M/S SESA STERLITE LTD.versusORISSA ELECTRICITY REGULATORY COMM. & ORS.

                        [2014] 13 S.C.R. 426


A                    M/S SESASTERLITE LTD.
                                  v.
      ORI SSA ELECTRICITY REGULATORY COMM. & ORS.

B                  (Civil Appeal No. 5479 of 2013)

                           APRIL 25, 2014
       [SURINDER SINGH NIJJARANDA. K. SIKRI, JJ.]

c        Electricity Act, 2003 - Enactment of - Object- Payment •
  of Cross Subsidy Surcharge (CSS) to Distribution company
  - Rationale - Discussed- Held: CSS is the charge payable
  by a consumer who opts to avail power supply through open
  access from someone other than Distribution licensee in
D whose area it is situated - Such surcharge is meant to
  compensate such Distribution licensee from the loss of cross
  subsidy that such Distribution licensee would suffer by
  reason of the consumer taking supply from someone other
  than such Distribution licensee.
E
         Eh~ctricity Act, 2003- s. 14 -Appellant, a Developer in
  the SEZ area having its unit in the SEZ, not drawing or utilizing
  any electricity from the Distribution Licensee viz. WESCO
  for its unit- State Electricity Regulatory Commission rejected
F the Power Purchase Agreement (PPA) entered into by the
  appellant with Mis. Sterlite Energy and directed the appellant
  to pay Cross Subsidy Surcharge (CSS) to WESCO holding
  the appellant to be a 'consumer' - Validity - Whether
  developer of a notified SEZ, who has been deemed by law to
G be a licensee for distribution of electricity, is required to, once
  again, apply to the Electricity Regulatory Commission for
  grant of a licence or the deeming fiction carved out in s. 14 of
  the Electricity Act automatically dispenses with this
  requirement and ipso facto makes such SEZ developer a
H
                                 426
   M/S SESA STERLITE LTD. v. ORI SSA ELECTRICITY                   427
               REGULATORY COMM.

distribution licensee - Held: No doubt by virtue of the status     A
of a developer in the SEZ area, the appellant was also treated
as deemed Distribution Licensee- However with this, it only
got exemption from specifically applying for licence uls.14
of the Electricity Act- In order to avail further benefits under
the Act, the appellant was also required to show that it was in    B
fact having distribution system and had number of consumers
to whom it was supplying the electricity - That was not the
case here- Notification dated 03.03.2010 issued u/s.49(1)
of the SEZ Act providing for the "Developer" of SEZ being
deemed as a "Distribution Licensee" was issued keeping in          C
view the concept of Multi Unit SEZs and did not apply to a
Developer like appellant who had established the SEZ only
for itself-Appellant to make payment of CSS to WESCO -
Special Economic Zone Act, 2005- s. 2(g)lj)(za)(zr:), ss. 3, 4,
11; 12, 13, 15and49.                                               D

     Dismissing the appeal, the Court
       HELD:1. In the present case, no doubt by virtue of
the status of a developer in the SEZ area, the Appellant E
is also treated as deemed Distribution Licensee.
However with this, it only gets exemption from
specifically applying for licence under Section 14 of the·
Electricity Act, 2003. In order to avail further benefits
under the Act, the Appellant is also required to show that F
it is in fact having distribution system and has number
of consumers to whom it is supplying the electricity. That
is not the case here. For its own plant only, it is getting
the electricity from Sterlite Ltd. for which it has entered ·
into PPA. The object and scheme of SEZ Act envisages G
several units being set up in a SEZ area. This is evident
from a collective reading of the various provisions of the
Special Economic Zone Act, 2005 (SEZ Act) viz. Section
2(g)U)(za)(zc), Section 3, 4, 11, 12, 13 and 15. The
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428         SUPREME COURT REPORTS                [2014] 13 S.C.R.



A Notification dated 03.03.2010 issued under Section 49(1)
  of the SEZ Act providing for the "Developer" of SEZ
  being deemed as a "Distribution Licensee" ~as issued
  keeping in view the concept of Multi Unit SEZs and will
  apply only to such cases in which the Developer is
B supplying the power to multiple Units in the SEZ. The
  said Notification will not apply to a Developer like the
  Appellant who has established the SEZ only for itself.
  Having regard to the factual and legal aspects and
  keeping in mind the purpose for which CSS is payable,
C on the facts of this case it is not possible for the Appellant
  to avoid payment of CSS to WESCO. [Paras 43, 44]
  [458-F-H; 459-A-E]
       CIVIL APPELLATE JURISDICTION: Civil Appeal
D .No.5479of2013.

          From the Judgment and Order dated 03.05.2013 of the
      Appellate Tribunal for Electricity in Appeal No. 206 of 2012.

           Shyam Diwan, Sr. Adv., Ms. Ranjana Roy Gawai,
 E    Abhishek K. Rao, Ms. Divya Roy, Ms. Vasudha Sen, Advs. for
      the Appellant.

           Parag P. Tripathi, Sr. Adv., Sibo Sankar Mishra, Adbhut
      Pathak, Buddy A. Ranganadhan, Hasan Murtaza, Aditya
 F    Panda, Shiv Kumar Suri, Raj Kumar Mehta, Ms. lshita C.
      Dasgupta, Advs. for the Respondents.

           The Judgment of the Court was delivered by

           A. K. SIKRI, J. 1. Instant is a statutory Appeal which is
 G filed by the Appellant under Section 125 of the Electricity Act,
   2003 (hereinafter referred to as 'the Act'). This Appeal arises
   out of the judgment and order dated 3'd May, 2013 passed by
   Appellate Tribunal for Electricity.

 H
   M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                        429
         REGULATORY COMM. [A. K. SIKRI, J.]

      2. By the aforesaid judgment, the Appellate Triounal has A
affirmed the orders of the Odisha Electricity Regulatory
Commission (hereinafter referred to as the 'State
Commission'). The essence of these orders is that even when
the Appellant is a "Deemed Distribution Licensee~· for the
purpose of Electricity Act, it is still li~ble t<:> pay Cross Subsidy B
Surcharge (CSS) to the Respondent No.8 viz. WES.CO which
is a Distribution Licensee for the area in question ..
                                        .                        .
       3. To put it in nutshell, the case of the Appellant is that it·
has its unit in Special Economic Zo'ne (SEZ) ·and ·it is a c
Developer in the said SEZ area. It is not drawing or utilizing
any electricity from the Distribution Licensee vll."WESCO for
its unit namelyVALE~SEZ. lnfac( the Appellant had entered
irifo a Power Purchase Agreement (PPA) dated 181h August,
2011 with M/s., Sterlite Energy L:td. The Appellan·( had filed D
application for getting approval of the said PPA. However the.
Odisha State Commission, instead of granting the approval,
rejected the said PPA and directed the Appellant to pay CSS
to WESCO holding the Appellant to be a 'Consumer'.
                                                                       E
       4. As per the Appellant, as it is a deemed distribution .
licensee for the purpose of Electricity Act by virtue of it being a
'Developer' because of the reason that its unit is in SEZ area
and such a recognition is given to the Appellant statutorily under
the provisions of Special EconomicZoneAct,2005 (hereinafter F
referred to as SEZAct). Therefore, the question of payment
of CSS to the Distribution Licensee does not arise. It is also
the case of the Appellant that, in any case, since no electricity
 is being drawn from the open access network WESCO,  of
there is no question of making payment of cross· subsidy G
 surcharge. This is the brief description of the dispute raised
 by the Appellant and· in orde·r to understand the gravamen of
 this dispute, we take a tour of the.factual roadmap.
                             .   '-''


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430         SUPREME COURT REPORTS                   [2014] 13 S.C.R.


