2016 (12) TMI 1363 - HC - VAT and Sales Tax

Whether sale of energy to BSEB is regarded as sale? - Concealed sale of energy - Penalty - Held that - the charging Section 3(1) of the Act when it speaks of levy of duty on either units or on the value of energy consumed or sold, has to be similarly read as the Constitutional Entry 53 providing the power to the State Legislature, to levy electricity duty either on the unit or on the value of energy consumed or sold for consumption - It is evident from the definition of value of energy in Section 2(ee) which is the computation provision brought in by amendment, after the earlier provisions and notifications had been struck down by the Court as providing no guidelines, that it provides for only two type of cases under sub-clause (i) that is, firstly, energy sold to a consumer by a licensee and, secondly, energy sold to a consumer by a person who generates energy - The petitioners are evidently not a licensee in the matters in hand, they are certainly not selling energy to the consumer; rather they are selling it to the BSEB, which is a licensee under Section 2(d) and which in turn sells the energy for ultimate consumption. Where the generator of energy does not directly receive payment of charges from the consumer, it can be covered within the purview of Section 2(ee) (i) of the Act. In this regard one should also bear in mind that the provision of a taxing statute should be strictly construed, and the benefit of any ambiguity must go to the assessee - Therefore, even on the ground of the applicability of the charging provision it has to be held that the charging provision under Section 3(1) read with the definition of consumer , licensee and value of energy as provided in the Act cannot be used to levy any tax on a generating company supplying energy to a licensee like the Electricity Board as in the present matter, as no tax can be computed in their cases - Decided in favor of the assessee.

Issues Involved:
1. Jurisdiction of the Commercial Taxes Officer
2. Interpretation of the Bihar Electricity Duty Act, 1948 and its amendments
3. Liability of the petitioners to pay electricity duty
4. Constitutional validity of the Bihar Electricity Duty (Amendment) Rules, 2015
5. Assessment orders and demand notices issued by the Commercial Taxes Officer
6. Penalty under Section 6C (1) of the Bihar Electricity Duty Act, 1948

Detailed Analysis:

1. Jurisdiction of the Commercial Taxes Officer:
The petitioners challenged the assessment orders on the ground that they were passed by the Commercial Taxes Officer, who is not the prescribed authority under the Bihar Electricity Duty Act and the Rules. The State, in its counter affidavit, provided a notification amending the Bihar Electricity Duty Rules to include the Commercial Taxes Officer as an assessing authority, effective from 23.6.2005. However, the petitioners argued that the amendments were not validly applied to their cases.

2. Interpretation of the Bihar Electricity Duty Act, 1948 and its amendments:
The petitioners contended that under Section 3(1) of the Act, read with the definitions of ‘consumer’, ‘licensee’, and ‘value of energy’ in Sections 2(b), (d), and (ee), they do not fall within the purview of the charging provisions. The court noted that the definition of ‘consumer’ excludes licensees, and the petitioners were generating energy and selling it to the Bihar State Electricity Board (BSEB), which is a licensee. Therefore, the petitioners were not liable to pay electricity duty under the Act.

3. Liability of the petitioners to pay electricity duty:
The court held that the petitioners, who generate and sell energy to the BSEB, do not come within the purview of the charging provisions of the Bihar Electricity Duty Act. The charging Section 3(1) of the Act, when read with the definitions provided, does not impose a duty on the petitioners as they are not selling energy to consumers but to a licensee.

4. Constitutional validity of the Bihar Electricity Duty (Amendment) Rules, 2015:
The petitioners initially challenged certain provisions of the Bihar Electricity Duty (Amendment) Rules, 2015 as ultra vires. However, during the hearing, no arguments were advanced on this point, and the court confined its consideration to the challenges against the assessment orders and demand notices.

5. Assessment orders and demand notices issued by the Commercial Taxes Officer:
The court quashed the assessment orders and demand notices issued by the Commercial Taxes Officer, holding that the petitioners were not liable to pay electricity duty under the Bihar Electricity Duty Act. The court emphasized the need for strict interpretation of taxing statutes and concluded that the petitioners did not fall within the scope of the charging provisions.

6. Penalty under Section 6C (1) of the Bihar Electricity Duty Act, 1948:
The court found that the penalty imposed under Section 6C (1) of the Act was not justified, as the petitioners were not liable to pay the duty in the first place. Consequently, the penalty provisions could not be applied to them.

Conclusion:
The court allowed all the writ applications, quashing the assessment orders and demand notices issued by the Commercial Taxes Officer. It held that the petitioners, who generate and sell energy to the BSEB, do not fall within the purview of the charging provisions of the Bihar Electricity Duty Act, 1948, and therefore, are not liable to pay electricity duty or any associated penalties.

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