IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 21/10/2003
CORAM
THE HONOURABLE MR. JUSTICE E. PADMANABHAN
W.P.No. 961 of 1998 and W.P.No.962 of 1998
and
3943, 20457, 20458, 20872, 20873, 21155 to 21158, 31261 to 31264,
21 356 to 21360, 23168 to 23173, 23417, 23909 to 23915, 15803,
25440, 25 441,and 25342 to 25349, 26368, 26369, 13872, 25081 to
25086, 23047, 23083 of 2001
and
60,61, 353 to 360, 583, 637, 904, 909, 938, 1262, 1335,
1336, 1722 to 1725, 1732, 1757 to 1762, 1764, 2251, 2267 to 2270,
2283 to 2284, 2 288 to 2291, 2305, 2442, 2593, 2658 to 2663,
2683, 2702, 2703, 2902 to 2905, 2955 to 2957, 2969 to 2971, 3056
to 3058, 3146, 3224, 3230, 3 231, 3223, 3234, 3244, 3245, 3478 to
3480, 3719 to 3721, 3748 to 3751 , 3743, 3877, 4076 to 4080,
4083, 4201 to 4204, 4308 to 4311, 4363, 4372, 4386, 4387, 4557 to
4560, 4872, 4621 to 4624, 4894 to 4897, 492 2, 5099, 512, 5246 to
5248, 5255, 5266, 52795291, 52i6 to 5298, 5299, 5300, 5301 to
5304, 5372, 5448, 5475 5476, 5504, 5510, 5847 to 5850, 5871, 5942
to 5945, 6164, 6191, 6200 to 6201, 6234, 6384, 6387, 6517 , 6518,
6384, 6712, 6739, 6855, 6877, 6982, 6989, 7154, 7155, 7385, 7
465, 7535 to 7538, 7539, 7540 to 7542, 7653, 7677, 7688, 7694,
7721, 7724, 7725, 7727, 7728, 7779, 8026, 8027, 8109, 8135 to
8137, 8262, 8 335, 8400, 8492, 8493, 8497, 8498, 8662 to 8665,
8680, 8737, 8905, 89 20, 8944, 8963 to 8969, 8984, 9028, 9029,
9144, 9145, 9188, 9426, 952 4, 10006, 10183, 10393, 10394, 10466,
10630, 11111, 11133, 11308, 113 09, 11609, 11836, 11837, 11843 to
11848, 12176, 12439 to 12441, 13678 , 13721 to 13723, 14524,
14525, 14843 to 14847, 15629 to 15635, 15636 to 15643, 15845 to
15847, 15907, 15930, 15983 to 15987, 16046 to 160 49, 16069,
16076, 16077, 16093, 16109, 16173, 16299, 16439, 16440, 16 489,
16494, 16973 to 16976, 17132, 17245 to 17248, , 17348, 17921, 18
202 to 18204, 18339, 18994, 19028, 19465, 19466, 19539, 19604,
19605, 19755, 19331, 19332, 19963, 20032, 20041 to 20043, 20368
to 20371, 2 0402, 20764, 28748, 20844, 21006, 21023, 21182,
21282, 21359, 21633 to 21638, 21743, 22017, 22429 to 22432, 22439
to 22442, 22459, 22555, 22556, 22639, 22661, 22838, 22845, 22855,
22996, 23063, 23511, 23803, 23845, 23846, 24226 to 24228, 24594,
24650 to 24652, 24680, 29370, 29385, 29766, 31461, 31521, 32041,
32293, 3234 0 to 32342, 32534 to 32 540, 35367, 11492, 12271,
12320, 17891 to 17894, 21254,29739, 32608, 32698 to 32705, 33461,
33462, 33547, 33564, 34310, 34311, 34528, 351 73, 35174, 35269,
35530, 35848, 35867, 35900, 36232 to 36234, 36454, 36691, 36789,
37125, 37311, 37372, 37509, 38178, 38179, 38396, 38397, 38459,
38596, 38657, 38666, 38803, 39889 to 39891, 39050, 39629, 406 43,
40742, 40894, 41633 of 2002, 1076, 2081, 2283, 2284, 6086, 1833
9, 19539, 19755, 19963, 20402, 20764, 21006, 30200, 33822, 42317,
433 10, 43311, 44248, 44611, 44731, 45293, 45315 to 45319, 45518,
45523, 46505, 46195, 46631, 46632, 1527 and 34618 of 2002
and
450, 1190 to 1193, 1667, 1746, 1781, 1796, 1811, 1812, 2627,
2628, 3140, 4032 to 4034, 5157, 6228, 6355, 6356, 6585, 6652,
6887, 7830, 7 831, 11025, 11026, 13051, 13056 and 18489, 1190 to
1193, 3309, 3426, 3428, 8883, 13755, 17416, 18544 and 22999 of
2003.
