tamil

Nadu Revision of Tariff Rates on Supply of Electrical Energy Act, 1978 (for

short “the 1978 Act”); the relevant provisions whereof are as under:

“3. Tariff rates for consumption of electrical energy

Not-withstanding anything contained in the Tamil Nadu  Essential  Articles  Control  and Requisitioning  (Temporary  Powers)  Act,  1949 (Tamil Nadu Act XXIX of 1949), the tariff rates payable  to  the  Tamil  Nadu  Electricity  Board  by any consumer on the electrical energy supplied by the Board shall be as specified in the Schedule to this Act.

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4. Power  of  the  State  Government  to  amend the Schedule -   

The State Government may after taking into account the Cost of production of energy, and such other matters as may be prescribed by notification, amend the provisions of the Schedule to this Act.”

5. Pursuant  thereto  and  in  furtherance  thereof,  High  Tension  Supply

tariff was prescribed.  The State issued a G.O. bearing No. G.O.Ms No. 29

dated  31.01.1995  providing  for  tariff  concession  for  High  Tension

industries; the relevant portions whereof are as under:

“a) In the case of new High Tension Industries to  be  set  up  in  the  areas  other  than  the  Madras Metropolitan  areas,  the  following  concessional tariffs  shall  be  charged  for  the  first  three  years from  the  date,  the  consumer  is  given  service connection under high tension tariff –I-

For the first year 60 per cent of the  High Tension rates.

For the second year 70 per cent of the   High Tension rates. For the third year 80 per cent of the   High Tension rates. For the fourth year Full Tariff.

The  above  concession  shall  apply  to  both unit  rates  and  maximum  demand  chares.   This concession shall not however, be applicable to an industry  set  up  before  the  3rd May,  1989.   The concession  shall  not  also  be  applicable   to  a consumer,  who  utilizes  power  from  his  own generating units or makes other arrangements  for

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production  purposes  and  utilizes  the  power supplied  by  the  Board  for  auxillary  purposes only.”

6. A memorandum was issued  on or  about  23.08.1995 to  specify the

time limit required for dealing with the applications for grant of electrical

connections  as  and when applications  therefor  are filed which are in  the

following terms:

“Adverting  to  the  above,  the  following  further instructions are issued regarding disposal of H.T. applications.  

i) The Superintending Engineers of all Elecy. Dist.  Circle  are  requested  to  bestow  their efforts  and  thrive  for  clearing  pending applications wherever possible.

ii) The  delays  in  processing  the  H.t. applications should be strictly avoided at all stages.  The revised flow chart showing the various  stages  of  processing  of  the  H.T. applications is enclosed.

iii) While  scrutinizing  the  applications  the defects observed in the application may be conveyed  to  the  applicants  at  the  first instance itself and not on piece meal with a view to speed up the disposal.

iv) It is further to be reiterated that those H.T. applications for which supply could not be extended within 18 months may be returned immediately  to  the  applications  with  a request to renew after a specific date.

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v) If  supply  could  be  extended  to  applicants within 18 months but requires enhancement of  transformer  capacity,  improvement  of existing lines etc., the load sanction may be accorded  pending  execution  of  such improvement  works  stipulating  the  above conditions.

Depending  on  the  readiness  reported  and  also based  on  the  merits  of  the  each  case  of  H.T. extension,  supply  may  be  effected  to  H.T. applicants using the powers delegated to the Chief Engineers  (Distribution)  vide memo.no.SE/IEMC/EE3/AEE1/802/91  dated 8.11.91.

All Superintending Engineers/Elecy. Distn. Circle are once again informed to ensure that delays do not occur beyond a reasonable time for processing the  H.T.  applications  as  H.T.  services  constitute major  source  of  revenue  for  the  Board  and  to bestow all  efforts  to  achieve  the  target  fixed for the year 95-96 without fail.”

7. The flow chart annexed thereto specified the maximum period of 18

months’ time to be taken from the date of filing of the application till the

date of grant of connection.  

8. The  G.O.  dated  31.01.1995  was  amended  on  14.02.1997  in  the

following terms:

“H.T. Tariff – I

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There  is  increase  in  both  demands  and energy charges.  For  consumption  of  energy  during  peak hours viz. 6.00 AM to 9.00 AM and 6.00 PM to 9.00  PM, the  energy charges  are  to  be  billed  at 20%  extra.   This  will  be  implemented  on installation of ‘Time of Day’ meters.

New industries set up on or after 15.2.97 are not eligible for any tariff concession.  However, in respect of H.T. industries set up in areas other than Chennai  Metropolitan  area  before  15.2.97  shall continue  to  avail  the  tariff  concession  until  the expiry  of  3  years  period  reckoned  from date  of service concession.”

By a G.O. issued on 14.02.1997, the Schedule appended to the 1978

Act was amended as under:  

“(a) New High Tension Industries set up in any area on or after 15th February 1997, shall not be eligible for tariff concession:  Provided  that  the  High  Tension  Industries set up in any area other than Chennai Metropolitan area before  15th February 1997 shall  continue to avail themselves of the said tariff concession until the expiry of  the  period  of  three  years  from the date  on  which  the  consumer  is  given  service connection.

(b) New industry to be set up in the areas other  than  the  Chennai  Metropolitan  area  which will  work  night  shift  only  and  existing  industry which has only night shift between 9.30 p.m. of a day and 5.30 a.m. of the next day, shall be given a concession of 40 per cent of the appropriate rate for energy consumed during night shift only for a

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period  of  seven  months  from  July  to  January during  a  period  of  five  years  from  the  date  of giving service concession.  This concession shall apply  to  energy  rate  arrived  at  after  fixing  the concession if any:

Provided that in respect of those having one day  shift  and  one  night  shift,  the  night  shift concession shall stand reduced from 40 per cent to 20 per cent.”