A           The Facts:

            5. These facts are in narrow compass and have been
      narrated succinctly by the Appellate Tribunal in its order. As
      there is no dispute about the correctness of these facts, we
B     intend to traverse the same therefrom. The Appellant is
      engaged in the business of production and export of aluminium.
      The Appellant has set up a 1.25 MTPA capacity aluminium
      smelter project in a sector specific Special Economic Zone.
      After getting all necessary approvals for the development of
c     SEZ for manufacture of export of aluminium the appellant set
      up the aforesaid plant. These approvals include the approval
      with captive power plant as well. It is also a matter of record
      that on 271h February, 2009 the Ministry of Commerce and
      Industry, Government of India issued a notification declaring
D     the unit of the Appellant to be SEZ. It was followed by
      Notification dated 3ro March, 2010 under Section 49(1) of the
      SEZAct. By the said notification, the Central Government of
      promoting the objects of SpeCial Economic Zone and in terms
      of powers delegated under the Special Economic Zone Act,
E     introduced a proviso to the provisions of Section 14(b) of the
      Electricity Act, 2003. By the said introduction, a developer of
      a Special Economic Zone was declared as a deemed licensee
      authorized to distribute electricity within the Special Economic
      z.one area. The effect of the aforesaid Notification under
F     section 14(b) of the Electricity Act is that the Appellant became
      a deemed Distribution Licensee.
        6. It would be pertinent to mention at this stage that the
  units of the Appellant are divided into two broad areas. One is
G Domestic Tariff Area (DTA) where it has established one of its
  unit. Other unit is VAL-SEZ which is in SEZ (hereinafter
  referred to as VAL-SEZ Unit). In so far as its unit in DTA is
  concerned, it draws power from open access and duly phased
  pays cross subsidy surcharge for this area. There is no dispute
H
    M/S SESASTERL:ITE LTD. v. ORISSAELECTRICITY                     431
          REGULATORY COMM. [A. K. SIKRI, J.]

 to this extent. In the present Appeal, we are concerned with A
 VAL-SEZ which is in SEZArea where the Appellant is stated
 as deemed Distribution Licensee for the purpose of Electricity
 Act by virtue of Notification under Section 14(b) of the Electricity
 Act.
                                                                      B
        7. For supply of energy to this unit in SEZArea (VAL-2),
 the Appellant entered into a PPA on 181h August, 2011 with
 Sterlite Energy Ltd. which was arrayed as Respondent No.4
 in the Appeal. However during the pendency of the Appeal
  under the scheme of merger approved by the High Court, c
 Sterlite stood merged with the Appellant itself and because of
 this reason the Respondent No.4 (hereinafter referred to as
· 'Sterlite') has been deleted from the array of parties at the.
  instance of the Appellant.
                                                                     D
       8. Since the supply of power by a Generating Company
to Distribution Company is regulated under the provisions of
Electricity Act, 2003, the Appellant on 30 1h August, 2011 filed a
petition before the State Commission for approval of the said
PPA. Subsequently, the State Commission at the preliminary E
hearing sought some clarifications with regard to the factual
aspects. The Appellant, thereafter filed two amendment
petitions. One was on 81h November, 2011 and another was
on 27 1h March, 2012 seeking for the additional prayer
requesting the State Commission to grant deemed distribution F
licence in favour of the Appellant on the strength of the
Government of India notification issued dated 3rd March, 2010
with effect from the date of the said notification.

       9.As already pointed out above, the State Commission G
 rejected. this application for grant of deemed Distribution
 Licensee and subsequently rejected the prayer of the Appellant
 for approval of PPAalso. The State Commission, while doing
 so held as under:
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432         SUPREME COURT REPORTS                    [2014] 13 S.C.R.


A          "a. Since the Application for grant of Distribution License
           was rejected, State Commission did not consider it
           necessary to go into the issues relating to the PPA.

           b. Consequent upon the rejection of the Application for
B          grant of Distribution License, State Commission held that
           VAL is to be treated as a consumer of WESCO.

          · c. As a result, VAL has to pay cross subsidy surcharge
            to WESCO for open access drawal of power from SEL."

C           10. This Order of the State Commission has been upheld
      by the Appellate Tribunal in Appeal filed by the Appellant.

           Question of Law:

        11. In the present Appeal, the Appellant has raised
D following question of law which the Appellant recall this Court
  to determine an answer:

           "Whether a developer of a notified Special Economic
           Zone, who has been deemed by law to be a licensee for
E          distribution of electricity, is required to, once again, apply
           to Electricity Regulatory Commission under the Electricity
           Act for grant of a licence or the deeming fiction carved
           out in Section 14 of the Electricity Act automatically
           dispenses with this requirement and ipso facto makes
F          such SEZ developer a distribution licensee."

           The Arguments: Appellant
       12. Mr. Shyam Diwan, Learned Senior Counsel
G appearing for the Appellant, with full of passion and vehemence
  argued that all the three findings of the State Commissi9n,
  which are upheld by the Appellate Tribunal, are ex facie
  untenable in law. Questioning the first aspect of the order of
  the authorities below refusing to register the said PPA, his
H plea was that since the PPA is a contract between the two
                                                                         /




   MIS SESASTERLITE LTD. v. ORISSAELECTRICITY                      433
         REGULATORY COMM. [A. K. SIKRI, J.] .

parties, the State Commission could not have refused to A
consider the same. Such outright refusal amounts to failure to
discharge the function enjoined by the Parliament on the State
Commission under Section 86(b) of the Act. Under this
provision, the State Commission has to .regulate electricity
purchase and procurement process of distribution licensee B
including the price at which electricity shall be procured from
the generating company. Thus it was duty bound to approve a
PPA subject to the terms and conditions which it deems fit in·
law and only when the parties fail to comply with those terms
of the license that such license can be revoked. The failure to C
not look into a PPA altogether amounts to non exercise of
jurisdiction.

       13. In so far as the opinion of the Appellate Authority that
the Appellant is to be treated as a consumer of WESCO is D
concerned, Mr. Diwan placed heavy reliance on the proviso to
Section 14(b) of the Act as per which developer of the notified
SEZ itself becomes deemed Licensee from the date of such
notification. He thus argued that when there was a specific
notification under that proviso declaring the Appellant as a E
developer, the Appellant was a deemed Licensee and
therefore there could not have any requirement for the Appellant
to obtain the license under the Electricit'! Act. As a fortiorari,
such ~ developer cannot be treated as a 'consumer'.·
Therefore, the authorities below could not, in law, hold the F
Appellant to be a consumer of WESCO.

