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TMI Blog2007 (5) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... ate shall impose, or authorize the imposition of, a tax on the consumption or sale of electricity (whether produced by a Government or other persons ) which is (a) consumed by the Federal Government, or sold to the Federal Government for consumption by that Government ; or (b) consumed in the construction, maintenance or operation of a Federal Railway by the Federal Railway Authority or a railway company operating that railway, or sold to that authority or any such railway company for consumption in the construction, maintenance or operation of a Federal Railway ;and any such law imposing, or authorising the imposition of a tax on the sale of electricity shall secure that the price of electricity sold to the Federal Government for consumption by that Government, or to the Federal Railway Authority or any such railway company as aforesaid for consumption in the construction, maintenance or operation of a Federal Railway, shall be less by the amount of the tax than the price charged to other consumers of a substantial quantity of electricity." 4. The 1935 Act did not contain any provision similar to Item No. 48-B of the Seventh Schedule of the 1935 Act. After coming into for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the grant of the license on the part of the Central Government; (b) where an objection is received from any local authority concerned, the State Government shall, if in its opinion the objection is insufficient, record in writing and communicate to such local authority its reasons for such opinion; (c) no application for a license under this Part shall be made by any local authority except in pursuance of a resolution passed at a meeting of such authority held after one month's previous notice of the same and of the purpose thereof has been given in the manner in which notices of meetings of such local authority are usually given; (d) a license under this part (i) may prescribe such terms as to the limits within which, and the conditions under which, the supply of energy is to be compulsory or permissive, and generally as to such matters as the State Government may think fit; and (ii) save in cases in which under section 10, clause (b), the provisions of sections 5 and 6, or either of them, have been declared not to apply, every such licensee shall declare whether any generating station to be used in connection with the undertaking shall or shall not form par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such tax by means of rules or orders to be made under the law by any authority, the law shall provide for the previous consent of the President being obtained to the making of any such rule or order." 8. A bare perusal of Section 3 of the 1939 Act would show that taxes were levied on sale of electrical energy by the licensee. There was, thus, no provision under the 1939 Act for levy of tax on consumption of electrical energy. 9. In exercise of its power conferred upon it under Entry 38 of List III of the Seventh Schedule of the Constitution of India, the Parliament enacted the Electricity (Supply) Act, 1948 (for short "the 1948 Act"). In terms of Section 5 thereof, each State was enjoined with a duty to constitute State Electricity Board. Section 12 of the 1948 Act provides for incorporation of such Boards constituted thereunder. 10. In the year 1962, the State of Tamil Nadu enacted Tamil Nadu Electricity (Taxation on Consumption) Act, 1962 (Act No. IV of 1962) (for short "the 1962 Act") to provide for the levy of tax on the consumption of electrical energy in the State of Madras. 11. "Consumer" and "energy intensive industries" have been defined in Sections 2(1) and 2(3) respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exemption or reduction in rate, in respect of the electricity tax payable under this Act by any specified class of persons, having regard to all or any of the following matters, namely:- (a) the nature of the business or industry carried on by such class of persons ; (b) the price of energy consumed in relation to the total cost of the manufacture or production of the principal product in any industrial undertaking owned or controlled by such class of persons ; (c) such other matters as may be prescribed. (2) Any exemption from electricity tax or reduction in the rate of electricity tax notified under sub-section (1) may be subject to such restrictions and conditions as may be specified in the notification. (3) The Government may, by notification, cancel or vary any notification issued under sub- section (1). 15. Section 14 of the 1962 Act provided that the said Act was in addition to and not in derogation of the 1939 Act. Section 18 of the 1962 Act also contained a provision that the same shall be subject to Article 288 of the Constitution of India. 16. The 1939 Act and the 1962 Act were repealed by the 2003 Act. Incidentally, the 2003 Act was not to consolidate and amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctricity tax shall be payable under Section 3 on the sale of electricity by a licensee to the persons nominated thereunder. It contains almost an identical provision of the 1939 Act. The 2003 Act provides for a complete machinery for assessment of the electricity duty payable. It also provides for an appeal from an order of assessment of electricity tax. 19. Section 14 of the 2003 Act provides for general exemption which is in the following terms: "Exemption and reduction of tax.