9911796707
TMI Blog1996 (2) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... t of electrical energy was levied on all Supplies of electrical energy made by the KSEB either directly or through licensees of Extra High Tension [EHT] and High Tension [HT] consumers. Thereunder, the licensees were allowed to retain 1% of the anount collected as collection charges. On October 1, 1984, the Government of India had withdrawn the levy of excise duty on electricity. The Government of Kerala in supersession of its Order dated April 6, 1979 had notified the State Electricity Supply [Kerala State Electricity Board and licensees Area] Surcharge Order, 1984 effective from October 1, 1984. Under clause [4] of the said Order all supplies of electrical energy made by KSEB either directly or through licensees, were liable to surcharge at the rate fixed at 2.5 paise per unit. In the explanatory note it was stated that though excise duty was discontinued, the State Government desired to continue the levy of surcharge. The EHT and HT consumers had filed writ petitions challenging the validity of the 1984 Order. Pending writ petitions, on August 1, 1988, the State Government discontinued the levy of surcharge with effect from that date by issuing an Ordinance called the Kerala Ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gy. It is not a tax either on sale or consumption of electrical energy. Entries 26 and 27 of List II [State List] of the Seventh Schedule to the Constitution empower the State legislature, subject to Entry 33 of List ITI [Concurrent List] to enact law empowering levy of surcharge on supply and distribution of goods and trade and commerce therein. Entry 53 of the State list empowers the State legislature to enact the law on sale or consumption of electricity. Having made the law under Entry 26 or 27, using the appropriate language for levy and collection of excise duty on supply of electricity, the Act cannot be construed to be one made under Entry 53 of the State List. He further contended that the word 'supply' has its own connotation. Equally, 'sale' and 'consumption' of electricity bear different connotations. The State legislature having enacted the Electricity Duty Act, 1963, imposes duty on electricity @ 30% and reduced it to 10% by later amendment and discontinued the levy of excise duty from August 1, 1988, and the so-called duty not having been passed on to the public exchequer, the Act was made only as a colourable device to avoid refund of excise duty to the tune of Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicates upon the disputes and gives a legislative declaration of the law which is impermissible under the scheme of the distribution of the sovereign powers between the legislature, the executive and the judiciary. Shri T.L. Vishwanatha Iyer, learned senior counsel for the State contended that the language employed and the title of the Act are not conclusive. Legislature derives power from Entry 53 to make the Act. It is law on sale or consumption of electricity. In Chakolas case [supra] the Division Bench of the High Court declared that impost is compulsory exaction for the benefits to the State and had declared that the executive was not competent to issue the predecessor Order under the Essential Articles [Control] Act. Section 3 thereof had not given express power to the Government to levy and collect excise duty. Consequently, the levy was declared ultra vires. The legislature acted thereon and enacted the Act. Though the words" sale or consumption" of electricity have not expressly been used in the Act and repeated as excise duty on supply of electricity duty, being in the nature of a tax impost and being a compulsory exaction for benefits to the State, it is a tax. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act enacted by the State legislature is one under Entry 53 of the State List, viz., "Taxes on the consumption or sale of electricity". Indisputably, the title of the Act as well as the charging Section 3 employ the words 'duty on supply of electricity. Under Article 246 [3] of the Constitution, every State legislature has explicit power to make law for that State with respect to the matters enumerated in List II [State List of the Seventh Schedule to the Constitution. The State's power to impose tax is derived from the Constitution. The Entries in the three Lists of the Seventh Schedule are not power of legislation but merely fields of legislation. The power is derived under Article 246 and other related Articles of the Constitution. The legislative fields are of enabling character designed to define and delimit the respective areas of legislative competence of the respective legislatures. There is neither implied restriction imposed on the legislature nor is any duty prescribed to exercise that legislative power in a particular manner. But the legislation must be subject to the limitations prescribed under the Constitution. In Navinchandra Mafatlal v. The Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g refund of tax improperly or illegally collected and the restriction on the exercise of that right are both ancillary or subsidiary matters relating to the primary head of tax on sale of goods". The provisions of Section 14 of the Act were, therefore, not held ultra vires the State Legislature. In The Madurai District Central Co-operative Bank Ltd. v. The Third Income Tax Officer, Madurai [AIR 1975 SC 2016], when the annuity scheme was enacted in the Finance Act, competence of the Parliament in that regard was questioned. This Court had held that Income-tax Act is a permanent statute. Finance Act passed every year prescribes the rates at which the tax is to be charged under the Income-tax Act. The annuity is only one of the benefits for deduction of the income-tax in calculation of the income chargeable to tax. While so interpreting, this Court had given