      In the alternative, it was argued that in any case, the
Appellant was purchasing the electricity from Sterlite under the
PPA and, therefore, by no stretch of imagination, it could be      G
treated as consumer of WESCO. To buttress this submission,
Mr. Diwan referred to the provisions of Section 2(15) of the
Electricity Act which defines the term "consumer" and submitted
that in order to treat the Appellant as a consumer, it was
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434        SUPREME COURT REPORTS                    [2014] 13 S.C.R.


A necessary to establish that it is supplied with the electricity by
  such "Licensee" or the "government" or "any other person
  engaged in the business of supplying electricity to the public".

        14. In so far as the third finding holding the Appellant liable
8 to pay CSS to WESCO for open access drawal of power from
  SEZ is concerned, the submission of Mr. Diwan was that there
  was no occasion for the State Commission (or for that matter
  Appellate Tribunal) to go into the aspect of CSS in an
  application filed by the Appellant initially for approval of PPA
c only which was later amended on the directions of the State
  Commission to include a prayer to the extent that the Appellant
  should be recognized as a Distribution Licensee under Section
  14(b) of the Electricity Act. It was submitted that even in the
  amended application there was no issue of CSS and the
D authorities below exceeded their jurisdiction in going into this
  issue and giving such a direction.

         Without prejudice to the aforesaid preliminary
  submission, Mr. Diwan argued that even on merits that such a
E decision was palpably contrary to law. In this behalf his
  submission was that since under Section 42 of the Electricity
  Act, 2003, cross subsidy surcharge is payable to the
  Distribution Licensee of the area of supply only when the
  "distribution system" of such Distribution Licensee is "used"
F for supply of electricity. Therefore, without a clear finding of
  fact on 3ppreciation of evidence, that the supply-line of SEL-
  VAL is connected to WESCO and that WESCO's "distribution
  system" is "used" for supply of electricity, State Commission
  could not have held that VAL has to pay cross subsidy
G surcharge to WESCO for open access drawal of power from
  SEL.

       In this context, the attention of the Court was drawn to the
  National Tariff Policy dated 5th January, 2014, Clause 8.5,
H Orissa Electricity Regulatory Commission (Terms and
   MIS SESASTERLITE LTD. v. ORISSAELECTRICITY                    435
          REGULATORY COMM. [A. K. SIKRI, J.]

Conditions for Open access Charges) Regulations, 2005 A
(Clause 13(1 )(ii)] and to Orissa Electricity Regulatory
Commission (Determination of Open access Charges)
Regulations, 2006 [Clause 2U). It was submitted that from a
bare perusal of the relevant Clauses of these Regulations, it is
clear that CSS can be levied on "open access customers" i.e. B
"a consumer who has availed of or intends to avail of open
access".

      In addition to the aforesaid submission, questioning the
correctness of the each of the findings of the State Commission c
and the Appellate Tribunal, Mr. Diwan emphasized that it is to
be kept in mind in deciding the issue that VAL SEZ is a
Deemed Distribution Licensee by operation of law and it need
not be a Distribution Licensee within the meaning of Section
2( 17) of the Electricity Act, 2003. He admitted that a contention D
of the Respondents that VAL SEZ does not qualify as a
Distribution Licensee within the meaning of Section 2(17) of
the Electricity Act, 2003 is misplaced since accepting such
contention would defeat the very purpose of the deeming fiction
created by the statute. The deeming fiction would have no E
relevance if the reality which the statute creates by way of fiction
already existed. He argued that none of the five provisos to
Section 14 of the Electricity Act, 2003 require the deemed
distribution licensees mentioned therein to obtain a license
under the Electricity Act. The Developer of a notified SEZ is a F
special entity under a special legislation and the definition of
"consumer" or "distribution licensee" etc. as defined under the
Electricity Act, 2003 cannot be made applicable.
      It is crucial point that the SEZ Act conceptually envisages G
"Developer" of an SEZ distinct from the "Zone" itself as also
distinct from "Unit". Developer is defined under Section 2(g)
of the SEZ Act whereas Special Economic Zone is defined
under Section (za) of the SEZ Act and Unit is defined under
Section 2(zc) of the SEZAct. Thus the Appellant in its capacity H
436         SUPREME COURT REPORTS                  [2014] 13 S.C.R.



A     as the Developer of the SEZ has the duty to develop, operate
      and maintain the Zone. Failing the reconciliation between the
      provisions of the Electricity Act, 2003 and the SEZ Act, the
      provisions, objects and purpose of the SEZ Act will prevail
      (Section 51 of the SEZ Act). The object and purpose of the
B     SEZAct, inter alia, is to provide an internationally for export
      production, expeditious and single window approval
      mechanism and a package of incentives to attract foreign and
      domestic investments for promoting export-led growth.

C            The Arguments: Respondents

         15. Mr. R.K. Mehta, Learned Counsel appearing on
  behalf of GRIDCO Ltd. refuted the aforesaid submissions of
  Mr. Diwan. His main argument was that even though the
D Appellant was possessed of notification issued under Proviso
  to Section 14(b) of the Electricity Act, which treats the Appellant
  as of Deemed Distribution Licensee, the concept of
  Distribution Licensee under the Electricity Act pre-supposes
  supply/distribution of power. An entity which utilizes the entire
E quantum of electricity for its own consumption and does not
  have any other consumers cannot be deemed to be a
  Distribution Licensee, even by a legal fiction. In support of
  this submission, the Learned Counsel referred to the definitions
  of "consumer" in Section 2(15), "Distribution Licensee" as
F contained in Section 2(17) and "supply" in relation to electricity
  to the consumers in Section 2(70). He also referred to Section
  42 of the Act which spells out the duties of Distribution Licensee
  and open access. His submission, thus, was that by virtue of
  the legal fiction created by the Notification dated 3rd March,
G 2010, a person who distributes Electricity can be deemed to
  be a distribution licensee even though he does not have a
  distribution license- But the legal fiction cannot go further and
  make a person who does not distribute electricity as a
  distribution licensee.
H
   M/S SESA STERLITE LTD. v. ORI SSA ELECTRICITY               437
         REGULATORY COMM. [A. K. SIKRI, J.]

       16. He also argued that if a 'Distribution Licensee' is A
equated with 'Consumer' the provisions of Section 2(15),
2( 17), 42 and 43 of the Electricity Act, 2003 would be rendered
otiose and nugatory; The mandate of Section 42 and 43 of
the Electricity Act, 2003 cannot be negated by exercise of
power under Section 49( 1)(b) of the SEZ Act. It was further B
submitted that only a proviso has been added to Section 14(b)
by Notification dated 3rd March, 2010 qua the Appellant. There
is no stipulation in the Notification that other provisions of the
Electricity Act will not apply to the Developer of a SEZ.
                                                                c
      17. Mr. Mehta called for harmonious construction of the ·
provisions of SEZ and the Electricity Act to support his
submission that the legal fiction of deemed Distribution
Licensee cannot be taken to the level of absurdity and made
applicable even when it does not involve distribution/supply of D
power at all. He further pointed out the object and scheme of
SEZAct envisages several units being set up in a SEZ. This
is evident from a collective reading of the various provisions
of the SEZAc;tviz. Section 2(g)Q)(za)(zc), Section 3, 4, 11, 12,
13 and 15: There can be a Sector Specific $EZ with Several E
Units i.e. for IT, Mineral Based Industries etc. but instances of
single unit SEZ like in the present case of the appellant may
be rare. The ~otification dated 3rd March, 2010 providing for·
the "Developer" of an SEZ being deemed as a "Distribution
Licensee" was issued keeping in view the concept of Multi F
Unit SEZs and will apply only to such cases in which the
Developer is supplying the power to multiple Units in the SEZ.
The said Notification will not apply to a Developer like the
Appellant who has established the SEZ only for itself.
                                                                G
    18. Mr. Parag P. Tripathi, Learned Senior Counsel
appeared with Mr. Shiv Kumar Suri, Advocate on behalf of
WESCO. His submission was that in the facts of present case
WESCO was entitled to CSS on the electricity purchase by
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438       SUPREME COURT REPORTS                  [2014] 13 S.C.R.