--The Government may, by notification, make an exemption or reduction in rate in respect of the electricity tax payable under this Act on electricity sold for consumption by or in respect of any-- (i) institution or class of person; (ii)place of public worship, public burial or burning ground or other place for the disposal of the dead; (iii) premises declared by the State Government to be used exclusively for purposes of public charity; (iv) vessel whether seagoing or inland." 20. The repeal and saving clause is contained in Section 20 thereof. 21. Section 20 and 21 of the 2003 Act read as under: "20(1) :- The Tamil Nadu Electricity Duty Act, 1939 and the Tamil Nadu Electricity (Taxation and Consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed all the issues against the writ petitioners. Before us, only argument Nos. 1, 3, 4, 5 and 7 have been pressed. 24. We may notice the same at the outset: "(1) The Tamil Nadu Act 12 of 2003 levying tax on consumption or sale of electricity is invalid for want of assent of the President of India, in view of Article 288(2) of the Constitution of India. (2) *** (3) The impugned Act is repugnant to Section 29 of the Electricity Regulatory Commissions Act, 1998. The Central Act, 1996 provided for the fixation of tariff for electricity to vest with the Commission. The tariff so fixed should be held to include the entire price payable for the energy. Thus, the impugned State Act which imposes a tax on the sale or consumption of electricity is repugnant to the Central Law. Since the State Act had not received the assent of the President, it is not saved by Article 254(2) of the Constitution. Hence, it is invalid in law. (4) Under the Tamil Nadu Electricity Taxation on Consumption Act, 1962, some of the appellants were exempted from payment of tax on consumption of self-generated energy. Even though this Act 1962 has been repealed by the present Act, in view of Section 20(2)(a) of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of repugnancy would arise only when both the laws are enacted on the same entry. The question of repugnancy between one law and another would arise only if both the laws of the Parliament and the State Legislature are referable to an Entry in List III. As indicated above, the Central Law is referable to Entry 38 List III while the State Law falls under Entry 53 List II. In these circumstances, no question of repugnancy would arise." 28. On argument No. 4, the High Court opined that as the exemption provision contained in Section 14 of the 2003 Act is inconsistent with the provisions of Sections 12 and 13 of the 1962 Act, Section 20(2)(a) of the 2003 Act will have no application stating: "37. However, in this case, as indicated above, there is an exemption as provided in Section 14 only with reference to the tax on the sale of electricity and not on the tax on consumption of electricity. Thus, it is clear that there is clear inconsistency between the Acts that have been repealed and the repealing Act of 2003. In these circumstances, in view of Section 20(2)(a) of the impugned Act, the exemption orders would cease to be valid on the coming into force of the new Act. Hence, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate to show that the classification is a valid classification. It was contended that in such an event, the validity of the 2003 Act can be read down for the purpose of upholding its constitutionality and according to the learned counsel the following words should be declared to be ultra vires "on electricity sold for consumption by". 33. Relying on the decision of a Constitution Bench of this Court in D.S. Nakara and Others v. Union of India [(1983) 1 SCC 305], the learned counsel would contend that for the aforementioned purpose, the court may take into consideration the historical facts that the exemption which had all along been granted could not have been taken away all of a sudden particularly when the appellants altered their position relying on or on the basis of the representations made by the State that in the event, such captive generating plant or cogenerating units are set up, they would be granted perennial exemption from payment of electricity tax. 34. It was submitted that in view of the decision of this Court in Manekagandhi v. Union of India [(1978) 1 SCC 248], the Act can be struck down not only on the ground of being discriminatory in nature but also on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the 1962 Act, particularly when such exemptions were to be granted 'permanently'. 38. Such a construction is permissible having regard to the fact that the 2003 Act is not a consolidating and amending statute but one for consolidation and rationalization. Having regard to the new economic policy, the statute encourages more private participation in the private sector and thereby a literal or narrow interpretation will defeat the same. In any event, Section 14 should be construed in such a manner so as to make it consistent with Article 14 of the Constitution of India. 