KERALA STATE ELECTRICITY REGULATORY COMMISSION THIRUVANANTHAPURAM

Transcription

1 1 KERALA STATE ELECTRICITY REGULATORY COMMISSION THIRUVANANTHAPURAM PRESENT: Shri. C. Abdulla, Member Shri. M.P.Aiyappan, Member October 6, 2009 IN THE MATTER OF Petition in respect of Tariff applicable to Ready Mix Concrete Unit Kerala State Electricity Board Vydyuthi Bhavanam Pattom, Thiruvananthapuram Petitioner M/s.Neptune Ready Mix Concrete (P) Ltd Muppathadam (P.O), Edayar Kochi ORDER Respondent 1. Background 1.1 The respondent M/s. Neptune Ready Mix Concrete (P) Ltd, Muppathadam (P.O), Edayar, Kochi is a company incorporated and registered under the Indian Companies Act. It is engaged in the manufacture and sale of ready mix concrete in its units at Edayar, Maradu Vellacode industrial units. The plant at Edayar is having consumer No under Electrical Section, Edayar and with and SSI permanent Registration No dated of District Industries Centre, Kochi. They have availed electric connection at LT IV Industrial tariff at the rate of Rs In the month of August 2008, the electricity bill was revised as per the commercial rate i.e. Rs per unit. The conversion of tariff from industrial to commercial was without notice and hearing the arguments of the respondent. The KSERC has published schedule of Tariff

2 2 in Gazette No dated , which contains terms and conditions for retail supply of electricity with effect from The tariff change issued by Kerala State Electricity Board cannot be made applicable to the respondent and entitled to be included in the industrial tariff and accordingly writ petition was filed by the respondent vide WP(C) No in the High Court of Kerala. 1.2 The Hon ble Court is of the view that, the only issue is whether the activity of operation of ready-mix concrete is a natural activity and merely a commercial activity. Though much effort is not required to answer this issue even on the basis of the concept of industrial activity and commercial activity vis-à-vis the question as to whether there is irreversible change of the status of the commodities which go into the making of the ready-mix concrete, it is appropriate that the said issue is first addressed by the Electricity Regulatory Commission rather than to be taken up for decision by the Court at the first instance. Under such circumstances, preserving the status quo as available on the basis of the interim order in force, the parties are relegated to the Kerala State Electricity Regulatory Commission requiring the Board to make appropriate reference to the Commission within a period of three weeks from the date of order, so that the Commission can make an early endeavour to decide on the issue. To expedite matters, the parties are directed to mark their appearance before the Kerala State Electricity Regulatory Commission on , so that the Commission could appropriately fix the date of hearing to expedite final disposal. The Commission would make an endeavour to decide the issue within a period of two months from the date of appearance. 1.3 The respondent submitted their argument before the Commission in time. But the petitioner has neither made appropriate reference nor was present before the KSERC within the stipulated time. Hearing on the matter was conducted on 14 th (4.00PM) & 27 th (11.00 AM) on May In the meantime the petitioner filed petition before Kerala State Electricity Regulatory Commission

3 3 2. Prayer of the petitioner KSEB. On the basis of the above facts, the prayers before the Commission are 1. All units running Ready Mix Concrete both under High Tension and Low Tension may be categorized under commercial category. 2. The respondent, M/s.Neptune Ready Mix Concrete (P) Ltd, Muppathadom P.O, Edayar, Kochi bearing Con No. 25/4396 at Maradu under HT and Con. No at Edayar under LT shall be permitted to be billed under respective Commercial tariffs from the date of connection. 3. M/s. Neptune Ready Mix Concrete (P) Ltd., Muppathadom P.O, Edayar, Kochi may be directed to reimburse to the Board an amount of Rs. 10,100/- towards the cost of filing petition. 4. Hearing of the matter 3.1 In the pleadings on the public hearing conducted at Commissions Office, KSEB stated that, the respondent is having three service connections Con No. 25/4396 at Maradu under HT-IV (Commercial) tariff, Con No at Edayar under LT-IV (Industrial) and another one under construction at Vellacode, Mundur at Trissur under temporary connection tariff. The activity performed at the two sites included in the present petition at Maradu & Edayar is preparing required quantity of ready mix concrete as demanded by individual customers, by mixing the ingredients as per specific requirements of each customer. This activity clearly indicates that the work performed in the said premises of the respondents is only preparation and supply of a mixture of required quantity of constituents and conveyed through special mixture vehicles and delivered at the consumer point. 3.2 Recent trends in business sectors, where at sales point, additions and alterations according to specific need of the buyer is done to suit the customer demand, which is only a part of commercial activity. For example in supply of paint, the finished ready to use paint from manufacturing industry is mixed by the dealer as per the demand and