A the Appellant from Sterlite which was consumed wholly and
  completely by the Appellant itself. It was pointed out that
  surcharge was meant to compensate a Distribution Licensing
  from the loss of cross subsidy surcharge that such distribution
  licensee would suffer by reason of the consumer taking supply
B from someone other than such Distribution Licensee, the
  moment it is found that the Appellant is covered by the Definition
  of a consumer within the meaning of Section 2(15) of the Act.
  He argued that in such a situation the mere fact that the
  Appellants claims to be a deemed Distribution Licensee is of
C no consequence at all since the entire power purchase by the
  Appellant is for its own use or consumer and not for the purpose
  of Distribution. The Appellant, therefore, could be categorized
  as a consumer as regards its own consumption even if it is a
  deemed Licensee. On merits, it was submitted that
D
  Transmission line between the Generating Company (Sterlite)
  and the Appellant is not a Dedicated Transmission Line, with
  an attempt to justify it giving various reasons which we shall
  advert to all a later stage.

E       19. It was also argued that as per Regulation 27 of the
  OERC (Conditions of supply Code) Regulations 2004, the
  "service line" shall be the property of the licensee unless
  otherwise specified in writing. Hence the line between the
  grid sub-station and the Appellant's SEZ qualify as the property
F of WESCO and therefore any use of such line could only be by
  Open Access under the EA and in any event CSS would be
  payable. Reference was also made to the Rule 4 of the
  Electricity Rules, 2005, as per which aforesaid line would be
  deemed as part of the Distribution System of WESCO. On
G that basis submission of Mr. Tripathi was that from any angle
  the matter is to be looked into the orders of the Appellate
  Tribunal was perfectly justified.


H
   M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                         439
         REGULATORY COMM. [A. K. SIKRI, J.]

     Our Analysis:                                                    A
     20. From the aforesaid narration of events·as well as
arguments of the counsel for the parties, it has become
manifest the primary dispute relates to the CSS which the
Appellant is called upon to pay to WESCO. As per the B
Appellant no such CSS is payable and the PPA which was
submitted by the Appellant to the State Commission for
approval, should have been accorded due approval by the
State Commission.
      (1) Special Feature of the 2003 Act ·
                                                                      c
       21. Before adverting to this central issue, it would be apt
to understand conceptually the rationale of payment of such
CSS to the Distribution Company, under tHe scheme of the
Electricity Act. The first enactment to govern electricity supply     D
in India was passed in the year 1910 viz. the Electricity Act,
1910. This Act envisaged growth of electricity industry through
private licences. It created the legal framework for laying down
of wires and other works relating to the supply of electricity.
Thereafter, the Electricity (Supply) Act, 1948 mandated the           E
creation of a State Electricity Board. The Board assigned the
responsibility of arranging the supply of electricity in the State.
It was experienced that over a period of time the performance
of State Electricity Boards had deteriorated on account of            F
various factors. Main failure orr the part of these Electricity
Boards was to take decision on tariffs in independent manner
and cross subsidies had reached untenable levels. To address
this issue and also to distance governance from determination
of tariffs, the Electricity Regulation Commission Act was             G
enacted in the year 1998. This Act created regulatory
mechanism. Within few years, it was felt that the three Acts of
 1910, 1948 and 1998 which were operating in the field needed
to be brought in a new self contained comprehensive
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440        SUPREMECOURTREPORTS                      [2014) 13 S.C.R.

A legislation with the policy of ensouraging private sector
  participation in generation, transmission and distribution and
  also the objectives of distancing the regulatory responsibilities
  from the Government and giving it to the Regulatory
  Commissions. With these objectfves in mind the Electricity
B Act, 2003 has been enacted. Significant addition is the
  provisions for newer concepts like power trading and open
  access. Various features of the 2003 Act which are outlined in
  the statement of objects and reasons to this Act. Notably,
  generation is being delicensed and captive generation is being
C freely permitted. The Act makes provision for private
  transmission licensees. It now provides open access in
  transmission from the outset.

          (2) Open Access and CSS
D
          22. Open access i~plies freedom to procure power from
  any source. Open access in transmission means freedom to
  the licensees to procure power from any source. The
  expression "open access" has been defined in the Act to mean
E "the non-discriminatory provision for the use of transmission
  lines or distribution system or associated facilities with such
  lines or system by any licensee or consumer or a person
  engaged in generation in accordance with the regulations
  specified by the Appropriate Commission". The Act mandates
F that it shall be duty of the transmission utility/licensee to provide
  non-discriminatory open access to its transmission system to
  every licensee and generating company. Open access in
  transmission thus enables the licensees (distribution licensees
  and traders) and generating companies the right to use the
G transmission systems without any discrimination. This would
  facilitate sale of electricity directly to the distribution companies.
  This would generate competition amongst the sellers and help
  reduce, gradually, the cost of generation/procurement.

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   M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                     441
         REGULATORY COMM. [A. K. SIKRI, J.]

      23. While open access in transmission implies freedom A
to the licensee to procure power from any source of his choice,
open access in distribution with which we are concerned here,
means freedom to the consumer to get supply from any source
of his choice. The provision of open access to consumers,
ensures right of the consumer to get supply from a person other B
than the distribution licensee of his area of supply by using the
distribution system of such distribution licensee. Unlike in
transmission, open access in distribution has not been allowed
from the outset primarily because of considerations of cross-
subsidies. The law provides that open access in distribution C
would be allowed by the State Commissions in phases. For
this purpose, the State Commissions are required to specify
the phases and conditions of introduction of open access.

      24. However open access can be allowed on payment D
of a surcharge, to be determined by the State Commission, to
take care of the requirements of current level of cross-subsidy
and the fixed cost arising out of the licensee's obligation to
supply. Consequent to the enactment of the Electricity
(Amendment) Act, 2003, it has been mandated that the State E
Commission shall within five years necessarily allow open
access to consumers having demand exceeding one
megawatt.      ··       ,

     (3) CSS: Its Rationale                                        F
      25. The issue of open access surcharge is very crucial
and implementation of the provision of open access depends
on judicious determination of surcharge by the State
Commissions. There are two aspects to the concept of G
surcharge-one, the cross-subsidy surcharge i.e. the surcharge
meant to take care of the requirements of current levels of cross-
subsidy, and the other, the additional surcharge to meet the
fixed cost of the distribution licensee arising out of his obligation
                                                                   H
442        SUPREME COURT REPORTS                  [2014] 13 S.C.R.


