2012 (4) TMI 785 - HC - Indian Laws

Court rules in favor of companies on electricity duty; deems retrospective application illegal. DVC liable, consumers not.

The court ruled in favor of the petitioner companies, including M/s Atibir Hi-Tech Pvt. Ltd., holding that they are not liable to pay electricity duty and ... Charging section - definition of licensee and assessee - mode and manner of recovery under Section 4 - deeming clause making Damodar Valley Corporation a deemed licensee - surcharge not recoverable from consumer - retrospective operation of statutory amendments - ultra vires for being arbitrary and unworkableDefinition of licensee and assessee - charging section - deeming clause making Damodar Valley Corporation a deemed licensee - Whether Damodar Valley Corporation is a licensee and/or assessee and whether the writ petitioner companies are assessees under the Bihar Electricity Duty Act, 1948 and Rules, 1949. - HELD THAT: - The court held that Section 3 is the charging provision which levies duty on units of energy consumed or sold, while Section 4 prescribes the mode and manner of payment and recovery. As earlier decided by the Supreme Court, the D.V.C. was not a licensee under the pre 2003 statutory scheme but was liable to pay electricity duty and therefore falls within the definition of 'assessee' in Rule 2(b) of the 1949 Rules. The Electricity Act, 2003 (by the fourth proviso to Section 14) has made D.V.C. a deemed licensee under the 2003 Act; that position does not retroactively convert the writ petitioners into assessees under the 1948 Act and 1949 Rules. The petitioning companies, though they obtained registration certificates under the Rules, are not assessees for the purposes of the 1948 Act and their registrations do not operate to make them assessees where no statutory liability existed. [Paras 63]D.V.C. is an assessee under the Rules of 1949; the petitioner companies are neither licensees nor assessees under the 1948 Act and 1949 Rules.Mode and manner of recovery under Section 4 - charging section - Whether the State may directly recover electricity duty from the writ petitioners who are consumers of D.V.C. - HELD THAT: - Having examined Section 3 (charging) and Section 4 (recovery procedure), the court concluded that where D.V.C. is the person liable under the statute to pay duty, the State cannot sidestep the statutory scheme and demand payment directly from D.V.C.'s consumers who purchase electricity for their own use and do not fall within sub section (4) or (4a) of Section 4. The factual position in these petitions is that the petitioners purchased electricity from D.V.C. for their own use and are not generators or sellers; therefore the State has no statutory authority to make direct demands on them under the pre amendment scheme. Further, where a valid contractual term between supplier and consumer provides for payment of duty by the consumer to the supplier, that contractual obligation is enforceable and not contrary to the statute. [Paras 37, 63]State Government has no right to recover electricity duty directly from the writ petitioners who are consumers of D.V.C.; bills or demands issued against them are quashed.Surcharge not recoverable from consumer - charging section - Whether the surcharge under Section 3A is recoverable from the consumers by D.V.C. - HELD THAT: - Section 3A levies surcharge on the person liable to pay electricity duty and expressly provides that notwithstanding anything to the contrary, no licensee or other person liable to pay surcharge shall be entitled to collect the surcharge from the consumer. Applying that clear statutory prohibition, the court held that the petitioners are not liable to pay surcharge and D.V.C. is not entitled to demand or collect surcharge from its consumers. [Paras 44]Surcharge under Section 3A is not payable by the consumers; D.V.C. cannot recover surcharge from them.Retrospective operation of statutory amendments - ultra vires for being arbitrary and unworkable - Validity of Jharkhand Electricity Duty (Amendment) Act, 2011 insofar as it makes provisions (notably amendments to Section 4) operative with retrospective effect and thereby exposes all consumers to direct liability and administrative burdens. - HELD THAT: - The court reviewed the amendments and the notification which made Sections operative retrospectively and examined the effect of extending statutory liability and recovery procedures to all consumers (numbering in lakhs). It found the retrospective operation (by delegated notification) resulted in radical and unworkable change: compelling every petty consumer to register, maintain accounts, file returns and face assessment and penal consequences. The State failed to demonstrate any legitimate object or workable scheme justifying retrospective imposition on such scale. The court held that the amendment to Section 4 (as made operative retrospectively) vests arbitrary power in the State to choose whether to demand duty from seller or consumer, is unworkable in administration, contrary to public interest and therefore declared that amendment ultra vires Article 14 to the extent indicated. The court left other challenges to the Act of 2011 open. [Paras 61, 63]Section 5 of the Jharkhand Electricity Duty (Amendment) Act, 2011 (amending Section 4 of the 1948 Act) is declared ultravires and illegal insofar as it is made operative retrospectively and empowers the State to arbitrarily demand duty from consumers, creating an unworkable and chaotic regime.Final Conclusion: Writ petitions allowed: D.V.C. is an assessee under the Rules of 1949; the petitioner companies are neither licensees nor assessees and cannot be subjected to assessment or direct recovery by the State for electricity duty; surcharge is not recoverable from consumers; retrospective activation of the amendment to Section 4 (Jharkhand Amendment Act, 2011) is declared ultra vires and quashed insofar as it effects the petitioners; pending assessment proceedings and demands against these petitioners are quashed. None who paid duty to the State may seek refund from the State. Issues Involved:1. Liability of the petitioner companies to pay electricity duty and surcharge.2. Validity and retrospective application of Jharkhand Electricity Duty Amendment Act, 2011.3. Status of Damodar Valley Corporation (DVC) as a licensee or assessee.4. Authority of the State to recover electricity duty directly from consumers.Summary:1. Liability of the petitioner companies to pay electricity duty and surcharge:The petitioner companies, including M/s Atibir Hi-Tech Pvt. Ltd., challenged the orders directing them to pay electricity duty and surcharge. The court considered definitions of 'consumer' and 'licensee' under the Bihar Electricity Duty Act, 1948, and relevant judgments. It was held that the petitioner companies, even if registered as assessees, are neither licensees nor liable to pay electricity duty and surcharge. The duty paid by the petitioner companies is not refundable. The Hon'ble Supreme Court remanded the matter for an authoritative judgment on the question of law.2. Validity and retrospective application of Jharkhand Electricity Duty Amendment Act, 2011:The amendment made various provisions effective retrospectively, causing all consumers to be liable to pay electricity duty directly to the State. The court found this amendment arbitrary, unworkable, and against public interest, leading to chaotic situations. The retrospective operation was declared ultravires and illegal. The court held that the amendment gives the State arbitrary power to demand duty from either the seller or consumer, which is unworkable.3. Status of Damodar Valley Corporation (DVC) as a licensee or assessee:DVC was not a licensee under the Bihar Electricity Duty Act, 1948, but was an assessee under Rule 2(b) of the Bihar Electricity Duty Rules, 1949. After the Electricity Act, 2003, DVC became a deemed licensee. The court held that DVC is liable to pay electricity duty and can recover it from its consumers under the terms of the agreement.4. Authority of the State to recover electricity duty directly from consumers:The court held that the State has no right to recover electricity duty directly from the consumers of DVC who obtain electricity for their own use. Any assessment or reassessment proceedings against these consumers were quashed. The court emphasized that the consumers are not assessees under the Act of 1948 or Rules of 1949.Conclusion:The court allowed the writ petitions, quashing the demands for electricity duty and surcharge against the petitioner companies. The retrospective application of the Jharkhand Electricity Duty Amendment Act, 2011, was declared illegal. The court affirmed that DVC is a deemed licensee and liable to pay electricity duty, but the State cannot directly recover the duty from DVC's consumers. The petitioners are not liable to pay surcharge to DVC.