and
WPMP Nos: 30173, 30174, 30803, 3084, 31261 to 31264, 31543 to
31547 34136 to 34141, 34551, 35341 to 35347, 23415, 37719 to
37721/2001
and
30173, 30174, 30803, 30804, 31261 to 31264, 31543 to 31547, 34136
to 34141, , 34551 35341 to 35347, 23415, of 2001 93,84, 516, 523,
894, 957, 1023, 1295, 1300, 1325, 1766, 1861, 1862, 2400 to 2403,
2413, 24 39 to 2444, 2446, 3117, 3132 to 3135, 3149, 3150, 5156
to 3159, 3175 , 3483, 3605, 3697, 3733, 3767, 3768, 4064 to 4067,
4154 to 4156, 417 5 to 4176, 4322 to 4324, 4426, 4533, 4542,
4543. 4532, 4548, 4558, 45 59, 4900 to 4902, 5208 to 5210, 5245
to 5248, 5373, 5438, 5518, 5727 to 531, 5434, 5939 to 5942,6076
to 6079, 6117, 6128, 6147, 6148, 6382 to 6385, 6893, 6894, 6519,
6522, 6923 to 6926, 6957, 7152, 7232, 735 8 to 7360, 7367, 7368,
7396 to 7408, 7413 to 7415, 7416, 7417, 7418 to 7421, 7517, 7587,
7614, 4615, 7650, 7657, 8115 to 8118, 8115, 8116, 8143, 8233 to
8236, 8491, 8529, 8542, 8543, 8579, 8808, 8813, 8994, 8995, 8808,
9253, 9286, 948, 9506, 9649, 9655, 9917, 9918, 10231, 103 03,
10381 to 10384, 10385, 10386 to 10388, 10535, 10560, 10571, 10578
, 10608, 10611, 10612, 10613, 10614, 10686, 10975, 10976, 11089,
111 27 to 11129, 11277, 11357, 11461, 11569, 11570, 11573, 11574,
11802 to 11805, 11817, 11889, 12090, 12106, 12135, 12156 to
12162, 12178, 12 254, 12255, 12378, 12379, 12438, 12752, 12914,
13540, 13757, 15056, 14057, 14154, 14339, 15011, 15049, 15253,
15254, 15255, 15639, 15937 , 15938, 15944 to 15949, 16413, 16757
to 16759, 18453, 18530 to 1853 3, 19528, 19529, 19942 to 19946,
20914 to 20920, 21199 to 21201, 212 93, 21324, 21397 to 21401,
21472 to 21475, 21508, 21517, 21518, 21542 , 21564, 21641, 22054,
22055, 22123, 22129, 22964 to 22967, 23264, 23 431 to 22434,
23571, 24478, 24839 to 24841, 25069, 26124, 26176, 2687 3, 26874,
26961, 26962, 27049, 27050, 27281, 26647, 26658, 27559, 276 56,
27667 to 27669, 28194 to 28197, 28244, 28748, 28841, 29049, 2906
9, 29279, 29420, 29538, 29929 to 29934, 30086, 30449, 30991 to
30994, 31003 to 31006, 31024, 31161, 31162, 31278, 31306, 31508,
31516, 31 522, 31701, 31802, 32403, 32758, 32811, 32812, 33312 to
33314, 33822, 33899 to 33901, 33933, 47755, 47774, 48291, 45885,
45962, 46637, 469 48, 47054 to 47056, 48451 to 48457, 52768,
15518, 16536, 16585, 24448 to 24451, 33503, 29375, 48221, 48553,
48665 to 48672, 49559, 49560, 49680, 49706, 51062, 51063, 51484,
52347 to 52349, 52534, 53074, 535 53, 53477, 53750, 54499 to
54501, 54801, 55166, 55303, 55820, 56063, 56145, 56316, 57177,
57178, 57416, 57417, 57510, 57643, 57717, 57731, 5795, 59322,
58249, 59006, 60253, 60378, 60551, 61576, 37574 to 375 81, 38992,
38993, 8733, 37283, 37288, 33922, 33978, 1505, 2881, 3149 , 3150,
8365, 25069, 26961, 26962, 44202, 50016, 62454, 63698, 63699,
64922, 65329, 65473, 66196, 66217 to 66221, 66458, 66460, 67618,
672 54, 67780, 67781, of 2002
and
1477 to 1480, 2088, 2186, 2221, 2235, 2250, 2251, 2628, 3294,
3934, 5077 to 5079, 6578, 7990, 8169, 8170, 8474, 8558, 8866,
10049, 10050, 13841, 13842, 16384, 16390, 23114, 4154, 11360,
17223, 21762, 231 68 and 28433 of 2003
and
WVMP. Nos; 1266, 1237, 1338, 1248, 1249, 1239 to 1241, 1258 to
1262, 1251 to 1256, 1243 to 1246, 1230 to 1235, 1263, 1210 to
1215, 1227 to 1229, 1216to 1219, 1220 to1224, 1250, 1207 to 1209,
1225 and 1226 of 2002.
W.P.No:3943 of 2002
M/s.South India Small
Spinnrs Association rep. By its
President Mr.U.G.Kanakarajan
Avinashi Road, Coimbatore ..Petitioner
-Vs-
1. The Secretary to Govt.,
Govt., of Tamil Nadu
Energy Department
Fort St. George
Chennai-9
2. The Tamil Nadu Electricity Board
rep. By its Chairman,
800, Anna Salai, Chennai-2
3. Tamil Nadu Electricity Regulatory Commission
rep. By its Chairperson,
Seethammal Colony, Alwarpet
Chennai-18. ..Respondents
Writ Petitions preferred under Art.226 of The Constitution of India,
seeking for the relief of writ of Declaration, declaring the Tamil Nadu
Electricity (Taxation on Consumption) Act, viz., Act, 32 of 1991 as ultra
vires, as stated therein.
