9911796707
TMI Blog1996 (2) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner-company is manufacturer of alloys, tool and special steel and it purchases electricity from Damodar Valley Corporation (hereinafter to be referred to as 'DVC), which is a licensee within the meaning of Section 2(d) of the Act for the purpose of its industry under an agreement executed between DVC being licensee and the petitioner-company as consumer. According to Clauses 17 of the agreement, the petitioner-company, which was a consumer, was liable to pay electricity duty (hereinafter to be referred to as 'duty') to the Government of Bihar on the electricity purchased by it from the DVC. The petitioner-company under ill advice applied for its registration as an assessee under the provisions of the Bihar Electricity Duty Rules, 1949 (hereinafter to be referred to as 'the Rules') and it was registered as an assessee. Later on, the petitioner-company having realised its mistake filed an application before the respondent-Deputy Commissioner, Commercial Taxes, for cancellation of the registration. 3. The petitioner-company received a notice issued by the respondent-Deputy Commissioner, Commercial Taxes, in relation to assessment years 1990 91 to 1994-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of the State, on the other hand, contended that the petitioner-company is liable to pay duty as well as surcharge under the provisions of the Act and no illegality was committed in issuance of orders of attachment, which have been issued after following the procedure prescribed under law. 5. Now the first question, which falls for consideration, is as to whether the petitioner-company is liable to payment of duty to the State of Bihar. For appreciating this point, it would be useful to quote provisions of Sections 2(b) to 2(b), 3, 3A and 4 of the Act, which read thus: 2(b) 'consumer means any person who is supplied with energy by a licensee, but does not include either a licensee or the 'distributing licensee' as described in Clause l(a) of Clause IX of the Schedule to the Indian Electricity Act, 1910), or a person who obtained sanction under Section 28 of the said Act. (c) 'energy' means electrical energy when generated, transmitted, supplied or used for any purpose except the transmission of a message. (d) 'licensee' means any person, including a company or a local authority licensed under part II of the Indian Electricity Act, 1910 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d refund of the duty shall also apply to the payment, assessment, recovery and refund of the surcharge. 4. Payment of duty.- (1) Every licensee shall pay every month to the State Government at the time and in the manner prescribed the proper duty payable under Section 3 on the units of energy consumed by him or sold by him to the consumer. (2) Every licensee may recover from the consumer the amount which falls to be paid by the licensee as duty in respect of the energy sold to the consumer. (3) The licensee may, for the purpose of Sub-section 2, exercise the power conferred on a licensee by Sub-section (1) of Section 24 of the Indian Electricity Act, 1910 (9 of 1910) for the recovery of any charge or sum due in respect of energy supplied by him. (4) Every person including any department of the State Government other than a licensee, who generates energy for his own use or for the use of his employees, or partly for such use and partly for sale, shall pay every month at the time and in the manner prescribed the proper duty payable under Section 3, on the units of energy consumed by him or his employees or sold by him. (4a) Every person other than a licensee who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er from the consumer the amount which falls to be paid by the licensee as duty in respect of energy gold to the consumer. Sub-Section (3) prescribes the mode of recovery of duty by the licensee from the consumer. Under Sub-section (4) of Section 4 every person other than a licensee who generates energy for his own use or for the use of his employees or partly for such use and partly for sale is liable to pay duty payable under Section 3 on the units of energy consumed or sold. Under Sub-section (4a) every person other than the licensee, who obtains, for sale or partly for his own use and partly for sale, bulk supply of energy generated by licensee or other person shall pay every month to the State Government at the time and in the prescribed manner the duty payable under Section 3 on the units of energy so obtained and sold or partly sold and partly consumed by him. 8. On behalf of the State, it has been submitted that the petitioner company is liable to pay duty under Section 3 of the Act. As stated above, Section 3 lays down incidence of duty on the units of energy consumed or sold. It further lays down that duty shall be levied at such rate as specified in the Schedule append ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f energy generated by DVC, which is a licensee. It has been stated on behalf of the State that out of energy obtained by the petitioner-company from DVC substantial part of it is being utilized by the petitioner-company for its own use and the rest is being used in making supply to its employees on payment of electrical charge at the rate of twenty-five paise per unit after giving certain amount of electricity free of charge and this activity of the petitioner-company, according to the State, amounts to sale of energy to its employees. According to the petitioner-company; electricity is supplied by it to its employees up to certain quantity free of charge and thereafter, they are required to pay electrical maintenance charges at the rate of twenty-five paise per unit. The position as admitted by the State in its supplementary counter affidavit is that the petitioner-company circulated letter dated 25.3.1987, contained in Annexure J, informing all its employees that certain amount of energy has been provided free of cost to its employees and beyond that, twenty-five paise per unit will be chargeable as electrical maintenance charge and the employees will be liable to pay charges for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees towards electrical maintenance changes. 