39. It was submitted that the 'privilege' is superior to the right and in that view of the matter even if the appellants have not acquired any right, they having enjoyed privilege, the same is saved under Clause (b) of Sub-section (1) of Section 20 of the 2003 Act. 40. The parties have set up their industries relying on the promises made by the State. In particular sugar industries have spent about Rs. 745.64 crores in that behalf. Taking account of this substantial spin-off, doctrine of promissory estoppel should be attracted in this case and in that view of the matter, the State is estopped fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that no electricity duty was payable at transmission loss. 46. Mr. A.R.L. Sundrasan, learned senior counsel appearing on behalf of the appellants in Civil Appeal arising out of SLP (C) No. 18220 of 2006 would submit that having regard to the Entry 38, List III of the Seventh Schedule of the Constitution of India, in terms whereof the Parliament had enacted the 1998 Act, the State could not have made any law in terms of Entry 58, List II of the Seventh Schedule of the Constitution of India as the entire filed of electricity is covered thereby and, thus, the impugned Act should he held to be repugnant to the 1998 Act. 47. The learned counsel appearing on behalf of the appellants in Civil Appeal arising out of SLP (C) No. 3600 of 2007, would submit that in terms of Article 288 of the Constitution of India, the focus is on the law which enables the State to impose tax and not the individual event of levy thereof and, thus, even if such actual levy might not have been levied, the Act authorizing imposition of such tax on river valley authorities, is bad in law. 48. The impugned Act suffers from callous exercise of power inasmuch as the State, by imposing tax, intended to give the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing on behalf of the State of Tamil Nadu, on the other hand, would submit: (i) The exclusive right of the State Legislature to legislate matters under entries enumerated in List II being exclusive, Entry 53 thereof would not be subservient to Entry 38 of List III of the Seventh Schedule of the Constitution of India. (ii) No material has been placed on record to show that the State Legislature has transgressed its legislative power in covert or indirect manner or otherwise over-stepped its limits. (iii) The functions of the State Electricity Regulatory Commission constituted under the 1998 Act refer to a non-taxing entry dealing with general aspects of electricity excluding taxation and, thus, the 1998 Act cannot prevail over Entry 53 of List II of the Seventh Schedule of the Constitution of India and, thus, in that view of the matter Article 254 of the Constitution of India cannot have any application. (iv) Article 288 of the Constitution of India would be attracted only when the following things are established: (a) Existence of an authority established by any law made by the Parliament; (b) The Authority must be established for regulating or developing any inter-stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 20(2)(a) and, thus, it must receive a restricted and contextual construction. (c) An exemption, by its very nature, does not create a right and it is always defeasible and susceptible to be withdrawn. (x) In absence of necessary pleadings, a challenge to the constitutionality of the Act on the purported ground of discrimination must fail. In matters of taxation including exemption, the State is given wide discretion and is allowed to pick and choose objects for taxation and exemption and in that view of the matter the notifications cannot be held to be ultra vires. (xi) The doctrine of promissory estoppel will have no application in the instant case as the State cannot be prevented from extending the exemption of electricity tax on consumption under the 2003 Act on the basis thereof or otherwise, inasmuch as there cannot be any estoppel against the exercise of legislative power to repeal any Act and to re-enact it. The exemption granted under Section 13(1) of the 1962 Act was otherwise subject to cancellation or variation under Section 13(2) thereof. (xii) Electricity tax is levied on a licensee under the 2003 Act in terms of Clauses (a) and (b) of Sub-section (1) of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under several entries, one of them being a tax entry. 56. A bare perusal of Entry 53 of List II and Entry 38 of List III, however, clearly suggests that they are meant to operate in different fields. 57. In National Thermal Power Corpn. Ltd (supra), this Court has clearly held that "the power of the State Legislature to enact law to levy tax by reference to List II of the Seventh Schedule has two limitations: one, arising out of the entry itself, and the other, flowing from the restriction embodied in the Constitution." 58. Entry 53 does not contain any such restriction and, thus, Clause (3) of Article 254 of the Constitution of India will have no application in the instant case. 59. Legislative competence of the State of Tamil Nadu to legislate the impugned Act is beyond any dispute. It cannot, therefore, be said that the State's action in enacting the Act suffers from colourable exercise of any power. Thus, it can be safely concluded that the State has not over-stepped its limits of power. [See K.C. Gajapati Narayan Deo and Others v. The State of Orissa, 1954 SCR 1 and R.S. Joshi, Sales Tax Officer, Gujarat and Others v. Ajit Mills Limited and Another, (1977) 4 SCC 98] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fields. However, in the event there does not exist any conflict, the parliamentary Act or the State Act shall prevail over the other depending upon the fact as to whether the assent of the President has been obtained therefor or not. (See Bharat Hydro Power Corpn. Ltd. v. State of Assam)" 64. The 2003 Act is, thus, not repugnant to the 1948 Act. ARTICLE 288 ISSUE 65. It is no doubt true that Section 18 of the 1962 Act as also Section 21 of the 2003 Act provided that they would be subject to the provisions of Article 288 of the Constitution of India. It deals with exemption from taxation by States in respect of water or electricity in certain cases. Clause (2) of the said Article mandates that when a State makes a law for imposition of tax and if any such law provides for fixation of the rates and other incidents of tax, the assent of the President would be required. 