The Electricity Department vs Sea Shell Hotels & Resorts & Ors

Court: Appellate Tribunal For Electricity
Case type: APPEAL NO. 296 OF 2022, APPEAL NO. 297 OF 2022 & APPEAL NO. 298 OF 2022
Decided on: 25-03-2026

<div> Judgement in Appeal No. 296, 297 and 298 of 2022 IN THE APPELLATE TRIBUNAL FOR ELECTRICITY (Appellate Jurisdiction) APPEAL NO. 296 OF 2022, APPEAL NO. 297 OF 2022 & APPEAL NO. 298 OF 2022 th Dated: 24 March, 2026 Present: Hon’ble Mr. Virender Bhat, Judicial Member Hon’ble Mr. Ajay Talegaonkar, Technical Member Appeal No. 296 of 2022 IN THE MATTER OF: The Electricity Department, Andaman and Nicobar Administration, Represented by Secretary (Power), Port Blair, Andaman and Nicobar Islands – 744101. ....Appellant Versus 1) Sea Shell Hotels & Resorts Through the Director, 02, Govind Nagar Beach Havelock Island, Andaman & Nicobar Islands-744211. 2) TSG Hotels & Resorts Through the Director, 25, Maulana Azad Road, Phoenix Bay, Port Blair – 744102. 3) Joint Electricity Regulatory Commission (For the State of Goa and Union Territory), Through the Secretary, rd th 3 and 4 Floor, Plot No. 55-56, Sector – 18, Udyog Vihar- Phase IV, Gurugram, Haryana – 122015. ...Respondents Counsel for the Appellant(s) : Mr. Vikramjit Banergee, ASG Mr. Vikrant N. Goyal Page 1 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 Counsel for the Respondent(s) : Mr. Buddy A. Ranganathan, Sr. Adv. Ms. Devina Sehgal Mr. Krishna Datta Multani for R-1&2 Mr. Pradeep Misra for R-3 APPEAL NO. 297 OF 2022 IN THE MATTER OF: The Electricity Department, Andaman and Nicobar Administration, Represented by Secretary (Power), Port Blair, Andaman and Nicobar Islands – 744101. ...Appellant Versus 1) Aparupa Sands Marina Through the Director, Govind Nagar – 2, Swaraj Deep Havelock Island, Andaman & Nicobar Islands – 744211. 2) Joint Electricity Regulatory Commission (For the State of Goa and Union Territory), Through the Secretary, rd th 3 and 4 Floor, Plot No. 55-56, Sector – 18, Udyog Vihar- Phase IV, Gurugram, Haryana – 122015. ...Respondents Counsel for the Appellant(s) : Mr. Vikramjit Banergee, ASG Mr. Vikrant N. Goyal Counsel for the Respondent(s) : Mr. Buddy A. Ranganathan, Sr. Adv. Ms. Devina Sehgal Mr. Krishna Datta Multani for R-1 Mr. Pradeep Misra for R-2 APPEAL NO. 298 OF 2022 IN THE MATTER OF: The Electricity Department, Andaman and Nicobar Administration, Represented by Secretary (Power), Page 2 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 Port Blair, Andaman and Nicobar Islands – 744101. ....Appellant Versus 1) Joint Electricity Regulatory Commission (For the State of Goa and Union Territory), Through the Secretary, rd th 3 and 4 Floor, Plot No. 55-56, Sector – 18, Udyog Vihar- Phase IV, Gurugram, Haryana – 122015. 2) Hotelier Association for Andaman & Nicobar Island Through Secretary, Girish Arora, 25, MG Road, Aberdeen Bazar, Port Blair – 744101. ...Respondents Counsel for the Appellant(s) : Mr. Vikramjit Banergee, ASG Mr. Vikrant N. Goyal Counsel for the Respondent(s) : Mr. Pradeep Misra for R-1 Mr. Buddy A. Ranganathan, Sr. Adv. Ms. Devina Sehgal Mr. Krishna Datta Multani for R-2 JUDGEMENT PER HON’BLE MR. AJAY TALEGAONKAR, TECHNICAL MEMBER 1. These Appeals have been filed by Electricity Department, Andaman and Nicobar Administration challenging the following Impugned Orders passed by the Joint Electricity Regulatory Commission (in short “JERC”). </div><table><thead><tr><th>Sl. No.</th><th>Appeal No.</th><th>Impugned Order</th><th>Dated</th></tr></thead><tbody><tr><td>1</td><td>Appeal No. 296 of 2022</td><td>Review Order No. 30 of 2020</td><td>02.12.2020</td></tr><tr><td>2</td><td>Appeal No. 297 of 2022</td><td>Review Order No. 31 of 2020</td><td>02.12.2020</td></tr></tbody></table><div> Page 3 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 </div><table><thead><tr><th>3</th><th>Appeal No. 298 of 2022</th><th>Order in Petition No. 44/2021 with corrigendum dt 04.06.21.</th><th>31.05.2021</th></tr></thead><tbody></tbody></table><div> Description of the Parties 2. The Appellant in Appeal Nos. 296, 297 and 298 of 2022 is the Electricity Department, Andaman and Nicobar Administration, a Department of the Andaman and Nicobar Administration (“Appellant” or “A&N Admin”). The Appellant is the distribution licensee and the utility responsible for generation, distribution and retail supply of electricity in the Union Territory of Andaman & Nicobar Islands. 3. Respondent Nos. 1 and 2 in Appeal No. 296 of 2022, Sea Shell Hotels & Resorts and TSG Hotels & Resorts were the Review Petitioners in Review Petition No. 30 of 2020 before the Commission. Both the above Respondents are engaged in the hospitality industry and claim entitlement to be billed under the Industrial tariff category. 4. Respondent No. 1 in Appeal No. 297 of 2022 is Aparupa Sands Marina. It was the Review Petitioner in Review Petition No. 31 of 2020 and also seeks classification under the Industrial tariff category. 5. Respondent No. 2 in Appeal No. 298 of 2022 is Hotelier Association for Andaman & Nicobar Island, which is an association representing hotel establishments in the Union Territory of Andaman & Nicobar Islands. 