4 4 requirement (colour, quantity, and quality) of the customer. Here the mixing activity is done by the retailer and tariff assigned is commercial one, the prime activity being commercial. 3.3 The activity of mixing ingredients to deliver customer specified quantity of concrete mixture is therefore analogous to the above and hence it is to be treated as commercial activity only. In large scale construction sites in the stare, electric connections are provided for large number of mixing units installed at all such construction sites and the tariff applied is LT VII (A) (Commercial) category. In the instant case, concrete mixing activity is carried out in a different premise and then transported in special vehicle to similar construction sites and the consumer is now demanding tariff structure of general industry. Purpose of preparing concrete mixture is for construction activities. The tariff structure clearly specifies that the tariff applicable for construction is commercial tariff. For small or medium applications, the consumer when install a mixer at site, he is liable to pay under commercial tariff. When concrete is used by large size commercial/flats/other large size contract work also, the ultimate purpose remains as commercial. So the tariff may kindly be retained as commercial for ready mix concrete to establish uniformity in this matter. 3.4 Hon. Commission may kindly take note of the fact that if industrial tariff is assigned as demanded by the consumer now, there can be influx of similar demands from all construction sites as well as from all analogous commercial establishments such as paint shops explained before. Hon. Commission may kindly take note of the fact, Hon. Commission while issuing orders upon tariff categorization through tariff order dated has rightly categorized CONSTRUCTION WORKS under commercial category both under HT and LT sectors. 3.5 M/s. Neptune Ready Mix Concrete (P) Ltd stated that Ready mix Concrete, or RMC is a type of concrete manufactured in a factory or batching plant, according to a set recipe, and then delivered to a worksite, by truck mounted transit mixers. This results in a precise mixture, allowing specialty concrete mixtures to be developed and used in

5 5 construction sites. Ready-mix Concrete is preferred over on- site concrete mixing because of the precision of the mixture and reduced worksite confusion. RMC is manufactured under computer- controlled operations. In a typical plant the process involves following steps. 1. All the incoming raw materials are stored in bins after samples, tested and certified in the laboratory. 2. When the customer places an order the mix recipe as well as quantity required is fed into the batching plant computer. The plant batches concrete based on the mix recipe and quantity fed in to the system. 3. Concrete batched is tested at the laboratory against various parameters. 4. It is transported to the construction site in truck mounted transit mixers to retain the quality and is placed at site using Concrete Pumps. 3.6 The concrete ready-mix is treated as a product and Kerala Value added tax is charged to the goods sold at the rate of 12.5%. The Government of Kerala have made the concrete ready-mix taxable as per S.R.O. No.82/2006 dated vide notification No. SL.80/ This product is given H.S.N. code No From this it is clear that the concrete ready-mix is manufactured under a manufacturing process and the final commercial product is made. Also it is an excisable product and is classified in Central Excise Tariff Act 1995 and chargeable to appropriate Excise duty. The Government of India, Ministry of Finance, Department of Revenue, Central Board of Excises &Customs, New Delhi has clarified that Ready Mix Concrete falls within the ambient of the word Manufacture as envisaged under section 2(f) of CESA 1944 and new product with new name emerges. 3.7 Making of ready mix concrete from sand, cement, granite, additives, water when put into the transformation process in the computer controlled machineries and transformed to ready mix concrete amount to the manufacture of a commercially different product and the process involves a manufacturing process. The manufacture of ready mix concrete is an industrial activity and the consumption of electricity to such industrial units can only be charged under industrial tariff.

6 6 3.8 In the States of Tamilnadu, Andhra Pradesh and Karnataka, the units for the production of ready mix concrete are included in industrial tariff. The Neptune Ready Mix Concrete (P) Ltd is a similarly satiated ready mix concrete manufacturing company, and entitled for the same treatment and tariff should be HT-1 or LT-4 industrial tariff. 4. Commission s findings 4.1 Ready mix concrete is a construction material, which is prepared from a process of mixing of sand, cement, granite, additives and water in a proportionate manner. Here a transformation process is taking place and a new product is formed, for which industrial activity consuming electricity took place. It is a matter of fact that the product ready mix concrete is used for construction like brick, cement etc for which a processing is taking place, but not within the construction premises. The product obtained after mixing is a different one, from that of the raw material and also the process is irreversible. 4.2 The documents viz. permanent certificate of registration issued by Ministry of Commerce and Industry, GoI and District Industries Centre Ernakulam; Registration Certificate of the Central Sales Tax department; Registration Certificate issued by Additional Sales Tax Officer, Kalamassery; renewal of registration under the Kerala VAT Act, Licence from Department of Factories and Boilers and other documents, it is seen that M/s. Neptune Ready Mix Concrete (P) Ltd at Edayar, Cochin is a manufacturing unit in a industrial area allotted by the Government of Kerala. They have been granted investment subsidy of Rs lakhs by the Industries Department. They are paying professional Tax for 29 employees. 4.3 Based on the documents furnished by M/s. Neptune Ready Mix Concrete (P) Ltd and considering the process taking place in the preparation of the ready-mix concrete, the Commission is of the view that the Ready Mix Concrete manufacturing unit has to be charged under industrial tariff.

7 7 5. Commission s Decision After examining the matter in detail, the Commission hereby orders as follows: 1) Decided to accept the argument of M/s. Neptune Ready Mix Concrete (P) Ltd, that the preparation of ready-mix concrete using machinery is an industrial process and electricity consumed has to be charged under HT I industrial tariff and LT IV Industrial Tariff. 2) KSEB shall issue necessary orders accordingly. The case is hereby disposed without orders on cost. Sd/- M.P. Aiyappan Member (Finance) Sd/- C. Abdulla Member (Engg). Approved for issue Sd/- Secretary-in-Charge