Hotels must be classified under commercial category for electricity tariffs due to service-oriented nature of hospitality.

The Appellant, a distribution licensee in the Union Territory (UT) of Andaman and Nicobar (A) Islands, challenged three orders passed by the Joint Electricity Regulatory Commission (JERC).

Historically, hotels in the UT were billed under the "Industrial" tariff category based on administrative policies.

Starting from the FY 2012-13 Tariff Order, the JERC reclassified them under the "Commercial" category.

Despite this, the Appellant continued to bill certain hotels at industrial rates until cautioned by the JERC in 2019.

Following a previous round of litigation (Appeal No. 71 of 2020), the JERC passed the Impugned Orders on December 2, 2020, and May 31, 2021, re-categorizing hotels back to the "Industrial" category.

The JERC based this shift on the practice in the State of Goa and an affidavit filed by an official of the A Administration supporting such re-classification.

The Appellant appealed, contending that the affidavit was filed without competent authorization and that hotels, by nature, belong to the commercial category.

1. Whether hotels should be classified under the "Industrial" or "Commercial" category for the purpose of electricity tariff determination under the Electricity Act, 2003.

2. Whether the categorization of consumers for tariff purposes is a policy matter for the Government or a statutory function of the Regulatory Commission.

Section 62(3) of the Electricity Act, 2003, which empowers the Appropriate Commission to differentiate tariffs based on "the purpose for which the supply is required".

Principle from Kerala SEB Ltd. v. Jhabua Power Ltd. (2024), establishing that statutory/adjudicatory functions of the Commission cannot be overridden by executive policy directions.

Principle from Mumbai International Airport Pvt. Ltd. v. MERC (2011) to define "purpose of supply" as the object of the activity, such as domestic, industrial, or commercial.

Principle from Bharti Airtel Ltd. v. MERC (2020) to clarify that government incentive policies labeling an activity as an "industry" do not automatically dictate its classification for electricity tariff purposes under the Act.

The Tribunal rejected the Appellant's argument that categorization is a government policy matter under Sections 108 and 109, holding that Section 62(3) explicitly grants this power to the Commission.

In interpreting "purpose of supply," the Tribunal examined the technical and economic definitions of "Industry" versus "Commercial" and observed that "Industry" involves systematic manufacturing/production from raw materials, whereas "Commercial" involves trade and services.

The Tribunal reasoned that hotels are fundamentally service-oriented establishments whose core business is providing accommodation and hospitality; while hotels may engage in ancillary food preparation, their predominant economic activity remains commercial.

The Tribunal noted that the JERC erred by relying on incentive-based classifications (like "Udyog Aadhaar") or the practice in Goa, as the legal "purpose" of supply for hospitality does not change based on registration or regional variations.

Regarding the disputed affidavit, the Tribunal found it unnecessary to rule on its validity because the classification could be determined on the merits of the activity itself.

The Tribunal allowed the appeals and set aside the Impugned Orders regarding the categorization of hotels; it directed that for the period covered by the appeals, the hotels in the AN Islands shall be placed under the Commercial category.

All pending applications were disposed of accordingly.