For petitioners: Mrs.Nalini Chidambaram, S.C.,
Mr.R. Thiagarajan,S.C.,
Mr.R.S.Pandiaraj,
Mr.Palani Selvaraj,
Mr.Kamalanathan,
Mr.Sivanandham,
Mr.C.S.Krishnamurthy
Mr.Rahul balaji
Mr.T.S.Sivagnanam
Mr.V.Ramajegadeesan
Mr.S.K.Nachimuthu
Mr.S.Kadarkarai
Mr.Md.Ibrahim Ali
Mr.S.Rakkappan
Mr.K.Kalyanasundaram
Mr.P.Radhakrishnan
Mr.R.kannan
Mr.N.Manoharan
Mr.K.Rajasekar
Mr.M.Ajmalkhan
Mr.G.Veerapathiran
Mr.C.Premano Louis
Mr.S.Jaswanth
Mr.K.R.A.Muthukrishnan
Mr.M.Jayaraman
Mr.Vijay Narayan
Mr.R.Vijayaraghavan
Mr.S.N.Kribanandam
Mr.V.P.Sengottuvel
Mr.M.Kannadasan
Mr.A.R.Jeyasankar
MR.V.Sanjeevi
Mr.V.Bharathidasan
Mr.S.Mohan
Mr.S.Navaneethakrihsnan
Mr.C.M.Krisnakumar
Mr.K.Selvaraj
Mr.N.L.Rajah
Mr.S.Natarajan
M/s.Aiyar & Dolia
M/s.Muthuani Doraisamy
Mr.S.Subbiah
M/s.Silambannan
For Respondents: Mr.N.R.Chandran,
Advocate General,
Mr.R.Raghupathy,
Additional Government Pleader
Mr.N.Srinivasan, for
Tamil Nadu Electricity
Regulatory Commission.
:COMMON ORDER
In this batch of writ petitions the petitioners either Company or
individual or Association of members, as a consumer of electricity have prayed
for the issue of a writ of Declaration declaring the Tamil Nadu Eletricty
(Taxation on consumption) Act, viz., Act 32 of 1991 as ultra vires the
Constitution of India, illegal, invalid and unenforceable and consequently
direct the respondents to refund the entire amount collected from the
consumers under the head of Electricity Tax.
2. Heard Mrs.Nalini Chidambaram, learned Senior Counsel, Mr.R.
Thiagarajan, learned Senior Counsel, Mr.Kamalanathan, Mr.Palani Selvaraj,
Mr.Sivanandam, Mr.R.S.Pandiaraj, and other learned counsels appearing for the
petitioners, Mr.N.R.Chandran, learned Advocate General for the State of Tamil
Nadu, and Mr.N.Srinivasan, learned standing counsel appearing for the
respondents 2 and 3.
3. The petitioners seek to invalidate Section 3.A of the Tamil Nadu
Electricity (Taxation on Consumption) Act, 1962. The petitioners challenge
the levy of additional tax on the consumption of energy in terms of Section
3.A in these batch of writ petitions. The petitioners seek to invalidate
Section 3.A as introduced by Tamil Nadu Act 32 of 1991 and consequently seek
for refund of the tax collected respectively from each one of them. Section
3A which is impugned reads thus:-
“3.A Levy of Additional Tax on consumption of energy:–(1)Save as otherwise
provided in Sub Section (1) of Section 3, there shall be levied and paid to
the Government every month, an additional tax on the consumption of energy
calculated at the rate of four per centum of the price of energy consumed by
the consumer:
provided that no additional tax shall be levied under this sub
section–
(a) On the energy consumed by any person for domestic connections
including hut connections or for agricultural purposes; or
(b) on the energy consumed by any person (other than a licensee) who
consumes energy generated by himself.
(2) The additional tax under sub section (1) shall be levied in addition to
any tax payable on the consumption of energy levied and collected under sub
section (1) of section 3.
(3) The provisions of this Act shall apply in relation to the addition to the
additional tax payable under sub section (1) as they apply in relation to the
tax payable under sub section (1) of Section 3.”
4. Section 3.A was inserted by the Tamil Nadu Electricity ( Taxation
on Consumption) Act 1991 (Act 32 of 1991). The Act 32 of 1991 received the
assent of the Governor on 11th October 1991 and it came into force with
retrospective effect from 1st October, 1991 as provided by Section 1(2) of the
Amending Act.
5. The learned counsel appearing for the petitioners fairly stated
that the impugned provision namely Section 3.A of the Tamil Nadu Electricity
(Taxation on Consumption) Act, 1962 falls well within the competency of the
State Legislature. There is no dispute that Section 3 .A falls within Entry
53, List II of Schedule VII to the Constitution. Therefore it cannot be
contended that it is not being contended that the provision is ultra vires.
6. Proviso to Section 3.A also provides that no additional tax has
been levied under section 3.A on the energy consumed by any person for
domestic connections including sale to hut connections or for agricultural
purposes. So also the energy generated and consumed by the consumers is not
subjected to additional tax. Sub section (3) makes it clear that Section 3.A
shall apply in relation to the addition to the additional tax payable under
sub section (1) as they apply in relation to the tax payable under sub section
(1) of Section 3.
7. The learned counsel appearing for the petitioners mainly contended
that by G.O.Ms.NO.787, PWD, dated 30th April 1979, the State Government by way
of simplification and rationalisation of tariff structure merged all duties or
taxes, being additional levies, such as surcharge, metropolitan levy and
electricity tax, wherever applicable depending upon the class of consumers and
also the Central Excise surcharge. The said G.O. Ms No. 787, PWD, dated
30th April 1979 has merged the tariff rate which includes the levy of tax
excepting metropolitan levy and Central Excise Surcharge.
8. The State Government issued a Notification under section 4 of the
Tamil Nadu Revision of Tariff Rates and Supply of Electrical Energy Act, 1979
and existing schedule was substituted by a new schedule of tariff rates. New
tariff rates consist of basic rate, besides central excise surcharge,
metropolitan levy. The basic rate varied from High Tension to Low Tension.