6. Respondent No. 3 in Appeal No. 296 of 2022, Respondent No. 2 in Appeal No. 297 of 2022 and Respondent No. 1 in Appeal No. 298 of 2022 is Joint Electricity Regulatory Commission (JERC) which is the statutory regulatory Page 4 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 authority constituted under the Electricity Act, 2003 for the State of Goa and the Union Territories. The Commission is vested with powers under Sections 61 and 62 of the Electricity Act, 2003 to determine tariff for various categories of consumers and to regulate electricity supply within its jurisdiction. Factual Matrix of the Case(s) 7. It has been brought out that at least since 1987 onwards, the Hotels were categorized under industrial category for the purpose of electricity tariff in view of various administrative orders and policies of A&N Administration. After enactment of the Electricity Act, 2003 (“the Act”), though the JERC was constituted in 2008, the earlier tariff schedule was continued till the FY 2011-12. The JERC passed its first tariff order for UT of A&N Islands for the year 2012-13 and the hotels were placed in the commercial category for the purpose of electricity tariff. This position continued in the subsequent tariff periods as well. However, the Commission, in the note under para 7.2 of the order dated 20.05.2019 in the Petition No. 274/2019 recorded that despite hotels being placed under the Commercial category in the approved rate schedule, the Electricity Department was continuing to bill certain hotels under the Industrial tariff. The Commission accordingly cautioned the Appellant that failure to comply with the tariff order and implement the prescribed categorization would invite appropriate action. 8. The aforesaid “Note” in the order dated 20.05.2019 in the Petition No. 274/2019 was challenged by some of the hotels by way of Appeal No. 71 of 2020 in this Tribunal. This Tribunal vide order dated 21.05.2020 recorded that hotels in A&N Islands had consistently been categorised under commercial tariff by successive JERC tariff orders since 2012, even though the licensee had continued Page 5 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 to bill them under industrial tariff on the strength of its own 2011 circular, without ever challenging the Commission’s categorisation. 9. The Appellants had initially assailed the note appended in the Tariff Order for FY 2019-20 on several grounds, however, during the course of hearing before this Tribunal in Appeal No. 71 of 2020, the Appellants chose not to press the appeal on the grounds originally urged. Instead, they confined their challenge to a limited plea of arbitrariness, contending that the direction requiring hotels in the A&N Islands to be billed under the Commercial tariff category was inconsistent with the treatment accorded to hotels in the State of Goa under the jurisdiction of the same Commission, where certain hotels had been permitted to avail Industrial tariff subject to fulfilment of prescribed conditions. The Appellants also sought to rely upon the approach adopted by the Commission in relation to establishments engaged in the bakery business, referring to the Commission’s tariff order dated 31.03.2015 passed in Petition Nos. 152/2014 and 155/2014 in support of their contention that a different dispensation had been extended to such establishments. On that narrow basis, and without expressing any view on the correctness of JERC’s Goa or A&N Islands approach, this Tribunal dismissed the appeal as withdrawn while granting liberty to move to JERC for review/revisit of hotel tariff categorisation prospectively from FY 2019-20 onwards, within four weeks, clarifying that such liberty will not be construed as permitting re-opening the subject of categorization or leviable tariff for purposes of any period anterior to FY 2019-20. 10. Consequntly, the Review Petitions 30 and 31 of 2020 were heard by the JERC and Impugned Orders were passed on 02.12.2020. In the order in Review Petition No. 30 of 2020, the JERC changed categorization for hotels to Industry. In the order in Review Petition No. 31 of 2020, only those hotels holding “Udyog Page 6 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 Aadhaar”, were placed under Industrial Category. These Impugned Orders have been challenged by the A&N Admin in Appeal Nos. 296 and 297 of 2022 respectively. 11. Appeal No. 298 of 2022 arises out of the Tariff Order dated 31.05.2021 read with Corrigendum dated 04.06.2021 passed in Petition No. 44 of 2021 for FY 2021- 22. By this Impugned Tariff Order, the Commission: i. Allowed only a marginal increase in tariff of the Commercial and Industrial categories; ii. Approved an increase in Government connections as opposed to the submission of no hike proposed by the Electricity Department in the Tariff Petition for FY 2021-22; and iii. Directed that Hotels be charged under the “Industrial” category, following its earlier Orders dated 02.12.2020 passed in Review Petition Nos. 30/2020 and 31/2020. 12. In the Impugned Orders, the JERC has changed its earlier position (of categorizing hotel in commercial category) and categorized hotels as Industry mainly on the basis of (i) similar categorization in the state of Goa and (ii) Affidavit filed on behalf of A&N Admin supporting such change. 13. The Appellant has prayed for the following relief in Appeal No. 296 of 2022: “i) Set aside order dated 02.12.2020 passed by the Joint Electricity Regulatory Commission in Petition No. 30 of 2020; ii) Allow the appellant to charge tariff from the Hotels under ‘Commercial’ Category instead of ‘Industrial’ Category; Page 7 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 iii) Pass such other order(s), direction(s) as this Hon’ble Court may deem fit and proper” 14. The Appellant has prayed for the following relief in Appeal No. 297 of 2022: “i) Set aside order dated 02.12.2020 passed by the Joint Electricity Regulatory Commission in Petition No. 31 of 2020; ii) Allow the appellant to charge tariff from the Hotels under ‘Commercial’ Category instead of ‘Industrial’ Category; iii) To pass such other order(s), direction(s) as this Hon’ble Court may deem fit and proper.” 15. The Appellant has prayed for the following relief in Appeal No. 298 of 2022: “i) To modify the Tariff order passed by the Joint Electricity Regulatory Commission dated 31.05.2021 and enhance the energy charges as proposed by appellants in paragraph 4.2 of 1 the petition no. 44 of 2021 for FY 2021-22 ; ii) To modify the Tariff order passed by the Joint Electricity Regulatory Commission dated 31.05.2021 by allowing to charge tariff to the Hotels under ‘Commercial’ Category instead of ‘Industrial’ Category; iii) To pass such other order(s), direction(s) as this Hon’ble Court may deem fit and proper.” 