9. By a letter dated 1.08.1997 addressed to the Chairman of the Board,

the State Government purported to clarify the meaning of the word “set up”,

stating:

“I am to state that the words “set up” would mean “obtained  service  connection”.   The  “New High Tension Industries set up in any area or after 15th February,  1997  would  mean  new  High  Tension Industries for which power service connection was actually extended on or after 15.2.97.”

10. Questioning the validity of the said notification dated 14.02.1997 as

also the letter  dated 1.08.1997, a large number of  writ  applications  were

filed contending that the same was barred under the doctrine of promissory

estoppel.  Writ petitions were also filed contending that the petitioners had

set  up  their  industries  before  14.02.1997  and  they  were  entitled  to  the

benefit of tariff concession in terms of the proviso appended to Clause (a) of

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High Tension  Tariff  –  I.   By a  judgment  and order  dated  23.04.1999,  a

learned Single Judge of the High Court disposed of the said batch of writ

applications directing:

a) Writ petitions which challenged the validity of the Notification dated 14.2.1997 withdrawing the concessions were dismissed.

b) Those petitioners who had informed the Electricity Board on or before  14.2.1997  about  their  readiness  for  getting  power connection or made applications to the Board would be entitled to enjoy the tariff concessions for the full period of three years, from  the  date  of  power  connection  as  stipulated  in  the Notification dated 31.1.1995.

c) Those writ petitioners who had not made applications or sent intimation to the Electricity Board regarding their readiness to got  power  connection  on  or  before  14.2.97  but  have  altered their position by establishing the industry on or before 14.2.97 would be entitled to the tariff concessions as stipulated in the Notification  dated  31.1.95  “provided  if  they  are  able  to establish  the  same  before  the  2nd respondent  –  Electricity Board.

11. Appeals were preferred thereagainst both by the Board and the State

Government.  Some of the industries who have challenged the notification

on  the  plea  of  applicability  of  the  doctrine  of  promissory  estoppel  also

preferred appeals.  Indisputably, during pendency of the said appeals before

the Division Bench of the High Court, the Schedule to the 1978 Act was

further amended by a notification dated 7.01.2000 whereby and whereunder

the following Explanations were added:

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“Explanation 1. – For the purpose of this clause, an industry may be considered to be set up on the date  of  obtaining  High  Tension  Service Connection.

Explanation 2. –  For the purpose of this clause “Existing Industry” means an industry, which has not  completed  five  years  from  the  date,  the consumer is given service connection and which is still eligible to the concessional tariff rate.”

12. The Division Bench of the High Court disposing of the said batch of

appeals by a judgment and order dated 19.07.2005 opined that it was not

necessary to discuss the individual fact of each of the respondents’ case on

the  premise  that  the  Secretary  to  the  Government  could  not  clarify  the

amendments to the Schedule which were made by the Governor.  The said

appeals were disposed of holding:

i) “…In the present case, the meaning of the words “set up is clear. These  words  mean  “erect  or  establish”,  as  pointed  out  by  the Supreme Court.  If the high tension industry has been erected or established before 15.02.1997, then it is entitled to the benefit of the tariff concession, even though electricity connection may not have been given to it prior to 15.02.1997.

ii) We do not agree that it  is the date on which the application for electricity supply is  received by the electricity board that  is  the relevant date.  An application can be made even before setting up the industry or it can be made after setting up the industry, but that is wholly irrelevant.  It is the date when the industry has been set up that is the relevant date.

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iii) We also do not agree that where the industries have not been set up, but are in the process of being set up, yet, the benefit of the concession  will  be  available,  on  the  basis  of  the  principle  of promissory estoppel.  There is no question of promissory estoppel because the language of the Notification is very clear and there is no estoppel against a Statute.”

13. It  is,  thus,  evident  that  two  points  were  determined  against  the

respondents.  No appeal has been preferred therefrom by the industries in

question.

14. The core questions which arise for our consideration are as under:

i) What is the connotation of the expression “set up” in the context

of  the  concessional  tariff  granted  in  favour  of  High  Tension

Industries for the first three years “from the date, the consumer is

given service connection?.

ii) Whether the expression “set up” appearing in the proviso to clause

(a)  of  High  Tension  Tariff  would  have  to  be  construed  in  the

context of the expression “shall continue to avail themselves of the

said tariff concession” appearing in the proviso?

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iii) Whether the expression “set up” would also takes its colour from

the context that the continued tariff concession could be availed by

the High Tension Industries “until the expiry of the period of three

years  from  the  date  on  which  the  consumer  is  given  service

connection.?

iv) Whether  the  expression  “set  up”  be  not  construed  to  ensure

certainty amongst the consumers who could continue to avail of

the tariff concession and whether the date on which the consumer

is given a service connection provides such certainty?

v) Whether  the  Notification  conferring  tariff  concessions  could  be

construed liberally to extend the benefit thereof by construction of

the  expression  “set  up”  and  by  introducing  the  element  of

uncertainty?

15. Mr. A.K. Ganguly, learned senior counsel appearing on behalf of the

appellants would submit that the State of Tamil Nadu intended to confer

benefit on a class of people.  Such classes of people having been identified

as consumers of High Tension Electrical Energy, it was permissible for the

State not  only to fix a cut-off date but also to specify the same so as to

enable the industries to take the benefit only from the date when they start

consuming electrical energy.  It was, however, submitted that there can be

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some exceptional  cases  where  despite  filing  of  applications  for  grant  of

electrical connection, there had been some avoidable delays on the part of

the Board.

It was urged that for the purpose of grant of benefit of concession in

tariff rate, the Board must know who the beneficiaries were.   

 The learned counsel further submitted that the Division Bench of the

High  Court  committed  a  serious  error  insofar  as  it  failed  to  take  into

consideration  that  a  High  Tension  industry  gets  ready  to  discharge  the

functions for which it was set up, only with certain formalities as provided

for in the Indian Electricity Act, 1910 (for short “the 1910 Act”) and the

Rules framed thereunder, viz, the Indian Electricity Rules, 1956 (for short

“the  1956  Rules”)  are  complied  with.   An  industry  starts  functioning,

according to the learned counsel, only when it is ready to operationalise its

machinery which can only be done when the power connection is granted.

