Full Judgment Text
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CASE NO.:
Appeal (civil) 5917 of 1994
PETITIONER:
BHARAT COKING COAL LTD.
RESPONDENT:
STEEL ABRASERS AND ALLIED PRODUCTS LTD.
DATE OF JUDGMENT: 06/09/1994
BENCH:
S.C. AGRAWAL & M.K. MUKHERJEE
JUDGMENT:
JUDGMENT
1994 SUPPL. (3) SCR 118
The Judgment of the Court was delivered by
M.K. MUKHERJEE, J, Special leave granted.
In this appeal, preferred by Bharat Coking Coal Limited (hereinafter
referred to as the appellant’) a Government Company within the meaning of
Section 617 of the Indian Companies Act, 1956, and its General Manger, the
only question that requires an answer is whether the appellant is entitled
to realise service charges from its buyer while selling coke.
Steel Abrasers & Allied Products Limited, the respondent herein, carries on
business of foundry casting and for that purpose it has to buy hard coke
from the appellant. The production’ and disposal of coal and coke are
controlled and regulated by Colliery Control Order, 1945 (’Order for
short’), initially framed by the Central Government under Rule 81 (2) of
the Defence of India Rules and being continued in force by Section 16(2) of
the Essential Commodities Act, 1955. In exercise of the powers conferred by
the Order, the Central Government issued a notification on December 27,
1991 fixing the prices at which different types of coal and coke, including
hard coke, would be sold. Alleging that despite such fixation of price of
hard coke by statutory notification the appellant was demanding and, for
that matter, realising, besides the price, service charges the respondent
filed a writ petition in the Patna High Court wherein it contended that
such action on the part of the appellant, which was a ’State within the
meaning of Article 12 of the Constitution of India, was wholly arbitrary
and illegal and, accordingly, prayed for appropriate relief. In contesting
the petition the appellant submitted that coal and coke were different
commodities and in view of the fact that the respondent was required to be
supplied foundry hard coke, which had a specified sized, it had to put in
some extra work and effort like shifting and sizing after production of the
coke in the plant, and that necessarily meant extra expenditure. According
to the appellant recovery of such expenditure was not barred by the
notification and, on the contrary, the notification per-mitted such
recovery., The High Court accepted the contention of the respondent and
issued a writ of mandamus directing the appellant not to charge from the
respondent any amount other than fixed in terms of the notification dated
December 27, 1991. Hence this appeal.
To answer the question raised in this appeal it is imperative to first
refer to the relevant provisions of the Order and the notification issued
thereunder. Clause 2(1) of the Order defines coal to include anthracite,
bituminous coal, lignite, peat and any other from of carbonaceous matter
sold or marketed as coat and also coke. It is pertinent to point out here
that through the definition clubs coke and coal in fact the two products
are distinct and different. Whereas is a stone like product excavated from
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the earth, coke is the processed product of coal obtained by indirect
heating in Beehive ovens and bye Product ovens which are commonly known as
’coke oven plants’. Clause 2(2) defines ’colliery to mean any mine or open
working where the getting of coal is the principle object and includes a
plant for the production of coke, (emphasis supplied). According to Clause
2(5) ’size’ when used in relation to coal shall have the same meaning as
given in the specification laid down by the Indian Standards Institution
(ISI) from time to time. (Emphasis supplied). Clause 3 empowers the Central
Government to prescribe the classes, grades and size into which coal may be
categorised and the specifications for each such class, grade or size of
coal. Clause 3A(4) entitles the Coal Controller appointed under the Order
to lay down the standards and methods of sampling and analysis of coal
which alone shall be used in declaration of grades or sizes of coal. Clause
4 of the Order which empowers the Central Government to fix the price of
coal reads as under :
"The Central Government may by notification in the official Gazette, fix
the sale price at which, or the maximum or the minimum sale price or both,
subject to which coal may be sold by colliery owners and any such
notification may fix different prices.
(i) for different grades and sizes of coal and
(ii) for different collieries."
Clause 4A which deals with retention price of coal and coke is extracted
below :
"The Central Government may having regard to all the relevant factors,
including the geological and milling conditions of the mining technology
employed in the collieries by the colliery owner, as well as the estimated
cost of production of coal and coke produced by such colliery owner, fix,
by notification in the Official Gazette, the retention price of respect of
each class, grade or size of coal and coke produced and sold by such
colliery owner."
Clause 5(1), so far as it is relevant for our purposes, provides that no
colliery owner or his agent shall sell, agree to sell or offer to sell coal
in excess of the price or the maximum price fixed under clause 4. The only
other clause of the Order which requires mentioning here in Clause 12A. It
provides that the Central Government may, through Gazette notification,
specify the authorities competent to allot quota of coal to any person or
class of persons and every such authority shall allot such quota subject to
such instructions as the Central Government may issue from time to time. In
exercise of the above power, the Central Government has specified its Coal
Controller to be the authority competent to allot quota of coal.
