Electricity consumption tax applies to self-used power for generation, but not to transmission or transformer losses.

A tax on consumption of electricity does not extend to units lost before the point of consumption, so transmission loss and transformer loss fall outside the charge. By contrast, electricity used by a consumer to generate further electricity remains taxable consumption where the statute treats self-generated energy as consumed energy. The operative distinction is between energy actually lost before consumption and energy used by the consumer for any purpose within the charging scheme. Accordingly, the levy is not payable on transmission or transformer losses, but it is payable on energy consumed for further generation.

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Issues: (i) whether electricity tax under the Act was chargeable on electrical energy lost in transmission or transformer loss; (ii) whether electricity tax was payable on electrical energy used by the assessee for generating further electrical energy.

Issue (i): whether electricity tax under the Act was chargeable on electrical energy lost in transmission or transformer loss.

Analysis: The charging scheme imposed tax only on units of energy consumed. Energy lost before reaching the point of consumption cannot, in the nature of things, be treated as energy consumed. To levy tax on such loss would be to treat the charge as one on generation or production rather than on consumption. The fact that the generator and consumer were the same entity did not alter this position.

Conclusion: No electricity tax was payable on electrical energy lost as a result of transmission loss or transformer loss.

Issue (ii): whether electricity tax was payable on electrical energy used by the assessee for generating further electrical energy.

Analysis: The Act taxed consumption of electricity without distinguishing between consumption for manufacturing and consumption for operating plant used to generate further electricity. The definition of consumer included a person who consumes energy generated by himself, and the charging and collection provisions equated self-generated energy consumed with energy obtained from others. The purpose for which the energy was used did not exclude it from being consumption.

Conclusion: Electricity tax was payable on electrical energy used for generating further electricity.

Final Conclusion: The appeal succeeded only to the extent that tax could not be levied on transmission and transformer losses, but the levy was upheld on energy consumed in generating further electricity, and the High Court's judgment stood modified accordingly.

Ratio Decidendi: Under a tax on consumption of electricity, energy actually lost before the point of consumption is outside the charge, but energy used by the consumer for any purpose, including self-generation of further electricity, remains taxable consumption where the statute so provides.

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