One of the essential  pre-requisite therefor is certification and approval by

the Inspector in terms of Section 37 of the 1910 Act and Rule 63 of the

1956 Rules.   

The said Rule reads as under:

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“63. Approval by Inspector.--

(1) Before making an application to the Inspector for  permission  to  commence  or  recommence supply after an installation has been disconnected for  one  year  and  above  at  high  or  extra-high voltage  to  any  person,  the  supplier  shall  ensure that the high or extra-high voltage electric supply lines or apparatus belonging to him are placed in position, properly joined and duly completed and examined.  The  supply  of  energy  shall  not  be commenced by the  supplier  unless  and  until  the Inspector  is  satisfied  that  the  provisions  of rules 65 to 69 both inclusive have been complied with and the approval  in  writing  of  the Inspector  has been obtained by him:

Provided  that  the  supplier  may  energise  the aforesaid electric supply lines or apparatus for the purpose of tests specified in rule 65…”

Compliance of Rule 63 of the 1956 Rules, Mr. Ganguly submitted, is

a  definite  parameter  to  assess  the  readiness  of  industry  to  discharge  the

functions  for  which  it  had  been  set  up.   The  Government  letter  dated

1.08.1997 being clarificatory in nature, the same should be given effect to.

It  was  furthermore  contended  that  the  subsequent  notification  dated

7.01.2000 whereby two Explanations were introduced is also clarificatory in

nature as a bare perusal of Explanation 1 would demonstrate that it merely

clarified what was inhered/ implied in the said proviso which also reflects

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the  undertaking  of  the  government  which  alone  was  competent  to  grant

exemptions to concerned industries and/ or to withdraw or modify the same.

It was urged that the operative part of the order of the Division Bench

should be suitably modified to reflect that the setting up of an industry prior

to  15.02.1997  implies  that  such  industry  was  ready  to  discharge  all  the

functions  for  which it  had been set  up and that  it  has  already become a

consumer  having  obtained  High  Tension  service  connection  from

15.02.1997  and  only  those  industries  which  have  been  set  up  before

15.02.1997 shall continue to avail themselves of the said tariff concession

until  the expiry of  the period of three years from the date  on which the

consumer is given a service connection.

16. Mr. K. Parasaran and Mr. S. Ganesh, learned senior counsel and other

learned counsel  appearing  on  behalf  of  some of  the  respondents,  on  the

other hand, would contend that the amendments to the Schedule carried out

by the notification are unreasonable being in contravention of the statute.

The word “set up” having been interpreted by this Court in  Commissioner

of Wealth Tax v. Ramaraju Surgical Cotton Mills, Ltd. [1967 (1) SCR 761]

which in turn having been followed in Kabini Minerals (P) Ltd. and another

v. State of Orissa and others [(2006) 1 SCC 54], it must be held that the said

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word is in contra-distinction of the word “commence”.  Some of the High

Tension industries having already set up their business and having gone for

commercial production by reason of generators, it cannot be said that they

had  not  been  set  up.   For  the  said  purpose,  not  only  the  doctrine  of

promissory estoppel should be applied, the wordings of the Section should

be  read  down  to  mean  that  those  industries  are  entitled  to  the  tariff

concession who were not only granted connection but who ought to have

been granted connection.   

It was pointed out that in most of the cases, not only the entrepreneurs

altered their position pursuant to or in furtherance of the promise made by

the State in terms of the notification dated 31.01.1995.  They had applied

for  grant  of  communication  much prior  to  the  cut  off  date  fixed  by the

notification dated 14.02.1997.  The entrepreneurs who had acted pursuant to

the promise made by the State should not be allowed to suffer for no fault

on their part.   

17. The learned counsel in most of these matters have drawn our attention

to the factual matrix involved in each of the cases to contend that it is the

Board  and/or  the  State  who  is  responsible  for  delay in  granting  electric

energy.  They have not only set up the industry and ready for commercial

production but, in fact, some of them, pursuant to or in furtherance of the

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permission granted by the State Electricity Board in terms of the provisions

of the Indian Electricity Rules, 1956 had set up diesel generating sets for the

purpose of running the factory which even stands accepted by the Board.

It was urged that although no appeals have been preferred from the

judgment of the Division Bench of the High Court, this Court in exercise of

its jurisdiction under Order 41, Rule 33 of the Code of Civil Procedure may

permit the respondents to raise the said contention.  Reliance in this behalf

has been placed on  UCO Bank v. Rajinder Lal Cooper [(2007) 6 SCC 694].

18. The High Court unfortunately did not go into the fact of each case.  It

proceeded on the basis that the word “set up” should be given its dictionary

meaning,  i.e.,  erect  or  establish  in  view  of  a  decision  of  this  Court  in

Ramaraju Surgical Cotton Mills Ltd (supra).  The effect for a clarificatory

order  has  also  not  been  considered  stating  that  the  Secretary  of  the

Government cannot clarify an amendment to the Schedule which has been

made by the Governor.  

19. We  wish  that  the  Division  Bench  would  have  bestowed  serious

considerations on the issues, as has been done by the learned Single Judge.   

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20. The  validity  of  the  1978  Act  is  not  in  question.   It  overrides  the

provisions of the 1948 Act.  It empowered the State Government to amend

the provisions contained in the Schedule to the Act prescribing tariff rates

payable by different classes of consumers for supply of electrical energy by

the Board taking into  account  the cost  of production of energy and such

other  matters  as  may  be  prescribed  by  notification.   Indisputably,  the

Schedule appended to the Act had been amended from time to time.  The

notification dated 31.01.1995 was issued amending the Schedule.  It for all

intent  and purport  substituted  the  then  existing  Schedule;  Part  A thereof

dealt with tariff for High Tension supply.  It is only in that notification some

concession, as noticed hereinbefore, had been granted.  The concession was

to  apply  to  both  unit  rates  and  maximum  demand  charges.   Certain

limitations for grant of the said concession had also been specified.   