1 During hearing as well as in the written submissions, the Appellant has not pressed for this relief. Page 8 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 Submissions of the Appellant- A&N Admin 16. The Appellant has primarily advanced its arguments under two broad categories: 16.1 The first set of contentions of Appellant is mainly on merits of the case. These contentions are summarized below: i. JERC has relied on the fact that in Goa, hotels have been placed under 'Industrial' category, but has failed to consider that in other UTs like Lakshadweep, Daman & Diu, Puducherry & Chandigarh, Hotels are charged 'Commercial' rates. ii. The ground that Hotels in A&N Islands be charged as Industrial category as the same is done in Goa is not tenable since A&N Islands cannot be equated with Goa in terms of power generation. There is economic dis-similarity between Goa and A&N Islands; the average cost of supply of electricity is much higher in latter. Further, the A&N Islands and Goa have dissimilar topography and geographical constraints. iii. There is contradiction in two orders dated 02.12.2020 in Review Petition No. 30/2020 and Review Petition 31/2020, while former places all the hotels under the Industrial category, the latter order places hotel in Industrial category only if they have Udyog Aadhaar issued to them under MSME. Further, even in Goa, a hotel is charged in Industrial category on production of a certificate from the Tourism Department stating that the hotel is registered under the Goa Registration of Tourist Trade Act, 1982. iv. The applicability of any tariff schedule and the categorization of establishments are policy matters to be determined by the States/Union Territories, as per the provisions of the Electricity Act, 2003. Section 108 and Section 109 of the Act empower the State Government or the Central Government (for Union Territories) to issue policy directions in such matters. Page 9 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 The role of the Regulatory Commissions, as defined under Section 62 of the Act, is limited to determining tariff rates within the framework of such policies. Therefore, any deviation from this established procedure contravenes the statutory framework and undermines the authority vested in the State/UT. 16.2 The second set of contention is related to affidavit filed by an officer on behalf of the Appellant, which has been considered by the JERC while passing the Impugned Orders. The Appellant contends that: i. The affidavit was filed without the approval of the competent authority. It was approved by the then Secretary (Power), who, in disobedience of the directions given by the Hon'ble Lt. Governor of the Union Territory of A&N Islands and without consulting the concerned departments of Law and Finance of the A&N Administration and filed affidavits/replies. ii. The A&N Admin has taken strict action against the officials involved for filing the affidavit. During the hearing, this Tribunal had advised Appellant to file an affidavit detailing the action taken against the officials involved, which was duly filed by the Appellant on 19.01.2026. iii. Hon'ble Lt. Governor, vide letter dated 17.08.2021 written to Ministry of Power, GoI, has pointed out financial loss to the State by providing this inherent subsidy to hotels. iv. That the Apex Court judgment in K.D Sharma v. Steel Authority of India (2008) 12 SCC 481, wherein following earlier precedents it was categorically held that judgment/ decree obtained by fraud is a nullity. v. In Andhra Pradesh State Financial Corporation vs. M/s. GAR Re-Rolling Mills & Anr. AIR 1994 SC 2151; and State of Maharashtra & Ors. Vs. Prabhu (1994) 2 SCC 481. Court should not act as to prevent perpetration of a legal fraud as the courts are obliged to do justice by promotion of good faith. Page 10 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 "Equity is, also, known to prevent the law from the crafty evasions and sub- letties invented to evade law." vi. The Apex Court in (2013) 11 SCC 296 in Ram Prakash's held that if any order or judgment or decree has been obtained from the Court by playing fraud, it is always open to the Court to recall the order on the application of the person aggrieved and such power can also be exercised by the Appellate Court. It is also held in the above referred decision that in case of fraud, the very obtaining of such judgment and decree amounts to nullity and he may institute a suit on the ground of fraud. Submissions of the Respondent JERC 17. JERC submits that the orders Impugned in Appeal Nos. 296 of 2022 and 297 of 2022 were passed by the Commission pursuant to the observations made by this Tribunal in Appeal No. 71 of 2020 and as per the concession made by the Appellant. Thus, Appeal will not lie against the consentum order and both the above mentioned Appeals are liable to be dismissed. 18. The Commission has considered all the data available with it and then passed the order categorizing the hotels registered under MSME category under industrial tariff and rest under commercial category. 