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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.