2010 (5) TMI 952 - HC - Indian Laws

Court validates Orissa Electricity Duty Act, upholds notifications. Duty increase justified, refunds ordered. Petitioners to pay differential amount.

Indian Metals and Ferro Alloys Ltd. and Ors. Versus State of Orissa and Ors.

The Court upheld the validity of the Orissa Electricity Duty Act, 1961, and the notifications dated 25.04.1992 and 10.10.2001. It found the duty on ... - Issues Involved:1. Vires of the Orissa Electricity Duty Act, 1961 (Sections 2, 3, and 5).2. Validity and reasonableness of the notifications dated 25.04.1992 and 10.10.2001.3. Legislative competence of the State Legislature under Entry 53, List-II of Schedule VII of the Constitution of India.4. Excessive delegation of power to the Executive.5. Discriminatory nature of the electricity duty on captive power plants.6. Validity of electricity duty on energy lost during transmission.7. Validity of Section 3(ii) of the Orissa Electricity Duty Act, 1961.Detailed Analysis:1. Vires of the Orissa Electricity Duty Act, 1961 (Sections 2, 3, and 5):The petitioners challenged the vires of Sections 2, 3, and 5 of the Orissa Electricity Duty Act, 1961, arguing that the impost was on the generation/production of electricity, which falls under Entry 84, List-I of Schedule VII of the Constitution of India, and thus beyond the legislative competence of the State Legislature. The Court held that the duty was on the consumption of electricity, which falls under Entry 53, List-II of Schedule VII, making it within the legislative competence of the State Legislature.2. Validity and Reasonableness of the Notifications Dated 25.04.1992 and 10.10.2001:The petitioners argued that the notifications were discriminatory and imposed an unreasonable burden by increasing the electricity duty from 0.12 paise to 0.20 paise per unit. The Court found that the classification and rates were reasonable and not arbitrary, as the duty was imposed on different types of consumers at different rates, and the increase was justified to meet the State's financial needs.3. Legislative Competence of the State Legislature:The petitioners contended that the impost on electricity consumption was beyond the legislative competence of the State Legislature. The Court referred to the Supreme Court's decision in Jiyajeerao Cotton Mills Ltd. v. State of Madhya Pradesh, which upheld the State's power to levy duty on the consumption of electricity under Entry 53, List-II of Schedule VII. The Court concluded that the State Legislature was competent to pass such an Act.4. Excessive Delegation of Power to the Executive:The petitioners argued that Section 3(1) of the Act allowed for an uncontrolled delegation of power to the Executive, making it arbitrary and discriminatory. The Court held that the guidelines provided under Section 3, which fixed the maximum duty and required the notification to be laid before the State Legislature, were sufficient to prevent arbitrary exercise of power.5. Discriminatory Nature of the Electricity Duty on Captive Power Plants:The petitioners claimed that the higher duty on captive power plants was discriminatory and violated Article 14 of the Constitution. The Court found that the classification was reasonable and based on intelligible differentia, as the duty aimed to augment revenue for the State. The Court rejected the argument of discrimination, citing previous judgments that upheld similar classifications.6. Validity of Electricity Duty on Energy Lost During Transmission:The petitioners argued that electricity duty should not be imposed on energy lost during transmission. The Court agreed, citing the Supreme Court's decision in State of Mysore v. West Coast Papers Mills Ltd., which held that no tax is payable on electricity lost in transmission. The Court directed the State to refund or adjust the duty paid on transmission loss.7. Validity of Section 3(ii) of the Orissa Electricity Duty Act, 1961:The petitioners contended that the phrase 'so however, that such modifications shall be without prejudice to the validity of any electricity duty levied or collected under the notifications' in Section 3(ii) was arbitrary and against natural justice. The Court agreed and struck out the phrase, holding that it was unfair to prevent consumers from claiming refunds for excess duty paid.Conclusion:The writ petitions were disposed of, with the Court upholding the validity of the Orissa Electricity Duty Act, 1961, and the notifications dated 25.04.1992 and 10.10.2001. However, the Court directed the State to refund or adjust the duty paid on transmission loss and struck out the arbitrary phrase in Section 3(ii) of the Act. The petitioners were directed to deposit the differential amount in the State Exchequer within four weeks.