A to supply. The presumption, normally is that generally the bulk
  consumers would avail of open access, who also pay at
  relatively higher rates. As such, their exit would necessarily
  have .adverse effect on the finances of the existing licensee,
  primarily on two counts - one, on its ability to cross-subsidise
B the vulnerable sections of society and the other, in terms of
  recovery of the fixed cost such licensee might have incurred
  as part of his obligation to supply electricity to that consumer
  on demand (stranded costs). The mechanism of surcharge is
  meant to compensate the licensee for both these aspects.
c
        26. Through this provision of open access, the law thus
  balances the right of the consumers to procure power from a
  source of his choice and the legitimate claims/interests of the
  existing licensees. Apart from ensuring freedom to the
D consumers, the provision of open access is expected to
  encourage competition amongst the suppliers and also to put
  pressure on the existing utilities to improve their performance
  in terms of quality and price of supply so as to ensure that the
  consumers do not go out of their fold to get supply from some
E other source.

         27. With this open access policy, the consumer is given
   a choice to take electricity from al'\Y Distribution Licensee.
   However, at the same time the Act makes provision of
 F surcharge for taking care of current level of cross subsidy. Thus,
   the State Electricity Regulatory Commissions are authorized
   to frame open access in distribution in phases with surcharge
   for:
          (a) Current level of cross subsidy to be gradually phased
 G
          out along with cross subsidies; and
          (b) obligation to supply.

        28. Therefore, in the aforesaid circumstances though
 H CSS is payable by the Consumer to the Distribution Licensee
   M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                      443
         REGULATORY COMM. [A. K. SIKRI, J.]

of the area in question when it decides not to take supply from A
that company but to avail it from another distribution licensee.
In nutshell, CSS is a compensation to the distribution licensee
irrespective of the fact whether its line is used or not, in view of
the fact that, but for the open access the consumer would pay
tariff applicable for supply which would include an element of B
cross subsidy surcharge on certain other categories of
consumers. What is important is that a consumer situated in
an area is bound to contribute to subsidizing a low and
consumer if he falls in the category of subsidizing consumer.
Once a cross subsidy surcharge is fixed for an area it is liable C
to be paid and such payment will be used for meeting the
current levels of cross subsidy within the area. A fortiorari,
even a licensee which purchases electricity for its own
consumption either through a "dedicated transmission line" or D
through "open access" would be liab!e to pay Cross Subsidy
Surcharge under the Act. Thus, Cross Subsidy Surcharge,
broadly speaking, is the charge payable by a consumer who
opt to avail power supply through open access from someone
other than such Distribution licensee in whose area it is E
situated. Such surcharge is meant to compensate such
Distribution licensee from the loss of cross subsidy that such
Distribution licensee would suffer by reason of the consumer
taking supply from someone other than such Distribution
licensee.                                                            F

      (4) Application of the CSS Principle

      29. In the present case, admittedly, the Appellant (which
happens to be the operator of an SEZ) is situate within the
area of supply of WESCO. It is seeking to procure its entire G
requirement of electricity from Sterlite (an Independent Power
Producer ("IPP") (which at the relevant time was a sister
concern under the same management) and thereby is seeking
to denude WESCO of the Cross Subsidy that WESCO would
                                                                H
444        SUPREME COURT REPORTS                   [2014] 13 S.C.R.


A othervvise have got from it if WESCO were to supply electricity
  to the Appellant. In order to be liable to pay cross subsidy
  surcharge to a distribution licensee, it is necessary that such
  distribution licensee must be a distribution licensee in respect
  of the area where the consumer is situated and it is not
B necessary that such consumer should be connected only to
  such distribution licensee but it would suffice if it is a "consumer"
  within the aforesaid definition.

         30. Having regard to the aforesaid scheme, in normal
c course when the Appellant has entered to PPA with Sterlite,
  another Electricity Generating Company and is purchasing
  electricity from the said Company it is liable to pay CSS to the
  WESCO. Admittedly under the PPA, the Appellant is
  purchasing his electricity from the said generating station and
D it is consumed by the single integrated unit of the Appellant.
  The Appellant therefore, qualifies to be a "consumer" under
  Section 2(15) of the Electricity Act. I~ is also not in dispute that
  the unit of the Appellant is in the area which is covered by the
  licenses granted to WESCO as distribL.tion licenses.
E
         31. Notwithstanding the above, because of the reason
  that the area where the unit of Val-SEZ unit of the Appellant is
  situate is a SEZ area and the Appellant is declared as
  developer for that area under the SEZAct, it is the contention
F of the Appellant that i11 such a scenario it is not liable tc pay
  any CSS to the WESCO. This submission flows from the fact
  that there is a notification issued in this behalf under proviso
  to Section 49 of the SEZ Act and the Appellant itself is treated
  as a deemed Distribution Licensee as per the provisions or
G Section 14 of the Electricity Act. On that basis, detailed
  submissions are made by the Appellant with an attempt to show
  that it cannot be treated as a "consumer" under the Electricity
  Act when the Appellant itself is deemed to be a licensee. It is
  further argued that since the supply line of VAL-SEZ is not
H
   M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                    445
         REGULATORY COMM. [A. K. SIKRI, J.]

connected to WESCO and it is getting the electricity directly A
from Sterlite under the PPA, there is no question of payment
of CSS to WESCO at all. Argument of the WESCO that the
lines owned by the VAL-SEZ are·only ''Transmission Lines"
under Section 2 of. the Electricity Act and not "dedicated
Transmission Lines" because of the reason that the duty of the B
Generator to establish and maintain dedicated transmission
lines, is sought to be refuted by arguing that even as per Section .
2(72) of the Act Transmission Lines are part of the Distribution
System of Licensing". It is argued that it is not even the case
of WESCO that the supply line of SEL-VAL is a part of WESCO C
 Distribution System.
    (5) Factual Aspect of the Electricity Supply to the
Appellant:
                                                                  D
       32. In order to appreciate these arguments, it would
appropriate to first advert to the factual aspect of the supply of
electricity by Sterlite to the Appellant under the PPA. No doubt
the Appellant is getting direct supply of electricity from Sterlite.
However, question is as to whether, in the process, it is using E
dedicated transmis~ion lines of WESCO. We may point out
at the outset that such an argument was not even raised before
the two authorities below. Primarily it was argued that having
acquired the status of deemed distribution licensee under the
Electricity Act, it cannot be treated as a "consumer" of other F
distribution licensee., viz. the WESCO. Even the question of
law which is proposed and framed iri the grounds of appeal
and is already reproduced, does not raise this issue, which is
even otherwise factual. Notwithstanding, the Learned Counsel
for the WESCO has argued that the transmission line between G
the Sterlite and the Appellant is not a dedicated transmission ·
line for the followin~ reasons:
     (a) Under Section 2(16) of the Electricity Act, 2003, a
"Dedicated Transmission Line" is an electric supply line for H
446         SUPREME COURT REPORTS                  (2014] 13 S.C.R.


A "point to point" transmission, which are required for the purpose
  of connecting electric line or electric plan of a generating
  station to "any transmission line", or "sub-station" or "generating
  station" or the "load centre"; "as the case may be".

