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Captive users are not liable to pay the additional surcharge levied under Section 42(4) of the Electricity Act, 2003: Supreme Court of India

So far as the captive consumers / captive users are concerned, they are not liable to pay the additional surcharge under Section 42(4) of the Act, 2003. In the case of the captive consumers/captive users, they have also to incur the expenditure and/or invest the money for constructing, maintaining or operating a captive generating plant and dedicated transmission lines. Therefore, as such the Appellate Tribunal has rightly held that so far as the captive consumers/captive users are concerned, the additional surcharge under sub-section (4) of Section 42 of the Act, 2003 shall not be leviable. This was observed by Hon’ble M. R. Shah, J in the matter of Maharashtra State Electricity Distribution Co. Ltd. vs. M/s. JSW Steel Limited & Ors. [Civil Appeal No. 5074- 5075 of 2019].

Feeling aggrieved and dissatisfied with a judgment passed by the Appellate Tribunal for Electricity, Delhi whereby the Appellate Tribunal allowed the appeals preferred by the respondents herein – the ‘captive consumers’ and has set aside the order passed by the Maharashtra Electricity Regulatory Commission (hereinafter referred to as the “State Commission”) in a petition by which the State Commission held that the group of ‘captive consumers’ are liable to pay additional surcharge, Maharashtra State Electricity Distribution Company Limited (hereinafter referred to as the “distribution licensee”), has preferred the present appeals.

The short question posed for the consideration of the Supreme Court in this case was: “Whether the captive consumers/captive users are liable to pay the additional surcharge leviable under Section 42(4) of the Electricity Act, 2003?”

Supreme court after perusing the facts and arguments presented, held that – “If a consumer or class of consumers want to receive the supply of electricity from a person other than the distribution licensee of his area of supply, he has to compensate for the fixed cost and expenses of such distribution licensee arising out of his obligation to supply. Therefore, the levy of additional surcharge under sub-section (4) of Section 42 can be said to be justified and can be imposed and also can be said to be compensatory in nature. So far as captive consumers/captive users are concerned, no such permission of the State Commission is required and by operation of law namely Section 9 captive generation and distribution to captive users is permitted. Therefore, so far as the captive consumers / captive users are concerned, they are not liable to pay the additional surcharge under Section 42(4) of the Act, 2003. In the case of the captive consumers/captive users, they have also to incur the expenditure and/or invest the money for constructing, maintaining or operating a captive generating plant and dedicated transmission lines. Therefore, as such the Appellate Tribunal has rightly held that so far as the captive consumers/captive users are concerned, the additional surcharge under sub-section (4) of Section 42 of the Act, 2003 shall not be leviable. Even otherwise, it is required to be noted that the consumers defined under Section 2(15) and the captive consumers are different and distinct and they form a separate class by themselves. So far as captive consumers are concerned, they incur a huge expenditure/invest a huge amount for the purpose of construction, maintenance or operation of a captive generating plant and dedicated transmission lines. However, so far as the consumers defined under Section 2(15) are concerned, they as such are not to incur any expenditure and/or invest any amount at all. Therefore, if the appellant is held to be right in submitting that even the captive consumers, who are a separate class by themselves are subjected to levy of additional surcharge under Section 42(4), in that case, it will be discriminatory and it can be said that unequal are treated equally. Therefore, it is to be held that such captive consumers/captive users, who form a separate class other than the consumers defined under Section 2(15) of the Act, 2003, shall not be subjected to and/or liable to pay additional surcharge leviable under Section 42(4) of the Act, 2003.”

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Judgement Reviewed by Mehvish Alam

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