66. A plain reading of Clause (2) of Article 288 of the Constitution of India raises no doubt that the application thereof was meant to be only in respect of the river valley authorities like Damodar Valley Corporation constituted in the year 1948 by the Damodar Valley Corporation Act, 1948. The question came up for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld also be so exempted. Had that been so, the same could have been explicitly provided for. The principle of construction of statute, that the exemption provisions would be attracted only when requisite conditions precedent therefor are satisfied, would apply in a case of constitutional interpretation also. 69. The learned counsel for the appellants would, however, submit that Article 265 of the Constitution read with Article 288 thereof would mandate compliance of the latter provision. 70. The expression "subject to" stated that the same would imply that the provisions of Article 288 will have to be complied with. It is no doubt true that ordinarily the expression "subject to" conveys the idea of a provision yielding place to another provision or other provisions subject to which it is made as has been held in Surinder Singh v. Central Government and Others [AIR 1986 SC 2166, para 6], South India Corporation (P) Ltd. v. Secretary, Board of Revenue, Trivandrum and another [AIR 1964 SC 207], Ashok Leyland Ltd. v. State of Tamil Nadu & Anr. [(2004) 3 SCC 1] and S.N. Chandrashekar and another v. State of Karnataka and Others, [(2006) 3 SCC 208]. But, keeping in view the nature of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "electricity sold for consumption" and makes no corresponding provision for exemption of tax on electrical energy self-generated and consumed. SHOULD WE READ IT DOWN 77. This leaves to the question as to whether the provisions of Section 14 of the 2003 Act should be read in such a manner so as to make it in consonance with Article 14 of the Constitution of India. The learned counsel would contend that Section 14 is loosely worded. We do not agree. The premise on which the said submission was made is that electricity cannot be stored. It has been held to be so in National Thermal Power Corpn. Ltd (supra) in the following words: " In this observation we agree with Grover, J. on all other characteristics of electric energy except that it can be stored and to the extent that electric energy can be stored, the observation must be held to be erroneous or by oversight. Science and technology till this day have not been able to evolve any methodology by which electric energy can be preserved or stored." [See also BSES Ltd (supra), para 16 & 18] 78. However, the editorial note in National Thermal Power Corpn. Ltd (supra) itself suggests that now electricity, at least to some extent is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to alter the law. 83. In The Union of India v. The Mohindra Supply Co. [AIR 1962 SC 256], this Court observed: "7 The Arbitration Act of 1940 is a consolidating and amending statute and is for all purposes a code relating to arbitration. In dealing with the interpretation of the Indian Succession Act, 1865, the Privy Council in Norendra Nath Sircar v. Kamlabasini Desai observed that a code must be construed according to the natural meaning of the language used and not on the presumption that it was intended to leave the existing law unaltered. The Judicial Committee approved of the observations of Lord Herschell in Bank of England v. Vagliano Brothers to the following effect: I think ... the proper course is in the first instance to examine the language of the statute and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with enquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view. If a statute, intended to embody in a code a particular branch of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, for the process of consolidation would lose much of its point if, whenever a question as to construction of a consolidating Act arose, reference had to be made to the statutes which it has consolidated and repealed. The primary rule of construction of a consolidation Act is to examine the language used in the Act itself without any reference to the repealed statutes. It is only when the consolidation Act gives no guidance as to its proper interpretation that it is permissible to refer to the repealed enactments for guidance and it is never legitimate to have recourse to repealed enactments to make obscure or ambiguous that which is clear in the consolidation Act. It is only when there is a real or substantial difficulty or ambiguity that the court is to attempt to resolve the difficulty or ambiguity by reference to the legislation which has been repealed and re- enacted in the consolidation Act. This rule applies to all types of consolidation Acts which are now three: (1) Pure consolidation. i.e. re- enactment, (2) Consolidation with correction and minor improvement, and (3) Consolidation