Low Tension and Tariff 1,2, and 4 etc., Basic Rate differed and apart from
basic rate for KVA of maximum demand per month has also been included in the
tariff rate. The said tariff rate is nothing but general conditions of supply
prescribed by the Tamil Nadu Electricity Board from time to time. After
G.O.Ms.No.78 7, dated 30th April 1979, which came into force on 1.5.1979,
there has been further revision of tariff rates by the following Government
Notifications:-
G.O.Ms.Nos
Date
Date of effect
1.G.O.Ms.NO.787, PWD, (Electricity)
30.4.1979
1/5/1979
2.G.O.Ms.NO.1518, PWD,(Electricity)
11/9/1981
15.9.1981
3.G.O.Ms.NO.861, PWD, (Electricity)
30.4.1982
1/5/1982
4.G.O.Ms.NO.1033, PWD, (Electricity)
16.5.1983
16.5.1983
5.G.O.Ms.NO.793, PWD, (Electricity)
25.5.1985
1/6/1985
6.G.O.Ms.NO.3042, PWD, (Electricity)
23.12.1986
1/7/1987
7.G.O.Ms.NO.482, PWD, (Electricity)
22.3.1989
1/4/1989
8.G.O.Ms.NO.553, PWD, (Electricity)
12/3/1990
1/4/1990
9.G.O.Ms.NO.1434, PWD, (Electricity)
27.8.1991
1/9/1991
10.G.O.Ms.NO.402, PWD, (Electricity)
24.1.1992
1/2/1991
11.G.O.Ms.NO.313, PWD, (Electricity)
26.2.1993
1/3/1993
12.G.O.Ms.NO.35,Energy Dept.,(A.2)
1/3/1994
1/3/1994
13.G.O.Ms.NO.29,Energy Dept.,(A.2)
31.1.1995
1/2/1995
14.G.O.Ms.NO.17,Energy Dept.,(A.2)
14.2.1997
15.2.1997
15.G.O.Ms.NO.115,Energy Dept.,(A.2)
19.7.1998
20.7.1998
16.G.O.Ms.NO.3,Energy Dept.,(A.2)
7/1/2000
7/1/2000
17.G.O.Ms.NO.95,Energy Dept.,(A.2)
28.11.2001
1/12/2001
9. While referring to G.O.Ms.No:787 PWD, Dt.30.4.1979, it is
contended that tax has already been merged with tariff rate under the policy
of rationalisation and simplification and having rationalised and merged the
tax with tariff rate, it is not open to the respondents to levy additional
tax. It is also contended that the respondents have no authority to levy
additional tax under Section 3.A as it is without authority. When no tax has
been levied under Section 3, the levy of additional tax under Section 3.A is
without authority and unenforceable. In other words, it is contended that
when there is no levy of tax under section 3 of the Tamil Nadu Electricity
(Taxation on Consumption) Act, 1962, no question of levy of additional tax
arises under Section 3.A and such a demand is without authority.
10. It is contended by Mr.Palani Selvaraj as well as by Mr.
Pandiaraj that levy of tax under the Electricity Act either under Section 3 or
under Section 3.A as inserted by the Amending Act unconstitutional or is
illegal and not authorised by law in that the levy infringes Art.288 of The
Constitution in so far as the Act has not been reserved for the assent of
President before levy of tax on Electrical or energy and therefore the
provision is unenforceable. Hence a direction may be issued to refund the tax
so far collected under the Act.
11. It is further contended by the counsel for the petitioners that
after merger, there being no identity of tax levied under section 3 , Section
3.A is unenforceable and there could be no levy of additional tax. It is also
contended that it amounts to double taxation. It is contended that Section
3.A offends Art.14,19 and 21 of The Constitution, besides the State has no
legislative competency to enact the Amending Act, 32 of 1991. It is also
further contended that it is an arbitrary exercise of power conferred on the
State. According to one of the counsel, there could be no levy of additional
tax on the consumption of energy and it is beyond the legislative competency.
12. Mr.Rahul Balaji, appearing for one of the petitioners namely
M/s.Madras Cements Company, referred to the exemption granted in favour of the
said petitioner and contended that there cannot be levy under section 3.A.
Mr.Rahul Balaji, contended that having granted exemption in favour of the
petitioner, it cannot be taken away indirectly under section 3.A by imposing
additional tax in respect of consumption of energy which is generated by the
said petitioner.
13. Per contra, the learned Advocate General leading the arguments on
behalf of the respondents contended that Section 3.A of the Act is an
independent provision which operates on its own strength and it is well within
the legislative competency of the State Legislature. It is contended that the
rate of levy has been increased and earlier merger of tax which was leviable
under section 3 has no consequence and even after merger also Section 3.A will
operate independently and there could be a levy of additional tax under
Section 3.A. It is contended on behalf of the respondents that levy under
Section 3.A will not amount to double taxation. Even assuming so, double
taxation is permissible and valid in law, unless and until it is established
that such levy is confiscatory in nature.
14. The learned Advocate General relied upon the pronouncement of the
Supreme Court in State of U.P., Vs. Renusagar Power Company, reported in AIR
1988 SC 1737 in this respect.
15. In these batch of Writ Petitions, the following points arise for
consideration:-
(1) Whether Section 3.A as introduced by Tamil Nadu Electricity (
Taxation on Consumption) Act, 1991 is beyond the legislative competency of the
State Legislature?
(2) Whether the provision of Tamil Nadu Electricity (Taxation on
Consumption) Act, 1962 as well as the Amendig Act are invalid, inoperative and
unenforceable as the same has not been reserved for the President for
consideration in terms of Art.288 of The Constitution?
(3) Whether there could be a levy of additional tax under section
3.A when the levy under section 3 ceased to exist on and after 1st May 1979?
(4) Whether the levy of additional tax is expropriatory and
violate Art.14 of The Constitution?