B           (b) The Transmission Line in question commences from
      the Generator (Sterlite) and connects to the 400 KV Sub-Station
      at Sterlite end at Jharsuguda. It does not connect directly to
      the "Load Centre" which is the Appellant.

C         (c) The 400 KV Busbar at the Generator (Sterlite) end is
      connected to a 200 KV Busbnar at VAL-CGP caters to the
      VAL- Smelter 1 in the Domestic Tariff Area.

        (d) The said 400/200 KV sub-station is also connected
  to the OPTCL Grid (State Transmission Utility) at Budhipadar
D through 220 KV Bus at VAL - CGP end for the purpose of
  evacuation of Sterlite power to GRIDCO as well as drawal of
  power by VAL- Smelter- 1.

       (e) The said 400/220 kv sub-station is also connected
E to Power Grid Corporation of India (PGCIL) line from which 2
  nos of 400 KV Lines emanate for Interstate sale of its Sterlite
  power through PGCIL Grid.

        (f) The said 400/220 kv sub-station which is connected
F through 5 Km of 220 KV line to the 220 KV Bus of switching
  station at VAL - CGP end. There are 4 no's of 200 KV
  transmission lines branching out from the said 220 KV
  switching station to carry power to VAL Smelter-1 Unit of the
  Appellant which is within the area of the Distribution LicenSE:ti
G (WESCO).
           (g) The said 400/220 kv sub-station also has 2 nos of
      33 KV Tertiary transmission lines from 100/220/33 KV
      Transformer supplying electricity to Vedanta Township.
H
   MIS SESASTERLITE LTD. v. ORISSAELECTRICITY                         447
         REGULATORY COMM. [A. K. SIKRI, J.]

      (h) Three such 400 KV Transmission lines emanating              A
from the 400 KV Busbar at the Sterlite-IPP (Generator end)
also happens to Supply power from the sub-station to the
Appellant's load centre (VAL-Smelter-2) in the SEZ area.

       (i) Hence, the only part of the "dedicated" transmission       B
line, if at all, is from the Generating Station 9Sterlite - IPP) to
such 400 KV Bus bar of the 400/220 KV Grid Sub-station.

      G) The transmission line that connects the sub-station to
the load centre of the Appellant is only a "transmission line" C
under Section 2(72) of the EP 2003.

    33. Following diagram is placed by WESCO to
demonstrate this:

                                                                      D




                                                                      E




                                                                       F




                                                                       G
           H ...........      ~~ '~ "'·~

                           fi '
                                     •
           ~~              ~i •1~ •~ i  ~

                           .I· ·~
           ~~                   ;   ]   !

                                                                       H
448          SUPREME COURT REPORTS                   {2014] 13 S.C.R.


A            34. Though the Appellant endeavoured to counter this
       position and has given its own diagram that does not lodge
      the aforesaid factual aspect. Therefore, prima facie we accept
      the position as explained by the WESCO. Thus we feel that
       notwithstanding that supply line of SEL-VAL is transmission
B     line, but not "dedicated transmission line". The Appellant
      ,cannot run away from the fact that under Section 2(10) of the
       Electricity Act, it is the duty of the Generating Company (i.e.
      WESCO) in this case to establish, operate and maintain
      dedicated transmission lines. Since it is duty bound to
C      establish, operate and maintain these dedicated lines by
       making huge investment, in order to get into the consumption
       in the area in question the very necessity of payment of CSS
      arises by the consumer of Electricity covered by the definition
D     of "consumer" under Section 2(15) of the Act but is not getting
      supply of that Generator and someone else. We have also to
       keep in mind the provision of Regulation 27 of OERC
       (Conditions of Supply Code) Regulation 2004. As per this
      Regulation the "service line" shall be the property of the licensee
E      unless otherwise specified in writing. This clause reads as
       under:

            "27. The entire service line, notwithstanding that whole
            or portion thereof has been paid for by the consumer,
            shall be the property of the licensee and shall be
 F          maintained by the licensee who shall always have the
            right to use it for the supply of energy to any other person
            unless the line has been provided for the exclusive use
            of the consumer through any arrangement agreed to in
            writing."
G
            35. Further as per Rule 4 of the Electricity.Rule, 2005
      the aforesaid line would be deemed to be part of Distribution
      System of WESCO:

H
                I



   M/S SESA STERLITE LTD. v. ORI SSA ELECTRICITY                    449
         REGULATORY COMM. [A. K. SIKRI, J.]

     "4. Distribution System - The distribution system of a A
     distribution licensee in terms of sub-section (19) of
     section 2 of the Act shall also include electric line, sub-
     station and electrical plant that are primarily maintained
     for the purpose of distributing electricity in the area.of
     supply of such distribution licensee notwithstanding that B
     such line, sub-station or electrical plant are high pressure
     cables or overhead lines or associated with such high
     pressure c;ables or overhead lines; or used incidentally
     for the purposes of transmitting electricity for others."
                                                                    c
     "Distribution system" is defined in Section 2(19) of the
     Act to mean:-
     "(19) "distribution system" means the system of wires and
     associated facilities between the delivery points on the D
     transmission lines or the generating station connection
     and the point of connection to the installation of the
     consumers:"

      "Transmission Line" is defined in Section 2(72) to mean:-
                                                                    E
      (72) "transmission lines" means all high pressure cables
      and overhead lines (not being an essential part of the
      distribution system of a licensee) transmitting electricity
      from a generating station to another generating station
      or a sub-station, together with any step-up and step-down      F
      transformers, switch-gear and other works ...."
     (6) Appellant deemed distribution Licensee: Its
effect

       36. It is now to be seen as to whether the fact that the G
·Appellant is a Developer in SEZ, armed with Notification dated
  3'd March, 2010 issued under Proviso to Section 49 of the
· SEZ Act and it deemed distribution licensee as per Section
                                                                     H
                                                     \



450         SUPREME COURT REPORTS                   [2014] 13 S.C.R.


A     14 of the Electricity Act, this would take away the Appellant
      from the clutches of CSS liability?

            37. In order to appreciate this argument let us first refer
      to the certain statutory provisions:
B          Section 49 of the Special Economic Zone Act provides
           as under:

           "Power to modify provisions of this Act or other
           enactments in relation to Special Economic Zon~s.
c          (1) the Central Government may, by notification, direct
           that any of the provision of this Act (other than Section
           54 and 56) or any other Central Act or any rules or
           regulations made thereunder or any notification or Order
D          issued or direction given thereunder (other than the
           provisions relating to making of the rules or regulations)
           specified in the notification-

           (a) shall not apply to a Special Economic Zone or a class
           of Special Economic Zones or all Special Economic
E          Zones: or
           (b) shall apply to a Special Economic Zone or a class of
           Special Economic Zones or all Specials Economic
           Zones only with such exceptions, modifications and
F          adaptation, as may be specified in the notificatior;s.''
           38. Likewise Section 14 of the Electricity Act reads as
      under:
           "14. Grant of License
G
           The Appropriate Commission may, on application made
           to it under section 15, grant any person licence to any
           person-

H
M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                        451
      REGULATORY COMM. [A. K. SIKRI, J.]