with Law Commission amendments. But when "the provisions of the Act itself invited refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral Clauses Act. But the provisions therein are not inconsistent with the provisions in Section 6 of the General Clauses Act. Hence the provisions of Section 6 of the General Clauses Act are attracted in view of the repeal of the Gold (Control) Ordinance, 1968. As the Gold (Control) Act does not exhibit a different or contrary intention, proceedings initiated under the repealed law must be held to continue. We must also remember that by Gold (Control) Ordinance, the Rules were deemed as an act of Parliament. Hence on the repeal of the Rules and the Gold (Control) Ordinance, 1968 the consequences mentioned in Section 6 of the General Clauses Act, follow. For ascertaining whether there is a contrary intention, one has to look to the provisions of the Gold (Control) Act, 1968. In order to see whether the rights and liabilities under the repealed law have been put an end to by the new enactment, the proper approach is not to enquire if the new enactment has by its new provisions kept alive the rights and liabilities under the repealed law but whether it has taken away those rights and liabilities. The absence of a saving clause in a new enactment preserving the rights and liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kaur." 92. In T.S. Baliah v. T.S. Rangachari, Income Tax Officer, Central Circle VI, Madras [1969 (3) SCR 65], this Court held: " The principle of this section is that unless a different intention appears in the repealing Act, any legal proceeding can be instituted and continued in respect of any matter pending under the repealed Act as if that Act was in force at the time of repeal. In other words, whenever there is a repeal of an enactment the consequences laid down in Section 6 of the General clauses Act will follow unless, as the section itself says, a different intention appears in the repealing statute. In the case of a simple repeal there is scarcely any room for expression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject the Court would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention. The question is not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. Section 6 of the General clauses Act therefore will be applicable unless the new legislation manifests an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 24 Continuation of orders, etc., issued under enactments repealed and re-enacted.--Where any Central Act or Regulation, is, after the commencement of this Act, repealed and re- enacted with or without modification, then, unless it is otherwise expressly provided any appointment, notification, order, scheme, rule, form or bye-law, made or issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force, and be deemed to have been made or issued under the provisions so re-enacted, unless and until it is superseded by any appointment, notification, order, scheme, rule, form or bye-law, made or issued under the provisions so re-enacted and when any Central Act or Regulation, which, by notification under section 5 or 5A of the Scheduled Districts Act, 1874, (14 of 1874) or any like law, has been ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance and only when such a rule would give rise to anomalous situation, the court may take recourse to purposive construction. It is also a well settled principles of law that casus omissus cannot be supplied. [See J. Srinivasa Rao v. Govt. of A.P. and Anr. 2006 (13) SCALE 27] 98. Proviso appended to Sub-section (1) of Section 20 of the 2003 Act although for all intent and purport incorporates Section 6 of the General Clauses Act but a significant departure therefrom must be borne in mind. If the legislature has used different words, or has omitted certain words, in our opinion, the same cannot be read as containing the words "unless a different intention appears". It may be that the provisions of the 2003 Act are demonstrably different from the 1962 Act but we must assume that the legislature did so deliberately. The intention of the legislature by making a distinction between Sub-section (1) and Sub-section (2) of Section 20 of the 2003 Act, in our opinion, is obvious. The fact that the significant words "unless a different intention appears" or the Act does not contain a provision inconsistent therewith were known to the legislature. Whereas in Sub- section (1) of Section 20 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cannot be construed to be notwithstanding anything contained in Sub-section (1) of Section 20 thereof. 104. Once the aforementioned conclusion is arrived at, it would not be necessary to construe the proviso appended to Sub-section (1) of Section 20 in its own language. Proviso, as is well known, has four functions, as has been noticed by this Court in S. Sundaram Pillai v. V.R. Pattabiraman, [(1985) 1 SCC 591 in the following terms: "43. (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision." [See also Swedish Match AB v. Securities & Exchange Board, India, (2004) 11 SCC 641] 105. In a case of this nature, the proviso restricts the operation of the repeal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provision. 