21. The  Schedule  was  amended  by  the  notification  dated  14.02.1997

reflecting the operation of grant of concession tariff to those who had set up

the new High Tension industries on or after 15.02.1997.  What is, therefore,

significant for our purpose is  the meaning of the word “set up” vis-à-vis

“commencement”.   

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22. A word cannot be assigned a meaning in vacuum.  It has to be read in

the context in which it has been used.  A decision which has been rendered

on a different act dealing with a different subject matter may not be apposite

while construing the same term in another statute.  We may, however, at the

outset notice the decision of this Court in Ramaraju Surgical Cotton Mills,

Ltd. (supra) wherein this Court in the context of interpretation of Section 5

(1)(xxi) of the Wealth Tax Act held:

“…A unit cannot be said to have been set up unless  it  is  ready  to  discharge  the  function  for which it is being set up. It is only when the unit has  been  put  into  such  a  shape  that  it  can  start functioning  as  a  business  or  a  manufacturing organisation  that  it  can be said that  the  unit  has been set up...”

The decision centered round an exemption provision in respect of a

portion of net wealth of a company established with the object of carrying

on an industrial  undertaking in India,  as is  employed by it  in a new and

separate unit set up after the commencement of the Act.  Although different

terms “setting up” and “commencement” were used, this Court opined that

the word “set up” is equivalent to the word “established” and that a business

is established when it “is ready to commence business”.  It was furthermore

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opined that an establishment could not be set up to be ready to commence

business if it not “set up”.   

The said view was reiterated by this Court in Kabini Minerals (P) Ltd.

(supra) stating:

“9. The  expression  “setting  up”  means,  as  is defined  in  the  Oxford  English  Dictionary,  “to place  on  foot”  or  “to  establish”,  and  is  in contradistinction  to  “commence”.  The distinction is this that when a business is established and is ready to commence business, only then it can be said of that business that it is set up. But before it is  ready to  commence  business  it  is  not  set  up. (See CWT v. Ramaraju Surgical Cotton Mills Ltd.)

10. In the said case, it was further held that the word  “set  up”  is  equivalent  to  the  word “established”  but  operations  for  establishment cannot  be  equated  with  the  establishment  of  the unit itself of (sic or) its setting up.”

23. What  is  necessary  to  take  into  consideration  is  that  the  Schedule

appended to Section 3 of the 1978 Act is a part of the Act.  It provides for

High Tension tariff.  It fixes up cut-off dates.  It is a piece of subordinate

legislation.  A subordinate legislation validly made may have to be read in

the same manner as if it is a part of the Act.  For the said purpose, although

the  same  would  be  amenable  to  constitutional  challenge  on  well-settled

principles of law, as noticed by this Court in  Bombay Dyeing & Mfg. Co.

19

Ltd. (3) v. Bombay Environmental Action Group and Others [(2006) 3 SCC

434], Vasu Dev Singh and Others v. Union of India and Others [(2006) 12

SCC 753] and  State of Kerala and Others v.  Unni and Another [(2007) 2

SCC 365], the validity thereof is not under challenge.

24. The notification dated 31.01.1995 postulated concession to the new

High Tension industries “to be set up” for the first three years from the date

the  consumer  is  given  a  service  connection.   It  did  not  speak  of

commencement of production.  It intended to attain a certainty as to from

which  date  such  concession  would  be  available.   Grant  of  service

connection was considered to be a pre-requisite for grant of the concession.

It is in the aforementioned context, the impugned amendment will have to

be construed.  It fixes a cut off date beyond which the concession shall not

be available to the industries, viz., those who had set up in any area on or

after 15.02.1997.

25. The proviso appended thereto, however, saves the cases of those who

had availed themselves of the said tariff  concession and they who would

continue to get the benefit thereof until expiry of the period of three years

from the date on which the consumer is given service connection.  The date

on which the service connection is given, therefore, plays an important role.

20

The clarification issued by the State during pendency of the appeals

should  have,  therefore,  been considered  by the  High Court  in  its  proper

perspective.  If it is clarificatory in nature, it could be given a retrospective

operation.   Such  a  question,  however,  should  have  been  posed  and

answered.   Furthermore,  the  letter  dated  1.08.1997  was  issued  as  some

confusion  arose.   When  a  subordinate  legislation  is  made  by  the  State

Government, it must be done in terms of the constitutional provision.  An

executive  order  is  also  issued  keeping  in  view  the  rules  and  executive

business.  It may not have the force of law but the same may come within

the  purview  of  the  well-known  principle  of  contemporaneous  exposito.

Rules of executive construction are also relevant.

26. The Government placed the entire record before the learned Single

Judge.  In his judgment, the learned Single Judge recorded :

“14. The  learned  Senior  Counsel  has  produced the note file of the Government.  From the file, I am able to see that the Chairman, Electricity Board himself while constructing the said expression ‘set up’ has stated that ‘withdrawal of tariff concession to  the  industries  set  up  with  respect  to  the industries  during  1994 the  date  of  load  sanction was taken into account’.  The Chairman has also recommended to  the effect  that  tariff  concession which  prevailed  prior  to  14.2.1997  can  be extended  to  consumers  who  have  informed

21

readiness on or before 14.2.1997 and certified as such  all  Field  Superintending  Engineers  on inspection of the industry after receipt of readiness report, and after 15.2.1997, due to the reason that it was not informed prior to 14.2.1997.”

27. It does not appear that the Chief Secretary of the State had issued the

letter in question upon following the procedure laid down in the Rules of

Executive Business framed under Article 166 of the Constitution of India.

We are, however, not much concerned therewith.  It is not a case where the

opinion of the Chief Secretary and/or for that matter the State was decisive.