19. As regards Appeal No 298 of 2022, JERC submits that the Appellant-A&N Admin had submitted the tariff proposal wherein there was nothing about the categorisation of hotels under commercial category. It was only after passing of order dated 31.05.2021 the Appellant-A&N Admin has changed its version that the hotels be placed under commercial category. Page 11 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 20. Under Section 62(3) of the Act, the Commission can frame different tariff for consumers considering the factors as given in the said section. Submissions of the Respondent Nos. 1 and 2 in Appeal No. 296 of 2022, Respondent No. 1 in Appeal No. 297 of 2022 and Respondent No. 2 in Appeal No. 298 of 2022 21. After giving a historical background and stating that the Appellant-A&N Admin has continuously defied the Impugned Orders passed by the JERC, the Respondent-Hotels have made detailed submissions. These submissions are summarized as under: i. The captioned Appeals are nothing but an abuse of the process of law and an attempt to re-agitate the same issues already adjudicated by the JERC on merits, by affording an opportunity of hearing to all the parties leading to Impugned orders. ii. The contemporaneous conduct of the Department was duly noted and condemned by the JERC in their Tariff Order dated 31.05.2021 for FY 2021- 22 and the Department was directed to comply with the 02.12.2020 Orders. However, the Department showed no regard or respect to the same. iii. The basis to challenge the Impugned Orders that the concerned authority was not competent to file the said reply/objections is an after-thought and was raised belatedly to overturn the decisions passed by the Commissions. It is stated that the concerned authority herein i.e., the Superintending Engineer of the Department, has been the authority for presenting the Tariff Petitions on a yearly basis before the JERC. It is further highlighted that even the review petition filed subsequently to challenge the Impugned Orders was signed by the same officer. Page 12 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 iv. It is thus apparent that the Impugned orders passed by the JERC in RP No. 30 and 31 of 2020 were consent orders passed after due consideration of the submissions of the parties. v. The Impugned orders were not only based on the averments made by the Department, but also considered issue on merit, based on the standard being applied to the Hotels in the State of Goa by the Commission itself. vi. The Respondents have questioned the correspondence between the Lt. Governor, Ministry of Power and JERC in the light of clear jurisdiction of the JERC in the matter. vii. It is further submitted that the JERC, in another Tariff Order passed on a Petition preferred by the Dept. of Electricity, Goa for FY 2017-18, had categorically stated that ‘ Hotels with lodging and boarding facilities ’ would be classified under an ‘Industrial tariff’ subject to production of a certificate from the Tourism Department stating that the intending applicant is registered under Goa Registration of Tourist Trade Act, 1982. Similarly, in so far as the A&N are concerned, only those hotels which have been recognised by the Government of India as an “Industry” after being issued the Aadhaar by the MSME are to be subjected to Industrial tariff. In this regard, the Respondent- Hotels have also sought clarity on the ambiguity created by the self- contradictory Impugned Orders. viii. The Tariff Order passed for FY 2019-20 containing the direction to the Department is bad in law and was rightly reviewed and corrected, vide the Impugned Order dated 02.12.2020, as the same was passed without following the principles of natural justice, without affording an opportunity to the hotels to submit objections, the same being unreasoned and also 2 creating a tariff shock to the consumers . 2 Vodafone India Limited vs. Maharashtra Electricity Regulatory Commission and Anr. 2012 ELR (APTEL) 1369 (para 6-8 and 11-12); and Shreyans Industries Limited vs. Punjab State Electricity Board (2018) 13 SCC 256 (para 5) Page 13 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 ix. Appellant-A&N Admin is now attempting to overturn the decisions passed by the JERC and the stand they took before the authorities below by maliciously and vicariously blaming its officers, basis an internal enquiry, citing procedural lapses and lack of approvals from the Lt. Governor etc. The Respondent-Hotels submit that the Affidavit filed on behalf of the Appellant- A&N Admin in compliance of order dated 22.12.2025 passed by the Tribunal shows that the CBI, after conducting the enquiry had submitted its report, wherein no action was recommended against the officer who had filed the affidavits. Further, while the disciplinary enquiry was initiated against all officers involved in the submission of the aforesaid affidavit, two officers stood exonerated by the orders of the Central Administrative Tribunal, Kolkata Bench and the Officers, who had filed the affidavits before the JERC, was merely placed under suspension w.e.f. 26.11.2021 and has not been formally chargesheeted, despite passage of over 5 years. The Respondent- Hotels have concluded that the plea of departmental action being taken against the erring officer of the Appellant-A&N Admin is nothing but a facade being created for deceiving and misleading the Tribunal. Our Analysis & Findings “People create memories, not things. If we ask guests what color the carpet was in their guest room, they probably won’t know. The real value comes from the ladies and gentlemen who bring that hotel to life. Ten percent is the platform, but the rest is people.” — Simon Cooper renowned hotelier and former Ritz-Carlton President 22. We have heard the Learned Counsel for the Appellant and the Learned Counsels for the Respondents. We have also perused written submissions filed by the Learned Counsels. Now, we proceed to analyse the issue at hand i.e whether Page 14 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 hotels should have been placed in the Commercial category or Industrial category for application of electricity tariff. 