In pursuance of Clause 3 and 4 of the Order the Central Government issued
the notification in question prescribing in table I thereunder the classes
and grades into which coal and coke are to be categorised and in Table II
to VI, the prices at which they are to be sold by the colliery owners at
pit-heads. Following the tables are twenty explanatory Notes of which the
Notes extracted below are relevant :
10. (i) The prices notified herein are applicable only to sale of coal at
pit-heads on FOR colliery siding basis or FOB purchaser’s transport basis
at the colliery loading point.
(ii) Where coal is transported beyond a distance of 3 tans to the loading
point, the coal companies shall be entitled to charge additional transport
costs from the purchasers at following rates :............(rest omitted).
12. The pit-head price of hard coke fixed in Table V and of soft coke fixed
in Table VI are exclusive of duties of excise royalty, cesses, and sales
tax on either the raw coal used for manufacturing the coke or on the Hard
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Coke or soft coke. The colliery owners shall be entitled to realise the
amount of such duties of excise, royalty, ceases and sales tax and other
taxes/levies, if any, from purchasers of Hard Coke and soft coke in
addition to the prices fixed for them. When the impost is on the raw coal
used for manufacture of coke, the sum realisable per tonne of soft coke or
hard coke shall be ascertained by multiplying the rates of raw coal by 1.35
for soft coke and 1.50 for hard coke.
14. For undertaking special slaing or beneficiation of coal additional
charges as my be negotiated between the purchaser and the producer may be
realised over and above the fixed prices.
15. The prices fixed in Table V for Hard Coke and Table VI for soft coke
shall not apply to small sized coke, coke breeze below 12 millimeters size,
Low temperature carbonization coke, pelletised coke or briquettes."
Since sizing of marketable hard coke has an important bearing on the issue
involved in this appeal and since we have already notified that under the
Order size of coal and coke is to be according to ISI specification, we may
now profitably look to the Indian Standard (Third revision) relating to
size analysis of coal and coke for marketing as adopted by ISI and
published by Bureau of Indian Standards in 1979. The foreword of the report
reads, inter alia, as follows :
"Coal as mined is termed as ’run-of-mine’. It has to be graded by screening
or crushing and screening on the basis of size ranges. Similarly, coke as
produced in various plants has an unspecified size distribution and has to
be suitably size graded. For a rational and economic use of these important
materials it is necessary to grade them and assist suitable nomenclature
linked with popular trade names and based on size fractions so that it may
be possible to market them with maximum advantage both to the producers and
the consumers." (emphasis supplied)
The report then prescribes the standard nomenclature and size ranges of
coal and coke for marketing and the methods of sampling and test for their
size grading. The size analysis of hard coke and its correspond-ing size
ranges for marketing are given in Table 2 of the report, which is
reproduced below:
TABLE 2 SIZE ANALYSIS OF HARD COKE FOR MARKETING
(Clauses 3.1 and 5.1.1)
SI. Nomenclature Size Range On
Tolerance (Trade Name)
No. (IS Steev) Over-
Percent By
(PS) size
Mass, Max
On
Und
ers
ize
(1) (2) (3) (4) (5)
(6)
(i) Coke, extra large -100 - 10
Foundry coke
(ii) Coke, large - 100 to - 25 5 10
BFcoke
(iii) Coke, medium -40 to + 25 5 10
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Nut coke
(iv) Coke, small -25 to + 10 5 10
Pearl coke
(v) Coke, fine -10 5 -
Breeze
Note : Size ranges other than these maybe specified for special uses."
The procedure for size analysis of coke prescribed in .the report is as
follows :
"Procedure for Size Analysis of Coke - Select appropriate sieves so that no
size fraction exceeds 25 per cent by mess of the sample. Arrange them in a
stack in a decreasing order of size apertures so that the sieve with the
smallest aperture is at the bottom. Accurate-ly weigh the sample and screen
it in small increments at a time so that undersize passes to the next sieve
and the apertures are not choked. Hand place the pieces of coke remaining
on the screen and transfer the oversize to a suitable container. Remove the
top sieve and repeat the operation on the next sieve. Continue this
procedure using hand snaking only until the oversize on each sieve has been
placed in a separate container.
If necessary, re-stack the set of sieves and repeat the process for
successive qualities until the entire sample has been grantities."