In the matter of interpretation of statute, the Court has the last say.   

We  have,  therefore,  to  consider  the  issues  raised  before  us

independently.

28. Furthermore, concession is to be given in respect of payment of the

charges for electrical energy.  When can it be given would be a question of

fact.  When it has been given would be known to everybody.  The bills are

required to be paid only after electrical energy is consumed.  Question of

availing  the  benefit  of  concession  would  not  arise  unless  a  service

connection is granted.  For the said purpose, the definition of consumer, as

contained in Section 2(1)(c) of the 1910 Act would be relevant.  The benefit

can be availed by the consumer keeping in view the nature of concession

22

granted. Exemption notifications, therefore, require construction depending

upon the tenor  of  the  statute/  notification.   Whether  it  should  undergo a

strict  construction or  a liberal  construction is  one thing  but  it  is  another

thing that whether a person is entitled to concession on a plain reading of

the notification.   

It may be true that the exemption notification should receive a strict

construction as has been held by this Court in Novopan India Ltd. Hyderabd

v.  Collector  of  Central  Excise  and  Customs,  Hyderabad [1994 Supp.  (3)

S.C.C.  606],  but  it  is  also  true  that  once  it  is  found that  the  industry is

entitled to the benefit of exemption notification, it  would receive a broad

construction.  [See Tata Iron & Steel Co. Ltd. v. State of Jharkhand (2005) 4

SCC 272 and  A.P. Steel Re-Rolling Mill Ltd. v.  State of Kerala (2007) 2

SCC 725].   

A  notification  granting  exemption  can  be  withdrawn  in  public

interest.  What would be the public interest would, however, depend upon

the facts of each case.

29. In State of Jharkhand v. Tata Cummins Ltd. [(2006) 4 SCC 57], this

Court held:

“6. Before analysing the above policy read with the notifications, it is important to bear in mind the connotation of the word “tax”. A tax is a payment

23

for  raising  general  revenue.  It  is  a  burden.  It  is based on the principle of ability or capacity to pay. It  is  a  manifestation  of  the  taxing  power  of  the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry  in  the  backward  area  as  a  term  of  the industrial  policy,  we  have  to  read  the implementing  notifications  in  the  context  of  the industrial  policy.  In  such  a  case,  the  exemption notifications have to be read liberally keeping in mind the objects envisaged by the industrial policy and  not  in  a  strict  sense  as  in  the  case  of exemptions  from  tax  liability  under  the  taxing statute.”

30. The  word  “set  up”,  therefore,  was  also  required  to  be  construed

keeping in view the provisions of the statute operating in the field, viz., the

1910 Act, the 1948 Act and the 1956 Rules.

31. Validity of the notifications on the ground they are unreasonable has

not been raised before the High Court.  We, therefore, cannot go into the

issue.  If that be so, it is difficult to agree with Mr. Parasaran that we should

undertake an exercise to interpret the notifications in a manner which would

not  lead  to  unreasonableness.   For  the  purpose  of  declaring  a  statute

unconstitutional,  foundational  facts  have  to  be  laid  therefor.  [See  M/s.

Seema Silk & Sarees & Anr. v. Directorate of Enforcement & Ors. Criminal

24

Appeal  @  SLP  (Crl.)  No.  6812  of  2007  decided  on  12th May,  2008].

Grounds are required to be raised therefor.  In absence thereof it would not

be possible for us to enter into the debate of constitutionality of the said

provisions.  The Division Bench of the High Court had rightly or wrongly

opined that the doctrine of promissory estoppel has no application.  The fact

that the said doctrine may apply even in relation to a statute is beyond any

dispute as has been held by this Court in  Mahabir Vegetable Oils (P) Ltd.

and Another v. State of Haryana and Others [(2006) 3 SCC 620], A.P. Steel

Re-Rolling Mill  Ltd. (supra),  Pawan Alloys and Casting Pvt. Ltd. v.  U.P.

State  Electricity  Board  and  others [(1997)  7  SCC  251]  and  Southern

Petrochemical  Industries  Co.  Ltd. v.  Electricity  Inspector  &  ETIO  and

Others [(2007) 5 SCC 447]

32. Strong reliance  has  been placed by Mr.  Parasarn on  Shah v.  Shah

[2002  Q.B.  35  :  (2001)  4  All  ER 138]  to  contend  that  the  doctrine  of

promissory estoppel is applicable even in the field of the statute.  Therein, it

was held:

“In the Godden case [1997] NPC 1 an attempt was made  to  defeat  by  an  estoppel  the  provision  in section 2(1) of the 1989 Act that  "a contract for the sale or other disposition of an interest in land can  only  be  made  in  writing  and  only  by incorporating all the terms which the parties have expressly  agreed  in  one  document  or,  where

25

contracts  are  being  exchanged,  in  each".  Simon Brown LJ stated that the argument that "although Parliament  has  dictated  that  a contract  involving the  disposition  of  land  made  otherwise  than  in compliance with  section 2 is void, the defendants are  not  allowed  to  say  so"  was  "an  impossible argument".  Simon  Brown  LJ  regarded  the principle stated in  Halsbury's Laws as a "cardinal rule"  the  "absolute  nature"  of  which  cannot  be "outflanked by one of the equitable techniques or types  of  estoppels  sought  to  be  deployed  in  the present case". Thorpe LJ and Sir John Balcombe agreed with Simon Brown LJ.

