2021 (6) TMI 263 - HC - Indian Laws

Levy of duty on inter-State sale of electricity - competence of the State legislature - vires of Section 4(4)(d) of the Tripura Electricity Duty Act, 2019 - HELD THAT - The contention of the State is that upon amendment of Entry 54 of List II the same is no longer subject to Entry 92A of List I and as a result Entry 53 of List II now stands as an independent fountain source of State legislative power and even if read conjointly with Entry 54, as of date the same is not subservient to Entry 92-A of List I as was the position pre 101st Constitutional amendment . This argument proceeds on a wrong legal principle that entries in the lists to the Seventh Schedule are source of legislative power which theory as noted earlier has been rejected by the Supreme Court in number of decisions. Again there is an inherent fallacy. Term goods has been defined in the Constitution under clause (12) of Article 366 as to include all materials, commodities and articles. Electricity continues to be treated as goods for the purpose of this clause also. Further, sub-section (24) of Section 2 of IGST Act provides that words and expressions used and not defined in the said Act but defined in the CGST Act shall have the same meaning as assigned to them in the said Act. In turn, CGST Act defines term goods in sub-section (52) of Section 2 as to mean every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. Thus, IGST Act which aims to levy tax on supply of goods which is in course of inter-State trade or commerce would bring within its sweep supply of electricity also - there is already a Central legislation for levy of duty on inter-State supply of electricity. The State legislature providing for levy of duty on inter-State sale of electricity would thus encroach an occupied field. Any such legislation would also shatter the territorial limitations on State legislature. The GST related amendments in the Constitution would not have rendered the ratio of the decision of the Supreme Court in case of National Thermal Power Corporation Ltd. 2002 (4) TMI 694 - SUPREME COURT inapplicable in relation to the assertion of the State legislature of its power to frame a law for levying tax on inter-State sale of electricity. Final relief that can be granted to the petitioner must be subject to the well established principle of unjust enrichment. In large number of decisions, the Supreme Court has laid down that whenever a question of refund of tax or duty arises, the petitioner before the Court can claim such refund only to the extent it has borne the element of duty or tax, as the case may be. If the petitioner has already passed on the burden of tax to other person or ultimate consumer, refunding the duty even on a declaration of the taxing statute being unconstitutional, will amount to unjust enrichment. The petitioner, therefore, can claim refund of duty already collected only to the extent it can establish that the duty element was owned by the petitioner without passing it on to the purchaser or the end consumer. In the petition itself the petitioner has averred that some of the duties the petitioner has borne whereas the rest of the duty element has been passed on. The petition is disposed of with directions and declarations that Section 4(4)(d) of the E.D. Act, 2019 is unconstitutional and ultra vires, being beyond the competence of the State legislature - No duty on the petitioner s inter-State sale of electricity shall henceforth be levied and collected.

Summary

Issues Involved:
1. Constitutional validity of Section 4(4)(d) of the Tripura Electricity Duty Act, 2019.
2. Legislative competence of the State legislature to levy duty on inter-State sale of electricity.
3. Refund of duty already collected under the impugned provision.
4. Application of the doctrine of unjust enrichment.

Analysis:

1. Constitutional Validity of Section 4(4)(d) of the Tripura Electricity Duty Act, 2019:
The petitioner challenged the vires of Section 4(4)(d) of the Tripura Electricity Duty Act, 2019, which sought to levy duty on inter-State sale of electricity. The Court examined the provision which imposes duty on electricity sold outside the State and found it unconstitutional. The Court held that the State legislature lacks the competence to levy such a duty on inter-State sales, as it is beyond the legislative powers granted to the State under the Constitution.

2. Legislative Competence of the State Legislature:
The Court referred to the decision in *State of Andhra Pradesh v. National Thermal Power Corporation Ltd.*, where the Supreme Court had held that the State legislature lacks competence to levy duty on inter-State sale of electricity. The respondents argued that subsequent constitutional amendments, particularly the amendment to Entry 54 of the State list, had changed the legal landscape. However, the Court concluded that despite these amendments, the State legislature still does not have the authority to tax inter-State sales of electricity. The Court emphasized that the entries in the lists of the Seventh Schedule are fields of legislation, not sources of legislative power, and must be read subject to other constitutional limitations.

3. Refund of Duty Already Collected:
The petitioner sought a refund of the duty already collected under the impugned provision. The Court held that any refund must be subject to the principle of unjust enrichment. The petitioner can claim a refund only to the extent it has borne the duty and not passed it on to consumers. The Court directed the petitioner to produce accounts to the Secretary, Finance, who would verify the documents and determine the extent of the refundable duty. The refund process was to be completed within specified timelines, failing which the refund would carry interest.

4. Application of the Doctrine of Unjust Enrichment:
The Court discussed the doctrine of unjust enrichment, which prevents a person from being unjustly enriched at the expense of another. The Court cited several precedents, including *Mafatlal Industries Ltd. v. Union of India* and *Jindal Stainless Limited v. State of Haryana*, to emphasize that a refund of tax or duty can only be granted if the claimant has not passed on the burden to another party. The Court applied this doctrine to the case, ensuring that the petitioner could only receive a refund for the duty it had not passed on to consumers.

Conclusion:
The Court declared Section 4(4)(d) of the Tripura Electricity Duty Act, 2019 unconstitutional and beyond the competence of the State legislature. It prohibited the future collection of duty on inter-State sales of electricity and directed the refund of duty already collected, subject to verification and the principle of unjust enrichment. The Secretary, Finance, was tasked with verifying the petitioner's accounts and determining the refundable amount, with specific timelines for compliance.