(5) To what relief, if any?
16. Taking up the first and second points together for consideration
at the first instance, identical points were considered by this court in a
batch of writ petitions challenging the validity of levy of tax on consumption
under the Tamil Nadu Tax on consumption or sale of Electricity Act, 2003 and
rejected after detailed consideration. However, it is sufficient to refer to
the provisions of The Constitution, while considering the contentions. It is
to be pointed out that the word “Consumption” is found under List II, Entry 53
of Schedule VII which reads thus:-
53. TAXES ON THE CONSUMPTION OR SALE OF ELECTRICITY
“`Consumption’. The word, not being limited in any way, authroises
the imposition of a duty on the consumption of Electricity by the producer
himself. Such a duty cannot be regarded as a duty of excise within the
meaning of Entry 84 of List I”.
This is the settled legal position as has been held by the Supreme Court.
17. The levy of additional tax in the present case by the impugned
provision is on the consumption of electrical energy which falls within Entry
53. This additional levy under section 3.A falls well within the Legislative
competency and there cannot be any doubt. The Supreme Court in J.C.Mills Vs.
State of Madhya Pradesh, reported in AIR 19 63, SC 414 upheld the validity of
identical levy. The Supreme Court held thus:-
“(6) It is difficult to see how the levy of duty upon consumption of
electrical energy can be regarded as duty of excise falling within Entry 84 of
List I. Under that Entry what is permitted to Parliament is levy of duty of
excise on manufacture or production of goods ( other than those excepted
expressly by that entry). The taxable event with respect to a duty of excise
if Manufacture or production. Here the taxable event is not production or
generation of electrical energy but its consumption. If a producer generates
electrical energy and stores it up, he would not be requir3d to pay any duty
under the Act. It is only when he sells it or consumes it that he would be
rendered liable to pay the duty prescribed by the Act. The Central Provinces
and Berar Electricity Act was enacted under Entry 48-B of List II of the
Government of India Act, 1935. The relevant portion of that entry read thus:-
“Taxes on the consumption or sale of electricity”
Entry 53 of List II of the Constitution is to the same effect. The argument
of Mr.Sastri is that the word “consumption” should be accorded the meaning
which it had under the various Electricity Acts, including Indian Electricity
Act, 1910. Under that Act and under the various Provincial and other Acts,
consumption of Electricity means according to him, consumption by person other
than producers and that both in the Government of India Act and under the
Constitution the word Consumption must be deemed to have been used in the same
manner. The Acts in question deal only with a certain aspect of the topic
electricity, and not with all of them. Therefore, in those Acts the word
consumption may have a limited meaning, as pointed out by learned counsel.
But the world consumption has a wider meaning. It means also use up, spend
etc., the mere fact that a series of law were concerned only with a certain
kind of use of Electricity, that is consumption of electricity by persons
other than the producer cannot justify the conclusion that the British
Parliament in using the word consumption in Entry 48-B and the Constitution
Assembly in Entry 53 of List II wanted to limit the meaning of Consumption in
the same way. The language used in the legislative entries in the
Constitution must be interpreted in a broad way so as to give widest amplitude
of power to the Legislature to legislate and not in a narrow and pedant sense.
We cannot, therefore, accept either th two grounds urged by Mr.Viswanath
Sastri challenging the vires of the Act.”
18. In a recent pronouncement in State of Andhra Pradesh, Vs.
National Thermal Power Corporation Ltd.,, reported in 2002 (5) SCC 203 the
Supreme Court held that a levy on the sale or consumption of electricity is
well within the legislative competence and valid. In that case tax on the
interstate sale of electricity was sought to be levied by the State of Andhra
Pradesh and while invalidating such a levy on the interstate sale the Supreme
Court held thus:-
“33. On behalf of the States of A.P. And M.P., it was submitted that
the subject of electricity has been specifically dealt with by Articles 287
and 288 of the Constitution and by implication the Articles, other than
Articles 287 and 288, should be read as not dealing with electricity. This
submission is stated only to be rejected. These articles make some provisions
for electricity and water or electricity in the special context dealt with by
those articles and do not exclude applicability of other articles where
electricity has been dealt with as goods.”
19. In State of U.P., Vs. Renusagar Power Company, reported in AIR
1988 SC 1737, at page 1761, the Supreme Court held thus:-
“75…..Price fixation, in our opinion, which is ultimately the basis
of rise in cost because of the rise of the electricity duty is not a matter
for investigation of court. This question was examined by this Court in Union
of India v. Cynamide India Ltd where one of our learned brothers who
delivered the judgment of the High Court of Allahabad was a party. There in
exercise of the powers under Section 3(2)(c) of the Essential Commodities Act,
the Drugs (Prices Control) Order, 1979 was made. The Central Government
thereafter issued notification thereunder. At page 741 of the report, C
hinnappa Reddy, J. speaking for the court referring to a passage of
Administrative Law by Schwartz with approval expressed the view that those
powers were more or less legislative in character. Fixation of electricity
tariff can also to a certain extent be regarded of this category. Chinnappa
Reddy, J. observed at page 735 of the report that price fixation is more in
the nature of a legislative activity than any other. He referred to the fact
that due to the proliferation of delegated legislation, there is a tendency
for the line between legislation and administration to vanish into an
illusion. Administrative, quasi-judicial decisions tend to merge in
legislative activity and, conversely, legislative activity tends to fade into
and present an appearance of an administrative or quasi-judicial activity.