Mr. Salve, the learned counsel appearing in support of the appeal,
submitted that when Note 10(1) clarified that the prices fixed under the
notification were applicable to sale at ’pit heads, they would, as regards
coke necessarily refer to sale at the ’coke oven plant, Since the coke as
prescribed in the plant, was required, to be properly handled to attain the
specification of foundry coke as laid down by ISI, the appellant could
legitimately demand handing charges besides the notified price, in terms of
Note 14, argued Mr. Salve. To bring home his contention Mr. Salve relied
upon the following averments made in the counter-affidavit filed on behalf
of the appellant in the High Court:
" It is stated after indirect heating of coal in Beehive Oven (B.H.) and
B.P. Plants coke is produced. After manufacture of coke further handing is
required for sale of coke. It is stated that Pit Head Coke is an assorted
sizes of coke having various size ranges. Coke below 1/2" size of 12 M.M.
size constitutes upto 6 to 8 per cent of total Pit Head coke. As per Indian
standard specification (I.S.) under size tolerance is 10 percent. Further
Indian Standard specification for Foundry Coke is 4" (+100). This
constitutes about 80 per cent of the total product.
It is stated that loading is not possible at Pithead. Therefore shifting,
sizing either by manual or by fork lifting and storing in different loading
points is undertaken either manually or by vehicles. The colliery owners
are spending substantial money to carry out despatch of coke according to
specification as improper handing of coke may result in breaking. The
operations required before despatch to suit Indian Standard Specification
generates substantial rejection. The expenditures incurred in screening,
stacking, loading and transportation into despatchable container is termed
as handling charges."
While dealing with the contentions of Mr. Salve, Mr. Sanyal, appearing for
the respondent, did not dispute that as regards coke pit heads as referred
to in Note 10(1) would mean coke oven plants. He, however, contended that
besides the prices as notified, the appellant could claim only
transportation charge if the coke was transported beyond a distance of 3
KMS to the loading point under Note 10(2) and the duties and levies
referred to in Note 12. According to Mr. Sanyal Mr. Salve’s reliance on
Note 14 to justify the impugned demand was wholly misplaced for the simple
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reason that neither did the respondent ask for any special size of coke nor
did the appellant undertake any process for its beneficiation. In other
words, according to Mr. Sanyal, the appellant sold to the respondent coke
of ’specified’ size as mentioned in the table and not of ’special size’ so
as to attract the provision of Note 14. While on this point he referred to
the note as appearing in the table to contend that if the appellant had
supplied coal of special size in terms of the note it might have laid any
claim under Note 14.
Having carefully considered the respective contentions of the learned
counsel in the light of the material on record we are inclined to accept
the contentions of Mr. Salve in preference to those of Mr. Sanyal From a
combined reading of the relevant clauses of the Order and the Notes
appended to the notification referred to earlier we may draw the following
conclusions:
(i) The Central Government may, be Gazette Notification, fix the sale price
for different grades and sizes of coal and coke and for different
collieries, including plants for the production of coke.
(ii) The prices so fixed are applicable to sale of coal at pitheads and not
of coke at coke oven plants.
(iii) Prices given in table V of the notification for hard coke shall not
apply to small sized hard coke and other types of cokes as mentioned.
(iv) No colliery owner shall sell and no person shall purchase coal or coke
at a price which is in excess of the notified price.
(v) However, besides the price so fixed the colliery owner is entitled to
realise (a) costs for transportation beyond a distance of 3 KMS to the
loading point at the specific rates, (b) excise duty, royalty, cess, sales
tax and other taxes/leviesm if any and (c) additional charges as may be
negotiated between the producer and the purchaser for undertaking special
sizing or beneficiation.
Terminologically coal as mined as known as ’run of the mine’ and taking a
cue from the same we may conveniently describe the coke as initially
produced in the plant as run of the plant’. The ’run-of- the plant’ has
been categorised as hard coke of different classes and grades in Table I
and their prices fixed accordingly in Table V of the notification depending
upon its ash content. That the coke so produced has to be suitably handled
to segregate those required for foundries according to ISI specification is
evident not only from the statements made in the counter affidavit of the
appellant but also from the foreword of the ISI report as quoted earlier.
The exercised so undertaken by the appellant to screen the run-of-the plant
which has an unspecified size distribution to get the extra large size,
specifically earmarked for foundry would certainly be one for special
sizing within the meaning of Note 14. The contention of Mr. Sanyal that
since the respondent had not contracted of supply of special size it was
not bound to pay for the same cannot be accepted as, in view of the
definition of ’size’ under the Order, the appellant is obligated to sell
only according to specifications of ISI. The note referred to in the table
of ISI notification does not come in aid of Mr. Sanyal as it only empowers
the ISI to specify different size ranges for special uses besides those
specified in the table and has no bearing to the issue involved in the
appeal.
Coming now to impugned judgment we find that in negativing the contention
of the appellant based on Note 14, the High Court observed that the said
Note had no manner of application to the facts of the case as the
respondent did not purchase special size of coal. Unfortunately, in making
the above observation the High Court failed to notice the definition of
’size’ under the Order and the report of the ISI in this regard.
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For the foregoing discussion we allow this appeal, set aside the impugned
judgment of the High Court and dismiss the writ petition filed by the
respondent. There will, however, be no order as to costs.