wide interpretation and upheld the power of the Parliament under Article 246 [11 read with Entry 82 of List I. In Hoechst Pharmaceuticals Ltd. & Anr. etc. v. State of Bihar & Ors. [(1983) 3 SCR 130] relied on by Shri Venugopal, the question arose whether levy of surcharge on sales-tax and prohibition from passing on the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not conclusive but the pith and substance of the statute needed to be looked into. The doctrine of pith and substance, though applied in determining the true character of the statutes under List III [Concurrent List] of the respective legislative topics of the State legislature and the Parliament, it was extended for consideration of the true character of the legislation even under the same legislative list. In all cases, therefore, the name given by the legislature in the impugned enactment is not conclusive on the question of its competence to make it. It is the pith and substance of the legislation which decides the matter which needs to be decided with reference to the provisions of the statute itself. In Chaturbhai M. Patel v. Union of India & Ors. [AIR 1960 SC 4251, another Constitution Bench had held that in every case where the legislative competence of the legislature in regard to a particular enactment was challenged with reference to the entries in the various lists, it was necessary to examine the pith and substance of the Act and if the matter came substantially within an item in the Central List, it could not be deemed to come within an entry in the Provincial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neously take place. It is true that in the definitions given in the New Encyclopaedia Britanica, Vol. 4, p.842 cited before us, distinction between supply and consumption is stated but adopting a pragmatic and realistic approach, we are of the considered view that as soon as the electrical energy is supplied to the consumers and is transmitted through the meter, consumption takes place simultaneously With the supply. There is no hiatus in its operation. Simultaneously sale also takes place. Charge will be quantified at a later date as per the recorded meter reading or escaped metering, as the case may be. The word `supply' used in the charging Section 3 should, therefore, receive liberal interpretation to include sale or consumption of electricity as envisaged in Entry 53 of the State List. It is true that when water supplied by the municipality to the consumers through their water mains, flows from the mains through the water meter and into the pipes fitted into the house and from there water is supplied from tap fitted to the pipes. Thus there is hiatus between supply and consumption. When water is actually used there would be consumption though water supplied gets recorded when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed as surcharge. The nature of such imposition is the same, viz., land revenue on which it is a surcharge". It would thus be settled law that surcharge is additional duty or tax imposed in addition to the original levy, on the same topic. In A.B. Abdul Kadir & Ors. etc. v. State of Kerala [(1976) 2 SCR 690], the Finance Act, 1950 had extended the Central Excise and Salt Acts 1944 to Part B State of Travancore Cochin and repealed the Cochin Tobacco Act, 1909 and the Tobacco Act [1 of 1087]. Thereafter, a system of licensing was introduced by which the licensees were required to pay a specified fee in respect of tobacco imported into the State. The appellants thereafter had challenged in the High Court the collection of the licence fee for the period. The Act was declared ultra vires and a refund was ordered to be made of the fees so collected. When the appellants thereafter filed a writ petition claiming refund pending writ petitions Kerala Luxury Tax on Tobacco [Validation] Acts 1964 was enacted by the State legislature to provide for the levy of luxury tax on tobacco and validated the levy and collection of the fees for licences within the specified period which had received th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ything to the contrary contained in any judgment, decree or order of any court the levy and collection of surcharge by the Board or other licensees on or after the 1st day of October. 1984 and before the 1st day of August, 1988 under the Kerala State Electricity Supply [Kerala State Electricity Board and Licensees Area] Surcharge Order, 1984, shall be deemed to be, and deemed always to have been validly levied and collected as if the said Order was a notified order under Section 3 of the [Act 22 of 1984]. Accordingly all acts, proceedings or things done by the Board or other licensees in connection with such levy collection and remittance of surcharge shall, for all purposes be deemed to be, and deemed always to have been, done or taken in accordance with the Act. Sub section [2] removes the doubts declaring that nothing in sub-section [l] shall be considered as preventing any person from claiming refund of any surcharge already paid in excess of the amount due from him under the order referred to in sub-section [l]. It is seen that the Act does not limit to the period covered under Section 11 of the Validation Act, Section 3, with a non obstante clause provides that notwithstandin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules made under the Act applied the rates on the percentage basis on the capital value of lands and buildings. In Patel Gordhandas Hargovindas v. Municipal Commissioner, Ahmedabad [(1964) 2 SCR 608] this Court had held that the term 'rate' must be given the special meaning it had acquired in English law and must be confined to an impost on the basis of the annual letting value; it could not be validly levied on the basis of capital value though capital value could be used for the purpose of working out the annual letting value. Thereafter, Gujarat