Any attempt to draw a distinct line between legislative and administrative
functions, it has been said, is ‘ difficult in theory and impossible in
practice’. Reddy J. insisted that it is necessary that the line must
sometimes be drawn as different legal right and consequences may ensue. It
appears to us that subsection (4) of Section 3 of the Act in the set up is
quasi-legislative and (quasi-administrative insofar as it has power to fix
different rates having regard to certain factors and insofar as it has power
to grant exemption in some cases, in our opinion, is quasi-legislative in
character. Such a decision must be arrived at objectively and in consonance
with the Principles of natural justice. It is correct that with regard to the
nature of the power under Section 3(4) of the Act when the power is exercised
with reference to any class it would be in the nature of subordinate
legislation but when the power is exercised with reference to individual it
would be administrative. Reference was made in this connection to the cases
of Union of India v. Cynamide India Ltd. and P. J. Irani v. State of
Madras.”
20. In the circumstances, the first point has to be answered in
favour of the respondents and against the writ petitioners holding that
Section 3.A as introduced by the Tamil Nadu Act, 1991 is well within the
legislative competency of the State Legislature and it is intra vires of the
Constitution.
21. As regards Art. 288 also, this court has considered the very
same contention elaborately while examining the validity of Tamil Nadu Tax on
Consumption or Sale of Electricity Act, 2003 and held that Art.288 of The
Constitution has no application at all. If electrical energy by any Authority
established by an existing law for developing any interstate river or river
valley, unless the enactment has been reserved for the consideration of the
President and received the assent, there cannot be a levy on such generation,
sale or distribution by that authority. Here, none of the petitioner falls
under the category of interstate river or river valley authority constituted
by an Act of Parliament, nor the petitioners consumed power sold by such river
valley authority or constituted by interstate river or river valley authority
so that they could claim that levy without consent of the President is
prohibited by Art.228 and therefore, it is invalid. This is not the case
here.
22. It is not open to the petitioners to invoke Art.288. The
generation or sale or distribution of electrical energy in the present case is
not by any interstate river or river valley authority constituted by an
enactment of Parliament and therefore no reliance could be placed upon
Art.288. In the present case, the generation and sale of electrical energy is
by the Tamil Nadu Electricity Board or it is a generation and consumption by
the consumers themselves in their own generating plants or captive generators
and therefore invocation of Art.288 is a misconception and it cannot be relied
upon. In the circumstances the point has to be answered in favour of the
respondents and against the writ petitioners.
23. Taking up the next point for consideration it has to be pointed
out that Section 3.A as introduced by the Amending Act operates as an
independent charging section. Section 3 provides that additional tax is
levied and shall be paid to the Government on the consumption of energy
calculated at the rate of 4 per centum of the price of energy consumed by the
consumer. Therefore in respect of consumption of electrical energy by a
consumer, an additional quantum of tax is levied at the rate of 4 per centum
of the price of energy consumed by the consumer. Section 3.A which is the
charging section operates independent of Section 3. It is like surcharge or
enhancing the rate of duty or tax payable under the Act with respect to
consumption of electrical energy by a consumer. As already pointed out it
falls under the legislative competency of the State. It is for the State to
fix rate of taxes either calling it as basic rate or surcharge or additional
tax any other terms so long as it is not expropriatory in nature. The rate of
4 per centum as was introduced by the Tamil Nadu Act, 32 of 1991 has
subsequently been revised and enhanced to 5 pr centum by Tamil Nadu Act 43 of
1994. This again is an additional levy which is additional to the tax levied
and payable under section 3 on the consumption of electrical energy by a
consumer. If a consumer consumes electrical energy the consumer has to pay an
additional amount of tax at 4 per centum of the price of energy consumed by
the consumer in addition to the tax if any payable under Section 3.
24. Even though there has been a merger of levy under Section 3 with
schedule of tariff notified under section 4 of the Tamil Nadu Revision of
Tariff Rate of Supply of Electrical Energy Act, 1978, it cannot be held that
there has been no levy, nor it could be held that there has been a total
exemption from levy, nor it could even be suggested that levy of tax under
Section 3 has been suspended. Admittedly there is no notification under the
Tamil Nadu Electricity Act, ( Taxation on Consumption) Act, 1962. But, 1991
Act confers power of exemption in terms of Section 12 or 13. Admittedly no
notification has been issued under the Tamil Nadu Electricity (Taxation on
Consumption) Act, 1962. IN fact the electricity tax has been levied under
Section 3 . Therefore the contention that there has been merger is of no
consequence and at any rate the same will not render Section 3.A as nugatory
or unenforceable. As already pointed out Section 3.A operates independently
as a charging section and it is an additional levy of tax.
25. While considering the effect of G.O.Ms.No:787, Public Works
Department, dated 30.4.1979, a Division Bench of this Court in M/s.