112. Mr. Andhyarujina also relied upon Maxwell on the Interpretation of Statutes, 12th edition, page 18, wherein it was stated: "When an Act is repealed, any delegated legislation made under the Act falls to the ground with the statute unless it is expressly preserved. Where the subordinate legislation is continued in force, however, the general rule is that its scope and construction are determined according to the repealed Act under which it was made." 113. The statement of law therein does not militate against our findings aforementioned. Construction would vary from statute to statute. 114. It is profitable to notice at this stage a decision of this Court in M/s. Universal Imports Agency (supra). In that case under the Indo-French Agreement entered into by and between the two nations on 1st November, 1954, the entire Administration of French Settlement vested in the Government of India. The territory of Pondicherry, thus, became a free port without any restriction in case of most imports. However, by reason of a notification dated 30th October, 1954, the importers in Pondicherry were required to obtain validation of licences held by them to import goods as peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Controller of Imports and Exports this Court while construing the words things done held that a proper interpretation of the expression things done was comprehensive enough to take in not only the things done but also the effect of the legal consequence flowing therefrom." 120. Furthermore, exemption from payment of tax in favour of the appellants herein would also constitute a right or privilege. The expression "privilege" has a wider meaning than right. A right may be a vested right or an accured right or an acquired right. Nature of such a right would depend upon and also vary from statute to statute. It has been so held by this Court, while construing Section 6 of the General Clauses Act, in M/s. Gurcharan Singh Baldev Singh v. Yashwant Singh and Others [(1992) 1 SCC 428] in the following terms: " The objective of the provision is to ensure protection of any right or privilege acquired under the repealed Act. The only exception to it is legislative intention to the contrary. That is, the repealing Act may expressly provide or it may impliedly provide against continuance of such right, obligation or liability " 121. We are, however, in a case of this nature, not really conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al consumers less 2% for transmission cost. However, an exemption provision was made from payment of Electricity General Tax therein stating: "Cogenerating sugar mills shall be exempted from the Electricity Generation Tax both for power consumed captively as well as power supplied to the Tamil Nadu Electricity Board and other third parties." 127. By reason of Act No. 43 of 1994, with a view to rationalize the rate of tax on consumption, rate of additional tax was increased from 4% to 5% without repealing GOMs. No. 230 dated 16.06.1993. 128. On 9.10.1995, the Ministry of Power, Union of India wrote to all State Electricity Boards and State Governments urging them to take steps to tap the potential in captive/ cogeneration power plants as energy shortage was visualized at 15% and peaking shortage at 30%. The State Governments, therefore, were urged to create an institutional mechanism to meet the said shortage. 129. On or about 23rd September, 1996, the Government of Tamil Nadu issued the following exemption notification bearing GOMs. No. 126: "In exercise of the powers conferred by sub- section (1) of Section 13 of the Tamil Nadu Electricity (Taxation on Consumption) Act 1962 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce hereinafter that even a right can be preserved by reason of invocation of doctrine of promissory estoppel. 133. Submission of Mr. Andhyarujina, however, is that there cannot be an estoppel against a statute and, in any event, an exemption granted under Sub-section (1) of Section 13 of the 1962 Act was subject to cancellation or variation under Sub-section (2) of Section 13 thereof. 134. In regard to the evolution of the said doctrine, it may not be necessary for us to notice all the decisions cited at the bar as most of them have recently been taken into consideration by this Court in M/s. A.P. Steel Re- Rolling Mill Ltd. v. State of Kerala & Ors. [2006 (14) SCALE 162]. 135. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. Appellants had undoubtedly been enjoying the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuant to or in furtherance of the promises or representations made by the State. The State accepted that equity operated in favour of the entrepreneurs by issuing Note 2 to the notification dated 16-12-1996 whereby and whereunder solvent extraction plant was for the first time inserted in Schedule III i.e. in the negative list." 138. We may, however, notice that a survey of the earlier decisions has also been made by this Court in State of Punjab v. Nestle India Ltd. and Another [(2004) 6 SCC 465] wherein the law has been stated in the following terms: "25. In other words, promissory estoppel long recognised as a legitimate defence in equity was held to found a cause of action against the Government, even when, and this needs to be emphasised, the representation sought to be enforced was legally invalid in the sense that it was made in a manner which was not in conformity with the procedure prescribed by statute." 