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TMI Blog1974 (9) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... used by it for generation of further electrical energy. The High Court answered both the questions in favour of the respondent company and quashed the demand which included tax on the above two counts. The State, it was held, was at liberty to make a fresh assessment of the electricity tax payable by the respondent company "without taking into account transmission losses and the quantity of electrical energy used for generation of further electrical energy". The State was also directed to refund the excess amount realised by it from the respondent company 4 Dr. to adjust it towards the electricity tax lawfully due from the respondent company for subsequent years. The respondent company is manufacturing paper and other pro- ducts at Dandeli. Since the Mysore State, Electricity Board was not in a position to supply the entire quantity of electricity required by the respondent company, the company started generating electricity by installing turbine and other machinery. On June 18, 1966 the appellants made a demand of ₹ 3,53,953.45 as arrears of electricity tax under the Act from the respondent company for the period from July 1959 to March 1966. On August 29, 1966 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him for the energy supplied by him he shall not be liable to pay the tax in respect of the energy so supplied. (3) Every person, who consumes energy generated by himself, or who supplies energy to any other person free of charge, shall pay, or collect and pay, as the case may be, to the State Government, at the time and in the manner prescribed, the electricity tax payable under section 3 on the units of energy consumed by himself or supplied to such other person. It would at this stage be appropriate to advert briefly to the process of generation and distribution of electricity. The process of generation of electricity normally consists of converting mechanical energy into electrical energy through what is known as the "generator". Such mechanical energy is normally supplied by turbine or piston engine. The motive power for such turbine or piston engine is supplied. by falling water, steam, gas, mineral oil or nuclear fuel. Electrical energy so generated is transmitted through metal conductors to places where-it is to be used. Some loss of electrical energy takes place in the transmission. Such loss is described as transmission loss. Electricity is transmitted over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of electrical energy is normally 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 is plainly not permissible under the Act. The fact that the consumer happens in the present case to be the same company which generated the electrical energy w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e less be consumption of such energy even though it has been consumed in operating the apparatus for generating further electrical energy. The purposes for which the energy has been consumed would not make any material difference for the purposes of the levy of tax under the Act. It is not disputed on behalf of the respondent company that if it had used electrical energy, generated by the State Electricity Board for generating further electrical energy, the use of such energy generated by the Board would have' attracted the provisions of the Act for liability to pay electricity tax. It would, in our opinion, make no difference that the electrical energy used by the respondent company for generating further electrical energy was that which had been generated by itself. Sub-section (3) of section 4 reproduced above makes it clear that electricity tax would be payable if a person consumes electrical energy generated by himself.' The sub-section thus puts the consumption of energy generated by the consumer himself at par with the consumption of energy generated by someone else. The definition of the word "consumer" also shows that it would include a person, who consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or supply, and a use for transformation. Transmission seems to me a process district from generation. It may be covered by the heading of "supply" or "distribution". Transformation is akin to generation in as much as it results in the conversion of electrical power of a certain voltage into one of a higher or lower voltage. It is a part of the process which makes electricity more suitable for use for one of the several purposes or even the main purpose of a generator of electricity. The generation is also for the same purpose as are transmission and transformation of electrical energy into power of appropriate voltage. Therefore, if electricity used upon in generation is taxable as consumption, it should, logically speaking, follow that electricity used up for transmission and transformation is also consumption even though it may be described as a "loss" which seems to me to be a rather misleading term invented by those engaged in supplying electricity. The problem before us is one of statutory construction which appears to me to be capable of solution by applying certain well-known rules of interpretation. The relevant provisions have been set ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation of electricity for any other purpose. One who generates electricity and then transmits and transforms it before utilising it for another purpose may be said to be generating it for several purposes. Spending up or utilisation of energy for each of the purposes, whether it be generation, or, transmission, or, transformation, or, manufacture of some particular commodity, can be said to be a use which must necessarily fall within the ordinary grammatical or dictionary meaning of the word consumption. S.-) long as energy is spent or used up, whatever be the process or purpose of such using up, it will be consumption. Speaking for myself, I find it impossible to reject the, argument of Mr. Gupte, that, immediately after the point of generation, begins the process of consumption whether the electricity, or, to use the term employed in the definition, "energy" is used up or lost in transmission or transformation or manufacture. The use of energy or electricity is necessarily a process of using up or destroying it in the course of such use. The mere fact that it is called "transmission loss" or "transformation loss", would, in my opinion, make no differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumed in transmission or transformation or a particular manufacturing process. It is, nevertheless. energy consumed. it is, so far as the definition goes, on par with electricity consumed for purposes of generation. In order to meet what appears to me to have been correctly put forward by Mr. Gupte as the ordinary meaning of "consumer", subject to the qualification in the definition given in Sec. 2, cl. (1) of the Act, learned counsel for the Respondents tried to rely upon the view adopted by the Madras High Court that transmission and transformation must be construed as substantial parts of the process of genera- tion. Even if we were to accept such an argument for Which no ground, justifiable from a technical point of view, has been put forward before us, I think that, upon the view adopted by my learned Brother Khanna with regard to taxation of energy consumed on generation, what is consumed for transmission and transformation of the energy would also be taxable because that would then be energy used up in the process of generation. But, as I have, said above, I do not find any acceptable basis for such a concept of the process of generation which was used by the Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X
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