23. We note that that Appellant has advanced its arguments mainly on two planks; first based on merits where they rely on the fact that JERC has only considered categorisation in Goa to place hotels under Industrial category, and disregarded the practice adopted by them in case of other UTs; geography and economics of power generation in A&N Islands is vastly different from that of Goa; and the applicability of any tariff schedule and the categorisation of establishments are policy matters to be determined by the Appropriate Government as per the provisions of the Act. The second plank of Appellant’s contention revolves around the affidavit filled by the officer on behalf of the A&N Admin supporting categorization of hotels under Industrial category, which the Appellant has claimed was filed without approval of the competent authority and has submitted details of the action taken or being taken against the officers involved. 24. On the other hand, the Respondent-Hotels have contended that the order of JERC was a consent order; and affidavit filed by the officer supporting categorization of hotels under the Industrial category was continuation of earlier policies and that the A&N Admin is now trying to disown the affidavit as an after thought. They have also placed reliance on practice in the state of Goa which is also regulated by the same JERC. 25. The gist of submissions of the JERC is that the Impugned Orders in Appeal Nos. 296 of 2022 and 297 of 2022 were passed by it based on the concession made by the A&N Admin and therefore these are consent orders and that the appeal is liable to be dismissd against these orders; and also that it had considered Page 15 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 all the data available with it before passing these orders. As regards Appeal No. 298 of 2022, the JERC submits that the Impugned Order was based on the proposal of A&N Admin, which had no mention of placing hotels under commercial category. 26. We are of the opinion that the contention of JERC and Respondent-Hotels that the Impugned Orders in Appeal Nos. 296 of 2022 and 297 of 2022 constitute consent orders is not correct, since the consent of the parties has not been expressly recorded therein and the orders also, inter alia, deal with the merits of the issue involved. 27. Next, we would like to analyse the contention of the A&N Admin that applicability of any tariff schedule and the categorization of establishments are policy matters to be determined by the Appropriate Government. In this regard, sub-section (3) of Section 62 of the Electricity Act, 2003 is relevant which is reproduced below: “ The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required” . (Emphasis added) 28. The language of this sub-section leaves no doubt in mind that differentiation in tariff can be made by the Commission on listed ground; one of which being ‘ the purpose for which the supply is required’ . Thus, tariff determination including for various category of consumers as also framing tariff Regulations (Section 61) is the function of the Appropriate Commission and not that of Appropriate Government. While A&N Admin has referred to Section 108 (Directions by the State Government) Page 16 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 and 109 (Directions to the Joint Commission) of the Act, no material has been placed on record to support that any direction was indeed issued under these Sections. Therefore, this argument does not deserve further discussion, particularly as the law declared is that the policy directions issued by the State Government cannot displace or override the statutory and adjudicatory functions entrusted to the State Electricity Regulatory Commission under the Act; the Commission, being an independent statutory authority, is required to exercise its functions in accordance with the scheme of the Act and cannot be compelled to act in a particular manner merely on the basis of executive directions (Kerala SEB Ltd. v. Jhabua Power Ltd., 2024 SCC OnLine SC 2819) . 29. Further, we were informed during the hearing that the cost of generation in A&N Islands is very high (of the order of Rs. 30 per kWh) due to predominantly diesel based generation and that consumers of all the categories are subsidised. That being the case, the A&N Admin could have decided on the extent of subsidy to various categories of consumers in accordance with Section 65 of the Act. Section 65 of the Act is reproduced below: “ Section 65. (Provision of subsidy by State Government): If the State Government requires the grant of any subsidy to any consumer or class of consumers in the tariff determined by the State Commission under section 62, the State Government shall, notwithstanding any direction which may be given under section 108, pay, in advance and in such manner as may be specified, the amount to compensate the person affected by the grant of subsidy in the manner the State Commission may direct, as a condition for the licence or any other person concerned to implement the subsidy provided for by the State Government: Provided that no such direction of the State Government shall be operative if the payment is not made in accordance with the provisions contained in this section and the tariff fixed by State Commission shall be applicable from the date of issue of orders by the Commission in this regard.” Page 17 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 30. The mechanism of operation of the scheme of granting subsidy is further elaborated in the Tariff Policy 2016 . The relevant part of the Tariff Policy, 2016 is extracted below: “8.2 Framework for revenue requirements and costs 8.2.1 The following aspects would need to be considered in determining tariffs: (1)……. (2) ……. (3) Section 65 of the Act provides that no direction of the State Government regarding grant of subsidy to consumers in the tariff determined by the State Commission shall be operative if the payment on account of subsidy as decided by the State Commission is not made to the utilities and the tariff fixed by the