139. Referring to Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [(1979) 2 SCC 409], this Court observed: "29. As for its strengths it was said: that the doctrine was not limited only to cases where there was some contractual relationship or other pre- existi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, be necessary for the Government to establish an overriding equity in its favour to defeat the petitioners plea of promissory estoppel. The Court also held that the Government of India had justified the withdrawal of exemption notification on relevant reasons in the public interest. Incidentally, the Court also noticed the lack of established prejudice to the promises when it said: (SCC p. 289, para 22) The burden of customs duty etc. is passed on to the consumer and therefore the question of the appellants being put to a huge loss is not understandable. (See also Shrijee Sales Corpn. v. Union of India and STO v. Shree Durga Oil Mills.) We do not see the relevance of this decision to the facts of this case. Here the representations are clear and unequivocal." 141. In MRF Ltd., Kottayam v. Asst. Commissioner (Assessment) Sales Tax and Others [(2006) 8 SCC 702], wherein one of us (Katju, J.) was a member, Kasinka Trading (supra) has also been held to be inapplicable where a right has already accrued; for instance, in a case where the right to exemption of tax for a fixed period accrues and the conditions for that exemption have also been fulfilled, the withdrawal of that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raseology used in Section 20(1) of the 2003 Act, right of the appellants cannot be said to have been destroyed. The legislature in fact has acknowledged that right to be existing in the appellants. LEGITIMATE EXPECTATION 146. We may also notice the emerging doctrine in this behalf, viz., Legitimate Expectation of Substantive Benefit. Ordinarily, the said principle would not have any application where the legislature has enacted a statute. As, according to us, the legislature in this case allowed the parties to take benefit of their existing rights having regard to the repeal and saving clause contained in Section 20(1) of the 2003 Act, the same would apply. If, thus, principle of promissory estoppel would apply, there may not be any reason as to why the doctrine of legitimate expectation would not. 147. Legitimate expectation is now considered to be a part of principles of natural justice. If by reason of the existing state of affairs, a party is given to understand that the other party shall not take away the benefit without complying with the principles of natural justice, the said doctrine would be applicable. The legislature, indisputably, has the power to legislate but wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch taken in Coughlan (supra). In a joint judgment the court said: "In all legitimate expectation cases, whether substantive or procedural, three practical questions arise. The first question is to what has the public authority, whether by practice or by promise, committed itself; the second is whether the authority has acted or proposes to act unlawfully in relation to its commitment; the third is what the court should do." 151. In determining whether an authority has acted "unlawfully", the court expressed its discontent with the standard laid down in Coughlan. It will be in the fitness of the continuing theme, to refer to Coughlan on this point: The traditional view has been that the Wednesbury categories were exhaustive of what was an abuse of power. However in Coughlan the court preferred "to regard the Wednesbury categories as the major instances (not necessarily the sole ones), of how public power may be misused" (para.81). In Coughlan the court followed R v Inland Revenue Commissioners ex parte Unilever [1996] S.T.C.681, in asking itself whether the reneging by an authority on its promise was "so unfair as to amount to an abuse of power" (para.78). It concluded that it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in IPI Steel Ltd. (supra) in the following terms: "From this circumstance, however, one cannot jump to the conclusion that it is an arbitrary way of levying consumption charges. Normally speaking, a factory utilises energy at a broadly constant level. May be, on certain occasions, whether on account of breakdowns, strikes or shutdowns or for other reasons, the factory may not utilise energy at the requisite level over certain periods, but these are exceptions. Every factory expects to work normally. So does the Electricity Board expect and accordingly produces energy required by the factory and keeps it in readiness for that factory keeping it ready on tap, so to speak. As already emphasised, electricity once generated cannot be stored for future use. This is the reason and the justification for the demand charges and the manner of charging for it. There is yet another justification for this type of levy and it is this: demand charges and consumption charges are intended to defray different items. Broadly speaking, while demand charges are meant to defray the capital costs, consumption charges are supposed to meet the running charges. Every Electricity Board requires machinery, pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... states expressly, is premised on unrestricted supply. Problems arise only when restrictions are placed on consumption on account of fall in production of electricity by the Board, as would be explained hereinafter." 