Additional levy imposed on coal block allottees is penalty, can't be passed on to end consumers: APTEL

Appellate Tribunal for Electricity (APTEL) recently held that the additional levy imposed on coal block allottees pursuant to the arbitrary allocation process was in the nature of penalty and could not be passed on to the end consumers (Jaiprakash Power Ventures Ltd vs MPERC & Ors)..M/s Jaiprakash Power Ventures Ltd (Appellant) had filed an appeal under Section 111 of the Electricity Act, 2003 against an order passed by the Madhya Pradesh Electricity Regulatory Commission..Before the Commission, the Appellant had argued that the additional levy raised by the fuel supply company i.e Madhya Pradesh State Mining Corp. Ltd (MPSPCL) on the Appellant was recoverable as variable (fuel) charges from the procurers of electricity..The additional levy was imposed pursuant to the direction of the Supreme Court cancelling several coal block allocations, and the provisions of the Coal Mines (Special Provisions) Act, 2015..The Supreme Court had requested the Central government to direct allottees to pay an additional levy of Rs 295 per MT of coal, towards financial loss caused to the exchequer by illegal and arbitrary allotments. .The Appellant said that additional levy formed part of the landed cost of fuel under Regulation 41 of the MPERC (Terms & Conditions for determination of Generation Tariff) Regulations, 2012 and was, thus, recoverable from the customers. .APTEL dismissed the appeal and held that the Commission was correct in holding that additional levy was a penalty which could not be passed through to the Discom and the consumers..Rejecting the Appellant's arguments, APTEL opined, ."..we notice that the compensation/ additional levy of Rs. 295 per metric tonne imposed by two orders of the Hon’ble Supreme Court is in the nature of penalty and by no stretch of imagination can be considered as statutory levy.".APTEL noted that the genesis of the additional levy was the "flawed and arbitrary allocation process" in respect of coal mines and it was imposed on the allottees/beneficiaries of the flawed allocation process to:- correct the wrong done by the Union of India; - act as a deterrent that by highlighting the wrong, it is expected that the Government will not deal with the natural resources that belong to the country as if they belong to a few individuals who can fritter them away at their sweet will; - the levy may also compensate the exchequer for the loss caused to it, in the manner suggested by the learned Attorney General and CAG Report..APTEL ultimately concluded, ."We are of the opinion that the additional levy is not simpliciter a compensation but a penalty for consuming the benefits of an illegal process..We are of the opinion that the additional levy of Rs. 295 per metric tonne imposed on original allottees of the captive coal block does not entitle to be included in the determination of the generation tariff to be passed on to the end consumers.".The appeal was accordingly dismissed. .Commission was represented by Advocates Parinay Deep Shah, Mandakini Ghosh, Surabhi Pandey, Ritika Singhal, Aradhna Tandon, Gajendra Tiwari, Saransh.Senior Advocates Sajan Poovayya, Sanjay Sen with Advocates Hemant Sahai, Sakya Singha Chaudhuri, Anand Kumar Srivastava, Shikha Pandey, Shivam Sinha, Tushar Srivastava, Soumya Prakash, Molshree Bhatnagar, Avijeet Lala, Shreya Mukerjee, Nithya Balaji, Astha Sharma, Nameeta Singh, Gayatri Aryan, Nishant Talwar, Meha Chandra, Narayani Anand, Arnav Vidhyarthi, Jaideep Gupta, Akshay Shandilya, Ruth Elwin, Ashok Shukla, Shantanu Singh, Saraswata Mohapatra, S. Prakash. .MP Power Management Co. Ltd was represented by Senior Advocate Purushendra Kumar with Advocates Nitin Gaur, Suparna Srivastava, Sanjana Dua, Anuradha Mishra, Rishabh Donnel Singh, Ashwin Nayak, Alok Shankar, Tushar Jain, Varun Mohan, K. K. Agarwal, Manoj Dubey..[Read order].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.