2000 (2) TMI 819 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of the definition of "sale" under Section 2(g) of the Manipur Tax on Sale of Electricity Act, 1984.
2. Levy of tax on sales of electricity outside the State of Manipur.
3. Imposition of penalty under Section 6 of the Act.
4. Validity of the demand notice dated July 27, 1989.
5. Availability of alternative remedy under Section 13 of the Act.

Detailed Analysis:

1. Constitutionality of the definition of "sale" under Section 2(g) of the Manipur Tax on Sale of Electricity Act, 1984:
The petitioner-Corporation contended that the definition of "sale" in Section 2(g) of the Act, which includes the transmission or supply of electricity outside the State of Manipur, is ultra vires to the Constitution of India. The court examined Article 246 and the entries in the Seventh Schedule of the Constitution. It was held that the State Legislature of Manipur does not have the power to legislate on inter-State sales of electricity, which falls under the domain of the Parliament. Therefore, the definition of "sale" involving transmission or supply of electricity outside the State of Manipur is unconstitutional and ultra vires.

2. Levy of tax on sales of electricity outside the State of Manipur:
The petitioner-Corporation argued that the tax should only be levied on electricity sold within Manipur, not on electricity transmitted to Nagaland and Assam. The court noted that Article 286(1) and Article 269(3) of the Constitution prohibit a State from imposing taxes on sales that occur outside the State or in the course of inter-State trade. The court concluded that the State of Manipur is not competent to levy such tax on inter-State sales of electricity.

3. Imposition of penalty under Section 6 of the Act:
The petitioner-Corporation challenged the imposition of penalties under Section 6 of the Act as unconstitutional and arbitrary. The court observed that the penalty provisions were valid for defaulting units within the State of Manipur. However, since the tax itself on inter-State sales was deemed unconstitutional, the penalties related to such taxes were also invalid.

4. Validity of the demand notice dated July 27, 1989:
The court examined whether the demand notice for Rs. 71,21,27,675 was valid. The court found that the demand was based on an unconstitutional tax imposition on inter-State sales. Therefore, the demand notice was invalid to the extent it sought taxes on sales outside Manipur. However, the court did not find any procedural infirmity in the issuance of the notice itself.

5. Availability of alternative remedy under Section 13 of the Act:
The court noted that the petitioner-Corporation did not avail the alternative remedy of appealing to the Government within the prescribed period under Section 13 of the Act. The court emphasized that ordinarily, it does not entertain writ petitions under Article 226 when an alternative remedy is available. However, given the constitutional issues involved, the court proceeded to adjudicate the matter.

Conclusion:
The court partly allowed the writ petition, declaring the definition of "sale" involving transmission or supply of electricity outside Manipur as unconstitutional. It invalidated the tax and penalties on inter-State sales but upheld the validity of the tax on intra-State sales. The petitioner-Corporation was granted liberty to approach the appropriate authority for remission of penalties within one month.

Order:
The writ petition is partly allowed, and the earlier ad interim order is vacated. No order as to costs.

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