State Commission shall be applicable from the date of issue of orders by the Commission in this regard. The State Commissions should ensure compliance of this provision of law to ensure financial viability of the utilities. To ensure implementation of the provision of the law, the State Commission should determine the tariff initially, without considering the subsidy commitment by the State Government and subsidised tariff shall be arrived at thereafter considering the subsidy by the State Government for the respective categories of consumers. (4)…… …………..” (Emphasis added) 31. However, nothing on record shows that the above-mentioned scheme of two tariff schedules one without and another with subsidy was adopted. Now, in the hindsight, A&N Admin can not claim control over tariff schedules. As a passing reference, it may be mentioned that this scheme of providing subsidy has now been prescribed vide Rule 15 under Electricity (Second Amendment) Rules, 2023. Page 18 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 32. Now we proceed to examine the matter on merits and thereafter will see if nd the 2 set of arguments of Appellant-A&N Admin regarding the affidavit filed without authorization needs any analysis. 33. In our opinion, the central issue in this case is the phrase “the purpose for which the supply is required” as mentioned in sub-section (3) of Section 62 of the Act. The said sub-section has already been extracted in para 27 of this Judgement. We note that this Tribunal in Judgement dated 31.05.2011 in Mumbai International Airport Pvt. Ltd. v. MERC & Ors. in Appeal No. 195 of 2009 (2011 SCC OnLine APTEL 95) has gone into the meaning of the phrase “the purpose for which the supply is required”. The relevant part of the order is extracted below: “ 69. One of the factors contained in Electricity Act, 2003 to be considered while determining the tariff is the purpose for which the supply is required. This factor has not been mentioned in Indian Electricity Act, 1910. But the same has been mentioned both in the Electricity Supply Act 1948 and the Electricity Act, 2003. The consumer of electricity power differ widely depending upon their requirement of power. Therefore, it is appropriate to categorize the consumers into various categories. The utility classifies the consumers into the following broader categories : i) Residential ii) Agricultural iii) Industrial iv) Commercial v) Others. 70. All these 3 Acts require that no undue preference should be shown to any consumer but however different tariffs could be fixed depending upon the various factors; one of them being purpose for which supply is required. While referring to the various factors in Section 62 (3) of the Electricity Act 2003, there is a technical rationale behind setting different tariffs depending upon those factors. As far as Page 19 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 categorization based on the purpose for which supply is required is concerned, it would give the following different meaning: The use of electricity is mainly for lighting, heating or cooling and to power a motor by almost all categories of consumers. Thus heating/cooling, lighting, etc,. may not be the ‘purpose’ for which supply is required in terms of provision of the Act. The purpose of supply is the object for which supply is taken, which may be for domestic use, agriculture, industry, education, research, public transportation, medical treatment, public water supply, public lighting, etc. Consumer categories could be classified on the basis of purpose of supply. ……..” (Emphasis added) 34. There are Judgements of this Tribunal which have gone into specific economic activity and its categorisation for electricity tariff purposes such as LPG Bottling Plans (APTEL Appeal No. 265 of 2014, dated 08.09.2016), Charitable Educational Institutes and Hospitals (APTEL Appeal No. 110 of 2009 and batch, dated 20.10.2011), Airport (APTEL Appeal No.195 of 2009, dated 31.05.2011) etc. The issue of categorization of hotels in A&N Islands had come up in Appeal No. 71 of 2020 before this Tribunal. Vide Judgement dated 21.05.2020, this Tribunal had dismissed this appeal as withdrawn without expressing any specific view and granting liberty to Respondent-Petitioner-Hotels to move JERC for review/revisit of hotel tariff categorisation prospectively from FY 2019-20 onwards. The present Appeal is against the consequent order of the JERC. 35. Thus, the issue of categorization of Hotels, specifically whether all or some type of Hotels should fall under “Industrial” or “Commercial” category is what we are required to settle here. 36. The Electricity Act, 2003 does not define “industry” or “commercial”. The broad guidance comes from the Section 62(3), which permits tariff differentiation based on “the nature of supply and the purpose for which the supply is required ”. Page 20 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 37. There are some notable Judgements on what constitutes an “Industry”, however, they are generally in the context of some specific laws such as Factories Act or Industrial Disputes Act. Clearly these statute-specific findings may not be suitable for the electricity tariff purposes. 38. Therefore, to settle the issue and differentiate as to whether a purpose of use of electricity in case of hotels fits into Industrial or Commercial category, we may look into some Dictionary Definitions and economics textbooks. First let us look into the term “Industry”. • Oxford Learner's: "the production of goods from raw materials, especially in 3 factories; heavy/light industry." • Cambridge: "the companies and activities involved in the process of 4 producing goods for sale, especially in a factory or special area." • Merriam-Webster: "manufacturing activity as a whole; a distinct group of businesses that provide a particular product or service; a department or branch of a craft, art, business, or manufacture especially : one that employs a large personnel and capital especially in manufacturing; systematic labor 5 especially for some useful purpose or the creation of something of value" 39. Since the dictionaries define industry largely in terms of manufacturing, for complete understanding of term Industry, we also need to see as to what constitutes manufacturing. 