Decided on February 07,2020

S.K.J. Coke Industries Ltd. Appellant
COAL INDIA LTD. Respondents


ANIRUDDHA BOSE,J. - (1.)The core dispute in this appeal involves the question as to whether the appellants were required to pay the price of coal consumed in their manufacturing process at a preferential rate, known in the trade parlance as "linked price", or the price under a Liberalised Sales Scheme (LSS). The latter pricing mechanism is similar to open market price of coal. The predecessor in title of the first appellant were a firm under the trade name Mahabir Coke Industries. At the material time, they were engaged in production of low ash metallurgical coal at a location close to Guwahati. They wanted to be under the preferential pricing regime on the strength of an arrangement with the respondent coal companies agreed upon in the year 1989. Under such arrangement Mahabir Coke Industries were permitted to lift 4000 metric tonnes of coal per month. Traditionally, the coal industry has been deeply regulated by the Government of India. The Colliery Control Order, 1945 was one of such regulating instruments. This Control Order has been replaced by Colliery Control Order, 2000 with effect from 1st January, 2000 but that factor is not of much significance so far as the present appeal is concerned. The basic coal mining industry is nationalised and largely controlled by the Coal India Ltd., a public sector undertaking. The appellants were approved linkage of said 4000 metric tonnes of low ash coal from Tirup and Tikak mines of North Eastern Coalfields (NEC). The said coal company is a subsidiary of Coal India Limited (CIL). The linking order was issued on 20th September, 1989. The respondent coal companies in course of hearing before us have sought to distinguish between "linkage" and "allocation". Their stand is that in the case of the appellants, there was monthly allocation of the said quantity of coal only for which they cannot claim preferential price. As cokeries, they were allocated coal suitable for use in steel plants subject to availability. The respondents' case is that linkage at preferential price is given to the industries or thermal plants out of coal not suitable for use in steel plants. For that reason, according to the respondent coal companies, appellants were not given linkage but allocated specified quantity. Clause 3 of the 1945 Control Order empowered categorisation and gradation of coal by the Central Government. Clause 4 thereof authorised the Central Government to fix different prices of coal for different classes, grades, sizes of coal as also prices of different collieries.
(2.)On 16th June 1994, a notification was issued by the Central Government in pursuance of the aforesaid two Clauses of the 1945 Control Order stipulating the classes and grades in which coal and coke were to be categorised. That notification also stipulated the sale prices for such coal, at which they could be sold by the colliery owner at pitheads. Table I thereof provided gradation with grade specifications of different types of coal. There was no such grading in respect of coal produced in the State of Assam and certain other states in the North Eastern Region in that Table. We shall henceforth refer to coal lifted by the appellants as "Assam coal". The second Table (Table II) to this notification dealt with sale prices of different types of coal mainly on the basis of "Useful heat value in kilo calories per kilogram". For coal from Assam and that region, price for ungraded coal with ash content not exceeding 25% was specified to be "not exceeding Rs.741.00 p." NEC made provisional declaration of grade of Assam coal under Clause 3A(1) of the 1945 Control Order on 11 th June 1997. By a further notification dated 26 th August 1997 the revised prices thereof were notified. Thereafter, by another notification dated 24th February 1999, the gradation formalities for coal produced in Assam and other States in the said region was completed by effecting suitable amendments to the notification dated 16th June 1994. In Clause 9 (ii) of the 1994 notification, there was stipulation to the following effect for computing the price of coal depending upon their ash content:-
"9. (i).......................

(ii) In case of coal produced in the State of Assam, Arunachal Pradesh, Meghalaya and Nagaland the price payable shall be increased at the rate of Rs.1/- per tonne for each percentage of ash by which the ash content falls below 22 per cent. Similarly when ash content exceeds 25 per cent, the price shall be reduced at the same rate of Rs. 11 per tonne per cent of ash by which the ash content exceeds 25 per cent."

(3.)The first appellant, whose predecessors were the petitioners before the First Court continued with receiving coal in terms of the notification dated 16th June, 1994 at the price stipulated therein till 18th January 1996. Admitted position is that coal lifted by the appellants had ash content below 25%. From 19 th January 1996, the price NEC was charging the appellants stood substantially enhanced. The reason for this, according to the respondent companies, was that a Liberalised Sales Scheme (LSS) was implemented by the CIL under authorisation of the Central Government to that effect. The LSS under which price was enhanced was on the basis of a notification dated 9th January, 1996. That notification was followed by another notification dated 11th March, 1996. On the latter date, a Liberalised Sales Scheme (Modified) was introduced. The notification of 9 th January, 1996 reads:-
"S.O. 21(E). In pursuance of the provisions of clause 18 of the Colliery Control Order, 1945, as continued in force by section 16 of the Essential Commodities Act, 1995 (10 of 1955), the Central Government, having regard to the stock position of coal, hereby exempts the Coal India Ltd., Subsidiaries of Coal India Limited and the Singareni Collieries Company Limited in respect of coal sold by them under any Liberalized sale Scheme (LSS) of the Government of India from the provisions of clauses 4, 4A and 4B of the said order. This notification shall remain in force on and from the date of its publication in the official Gazette and until the 31st day of March, 1996."


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