State tax on electricity sales cannot extend to inter-State supply, but in-State delivery point supported the demand and penalty.

A State may tax sale of electricity only within its territorial competence; a statutory definition that extends the levy to transmission or supply outside the State is ultra vires to that extent. Applying Article 246, Entry 53 of List II, and Article 286(1), the Court noted that inter-State or extra-State sales fall outside State taxing power, so section 2(g) was unconstitutional only insofar as it covered supplies outside Manipur. On the demand and penalty, the delivery point was found to be within Manipur, the absence of framed rules did not invalidate the demand, and penalty relief was left to the statutory remission power.

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Issues: (i) whether section 2(g) of the Manipur Tax on Sale of Electricity Act, 1984 was ultra vires insofar as it treated transmission or supply of electricity outside the State as a taxable sale and whether the State had competence to levy tax on such inter-State sale of electricity; (ii) whether the impugned demand and penalty under the Act were illegal for want of rules and on the footing that the supply to the beneficiary States was outside Manipur.

Issue (i): whether section 2(g) of the Manipur Tax on Sale of Electricity Act, 1984 was ultra vires insofar as it treated transmission or supply of electricity outside the State as a taxable sale and whether the State had competence to levy tax on such inter-State sale of electricity.

Analysis: The constitutional scheme under Article 246 read with Entry 53 of List II permits State taxation on consumption or sale of electricity within the State, but Article 286(1) prohibits a State from imposing tax on sales taking place outside the State. Power over inter-State sale or purchase lies in the Union field, and the State Legislature cannot enlarge its taxing reach to cover transmission or supply outside Manipur. The definition in section 2(g), to the extent that it included transmission or supply of electricity outside the State, therefore travelled beyond the State's legislative competence.

Conclusion: The provision was held unconstitutional and ultra vires only to the extent it purported to cover transmission or supply of electricity outside Manipur; the State's power to tax sale of electricity within the State was upheld.

Issue (ii): whether the impugned demand and penalty under the Act were illegal for want of rules and on the footing that the supply to the beneficiary States was outside Manipur.

Analysis: The Court found that the delivery point for supply to the bulk consumers was at Loktak station in Manipur, and the points at Dimapur and the Assam stations were only for measurement of consumption. On that footing, the impugned demand was not shown to be infirm. The absence of framed rules was not accepted as a ground to invalidate the demand, and the statutory penalty could not be struck down in the writ proceeding. At the same time, section 6 vested discretion in the competent Government to remit the whole or part of the penalty in special cases, and the petitioner was left to pursue that statutory remedy.

Conclusion: The impugned demand and penalty were upheld, subject to the petitioner's liberty to seek remission of penalty from the Government under section 6.

Final Conclusion: The writ petition succeeded only to a limited extent on the constitutional challenge to section 2(g) insofar as it extended to sales outside the State, while the tax demand and penalty were otherwise sustained and the petitioner was given liberty to seek remission of penalty under the Act.

Ratio Decidendi: A State can levy tax on sale of electricity only within its territorial competence, and any statutory definition that purports to tax inter-State or extra-State sales is ultra vires; however, where the delivery point is within the State and the demand is otherwise supported by the statute, the assessment or demand will not be quashed merely because rules are not framed, and penalty relief must be sought under the statutory remission power.

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