6 • Merriam-Webster (manufacture): • As a noun: the process of making wares by hand or by machinery especially when carried on systematically with division of labour; also “a productive industry using mechanical power and machinery”. 3 industry noun - Definition, pictures, pronunciation and usage notes | Oxford Advanced Learner's Dictionary at OxfordLearnersDictionaries.com 4 INDUSTRY | English meaning - Cambridge Dictionary 5 INDUSTRY Definition & Meaning - Merriam-Webster 6 https://www.merriam-webster.com/dictionary/manufacture Page 21 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 • As a verb: to make from raw materials by hand or by machinery, or to make into a product suitable for use. • Cambridge (manufacturing): defines manufacturing as the business of 7 producing goods in large numbers, especially in factories. 8 • Introduction to Manufacturing" from Elsevier (Peter Scallan, 2003) “Although the basis of manufacturing can be traced back as far as 5000–4000 BC, the word manufacture did not appear until 1567, with manufacturing appearing over 100 years later in 1683 (Kalpakjian, 1995). The word was derived from the Latin words manus (meaning ‘hand’) and facere (meaning ‘to make’). In Late Latin, these were combined to form the word manufactus meaning ‘made by hand’ or ‘hand-made’. Indeed, the word factory was derived from the now obsolete word manufactory. In its broadest and most general sense, manufacturing is defined as (DeGarmo et al., 1988): the conversion of stuff into things. However, in more concise terms, it is defined in the Collins English Dictionary (1998) as: processing or making (a product) from raw materials, especially as a large scale operation using machinery. In a modern context, this definition can be expanded further to: the making of products from raw materials using various processes, equipment, operations and manpower according to a detailed plan.” (Emphasis added) 40. It is obvious that Industrial is something that is connected to Industry. Further, the common thread is that Industry engages in manufacturing, which in turn is the systematic process of making products from raw materials or components, generally by machines and organised labour, usually in factories. 7 https://dictionary.cambridge.org/dictionary/english/manufacturing 8 https://booksite.elsevier.com/samplechapters/9780750651295/9780750651295.PDF Page 22 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 41. Now, let us look into the term “Commercial”, to clearly differentiate it from “Industrial”. 9 • Cambridge: “related to making money by buying and selling things” • Oxford Learners: [usually before noun] connected with the buying and selling 10 of goods and services 11 • "English for Business Studies" by Ian MacKenzie, 2nd ed., 2002 42. Thus, a consistent theme emerges from the dictionaries and economics textbooks that distinguishes industrial (production/manufacturing from raw materials, factories) from commercial (trade, distribution, services). 43. For electricity tariff purposes, the classification of hotels should be guided by the predominant economic purpose of their activity, consistent with the ordinary meanings of industrial and commercial and with the guidance under Section 62(3) of the Act (“purpose for which the supply is required”). Hotels are, in essence, service establishments. Their core business model is the provision of 9 https://dictionary.cambridge.org/dictionary/english/commercial 10 https://www.oxfordlearnersdictionaries.com/definition/english/commercial_1 11 https://assets.cambridge.org/052175/285X/sample/052175285Xws.pdf Page 23 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 accommodation, hospitality, and related services (rooms, housekeeping, reception, concierge, conference facilities, etc.). The primary revenue stream is not the sale of manufactured goods, but charges for lodging and hospitality services, often complemented by ancillary services (banquets, events, spa, etc.). While hotels usually have restaurants, cafés or kitchens that do convert raw ingredients into finished food and beverages, this activity is ancillary and embedded within the broader hospitality operation. Such ancillary activities are aimed at supporting the hospitality service and enhancing guest experience. 44. Of the various case laws referred by the Respondent-Hotels, we find that only one namely Bharti Airtel Ltd. v. MERC (Appeal No. 337 of 2016, decided on 12.02.2020) is relevant to the issue at hand. In this case, this Tribunal had examined the issue that the mobile towers which for long period were placed under industrial category were shifted to commercial category. In our view the finding of this Tribunal in this Judgement goes against what is being argued by the Respondent-Hotels that the policy has been to treat hotels as Industry. The relevant extract of the conclusions of this Tribunal are reproduced below: “12.18 In view of the facts and submissions placed before us during the proceedings, we opine that the classification under the Electricity Act is not governed by the classification adopted by the State Govt. under any policy brought out by the State Govt. for providing incentives to specific industry . It would thus appear that the State Commission has consciously with full application of mind categorised the mobile/broadcasting towers under HT-I industrial category for the purpose of retail supply tariff