155. Thus, what is permissible for the purpose of framing a tariff need not necessarily be permissible for levy of tax. Tariff for supply of High Tension energy is in two parts, viz., (a) units consumed and (b) maximum demand. The High Court proceeded on a wrong premise to hold that the tax is levied only on the maximum demand, i.e., on the energy consumed. It is now accepted that the maximum demand indicator installed in a factory premises of a consumer of High Tension electrical energy shows the maximum amount of energy drawn during any consecutive thirty minutes in a total month of consumption of electrical energy. Maximum demand charge is fixed on that basis although the connected demand may be much more. 156. Mr. Andhyarujina himself has produced before us the terms and conditions of supply of Tamil Nadu Electricity Board wherein 'demand' has been defined in the following terms: "(vii) "Demand" (a) "Average Demand" for the month means the ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the term. Clause 29A is subject to the other provisions. It has been included for the purpose of defining the tax on the sale or purchase of goods as envisaged under Entry 54 of List II of the Seventh Schedule of the Constitution of India and not for the purpose of Entry 53. 161. The reason for insertion of such an explanation is to get over the decision of this Court in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1959 SCR 379] wherein it has been held that tax cannot be imposed on sale of materials transferred in execution of a works contract stating: "In our opinion, that is not the inference to be drawn from the absence of words linking up the meaning of the word "sale" with what it might bear in the Sale of Goods Act. We think that the true legislative intent is that the expression "sale of goods" in Entry 48 should bear the precise and definite meaning it has in law, and that that meaning should not be left to fluctuate with the definition of "sale" in laws relating to sale of goods which might be in force for the time being. It was then said that in some of the Entries, for example, Entries 31 and 49, List II, the word "sale" was used in a wider sense than i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1930 for the purpose of levy of sales tax." While noticing the said case, it has been held: "105. The amendment introduced fiction by which six instances of transactions were treated as deemed sale of goods and that the said definition as to deemed sales will have to be read in every provision of the Constitution wherever the phrase tax on sale or purchase of goods occurs. This definition changed the law declared in the ruling in Gannon Dunkerley & Co. only with regard to those transactions of deemed sales. In other respects, law declared by this Court is not neutralised. Each one of the sub-clauses of Article 366(29-A) introduced by the Forty-sixth Amendment was a result of ruling of this Court which was sought to be neutralised or modified. Sub-clause (a) is the outcome of New India Sugar Mills Ltd. v. CST and Vishnu Agencies (P) Ltd. v. CTO. Sub-clause (b) is the result of Gannon Dunkerley & Co. Sub-clause (c) is the result of K.L. Johar and Co. v. CTO. Sub-clause (d) is consequent to A.V. Meiyappan v. CCT. Sub-clause (e) is the result of CTO v. Young Mens Indian Assn. (Regd.). Sub-clause (f) is the result of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; but the same has to be considered having regard to the definition of "goods" contained in Clause (12) of Article 366 of the Constitution of India. When this Court held electricity to be 'goods' for the purpose of application of sales tax laws and other tax laws, in our opinion, the same would have nothing to do with the construction of Entry 53 of List II of the Seventh Schedule of the Constitution of India. 165. Supply does not mean sale. A' fortiori it does not also mean consumption. 166. A 'goods' may be a tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of transmitted, transferred, delivered, stored and possessed. 167. Strong reliance has been placed by Mr. Andhyarujina on a decision of this Court in M/s. Northern India Iron & Steel Co. v. State of Haryana and Another [(1976) 2 SCC 877] wherein it has been held: "10. Coming to the question of duty, we have no hesitation in an outright rejection of the extreme contention put forward on behalf of the appellants that no duty is liviable at all on the demand charge. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hes the point of consumption, the question of levy of tax on consumption of such energy would not in the very nature of things arise. The place of consumption of electrical energy is normally at some distance from the place where electrical energy is generated. Electrical energy has consequently to be transmitted through metal conductors to the place where it is consumed. Such transmission admittedly entails loss of some electrical energy and what is lost can plainly be not available for consumption and as such would not be consumed. If a person, for example, generates 100 units of electrical energy and loses 10 units in the process of transmission from the point of generation to the point of consumption, he would in the very nature of things be able to supply only 90 units of electrical energy to the consumers. The tax which would be payable on the electrical energy consumed in such a case would be only for 90 units and not 100 units. To hold otherwise and to realise tax on 100 units of electrical energy would be tantamount to levying tax on the generation or production of electrical energy and not on its consumption. Such a tax on the generation or production of electrical energy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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