legislature amended the Act and enacted Gujarat Imposition of Tax by Municipalities [Validation] Act, 1963. Section 3 thereof which validated past assessments and collections an rate, on lands and buildings on the basis of capital value or a percentage of capital value, was declared valid, despite any judgment of a court or Tribunal to the contrary. Future assessment and collection on the basis of capital value for the period from and after the Validation Act, was authorized. Section 99 was enacted in the Gujarat Municipalities Act to provide for the levy of a tax on lands and buildings "to be based on the annual letting value or the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake such a valid law and make it retrospectively so as to bind even past transactions. The validity of a Validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether in making the validation it recovers the defect which the courts had found in the existing law and makes adequate provisions in the Validating law for a valid imposition of the tax". This Court upheld the constitutionality of the impugned enactment. The validity of the validating Act is to be judged by the following tests: [i] whether the legislation enacting the validating Act has competence over the subject matter; [ii] whether by validation, the legislature has removed the-defect which the court had found in the previous law [iii] whether the validating law is inconsistent with the provisions of Chapter III of the Constitution. If tests are satisfied, the Act can confer jurisdiction upon the Court with retrospective effect and validate the past transactions which were declared to be unconstitutional. The legislature cannot assume power of adjudicating a case by virtue of its enactment of the law without leaving it to the judiciary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid law is not the function of the judiciary and therefore, by taking these steps the legislature cannot be accused of trespassing on the preserve of the judiciary. Courts have to be vigilant to ensure that non-compliance of power so thoughtfully conceived by our Constitution is not allowed to be upset but the concern for safeguarding the judicial power does not justify conjuring up trespassers for invalidating laws. If the vice from which an enactment suffered is cured by due compliance with the legal or constitutional requirements, the legislature has the competence to validate the enactment and such validation does not constitute an encroachment on the function of the judiciary. It was held at page 218 that the legislature can pass laws with retrospective effect nullifying the mandamus issued by the Court. In M/S Tirath Ram Rajindra Nath Lucknow v. State of U.P. & Anr. [(1973) 3 SCC 585], Section 3 of the U.P. Sales Tax Acts 1948 imposes multi-point sales tax on the sale of certain goods. Section 3-A empowered the Government to levy sales tax on some of the goods "at such single-point in the series of sales by successive dealers" as may be prescribed by the State Government. Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house" with retrospective effect so as to eliminate the impediment on which the High Court rested its judgment. It also made validation of the actions by Section 4 of the Validation Act with retrospective effect. On that basis when it was contended in this Court for the respondent that the legislature had overruled or set aside the judgment of the High Court and it was constitutionally g impermissible, a Bench of three Judges had held that the State legislature had not overruled or set aside the judgment of the High Court. It had amended the definition of the house by substituting a new section in the place of an old one, providing a new definition which had retrospective effect, notwithstanding anything contained in any judgment, decree or order of the court or other authority. In other words, this Court had held that the legislature removed the basis of the decision rendered by the High Court so that the decision could not have been given in the altered circumstances. In I.N. Saksena v. The State of M.P. [(1976) 3 SCR 237], the State Government amended its memorandum to compulsorily retire a government servant on attaining the superannuation of 58 years. However, it empowered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. In A.B. Abdul Kadir & ors. etc. v. State of Kerala [(1976) 2 SCR 690] in the previous decision rendered in A.B. Abdulkadir & Ors v. The State of Kerala & Anr. [(1962) Supp. 2 SCR 741], the Cochin Tobacco Act and the Rules made thereunder and the similar Acts were in substance corresponding to the Central Excise and Salt Act, 1944. The Cochin Tobacco Act stood repealed on April 1, 1950. Consequently, there was no law operating to pay licence fee. The Rules made in the 1950 and 1951 and the repealed Act were held void ab initio. Thereafter, Kerala State legislature enacted Kerela Luxury Tax on Tobacco [Validation] Act, 1964. Section 5 thereof validated the levy and demand changing the character of the levy from fee to the tax. When the constitutionality of the Validation Act was challenged, a three-Judge Bench had held that the State Legislature had competence to enact luxury tax on tobacco and to recover the tax in the shape of licence fee for vend and stocking of tobacco. The legislature, therefore, has competence to convert the of character of collection "from impermissible excise duty into permissible luxury tax" which would not render the Act unconstitutional. Only conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [supra]. In State of Orissa & Anr. v. Gopal Chandra Rath & Ors.