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Issues:
1. Whether the generation of electric energy can be subjected to payment of excise duty. 2. Legality of imposition of excise duty on electricity. 3. Authority of Electricity Board to demand payment with retrospective effect. 4. Power of the Board to levy surcharge exceeding excise duty rate. Analysis: 1. The main issue in this case was whether the generation of electric energy could be subjected to payment of excise duty. The petitioner challenged the amendment under the Finance Act, 1978, which included electricity in the tariff item 11E of the Central Excises and Salt Act, 1944. The petitioner argued that excise duty could only be levied on manufactured goods and not on articles where the process of manufacture was not applicable. The Court analyzed the term "goods" in the Constitution and held that electricity fell within the ambit of excise law as it was considered a product of production. The Court rejected the argument that excise duty could only be imposed on tangible goods, citing precedents and constitutional provisions. 2. The legality of the imposition of excise duty on electricity was challenged on the grounds that it was a tax on consumption, not production. The petitioner contended that the measure could not be applied to production. The Court examined technical aspects related to the measurement of electrical energy in kilowatt hours. The Court considered scientific viewpoints presented in affidavits and concluded that the tax on electricity consumption could still be measured in terms of production, thus upholding the validity of the excise duty on electricity. 3. The issue of retrospective nature of the surcharge imposed by the Electricity Board was raised. The Court noted the provisions of the Provisional Collection of Taxes Act and held that the necessary declaration had been made to bring the new provisions into force from the specified date. The Court clarified that the demand made by the Board with effect from 1st March, 1978, was valid and not retrospective as argued by the petitioner. 4. The petitioner also challenged the authority of the Electricity Board to levy a surcharge exceeding the excise duty rate. The Board justified the surcharge by explaining the rise in costs of electricity generation due to increased excise duty on basic fuels and losses in transmission. The Court upheld the Board's authority to modify tariffs under the Electricity (Supply) Act, 1948, and deemed the reasons for the surcharge increase reasonable and well-founded. Consequently, the Court dismissed the writ application, ruling in favor of the Electricity Board.
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