 (a) To transmit electricity as a transmission licensee: or       A

 (b) To distribute electricity as a distribution licensee: or

 (c) To undertake trading in electricity as an electricity
 trader, in any area which may be specified in the licence:
                                                                  B
  Provided that any person engaged in the business of
  transmission or supply or electricity under the provisions
  of the repealed laws or any Act specified in the Schedule
· on or before the appointed date shall be deemed to be
 a   licensee under this Act for such period as may be C
  stipulated in the licence, clearance or approval granted
  to him under the repealed laws or such Act specified in
  the Schedule, and the provisions of the repealed laws or
  such Act specified in the Schedule in respect of such
  licence shall apply for a period of one year from the date D .
  of commencement of this Act or such earlier period as
   may be specified, at the request of the licensee, by the
  Appropriate Commission and thereafter the provisions
   of this Act shall apply to such business:
                                                                  E
 Provided further that the Central transmission Utility or ·
 the State Transmission Utility shall be deemed to be a
 transmission licensee. under this Act:

 Provided also that in case an Appropriate Government              F
 transmits electricity or distributes electricity or undertakes
 trading in electricity, whether before or after the
 commencement of this Act, such Government shall be
 deemed to be a licensee under this Act, but shall not be
 required to obtain a licence under this Act:                     G

 Provided also that the Damodar Valley Corporation,
 established under sub-section(1) of section 3 of the
 Damodar Valley Corporation Act, 1948, shall be deemed

                                                                   H
452    SUPREME COURT REPORTS                   [2014] 13 S.C.R.


A     to be a licensee under this Act but shall not be required
      to obtain a licence under this Act and the provisions of
      the Damodar Valley Corporation Act, 1948, in so far as
      they are not inconsistent with the provisions of this Act,
      shall continue to apply to that Corporation:
B
      Provided also that the Government Company or the
      Company referred to in sub-section (2) of section 131 of
      this Act and the company or companies created in
      pursuance of the Acts specified in the Schedule, shall
c     be deemed to be a licensee under this Act.

      Provided also that the Appropriate Commission may
      grant a licence to two or more persons for distribution of
      electricity through their own distribution system within the
      same area, subject to the conditions that the applicant
D
      for grant of licence within the same area, subject to the
      conditions that the applicant for grant of licence within
      the same area shall, without prejudice to the other
      conditions or requirements under this Act, comply with
E     the additional requirements (including the capital
      adequacy, credit worthiness, or code of conduct) as may
      be prescribed by the Central Government, and no such
      applicant who complies with all the requirements for grant
      of licence, shall be refused grant of licence on the ground
F     that there already exists a licensee in the same are for
      the same purpose:
      Provided also that in a case where a distribution licensee
      proposes to undertake distribution of electricity for a
      specified area within his area of supply through another
G
      person, that person shall not be required to obtain any
      separate licence from the concerned State Commission
      and such distribution licensee shall be responsible for
      distribution of electricity in his area of supply:
H
   M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                        453
        . REGULATORY COMM. [A. K. SIKRI, J.]

     Provided also that where a person intends to generate A
     and distribute electricity in a rural area to be notified by
     the State Government, such person shall not require any
     licence for such generation and distribution of electricity,
     but he shall comply with the measures which may be
     specified by the Authority under section 53:                 B ·

     Provided also that a distribution licensee shall not require
     a licence to undertake trading in electricity."
      39. We would also like to take note of Notification dated
3rd March, 2010 issued in the case of Appellant. It makes the C
following reading:

     "NOTIFICATION

    , S.O. No.528(E). In exercise of the powers conferred by D
      clause(b) of sub-section (1) of section 49 of the Special
      Economic zones Act, 2005 (28 of 2005), the Central
      Government hereby notifies that the provisions of clause
      (b) of section 14 of the Electricity Act, 2003 (36 of 2003),
      shall apply to all Special Economic Zones notified under E
      sub-section (1) of section 4 of the Special Economic
      Zones Act, 2005, subject to the following modification,
      namely:-
      ln clause (b) of section 14 of the Electricity Act, 2003 (36   F
of 2003), the following proviso shall be inserted, namely:-
     "Provided that the Developer of a Special Economic Zone
     notified under sub section (1) of section 4 of the Special
     Economic Zones Act, 2005 shall be deemed to be a
     licensee for the purpose of this clause, with effect from G
     the date of notification of such Special Economic Zone."
       40. The reading of Section 49 of SEZAct would reveal
that the Central Government has got the authority to directthat
                                                                     H
454         SUPREME COURT REPORTS                   [2014] 13 S.C.R.


A any of the provisions of a Central Act and rules and regulations
  made thereunder would not apply or to declare that some of
  the provisions of the Central Acts shall apply with exceptions,
  modifications and adaptation to the Special Economic Zone.
  So, under the scheme of Special Economic Zone Act, Central
B Government has to first notify as to what extent the provision
  of the other Acts are to be made applicable or applic;able with
  modification or not applicable for the Special Economic Zone
  area. It is in furtherance thereto, the Government of India,
  Ministry of Commerce and Industry through its notification dated
C 21st March, 2012, with regard to power generation in Special
  Economic Zone, has declared that all the provisions of the
  Electricity Act, 2003 and Electricity Rule, 2005 shall be
  applicable to the generation, transmission and distribution of
  power, whether stand alone or captive power. This notification
0
  would clarify that there is no inconsistency between Special
  Economic Zone Act, 2005 and Electricity Act, 2003.

          41. No doubt vide Notification dated 3'd March, 2010
   Central Government has added an additional proviso to Clause
 E (b) of Section 14 of the Electricity Act viz. the Appellant shall
   be deemed to be licensee for the purpose of the said clause
   w.e.f. the date of notification of such SEZ. It is on this basis,
   the argument of the Appellant is that as it is already a deemed
   Distribution Licensee it need not apply for this license to the
 F said Commission before entering into the PPA and the State
   Government is bound to grant the License. This contention is
   negated by the Appellate Tribunal on two grounds which are
   as follows:

G          (i) There has to be a harmonious construction of SEZ
      Act and Electricity Act to give effect to the provisie111s of both
      the acts so long as they are not consistent with each other in
      the opinion of the Tribunal. The provisions of Section 51 of
      SEZAct, 2005 are to be considered along with the provisions
 H
     M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                       455
           REGULATORY COMM. [A. K. SIKRI, J.]

 of Section 49 of the said Act. Accordingly, in view of the A
 provision of the SEZAct, 2005 and consequent notification by
 the Ministry of Commerce and Industry, the deemed distribution
 licensee status as claimed by the Appellant should also be
 tested through other provisions of the Electricity Act, 2003 and
 Electricity Rules, 2005, for certifying its validity and converting B
 it into a formal distribution licensee. In fact, the Appellant has
 submitted to the jurisdiction of the State Commission, by filing
 a petition before the State Commission seeking for approval
 of the PPA and also for grant of distribution licence. The
 Appellate Tribunal, thus queried as to how could the Appellant C
 now question the jurisdiction?

