9911796707
TMI Blog2020 (5) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... mposing cess on generation of electricity is beyond the competence of the State. In view of the Constitutional validity of subsections [1] and [2] of Section 3 of the Act, 2013 being upheld by this Court, now the challenge would only revolve around Section 4[3] of the Act, 2013. Section 4[3] of the Act, 2013 deals with the payment of tax. In terms of sub-section [3] of Section 4, the incidence of tax is on the consumption. The consumption of electricity relates to every person generating electricity by himself, and or who supplies electricity free of charge or otherwise to any other person through his own system - The electricity tax is payable as per Section 3, the charging Section. Section 4[3] is the payment of tax to be made by different class of persons. The Hon ble Apex Court in the case of GOVIND SARAN GANGA SARAN VERSUS COMMISSIONER OF SALES TAX AND OTHERS [ 1985 (4) TMI 65 - SUPREME COURT] , has held that the components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectricity [Taxation on Consumption] [Amendment] Act, 2013 ['Act, 2013' for short] insofar as levy of tax on consumption of electricity by captive generative units is concerned inter alia assailing the notification bearing No.EN 27 EBS 2013, Bengaluru dated 24.11.2014 published in the Karnataka gazette dated 19.03.2015 whereby the rate of electricity tax to be collected as electricity tax on captive consumption and auxillary consumption of electricity generated by the captive power generating plant/cogeneration plant is fixed and the consequential demand notices issued. FACTS IN BRIEF: 3. The petitioners are public limited companies registered under the provisions of the Companies Act, 1956. The petitioners assert that they have developed, designed, engineered, financed, constructed, operating and maintaining captive electric power generating stations at various places in Karnataka. 4. The respondent - Additional Chief Electrical Inspector has demanded the electricity tax on electricity generated and consumed by these petitioners from 19.03.2015. Being aggrieved by the levy of electricity tax on captive and auxiliary consumption, the petitioners are before this Court. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered as sub-section [1] thereof, and, - [i] in the heading, after the words "electricity charges", the words "and energy generated" shall be inserted; and [ii] after sub-section [1] as so renumbered, the following sub-section shall be inserted, namely:- "[2] Subject to the provisions of this Act, there shall be levied and paid to the State Government, with effect from the date of commencement of Karnataka Electricity [Taxation on Consumption] [Amendment] Ordinance, 2003 and till the first day of July 2004, an electricity tax at the rate of fifty paise per unit on all the units of energy generated by any person not being a licensee who consumes the energy generated by himself or supplies to another person free of charge." KARNATAKA ACT No. 5 OF 2004: 2. Amendment of Section 3.- Section 3 of the Karnataka Electricity [Taxation on Consumption] Act, 1959 [Karnataka Act 14 of 1959] [hereinafter referred to as the principal Act] shall be renumbered as sub-section [1] thereof; and, [i] in the heading, for the words "electricity charges", the words "electricity charges etc.," shall be substituted; and [ii] after sub-section [1] as so renumbered, the following sub-section shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted, namely:- "(1) Every licensee shall collect and pay to the State Government at the time and in the manner prescribed, the electricity tax payable under this Act,- (a) on the electricity charges included in the bill issued by him to the consumer. The tax so payable shall be a first charge on the amounts recoverable by the supplier for the electricity supplied by him and shall be a debt due by him to the State Government: Provided that where the licensee has been unable to recover the amounts due to him for the electricity supplied by him he shall not be liable to pay tax in respect of the electricity so supplied; (b) on the units of electricity supplied to consumers by non licensee through the licensee." (ii) for sub-section (3), the following shall be substituted, namely:- "(3) Every person who consumes electricity generated by himself, and or who supplies electricity free of charge or otherwise to any other person through his own system, 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." (iii) in sub-section (4),- (a) the words "free of charge" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d W.P.No.14434 of 2016 and allied matters (D.D.4.10.2016), further considered and reiterated in the case of ACC Limited V/s. The State of Karnataka and Others, W.P.No.12927/2017 [D.D.21.11.2019] the challenge to the Constitutional validity of Section 4[3] of the Amendment Act, 2013 is a mere formality since Section 4 of the Act, 2013 contemplates payment of tax in terms of Section 3 of the Act. Learned counsel argued that the incidence of tax is on the consumption not on the generation of electricity. Imposition of tax on consumption is held to be valid by the Division Bench of this Court in the case of Biocon1 supra relating to the earlier Amendment Act 4/2003. In view of the aforesaid decision, the provisions of Section 4[3] being identical requires to be upheld. It was submitted that the provisions of Madhyapradesh Upkar [Sanshodhan] Adhyadesh, 2001 certainly relates to the levy of tax on the event of generation of electricity, to cure the said defect, explanation was introduced by Sanshodhan Adhiniyam, 2003. In such circumstances, the Hon'ble Apex Court has held that the explanation cannot override the main provision. On the interpretation of the language employed in the main p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced". The phrase "whether for sale or supply" merely clarified that all electricity produced irrespective of its destination would be liable