Yaxley v Gotts [2000] Ch 162 was also concerned with section 2 of the 1989 Act. An oral agreement purporting to grant an interest in land, though void and unenforceable under section 2, was held still to  be  enforceable  on  the  basis  of  a  constructive trust  under  section  2(5)  which  provides  that "nothing  in  this  section  affects  the  creation  or operation  of  resulting,  implied  or  constructive trusts". Robert Walker LJ stated, at p 175:  "Parliament's requirement that any contract for the disposition of an interest in land must be made in a particular  documentary  form,  and  will  otherwise be void,  does not  have such an obviously social aim as statutory provisions relating to contracts by or  with  moneylenders,  infants,  or  protected tenants. Nevertheless it can be seen as embodying Parliament's  conclusion,  in  the  general  public interest,  that  the  need  for  certainty  as  to  the formation of contracts of this type must in general outweigh the disappointment  of those who make informal  bargains  in  ignorance  of  the  statutory requirement. If an estoppel would have the effect of  enforcing  a  void  contract  and  subverting Parliament's  purpose  it  may have  to  yield  to  the statutory law which confronts it, except so far as the  statute's  saving  for  a  constructive  trust

26

provides a means of reconciliation of the apparent conflict." Clarke LJ stated, at p 182, that where a particular estoppel  relied  upon  would  offend  the  public policy behind a statute it is necessary to consider the  mischief  at  which  the  statute  is  directed. Where a statute had been enacted as the result of the  recommendations  of  the  Law Commission  it *44 is  appropriate  to  consider  those recommendations. He stated that in his opinion:  "the  contents  of  that  report  [Transfer  of  Land: Formalities  for  Contracts  of  Sale  etc  of  Land (1987) (Law Com No 164)] will be of the greatest assistance  in  deciding  whether  or  not  the principles of particular types of estoppel should be held to be contrary to the public policy underlying the  Act.  In  this  regard  it  seems  to  me  that  the answer is  likely to depend upon the facts  of the particular case."  Beldam  LJ  stated,  at  p  191,  that  "The  general principle that a party cannot rely on an estoppel in the face of a statute depends upon the nature of the enactment,  the  purpose  of  the  provision  and  the social policy behind it."

The  said  decision  has  also  been  referred  to  Actionstrength  Ltd.

(trading as Vital Resources)  v.  International Glass Engineering IN.GL.EN

SpA and another   [2003 (2) All. E.R. 615 at 619], but therein it was held

that the doctrine of promissory estoppel may not be applicable in case of a

statute.  As would appear from the discussions hereinafter, applicability of

the said doctrine would depend upon various factors  including the nature

27

and purport of the Statute, the object it seeks to achieve, the purpose for

grant of concession/exemption etc.  

33. It, therefore, depends on the nature of the statute as also applicability

of the doctrine.  As noticed hereinbefore, even such a question had not been

raised before the High Court.

34. The GOMs dated 31.01.1995 granted  concession  for  the new high

tension  industries  to  be  set  up.   The  eligibility  for  grant  of  concession

therefore was for the industries which were to be set up after the said date.

The exemption does not stop at that.  It is given a retrospective effect.  It is

extended to those industries which were set up after 3.05.1989.  However,

exception therefor is sought to be curved out in respect of those industries

who had been utilizing power from their own generating units or making

other arrangements for production for the purposes and utilizing the power

supplied by the Board in  auxiliary purposes  only.  The said notification,

therefore is a broad based one.  It not only is to apply to those industries

which were to be set up on or from 31.01.1995 but also to those which were

set up after 3.05.1989.   

We may notice that concessional tariffs, however, were to be granted

only for three years.  Those three years of concessional  tariffs,  therefore,

28

were available to any industry which had been set up after 3.01.1989 till the

concession  is  withdrawn.  Unlike  other  notifications,  no  period  is  fixed.

This  Court,  in  a  number  of  decisions,  has  considered  the  effect  of  the

notifications which were applicable for a fixed period, may be three years or

five years.   The concession,  although was to  apply for a period of  three

years both in respect of unit as also maximum demand charges, the same

was meant to be applied to all those industries who intended to set up their

industries in the areas other than Madras Metropolitan areas.   

Indisputably, the respondents before us have started setting up their

industries  after  the said date.   It  is  on the  aforementioned backdrop,  the

impugned notification dated 14.02.1997 requires interpretation.  Those who

had set up their industries have acquired a right, viz. the right to obtain the

tariff concession once a right is accrued in their favour.  What was promised

to them was that they would be granted the tariff concession for a period of

three years @ 60%, 70% and 80% of the consumption charges.   

35. Whether  by  reason  of  the  said  notification  dated  14.02.1997,  an

accrued or vested right has been taken away or not is the question.  The core

question, therefore, is as to whether by reason of the said notification dated

31.01.1995, the entrepreneurs who had set up new high tension industries

after the said date have acquired any right pursuant thereto.

29

The  notification  dated  31.01.1995  must  be  interpreted  in  a  broad

based manner, as a promise was made to grant the concessional tariff not

only for the new industries which were to be set up thereafter but also to the

pre-existing  industries.   The right  accrued to  them is  sought  to  be taken

away w.e.f. 15.02.1997.  Those who were eligible upto 14.02.1997 to avail

the benefit of the notification dated 31.01.1995 became ineligible.  It is in

the aforementioned context, the proviso appended to clause (a) is required

to  be  interpreted.   It  has  used  the  term ‘set  up’  in  any area  other  than

Chennai  Metropolitan area before 15.02.1997.  Should the rule of liberal

interpretation be applied?  In our opinion, it  should not  be.   An accrued

right ordinarily cannot be taken away with retrospective effect.  It is not a

case where the notification has a retroactive operation.  A person may apply

on  a  particular  date  for  grant  of  electrical  connection.   He  may get  the

electrical connection within a few days or a few weeks or a few months.

According to the State Electricity Board, keeping in view the role played by

all  the  three players,  namely,  the consumer,  the Board  and the State,  an

outer limit of 18 months is taken for grant of supply.

36. There  are  cases  before  us  wherefrom  it  appears  that  electrical

connections  had  not  been  provided  owing  to  default  on  the  part  of  the

Electrical Inspector who is an officer of the State and/or authorities of the

30

Board, although prompt action had been taken in the matter of depositing of

money and/or complying with directions by the consumers.   