to be charged from the Appellants herein under the tariff orders issued by it from time to time. We have perused the rulings under the various judgments of the Apex Court and note that in a host of judgments, Hon’ble Supreme Court has held that a long standing view taken by an authority ordinarily be adhered to and not disturbed so as to maintain consistency and to avoid uncertainty. In terms of the above, the State Commission has since the year 2008 taken a consistent view to put mobile / telecom towers under industrial category without going into the details where they fall under the GOM policy or not. Besides, the said position has been held for quite a long time Page 24 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 and also there is no change whatsoever in the factual or legal position, the above principles of law settled by the Apex Court applies squarely in the instant case in hand. … 13.15 After careful consideration and analysis of the submissions of both the parties, it transpires that as per the ruling of the State Commission, in the impugned order, the telecom towers registered under the State Govt. Policy would be classified as industry and other telecom towers would be classified as commercial which is contrary to Section 62(3) of the Electricity Act, 2003. The very rationale adopted by the State Commission in granting industrial tariff to mobile/telecom towers was that these services are essential in nature and tantamount to industrial category despite having no manufacturing activities. It is noticed that vide the impugned order, it is not that all mobile / telecom towers have been put under commercial category but the only criteria for their decision is the registration under the IT/ITES Policy of Govt. of Maharashtra. Resultantly, such pre- requisite condition may put some towers under industrial category and some towers under commercial category which is contrary to the purpose of electricity classification due to the fact that use/purpose of the electricity is not affected by any registration process as the nature of the activities whether registered or not continues to be the same . Moreover, it has been presented by the Appellants during proceedings that they are registered under the IT/ITES Policy and some sample certificates were also produced before us. It is, thus clear that the discom/MSEDCL is now insisting a separate certificate for each of the thousands odd telecom towers of the Appellants to avail the industrial tariff. Further, the fact that the mobile towers and related instalments of the Appellants were treated and covered in the definition of IT/ITES under the policy of the Govt. of Maharashtra will also be evident from the registration certificate issued by the Govt. for the said instalments of the Appellants right since the year 2004. We have taken note of various judgments relied upon by the parties and the National Telecom Policy, 2012 which provide that telecom services are part / sub-set of the information technologies and hence as industrial units. It is also relevant to note that based on the nature of services, many services including telecom services have been recognised as an important infrastructure, public utility services, essential services etc. and have been considered under the incentive scheme as far as electricity tariff is concerned. For instance, airports, hospitals, cold storage, LPG/CNG bottling plants etc. have been considered under the industrial tariff which clearly do not involve manufacturing activities.” (Emphasis added) Page 25 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 45. The aforementioned judgement affirms that while Government may, for the purpose of promoting certain economic activity classify it as industry, it does not necessarily mean that the “purpose for which the supply is required” would also fall into “Industry” as intended under Section 62(2) of the Act. The direction of JERC in one of the Impugned Order to classify only those hotels with “Udyod Adhar” as Industry while others continued to be in Commercial category is also not consistant with the conclusion in the said Judgement of this Tribunal. 46. Based on the preceding analysis, we conclude that if the question is whether hotels should be classified under the Commercial Category or Industrial Category for electricity tariff purposes, the answer is unequivocally the “Commercial Category”. During hearing, we have been informed that in subsequent years, which are not covered in the Appeals before us, JERC has created a separate, bespoke tariff category for hotels. At this stage, there is no need for us to make any observation on creation of such new category. 47. Since we have already concluded based on the merits that the hotels should have been placed under Commercial category, and not Industrial category, we find it unnecessary to go into the issue of affidavit filled by the officer of A&N Admin supporting categorisation of hotels under Industrial Category, and which A&N Admin claims was filed without proper approval. Such an analysis will not add any value to our conclusion, particularly as this affidavit was not the sole basis for relevant direction in the Impugned Orders. ORDER For the foregoing reasons as stated above, the captioned Appeal Nos. 296, 297 and 298 of 2022 are allowed and the Impugned Orders are set aside to the extent Page 26 of 27 Judgement in Appeal No. 296, 297 and 298 of 2022 of categorisation of hotels for electricity tariff purposes. For the period covered in these Appeals, the Hotels shall be placed under Commercial category. The Captioned Appeals and pending IAs, if any, are disposed of in the above terms. th PRONOUNCED IN THE OPEN COURT ON THIS 24 DAY OF MARCH, 2026. (Ajay Talegaonkar) (Virender Bhat) Judicial Member REPORTABLE / NON-REPORTABLE kns/mkj/kks Technical Member Page 27 of 27 </div>