       (ii) The Appellate Tribunal pointed out that there are none
  provisos to Section 14(b) ofthe Electricity Act and another is
  added in respect of the Appellant vide Notification dated 3rd       D
  March, 2010. A reading of these provisos would indicate that
  some of them confer status of deemed distribution licensee
  on certain specified entities who are not required to take
  separate licence from the State Commission under this Act
. whereas some other provisos merely declare the party as             E
  deemed licensee and nothing specified as to whether they
  are required to obtain the licence or not. However when it is
  specially provided in proviso 4 and proviso 8 and 2 that the
  Damodar Valley Corporation and State Government are not
  required to obtain licence, and other provisos do not confer        F
  such privilege, they would be required to·obtain licence.

      42. Further discussion on this aspect by the Appellate
 Tribunal is as under:
                                                                      G
       "42. Keeping this in mind, the statute makers by the
       notification dated 3.03.2010 have inserted the additional
       proviso to Section 14(b) of the Electricity Act. Admittedly,
       the development and operation of the SEZ are two
                                                                      H
456   SUPREMECOURTREPORTS                      [2014] 13 S.C.R.


A     distinct activities. Thus, the jurisdiction of the State
      Commission to scruitinise the deemed distribution status
      of the Appellant is well established in view of the Section
      49(1) of SEZ, Act, 2005 and the notification of the Central
      Government dated 21.03.2012. Therefore, the contention
 B    of the Appellant that the State Commission dealt with the
      matter relating to the grant of distribution licence by going
      beyond its jurisdiction is misplaced.

      43. It is noticed that the Ministry of Commerce and
 c    Industry (Department of SEZ Section) has accorded SEZ
      status to the Appellant for development and operation
      and maintenance of sector specific Special Economic
      Zone for manufacture and export of aluminium on the
      condition that the Appellant should establish captive
 D    ge~erating plant as stipulated in the approval letter of
      Ministry of Commerce and Industry but it is pointed out
      the still the plant has not been established for various
      reasons. If Captive generating plant of 1215 MW had
      been established as per the condition inside the SEZ
 E    area, the question of power purchase from Sterlite Energy
      Limited under the pretext of distribution licensee status
      would not have arisen. That apart, the State Commission
      has framed Orissa Electricity Regulatory Commission
      (conduct of business) Regulation, 2004 under the powers
 F    conferred under Section 181 of the Electricity Act, 2003.
      The distribution of electricity Licence (Additional
       requirement of Capital Adequacy, Credit Worthiness and
       Code of Conduct) Rules, 2005 framed by the Central
       Government also would apply to the Appellant for
 G
       distribution licence in addition to the requirements of
       State Commission's Regulations.
      45. Section 174 of the Electricity Act provides that the
      provisions of the Electricity Act shall have to overriding
 H
M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                    457
      REGULATORY COMM. [A. K. SIKRI, J.]

 effect notwithstanding anything inconsistent with any other A
 law for the time being in force or in any instrument having
 effect by virtue of any law other than Electricity Act. That
 apart, Section 175 also provides that the provisions of
 the Electricity Act are in addition to and not in derogation
 of any other law for the tirrie being in force.              B

  47. The perusal of the notification dated 03.03.2010
  would make it evident that the legislation's intention for
  declaring the develop~r in SEZ area as deemed
  distribution licence, is confined only to clause~b of Section c
  14 of Electricity Act, which deals with the grant of license
  by the appropriate State Commission to any person for
  distribution of electricity. The said notification has not
  curtailed the power of State Commission so far as the
. applicability of other provisions is concerned. The D
  interpretation of various relevant terms was necessary
  prior to grant of deemed distribution licence by the State
  Commission. Therefore, the State Commission rightly
  acted upon those provisions. As a matter of fact, by the
  said amendment by inserting another proviso to Section E
  14(b), the context has not been changed as claimed by
  the Appellant.
 49. As correctly indicated by the State Commission, the
 definition of term "distribution licensee" as enumerated F
 under Section 2(17) of Electricity Act, 2003, emphasizes
 upon the distribution licensee to operate and maintain a
 distribution system and supply of power to the
 consumers .. Considering the definition of 'supply' in
 Section 2(70), the supply here means sale of electricity G
 to consumers. By merely·being authorized to operate
 and maintain a distribution system as a deemed
 licensee, would not confer the status of distribution
 licensee to any person. The purpose of such
                                                          H
458        SUPREME COURT REPORTS                    [2014] 13S.C.R.


A         establishment is for supply of power to consumers. Mere
          fact that the Appellant claims to be a deemed distribution
          licensee is of no consequence at all since admittedly,
          the entire power purchased by the Appellant is for its own
          use and consumption and not for the purpose of
B         distribution and supply/sale to consumers.

          50. An entity which utilizes the entire quantum of electricity
          for its own consumption and does not have any other
          consumers, cannot, by such a notification, be deemed
c         to be distribution licensee, even by a legal fiction. By
          virtue of the legal fiction created by the notification dated
          3.03.2010, the Developer of SEZ notified under the SEZ
          Act, who distributes electricity can be deemed to be a
          distribution licensee. Thus, this legal fiction cannot go
D         further and make a person who does not distribute
          electricity to the consumers as to distribution licensee .
        . Therefore there is no merit in the contention of the
          Appellant.

E        43. We are in agreement with the aforesaid rationale in
  the impugned order of the Appellate Tribunal as that is the only
  manner in which the two Acts can be harmoniously construed.
  To recapitulate briefly, in the present case no doubt by virtue of
  the status of a developer in the SEZ area, the Appellant is also
F treated as deemed Distribution Licensee. However with this,
  it only gets exemption from specifically applying for licence
  under Section 14 of the Act. In order to avail further benefits
  under the Act, the Appellant is also required to show that it is in
  fact having distribution system and has number of consumers
G to whom it is supplying the electricity. That is not the case
  here. For its own plant only, it is getting the electricity from
  Sterlite Ltd. for which it has entered into PPA. We have to
  keep in mind the object and scheme of SEZ Act which
  envisages several units being set up in a SEZ area. This is
H
   M/S SESASTERLITE LTD. v. ORISSAELECTRICITY                      459
         REGULATORY COMM. [A. K. SIKRI, J.]

evident from a collective reading of the various provisions of A
the SEZ Act viz. Section 2(g)G)(za)(zc), Section 3, 4, 11, 12,
13 and 15. There can be a Sector Specific SEZwith Several
Units i.e. for IT, Mineral Based Industries etc. but instances of
single unit SEZ like in the present case of the Appellant may
be rare. The Notification dated 03.03.2010 providing for the B
"Developer" of SEZ being deemed as a "Distribution Licensee"
was issued keeping in view the concept of Multi Unit SEZs
and will apply only to such cases in which the Developer is
supplying the power to multiple Units in the SEZ. The said
Notification will not apply to a Developer like the Appellant who C
has established the SEZ only for itself.

     44. Having regard to the aforesaid factual and legal
aspects and keeping in mind the purpose for which CSS is
payable, as explained in detail in the earlier part of this D
judgment, we are of the view that on the facts of this case it is
not possible for the Appellant to avoid payment of CSS to
WESCO. We, therefore, do not find any merit in this Appeal
which is accordingly dismissed.
                                                                  E


Bibhati Bhushan Bose                           Appeal dismissed.