37. A statute, even a subordinate legislation, may have to be construed

reasonably.   A  subordinate  legislation  ordinarily  would  not  be  given  a

retrospective effect.  Retrospective effect can be granted only if there exists

any power in that behalf.  There is nothing to show that such a power has

been conferred upon the State in terms of the Act.  While saying so, we are

not oblivious of the situation that the State has a statutory power to fix the

tariff.  It may also be true that when a statutory power is conferred, the State

would have power to amend, alter, modify or rescind the same.  The Court

must also bear in  mind that  it  may not  cause undue hardship.   What we

mean  to  say  that  if  construction  of  a  statute  is  possible  as  a  result  of

hardship  is  avoided,  vis-à-vis,  an  undue  hardship  would  be  created,  the

court will prefer the former interpretation.  The proviso is an exception to

the main clause whereas all industries which were set up on or after 15th

February become wholly ineligible for any tariff concession but those who

had set up prior thereto shall continue to avail themselves of the said tariff

concession.   Legally,  those  who  had  not  become consumer  of  electrical

energy, but were the potential consumers, they had not only applied for it

but they were and, in fact, some of them has also been gone into commercial

31

production.  Once they have set up the high tension industries and who had

gone up for commercial production must be held to have set up the high

tension industries.  Once they have set up the high tension industries after

31st March, 1995, they became entitled to the benefit of concessional tariff

for a period three years.  Such concession was to be availed by them from

the date of grant of service connection.  If they had already been granted

service  connection,  they  would  continue  to  avail  themselves  of  the  said

tariff concession.  However, the difficulty arises only in cases where despite

applying for grant  of  electrical  communication,  actual  service connection

had  not  been  granted.   If  a  literal  interpretation  of  the  proviso  is  taken

recourse to, the same may result in an anomaly in the sense that in one case,

connection may be granted in one day and in another case, connection may

not be granted for a long time.  Because of the acts of discrimination on the

part of the officers of the Board or the State, the entrepreneurs would suffer.

It  is  in  the  aforementioned  limited  sense,  the  doctrine  of  promissory

estoppel will have application.  If doctrine of promissory estoppel applies,

the right accrued in terms thereof cannot be withdrawn with a retrospective

effect.   [See  Mahabir  Vegetable  Oils  (P)  Ltd. (supra)  Southern

Petrochemical Industries Co. Ltd. (supra)]  

32

38. In  MRF Ltd., Kottayam v.  Asstt. Commissioner (Assessment) Sales

Tax and others [(2006) 8 SCC 702], this Court held :

“In any event, the appeal preferred by the State of Kerala  was  dismissed  and  the  judgment  of  the High  Court  has  therefore  become  final. Accordingly, it  was held that  Section 10(3) does not  confer  the  power  to  withdraw an exemption with retrospective effect. Effect of this is that the amendment Notification SRO No. 38/98 has to be read  so  as  not  to  take  away  or  disturb  any manufacturer’s  pre-existing  accrued  right  of exemption  for  a  period  of  7  years.  If  SRO No. 38/98  is  construed  as  now  contended  by  the respondent, then the inevitable consequence would be that  SRO No. 38/98 would itself  be rendered ultra vires Section 10(3) of the Act, and therefore, illegal, bad in law and null and void.”

39. Yet  again,  in  Tata  Teleservices  Ltd. v.  Commissioner  of  Customs

[(2006) 1 SCC 746], this Court held:

“10. We are of the view that the reasoning of the Bombay Bench of the Tribunal as well as that of  the  Andhra  Pradesh  High  Court  must  be affirmed and the decision of the Delhi Tribunal set aside insofar as it relates to the eligibility of LSP 340 to  the benefit  of  the exemption  notification. The  Andhra  Pradesh  High  Court  was  correct  in coming to  the conclusion  that  the  Board had,  in the impugned circular, predetermined the issue of common parlance  that  was  a  matter  of  evidence and  should  have  been  left  to  the  Department  to establish  before  the  adjudicating  authorities.  The Bombay Bench was also correct in its conclusion

33

that the circular sought to impose a limitation on the  exemption  notification  which  the  exemption notification itself did not provide. It was not open to  the  Board  to  whittle  down  the  exemption notification  in  such  a  manner.  The  exemption notification  merely  reproduced  the  language  of Entry  8525  20  17  and  since  the  exemption notification merely reproduced the tariff entry, the limitation  sought  to  be  imposed  by  the  Board would  tantamount  also  to  reading  the  limitation into the classification itself.”

40. In State of Orissa and Others v. Tata Sponge Iron Ltd. [(2007) 8 SCC

189], this Court held:  

“20. In view of the clear legal provision as also the aforementioned Notification dated 23-9-1992, there  cannot  be  any  doubt  whatsoever  that  the exemption  in  respect  of  deferment  of  sales  tax having been provided for under the Orissa Sales Tax Act as also the notification issued thereunder, the High Court, in our opinion, is correct in taking its view.”

41. In  State  of  Kerala  and  Others v.  Kurian  Abraham  (P)  Ltd.  and

Another [(2008) 3 SCC 582], it was opined :

“23.  Tax  administration  is  a  complex subject.  It  consists  of  several  aspects.  The Government  needs  to  strike  a  balance  in  the imposition of tax between collection of revenue on one  hand  and  business-friendly approach  on  the other  hand.  Today,  Governments  have  realized that in matters of tax collection, difficulties faced

34

by the business have got to be taken into account. Exemption,  undoubtedly,  is  a  matter  of  policy. Interpretation of an Entry is undoubtedly a quasi- judicial function under the tax laws. Imposition of taxes  consists  of  liability,  quantification  of liability and collection of taxes.  Policy decisions have to be taken by the Government. However, the Government  has  to  work  through  its  senior officers  in  the  matter  of  difficulties  which  the business  may face,  particularly in  matters  of  tax administration. That is where the role of the Board of Revenue comes into play. The said Board takes administrative  decisions,  which  includes  the authority to grant  Administrative Reliefs.  This  is the underlying reason for empowering the Board to issue orders, instructions and directions to the officers under it.”