11. Thus, on the basis of the aforesaid facts, it has been submitted on behalf he petitioners that dominant object of supplying electricity by the tioner-company to its employees is by way of rendering services as a are measure as such, the said activity cannot constitute 'sale' within the meaning of the aforesaid Sub-section (4a). Reference in this connection may be le to a decision of the supreme court in the case of . Northern India Caterers (India) v. Lt. Governor of Delhi [1979]1SCR557 . In case the Court was considering the question if service of meals to casual visitors in restaurant located in a hotel in which lodging and means are provided to residents is sale and taxable as such under the provisions of Bengal Finance (Sales Tax) Act, 1941. It was laid down that the supply of meals was essential in the nature of service provided and could not be treated as a section of sale. The Court observed thus: It has already been noticed that in regard to hotels this Court has in Associated Hotels of India Ltd. AIR 1972 SC 11310 (supra) adopted the concept of the English law that there is no sale when food and drinks are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions contained in Section 46 read with the rules referred to above, leave no room for doubt that the dominant object of running the canteen is rendering service as a welfare measure under the Factories Act and the Rules. Consequently, the substance of the transaction in canteen sales, evidenced by its dominant object, is not sale of food, but rendering of services as a welfare activity as enjoined by the Factory Act and the State Rules. The fixation of price of food articles supplied by the canteen on non-profit basis as required under Rule 80 of the M.P. Factories Rules is in conformity with the dominant object of service and welfare and excludes the intention of sale of food as business activity. 14. Before Bombay High Court in the case of Commissioner of Sales Tax v. Cutchi Dasha Oswal Mahjan Grah Udyog Committee (1975) 36 S.T.C 1 question was raised as to whether activity of a trust, which was founded to ameliorate living condition of poor and destitute women of a community of engaging certain women for preparing eatables and sale of the same at profit, which is utilised for given relief to more woman, would amount to business for the purpose of incurring liability to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competent to contract; (ii) mutual assent; (iii) a thing, the absolute or general property in which is transferred from one seller to the buyer and (iv) a price in money paid or promised. A transaction which does not conform to the traditional concept of sale cannot be regarded as one in respect of which the State Legislature is competent to enact an Act imposing liability for payment of tax. The Court laid down thus: Consumption by an owner of goods in which he deals is therefore not a sale within the sale of the Goods Act and, therefore, it is not a 'sale of goods' within the meaning of Entry 54, List II, Schedule VII of the Constitution of India. The legislative power for levying tax on sale of goods being restricted to enacting legislation for levying tax on transactions which conforms to the definition of sale of goods within the meaning of sale of Goods Act, 1930, the extended definition which included consumption by a retail dealer himself of motor spirit or lubricants sold to him for retail sale is beyond the competence of the State Legislature. But the Clause in the definition in Section 2(i) and includes the consumption by a retail dealer himself or on his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection shows that the licensee alone is entitled to recover the amount of duty on the quantum of energy sold to the consumer and the petitioner-company is liable to pay the same to the licensee alone and not to the State Government. If there is an agreement between the petitioner-company and DVC to pay the amount of duty to the State on the energy purchased by the petitioner-company from it, the same is internal arrangement between them and on the basis of same, no liability can be fastened on the petitioner-company to pay duty to the State Government. On the basis of that agreement, if the petitioner-company pays duty, it will be treated that it is paying duty to the State Government on behalf of DVC at its agent and not in its individual capacity. Since under law, the petitioner-company is not obliged to pay duty directly to the State, an application filed by it for registration as an assessee under the provisions of the Rules and consequent registration thereof cannot fasten liability upon it to pay electricity duty to the State Government. 19. It appears that in relation to Bihar Sales Tax Act, 1959 and Bihar Finance Act, 1981, though the provisions are not identical, but to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax, when the seller is not in a position to pass it on to the consumer is a matter of police and does not affect the competence of the Legislature. In view of foregoing discussions, I have no difficulty in holding that the petitioner-company is not liable to pay duty under the provisions of the Act to the State Government but the DVC is entitled to recover duty from the petitioner-company in respect of energy sold to it even by enforcing Clauses 17 of the agreement requiring the petitioner-company to deposit duty with the State Government on the amount of energy sold to it and in that event, the petitioner-company shall be depositing duty as a representative of DVC. 21. The next question, which has to be considered, is as to whether the petitioner-company is liable to pay surcharge as required under Section 3A of the Act. According to Section 3A every licensee or every other person, who is liable to pay duty under Section 4 of the Act, is liable to pay surcharge at the rate of two paise per unit of energy consumed or sold and the surcharge payable shall be unit of energy consumed or sold and the surcharge payable shall be in addition to the duty payable under Sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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