Navbharath Ferro Alloys Ltd., Ms.6 & others Vs. The State of T.N. rep. by
the Secretary to Govt., PWD (Electricity), reported in 1997 Writ L.R.201, and
examining the levy in particular the basis for calculation of energy tax, held
thus:-
“5. The contention is that in the event the revised tariff is also
applied as clarified by the Chief Engineer, in his memo No.450/J2/70-2 dated
10.5.1979, the revised tariff effected under G.O.ms.No.787 P. W.D
(Electricity) dated 30.4.1979 would include the tax whatever leviable,
therefore the amount of tax payable on the tariff that prevailed prior to
G.O.Ms.No.787 dated 30.4.1979 shall have to be excluded from the price of
energy for the purpose of levying the energy tax. We are of the view that the
energy tax payable by the captive energy consumers has to be determined not on
the basis of the explanatory memo issued b the Chief Engineer. It is not
explained as to under what authority he had issued such memo. Even without
going into that question, we are of the view that what is relevant for the
purpose of deciding the energy tax liability of the petitioners, who are using
the captive energy produced by them, is the definition of the price of energy
as per Sec.2(9), Sub sec. (2) of Sec.5 and Sec.3(1)(a) and (b) of the Tamil
Nadu Act 4 of 1962. All these provisions, which have been referred to above,
read together would make it clear that the tariff for the time being
prevailing in force would be the price or the money consideration payable by
the energy consumers. Whatever may be the contents of the tariff, as long as
it answers the requirement of the definition of price of energy as meaning the
money consideration paid by a consumer to a licensee, excluding items (i) to
(iv) of Cl.(9) of Section 2 of the Tamil Nadu Act 4 of 1962 would be the price
of energy therefore, we are of the view that it is not possible to accede to
the contention of the petitioner that in the tariff revised by G.O.M.s.NO.787
dated 30.4.1979l the tax payable on the tariff as it stood prior to 1.5.1979
should be excluded for the purpose of determining the energy tax, because the
said tax payable on the tariff has been made as part and parcel of the price
or the money consideration payable by the energy consumer to the licensee.
6. The Tamil Nadu Act 1 of 1979 has been considered by a Division
Bench of this Court (to which one of us the Hon’ble The Chief Justice, was a
party) M/s.Snam Abrasives Ltd., rep, by its director T.V. Sivaraman, V. The
Commissioner and Secretary to the Government Public Works & Electricity
Department and Others (ILR 1996) 2 Madras 501). In para 11 of the said
decision, it has been held that Section 4 of the Act No.1 of 1979 gives power
to the State Government to change the tariff schedule. The relevant portion
of the judgment is as follows:-
“…When section 4 gives the power to change the Schedule, it goes without
saying that the Government has the power to prescribe the rates different from
what was prescribed under Act 1 of 1979 and in so doing they can equally
prescribe a different rate for the industries which had been grouped, under
Heading V. Special Tariff. Therefore, when the Tariff Schedule Act was first
amended by G.O.Ms.NO.787 dated 3 0.4.1979 the fact that the Synthetic Gem
Industry was levied at the rate of 20 Paise per KWH where as Caustic Soda,
Calcium Carbine, Aluminum Fertiliser etc., were charged at the rate of 17
paise, 10 paise, 19 paise respectively per KWH cannot be faulted on the ground
that a different classification had been adopted. We are clearly of opinion
that only tariff rates as applicable to ce rtain industries have been
prescribed and this is perfectly legitimate and within the power of the
Government under section 4 of the Act. In other words, Section 4 does give
the power to the Government industries by amending the schedule and this is
precisely what has been done in the various Government orders. The first
contention of the appellants, therefore, fails…..”
The explanatory note issued by the Chief Engineer, whose authority has not
been explained to us, is not in conformity with the reasons for issuing
G.O.Ms.No.787 dated 30th April, 1979. In addition to that, as already pointed
out the said explanatory note apart from being contrary to Section4 of Act 1
of 1979 the scope of which is explained in the aforesaid decision is not
relevant for purpose of deciding the price of energy in relation to the
captive energy produced by the consumers.”
This answers the material contention advanced by the learned counsel for the
petitioners. This court is bound by the Division Bench pronouncement of this
Court.
26. Sub section (2) of Section 3.A makes it clear that the imposition
under section 3.A(1) shall be in addition to any tax payable on the
consumption of energy levied and collected under sub section (1) of Section 3.
The Legislature has made it clear that the levy under section 3.A(1) shall be
in addition to to the levy payable under sub section (1) of Section 3. Even
assuming for the purpose of argument that there has been no levy under sub
section (1) of Section 3 there could be a levy under section 3.A(1) in respect
of consumption of energy by the consumer calculated at the rate of 4 per
centum of the price of energy consumed by the consumer.
27. As rightly pointed out out by the learned Advocate General
Section 3.A operates independent of Section 3 and the State Legislature ha
imposed an additional amount of tax under sub section (1) of Section 3.A which
is in addition to all the tax payable under section (1) of Section 3.
Assuming for purpose of argument that there has been no levy under sub section
(1) of section 3, it cannot be contended that there could be no levy at all
under section 3.A(1). Such a contention is a misconception and has no legs to
stand. As already pointed out it is a further levy under sub section (1) of
Section 3.A and section 3.A(1) being the charging section itself, operates
independently and the consumption of energy tax has been levied at the rate of
4 per centum on the price of energy consumed by the consumer. Therefore it
makes no difference whether there is separate levy of tax under section 3(1)
or not. As already indicated there has been a levy under sub Section (1) of
Section 3 and it is not as if there has been no notification withdrawing or
suspending the enforcement of the provisions of the Act.
28. There may be individual exemption under sections 12 or 13 of the
1962 Act. But the same will not in any manner impinge upon Section 3.A or the
operation of levy under section 3.A(1). The learned counsel for the
petitioners advanced such a contention while placing reliance on a publication
by the Electricity Board which indicates salient features of the revised
tariff stating that there shall not be any levy of tax. But a perusal of the
tariff notification is otherwise. Even assuming so, the same will not affect
the levy under section 3.A which also falls within the legislative competency
of the State.
29. Mr.Ragul Balaji, learned counsel appearing for M/s.Madras Cements
contended that there is an exemption in favour of the petitioner and therefore
there cannot be a levy. The said contention overlooks the sub section in
Sec.3.A. It is an exemption in respect of levy under section 3(1). However,
proviso to Section 3.A(1) makes it clear that no additional tax has been
levied under sub section (1) of Section 3.A on the energy consumed by any
person who consumes energy generated by itself. This proviso has been lost
sight of by Mr.Rahul Balaji, counsel for the petitioner. Hence this
contention cannot be countenanced.
