Electricity duty on self-consumed power is a consumption tax, not excise, and falls within legislative competence.

Electricity duty on self-consumed power was treated as a levy on consumption, not on manufacture or production. The Supreme Court's construction of Section 3 of the Central Provinces and Berar Electricity Duty Act, 1949 read the charging provision with the definitions of "consumer" and "producer" to include electricity generated and consumed by the producer himself, so the duty applied to self-use. On constitutional competence, the levy was found to fall within the legislative power to tax consumption of electricity, and not to amount in substance to an excise duty, because the taxable event was consumption rather than production. The duty was therefore upheld and the challenge failed.

---

---

Issues: (i) whether, on the true construction of Section 3 of the Central Provinces and Berar Electricity Duty Act, 1949, a producer of electrical energy consuming electricity generated by himself was liable to pay electricity duty; and (ii) whether the levy of duty on such self-consumed electricity was beyond legislative competence or amounted in substance to an excise duty.

Issue (i): whether, on the true construction of Section 3 of the Central Provinces and Berar Electricity Duty Act, 1949, a producer of electrical energy consuming electricity generated by himself was liable to pay electricity duty.

Analysis: Section 3 was the charging provision and imposed duty not only on electrical energy sold or supplied to a consumer but also on electrical energy consumed by the producer himself or by his employees. The definitions of "consumer" and "producer" in Section 2(a) and Section 2(d-1) showed that a producer who generated electricity for his own consumption was within the charging net. The table of rates applied to electrical energy supplied for consumption, and the levy on self-consumed electricity therefore fell within the statutory language.

Conclusion: The producer was liable to pay duty on electricity consumed by itself, and the challenge on construction failed.

Issue (ii): whether the levy of duty on such self-consumed electricity was beyond legislative competence or amounted in substance to an excise duty.

Analysis: The taxable event under the impugned levy was consumption of electrical energy, not its manufacture or production. A duty of excise attaches to manufacture or production, whereas the present levy was attracted only when electricity was consumed. The subject-matter of the levy corresponded to the constitutional power to impose taxes on the consumption or sale of electricity under Entry 48B of List II of the Government of India Act, 1935 and Entry 53 of List II of the Constitution of India. The expression "consumption" was given a broad meaning and was not confined to consumption by persons other than the producer. The legislative entries were to receive a wide and not a narrow construction.

Conclusion: The levy was within legislative competence and did not amount to an excise duty; the constitutional challenge failed.

Final Conclusion: The duty on electricity consumed by the producer itself was upheld, and the appeal failed in its entirety.

Ratio Decidendi: Electricity duty imposed on the consumption of electrical energy by the producer himself is a tax on consumption, not an excise duty, and must be construed within the broad amplitude of the constitutional entry conferring power to tax consumption of electricity.

---