- [(1995) 6 SCC 242] in the context of service law, validating statute with retrospective effect was affirmed by this Court. In Janapada Sabha, Chhindwara etc. v. The Central provinces syndicate Ltd. & Anr. etc. [(1970) 3 SCR 745], this Court in its earlier decision in The Amalgamated Coalfields Ltd. v. The Janapada Sabha, Chhindwara [(1963) Supp. 1 SCR 172] had held that the expression "first imposition" occurred in Section 51 [2] of the C.P. and Berar Local Government Act, 4 of 1920. The imposition of levy at the rate of 9 paise per tonne was declared illegal. Direction was issued restraining the Government to recover the same. The Madhya Pradesh Act, 1964 was made and Section 3 thereof validated the invalid imposition assessment and collection of cess. A Constitution Bench had held that Act 18 of 1964 is a piece of clumsy drafting. By a fiction, it deemed the Act of 1920 and the Rules framed thereunder to have been amended without disclosing the text or even the nature of the amendment; nor was there any indication that the invalid notification must be deemed to have been issued validly under Section 51 [2] of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date invalid assessments and to overrule the decision of the High Court. Section 7 was, therefore, held invalid. In Madan Mohan Pathak v. Union of India & Ors. etc. [(1978) 3 SCR 334], on the basis of a settlement, bonus became payable by the LIC to its Class III and Class IV employees. In a writ, a single Judge of the Calcutta High Court issued mandamus directing payment of bonus as provided in the settlement. During the pendency of Letter Patent Appeal, LIC [Modification of Settlement] Act, 1976 was enacted denying bonus payable to the employees. The appeal was withdrawn. The validity of 1976 Act was challenged in this Court under Article 32 of the Constitution. A Bench of seven Judges had held that the Parliament was not aware of the mandamus issued by the Court and it was declared that the 1976 Act was void and writ of mandamus was issued to obey the mandamus by implementing or enforcing the provisions of that Act and directed payment of bonus in terms of the settlement. It was pointed out that there was no reference to the judgment of the High Court in the statement of objects and reasons, nor any non obstante clause referring to the judgment of the Court was made in Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant legislation. Thereafter, the LIC [Amendment] Act, 1981 was enacted. Sub-section [2] of Section 48, [2A], [2B] and [2C] were added providing regulation by the other provisions in respect of terms and conditions of service of the employees w.e.f. January 31, 1981. Sub section [2B] empowered the LIC to make rules under clause (cc) of sub-section [23 to include power to give retrospective effect to such rules and to amend by way of addition, variation or repeal, the regulations of the other provisions contained in sub-section [2A] with retrospective effect but not from June 20, 1979. Sub-section [2C] provided validating clause with usual language. The same was challenged under Article 32 of the Constitution and this Court understood in that perspective it in A.V. Nachane & Anr. v. Union of India & Anr. [(1982) 2 SCR 246] while upholding the validation with effect from the date the Amendment had come into force, declared the retrospective legislation as unconstitutional holding that the rules sought to abrogate the terms of 1974 settlement relating to bonus which would be complied with pursuant to the mandamus issued by the High Court. Rule 3 sought to supersede the terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the obligatory process of the Tribunal. Therefore, it amounted to interference with the judicial power of the State vested in the Tribunal. It ran counter to the binding decisions of the Court regarding the Tribunal's power to grant interim relief. Accordingly, it was declared unconstitutional. It may be pointed out at this stage that this decision is on the anvil of constitutional operation of the special Tribunal constituted pursuant to the directions issued under the Inter-State Water Disputes Act which itself was made under the Constitution, conferring exclusive power on the Tribunal to adjudicate inter-State water disputes. In S.R.Bhagwat & Ors. v. State of Mysore [(1995) 4 SCC 16] the controversy related to Karnataka State Civil Services [Regulation of Promotion, Pay and Pension] Act, 1973. A Division Bench of the High Court allowed the writ petitions and directed collection of the pay, posts, seniority and promotion with all consequential benefits of par with their juniors. The Act was made denying financial benefits as directed by the Division Bench which became final. They were challenged under Article 32 and this Court held that a writ of mandamus or directions wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consistent thread that runs through all the decisions of this Court is that the legislature cannot directly overrule the decision or make a direction as not binding on it but has power to make the decision ineffective by removing the base on which the decision was rendered, consistent with the law of the Constitution and the legislature must have competence to do the same. Considered from these perspectives, the question is: whether Section 11 can answer the tests laid down hereinbefore. It is seen that the duty was collected under an order made in exercise of Section 3 of the Essential Articles Act and it was held to be not a tax but a duty for the benefit of KSEB. That duty being a compulsory exaction for the benefit of public exchequer is a tax. Duty on supply of electricity was declared to be additional burden and a levy within Entries 26 and 27 of List II, subject to Entry 33 of List III [Concurrent List]. Duty is an additional burden and partakes the character of a tax. Entry 53 of List II [State List] empowers the State Legislature to impose tax on consumption or sale of electricity. It is, therefore, a compulsory exaction for the benefit of the Revenue. Therefore, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
