Electricity tax must follow actual consumption, while accrued exemption rights survive repeal and savings clauses.

The Court held that Article 288 did not invalidate the State levy, because its special protection was confined to specified inter-State river or river-valley authorities and not ordinary consumers. It further held that the State tax law was not repugnant to the Electricity Regulatory Commissions Act, since taxation and regulation operated in distinct fields and the State acted within legislative competence. The repeal-and-savings clause preserved accrued exemption rights, and the earlier exemption notifications survived; promissory estoppel and legitimate expectation also supported that result. Electricity tax was confined to actual consumption and could not be extended to maximum demand charges or transmission loss.

---

---

Issues: (i) Whether the State enactment required Presidential assent under Article 288 of the Constitution of India and was saved from challenge on that ground; (ii) whether the State enactment was repugnant to the Electricity Regulatory Commissions Act and beyond legislative competence under the constitutional distribution of powers; (iii) whether the repeal and savings clause preserved the earlier exemption notifications and the appellants' rights to exemption, including on the basis of promissory estoppel and legitimate expectation; (iv) whether electricity tax could be levied on maximum demand charges or must be confined to actual consumption, excluding transmission loss.

Issue (i): Whether the State enactment required Presidential assent under Article 288 of the Constitution of India and was saved from challenge on that ground.

Analysis: Article 288 applies to laws imposing tax in respect of water or electricity stored, generated, consumed, distributed or sold by authorities established for regulating or developing inter-State rivers or river valleys. The challenged enactment, however, operated generally on consumers and licensees, and the special protection contemplated by Article 288 was held to be confined to the specified authorities and not extended to ordinary consumers. The Court also held that mere reference to Article 288 in the statute did not enlarge the constitutional requirement so as to invalidate the enactment for want of Presidential assent in the present context.

Conclusion: The challenge based on Article 288 failed.

Issue (ii): Whether the State enactment was repugnant to the Electricity Regulatory Commissions Act and beyond legislative competence under the constitutional distribution of powers.

Analysis: The taxing power under Entry 53 of List II and the regulatory power under Entry 38 of List III operate in distinct fields. The Central law dealt with regulation and tariff, whereas the impugned State law imposed a tax on consumption or sale of electricity. As taxation is a separate head of legislation, and no direct conflict existed in the same field of law-making, repugnancy under Article 254 was not attracted. The State Legislature thus acted within its legislative competence.

Conclusion: The repugnancy and competence challenge failed.

Issue (iii): Whether the repeal and savings clause preserved the earlier exemption notifications and the appellants' rights to exemption, including on the basis of promissory estoppel and legitimate expectation.

Analysis: The Court held that the repeal clause preserved rights, privileges, and benefits already accrued under the repealed enactments, and that the earlier exemption notifications constituted enforceable accrued rights. The newer Act did not contain language sufficient to extinguish those rights by necessary implication. The doctrine of promissory estoppel was also held applicable because the appellants had altered their position on the faith of the State's clear representations and notifications granting exemption. On the same reasoning, substantive legitimate expectation was also recognized. The exemption could not be treated as having vanished merely because the statutory regime changed.

Conclusion: The appellants' exemption rights were held to survive the repeal.

Issue (iv): Whether electricity tax could be levied on maximum demand charges or must be confined to actual consumption, excluding transmission loss.

Analysis: The Court distinguished tariff, demand charges, and tax. A tax on consumption must be linked to actual consumption of electricity, not to a notional demand figure. Maximum demand indicates the consumer's highest draw within a defined interval and serves a different billing purpose, while electricity lost in transmission is not consumed at all. The taxing provision could not be extended by analogy to demand charges or transmission loss, since a taxing statute requires strict construction and tax must attach to the taxable event actually contemplated by the statute.

Conclusion: Electricity tax could not validly be levied on maximum demand charges or on transmission loss; it had to be confined to actual consumption.

Final Conclusion: The impugned judgment was set aside and the appellants succeeded on the principal issues, with the Court holding that the exemption rights survived and that the tax could not be levied beyond actual consumption.

Ratio Decidendi: In taxing legislation, a levy must be confined to the taxable event expressly created by the statute, and accrued exemption rights preserved by a repeal-and-savings scheme cannot be destroyed except by clear legislative language or necessary implication.

---