42. It  is  not  a  case  where  decisions  were  altered  pursuant  to  any

representation made by the State.  Concessions in tariff had been granted by

reason of a statutory provision.  Such concessions could also be withdrawn.

If the appellants have not altered their position pursuant to any promise, the

doctrine of promissory estoppel would not apply.  If that be so, the question

of any right being vested in the appellants  would also not apply.  In any

event, the reasonableness  of the statute was not the subject matter of the

writ  petition.   The provisions  have  not  been sought  to  be declared  ultra

vires.   Even otherwise,  the State while amending statute stated about the

public interest necessitated the same.  When a statute is amended keeping in

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view  the  public  interest  even  the  concession  can  be  withdrawn  with

retrospective effect.

43. In Kasinka Trading & Anr. v. Union of India & Anr. [(1995) 1 SCC

274], the power of the State to change its policy decision in public interest

was emphasized.  It was held that the power which can be used for grant of

concession, namely, Section 25(1) of the Customs Act itself is the source to

rescind the earlier notification, stating :

“Since,  the  notification  had  been  issued  under Section 25(1) of the Act, the very same power was available  to  the  authority  for  rescinding  or modifying that notification and appellant ought to have known that the said notification was capable of or liable to be revoked, modified or rescinded at any time even before the expiry of 31.3.1981 if the ‘public interest’ so demanded.  To hold that after the Government had issued the Notification No.66 of 1979 indicating that it was to remain operative till  31.3.1981,  it  could  not  be  rescinded  or modified  before  the  expiry  of  that  date  would amount  to  prohibiting  the  Government  from discharging its statutory obligation under Section 25(1) of the Act, if it was satisfied that it was in the  ‘public  interest’  to  withdraw,  modify  or rescind  the  earlier  notification.   The  plain language of Section 25 of the Act is indicative of the position that it is the public interest and public interest alone which is the dominant factor.  It is not the case of the appellants that the withdrawal of  Notification  No.66  of  1979  by the  impugned notification  was  not  in  ‘public  interest’.   Their case,  however,  is  that  relying  upon  the  earlier

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notifications they had acted and the Government should  not  be  permitted  to  go  back  on  its assurance as otherwise they would be put to huge loss.   The  courts  have  to  balance  the  equities between the parties  and indeed the courts  would bind  the  Government  by its  promise  ‘to  prevent manifest injustice or fraud’.”

It was further held :

“23. The  appellants  appear  to  be  under  the impression  that  even  if,  in  the  altered  market conditions the continuance of the exemption may not  have  been  justified,  yet,  Government  was bound to continue it to give extra profit  to them. That certainly was not the object with which the notification  had  been  issued.  The  withdrawal  of exemption “in public interest” is a matter of policy and the courts would not bind the Government to its  policy  decisions  for  all  times  to  come, irrespective of the satisfaction of the Government that  a change in the policy was necessary in the “public interest”. The courts, do not interfere with the  fiscal  policy  where  the  Government  acts  in “public interest” and neither any fraud or lack of bona fides  is  alleged much less  established.  The Government  has  to  be  left  free  to  determine  the priorities  in  the  matter  of  utilisation  of  finances and to act in the public interest  while issuing or modifying  or  withdrawing  an  exemption notification under Section 25(1) of the Act.”

Kasinka Trading (supra) has been followed in many cases including,

Shrijee Sales Corporation & Anr. v.  Union of India [(1997) 3 SCC 398],

Bannari Amman Sugars Ltd. v. Commercial Tax Officer & Ors. [(2005) 1

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SCC 625],  Kuldeep Singh v.  Govt. of NCT of Delhi [(2006) 5 SCC 702],

M.P. Mathur & Ors. v. DTC & Ors. [(2006) 13 SCC 706] and Ramchandra

Murarilal  Bhattad & Ors. v.  State of Maharashtra & Ors. [(2007) 2 SCC

588].

44. A distinction must be made between a policy decision and a statute.

Whereas  prima  facie  a  policy  decision  may  not  have  any  retroactive

operation, a statute may have.  Only because it affects a past transaction the

same, by itself, would not come in the way of the legislature in enacting an

enactment or the executive government to exercise its power of subordinate

legislation.

45. We have noticed hereinbefore that some of the industries had even

installed generators.  They had to do it.  They inevitably had to do it because

the Board would not supply power.  Would it not be too much to contend

that even those industries have not been set up as they have not become

consumers?  We think that for the said purpose, the proviso has to be read

down.   It  must  be  made  applicable  to  them  who  not  only  had  started

commercial  production before the said  date,  namely, 14.02.1997 but  also

had applied and were otherwise ready to take electrical connections having

deposited the amount asked for.   

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46. Those hard cases, even according to Mr. Ganguly, should be brought

within the purview of the proviso.  

We, therefore, hold:

1. As the  concession  had  been granted  by the  State,  it  had  the

power to withdraw the same.

2. It is  not  a case where in view of the doctrine of promissory

estoppel,  the  State  could  not  have  in  law  amended  the

Schedule.

3. In  view  of  existence  of  public  interest  the  doctrine  of

promissory estoppel would have no application.

4. Even  otherwise  the  appellants  having  not  preferred  appeals

against the judgment of the Division bench of the High Court,

the said questions cannot be permitted to be raised before us.

5. Proviso appended to the main provision should be read down

as stated in paragraphs 44 and 45 supra.  

6. In view of our findings aforementioned, we have not gone into

the merit of the matter involved in each case separately.  

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We direct accordingly.  The matters would now be examined by the

Appropriate  Authority  of  the  Board,  as  directed  by  the  High  Court  in

individual  cases.   The  appeals  are  allowed  with  the  aforementioned

directions.  No costs.

………………………….J. [S.B. Sinha]

..…………………………J.     [Lokeshwar Singh Panta]

New Delhi; May 16, 2008

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