30. Taking up the next point for consideration, namely levy of
additional tax of 4 per centum on the tax cannot be held to be expropriatory
in nature, nor it offends Art.14. It is a levy of tax which falls within the
legislative competency of the State. As rightly pointed out by the learned
Advocate General there could be a double taxation also so long as such
taxation is not expropriatory.
31. In Empire Industries Ltd., V. Union of India, reported in 1986
SC 663, the imposition of tax by Legislature was challenged as violative of
Art.14. In that context, the Supreme Court held thus:-
“49. Imposition of tax by legislation makes the subjects pay taxes. It is
well-recognised that tax may be imposed retrospectively. It is also
well-settled that that by itself would not be an unreasonable restriction on
the right to carry on business. It was urged, however, that unreasonable
restrictions would be there because of the retrospectivity. The power of the
Parliament to make retrospective legislation including fiscal legislation are
well-settled. (See M/s Krishnamurthi & Co. v. State of Madras.) Such
legislation per se is not unreasonable. There is no particular feature of
this legislation which can be said to create any unreasonable restriction upon
the petitioners.”
32. In Venkateshwara Theater Vs. State of Andhra Pradesh, reported
in AIR 1993 SC 1947, the Apex Court while analysing the case law and taxation
provision with reference to Art.14 the Supreme Court held thus:-
“20. Since in the present case we are dealing with a taxation measure it is
necessary to point out that in the field of taxation the decisions of this
Court have permitted the legislature to exercise an extremely wide discretion
in classifying items for tax purposes, so long as it refrains from clear and
hostile discrimination against particular persons or classes. (See: East
India Tobacco Co. v. State of A.P.(AIR 1962 SC 1733), P.M. Ashwathanarayana
Shetty v. State of Karnataka (AIR 1989 SC 100), Federation of Hotel &
Restaurant Association of India v. Union of India (1989) 2 SCR 918, Kerala
Hotel & Restaurant Association v. State of Kerala (AIR 1990 SC 913) and
Gannon Dunkerley and Co. v. State of Rajasthan (1993) 1 SCC 364.)”
33. In Kodar Vs. State of Kerala, reported in Vol.34 (1974) SC 73 at
page 76, the Supreme Court while testing the validity of additional tax as
infringing Art.19(1)(g) and 19(1)(f), held thus:-
“9. As regards the contention that the State Legislature has no power to pass
the measure, we are of the view that additional tax is really a tax on the
sale of goods. The object of the Act, as is clear from its provisions, is to
increase the tax on the sale or purchase of goods imposed by Tamil Nadu
General Sales Tax Act, 1959 and the fact that quantum of the additional tax is
determined with reference to the sales tax imposed would not alter its
character. It may be noted that additional tax is to be imposed only if the
turnover of a dealer exceeds Rs 10 lakhs. It is in reality a tax on the
aggregate of sales affected by a dealer during a year. The additional tax, e,
is an enhancement in the rate of the sales tax when the turnover of a dealer
exceeds Rs 10 lakhs a year and it is a tax on the aggregate of -the sales
affected by the dealer during the year. The decisions in Ernakulam Radio
Company v. State of Kerala which was affirmed by a Division Bench of the
Kerala High Court in Kuikar v. Sales Tax Officer took that view. The same
view was taken by the Andhra Pradesh High Court in A.S. Ranachandra Ran v.
State of Andhra Pradesh This is the correct view. Entry 54 in List II
authorises the state legislature to impose a tax on the sale or purchase of
goods. So, the contention of the appellants that the additional sales tax is
not a tax on sales but on the income of the dealer is without any basis.
10. As regards the second contention that the provisions of the Act are
violative of the fundamental rights of the appellants under Article 19(1)(f)
and 19(1)(g), as the tax is upon the sale of goods and is not shown to be
confiscatory, it cannot be said that the provisions of the Act impose any
unreasonable restrictions upon the appellants’ right to carry on trade. It
is, no doubt, true that every tax imposed some restriction upon the right to
carry on a business; but it would not follow that the imposition of the tax in
question is an unreasonable restriction upon the appellants fundamental right
to carry on trade. Generally speaking, the amount or rate of a tax is a
matter exclusively within the legislative judgment and as long as a tax
retains its avowed character and does not confiscate property to the State
under the guise of a tax, its reasonableness is outside the judicial ken.”
34. In fact except making bald averments that the levy is
expropriatory, no basis has been made as to how it is expropriatory. Levy of
4 per centum as additional tax on the fact is not expropriatory, nor it
violates Art.14. There is nothing to show that the levy of 4 per centum is
arbitrary. Hence, this point is also answered in favour of the respondents
and against the petitioners.
35. In the result, all the writ petitions and WPMPs are dismissed
holding that introduction of Section 3.A by Tamil Nadu Act, 32 of 1991 is not
liable to be declared as invalid or unenforceable or inoperative. No case has
been made out for issue of a writ of Declaration invalidating Section 3.A as
introduced by Tamil Nadu Act, 2 of 1991, nor the petitioners are entitled to
the consequential relief prayed for by them. The parties shall bear their
respective costs in these Writ Petitions and consequently all WPMPs are also
dismissed.
Indedx: Yes
Internet: Yes
gkv
To
1. The Secretary to Govt.,
Govt., of Tamil Nadu
Energy Department
Fort St. George
Chennai-9
2. The Tamil Nadu Electricity Board
rep. By its Chairman,
800, Anna Salai, Chennai-2
3. Tamil Nadu Electricity Regulatory Commission
rep. By its Chairperson,
Seethammal Colony, Alwarpet
Chennai-18.