to cess at the specified rate. The use of the word "whether" after the phrase "energy produced" means that the cess would apply on units produced whichever of the alternatives mentioned after the word "whether", namely, sale or supply or consumption is the case. There is no reason to assume that the words used did not reflect the intention of the Legislature. The imposition envisaged was on the production of electricity units. The charge was on generation and not on the sale or consumption of electricity. There is a conscious linguistic departure from the language used in Section 3 of the Electricity Duty Act, 1949 and indeed the language used in Section 3(1) of the same Act where the cess is levied on the total units of electrical energy sold or supplied by distributors of electrical energy. When dealing with producers under sub-Section (2) of the same section, the cess is required to be paid "on the total units of electrical energy produced". If, as is contended by the respondents, the incidence of levy under Section (1) and sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany or a firm or any organization for own use or consumption 15. In the case of National Hydroelectric Power Corporation Ltd., and Another V/s. State of Jammu and Kashmir and Others 2005 [2] JKJ 5, the Hon'ble High Court of Jammu & Kashmir at Srinagar while considering the levy of tax by the State in exercise of the powers conferred under Section 3[1] Jammu and Kashmir Electricity [Duty] Act, 1963 on generation of electric energy in Hydroelectric Power Projects has observed thus: "33. As a matter of fact, the petition is fit to succeed on a short point that the power to impose levy on production/generation of electricity is the preserve of Parliament in terms of Entry 84 of List I and, therefore, legislature of the state of Jammu and Kashmir has no jurisdiction to make law with respect to such an imposition. The point is squarely covered by a recent decision in M.P. Cement Manufactures Association v. State of Madhya Pradesh, (2004) 2 SCC 249, wherein the Supreme Court categorically held that electricity being goods, the Parliament has exclusive legislative competence to legislate in respect of levy of duty on production of electricity. The Madhya Pradesh Electricity Duty Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption of electricity......." 16. The Hon'ble High Court of Punjab and Haryana in the case of Rana Sugars Limited and Others V/s. State of Punjab and Others MANU/PH /3167/2013 while dealing with the notifications issued by the State of Punjab imposing duty on the sale of electricity from the independent/captive power plants to customers situated outside the state of Punjab under the various segments considering the Constitutional Bench Judgment of the Hon'ble Apex Court in State of A.P. V/s. National Thermal Power Corporation Ltd., and Others AIR 2002 SC 1895, has held thus: "15. IN OUR VIEW, AFORESAID LEAVES NO MANNER OF DOUBT THAT THE FOLLOWING ASPECTS EMERGE FROM THE AFORESAID JUDGMENT:- a) Electricity is "goods" even if electrical energy is not tangible or cannot be moved or touched. It can be transmitted, transferred, delivered, possessed etc. like any other moveable property; b) A significant characteristic of electric energy is that its generation or production coincides almost instantaneously with its consumption. Thus, continuity of supply and consumption starts from the moment the electrical energy passes through the meters and sale simultaneously takes place as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 Act or levying the tax on the consumption of electricity. The state is empowered by Entries 53 and 54 of List II of VII Schedule. Since the Act has legislated well within the provisions of Constitution, it has to be held that it is constitutional and not ultra vires or illegal. What is levied is on the consumption of electricity but not for supply of electricity. No matter whether a person generates electricity on his own or takes it from outside the State through open access system, but levying of tax is on consumption. As is held by the Hon'ble Supreme Court in the case of ANDHRA PRADESH v. NATIONAL THERMAL POWER CORPORATION LTD. (supra), the moment electricity is generated it is to be consumed and it cannot be stored. The moment electricity is generated within the State or from outside the State, it is to be consumed and accordingly, the State is empowered to levy tax on consumption. In the said case, the Hon'ble Supreme Court has not laid down law in respect of consumption of electricity and on the other hand it has been held that the State is empowered to levy tax as per Entries 53 and 54 of the List II of VII Schedule of the Constitution. In view of the foregoing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution of India. The very question inasmuch as the levy of tax on consumption by the producers of electricity was considered, analyzed and decided in paragraph 22 of the judgment extracted supra. The consumers also the producers of electricity are not exonerated from the levy of tax since electricity cannot be stored. Production and consumption being simultaneous, the argument that tax levied is in fact on production only and not on consumption, was negated. In the said judgment, the Division Bench has considered the decision of M.P.Cement Manufacturers Association2. rendered by the Hon'ble Apex Court. Indeed in M.P. Cement Manufacturers Association2 case, the levy of tax was on the generation of electricity as could be seen from the language employed in Section 3[2] of the M.P.Upkar [Sanshodhan] Adhiniyam, 2003 and in order to bring it within the arena of consumption tax, subsequent explanation was added. The Hon'ble Apex Court considering the scope of explanation held that, explanation cannot override the main provision and accordingly, held that the State has no competence to levy tax on the generation which is the domain of the Parliament. Such being the legal position, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
