Captive power: SC admits petition on levy of cess

Captive power: SC admits petition on levy of cess

New Delhi: The Supreme Court has admitted a petition filed by the Chhattisgarh government, seeking imposition of 10 paise per unit cess on sale of electricity by captive power producers (CPPs).

A bench headed by Justice S.H. Kapadia, while admitting the petition, asked the department concerned to raise the bills so that the claim does not become time-barred.

However, it said, “no coercive steps shall be taken by the state to recover the dues till further orders. At the same time, the assessee will not press for the refund on the basis of the impugned judgement during the pendency of the case."

Earlier, in another related matter, the apex court had stayed the refund of the cess amounting to more than Rs100 crore as sought by the CPPs.

The Chhattisgarh government had approached the apex court, seeking quashing of the Chhattisgarh High Court order that struck down its notification imposing 10 paise per unit cess on sale of electricity by CPPs.

Big companies like Associated Cement, Grasim Industries, Lafarge India, Ambuja Cement Eastern Ltd, Bharat Aluminium, Monnet Ispat & Energy, which have captive power plants,The CPPs had challenged the state’s decision on the ground they were being discriminated against, as independent power producers (IPPs) were not required to pay the cess. However, the state government has contended that the High Court had proceeded on the assumption of differential tariff imposition, although the cess was in the nature of tax.

Differentiating between the power producers, the government said they could not be equated with IPPs as they were subjected to different tax regime as compared to CPPs and there were no independent power producers which had started generating electricity in the state.

“The High Court had erred in holding that in declaring Section 3(1)(a) of Chattisgarh Act of 1981 as ultra vires on the ground that same was discriminatory qua various producers on electricity.... erred in striking a parity between IPPS and CPPS, which constitute two different classes altogether and which is evident from reading of Electricity Act, 2003," the petition stated.

According to the state, the concept of open access -- direct supply of electricity to a producer without being a distributor -- and discrimination does not arise as there were no IPPs in the state which had started generating electricity and therefore the question of taxing them did not arise.

It further stated that it had received notices seeking refund from various companies, including Ultra Tec of Aditya Birla group.

CPPs are exempted from electricity duty for 5 years and do not pay any surcharge, while IPPs have to incur additional cost in the form of wheeling charges, transmission losses and surcharge, according to the state government.

CPPs, on the other hand, stated that the High Court had correctly held that the imposition of cess on them was contrary to various Central and state policies and was not in public interest.

Balco in its reply through counsel Arun Beriwal stated that due to inadequate and irregular power supply, it was compelled to set up its own coal-based 270 MW CPP for its power intensive aluminium plant in the state.

“There was no reasonable and or cogent explanation as to why the rate of cess was fixed at 10 paise per unit for CPPS, 5 paise per unit for distributor and absolutely zero paise for IPPs," it stated.