2021 (10) TMI 691 - SC - Indian Laws

High Court Can Hear Writ Petitions Challenging Electricity Duty Under Bihar Electricity Duty Act Section 3

M/s Magadh Sugar & Energy Ltd. Versus The State of Bihar & Ors.

The SC held that the High Court erred in declining to entertain the writ petition challenging the imposition of electricity duty and penalty. While ... Imposition of electricity duty and penalty on the electricity - Maintainability of petition - alternate statutory remedy under Section 9A of the Act, present or not - appropriate forum - High Court declined to entertain the writ petition instituted by the appellant on the ground that the dispute between the parties is factual in nature and is suitable for adjudication in terms of the statutory remedy provided in the Bihar Electricity Duty Act 1948, Bihar Electricity Act or the Act - whether dispute involves questions of fact which are not amenable to the writ jurisdiction of the High Court? HELD THAT:- While a High Court would normally not exercise its writ jurisdiction under Article 226 of the Constitution if an effective and efficacious alternate remedy is available, the existence of an alternate remedy does not by itself bar the High Court from exercising its jurisdiction in certain contingencies. This principle has been crystallized by this Court in Whirpool Corporation v. Registrar of Trademarks, Mumbai, [1998 (10) TMI 510 - SUPREME COURT] and Harbanslal Sahni v. Indian Oil Corporation Ltd, [2002 (12) TMI 564 - SUPREME COURT]. The principle of alternate remedies and its exceptions was also reiterated recently in the decision in Assistant Commissioner of State Tax v. M/s Commercial Steel Limited, [2021 (9) TMI 480 - SUPREME COURT] - In State of HP v. Gujarat Ambuja Cement Ltd, [2005 (7) TMI 353 - SUPREME COURT] this Court has held that a writ petition is maintainable before the High Court if the taxing authorities have acted beyond the scope of their jurisdiction. It is not the case of the appellant that the respondents have miscalculated the duty and penalty imposed on it. The appellant contends that the State Government does not have the power to levy tax on its sale of electricity to BSEB. Thus, the plea strikes at the exercise of jurisdiction by the Government. In view of the law discussed above on the rule of alternate remedy, the High Court can exercise its writ jurisdiction if the order of the authority is challenged for want of authority and jurisdiction, which is a pure question of law. The issues raised by the appellant are questions of law which require, upon a comprehensive reading of the Bihar Electricity Act, a determination of whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor; and whether the first respondent has the legislative competence to levy duty on the sale of electricity to an intermediary distributor - The question of whether the appellant is liable to file returns under Sections 6B(1) and 5A of the Act is directly related to the issue of whether the sale of electricity by the appellant to BSEB falls under the charging provisions of Section 3(1). The questions raised by the appellant can be adjudicated without delving into any factual dispute. Thus, the present matter is amenable to the writ jurisdiction of the High Court. The High Court made an error in declining to entertain the writ petition and it would be appropriate to restore the proceedings back to the High Court for a fresh disposal - Application disposed off. Issues involved:1. Jurisdiction of the High Court to entertain the writ petition despite the availability of an alternate statutory remedy.2. Interpretation of Section 3 of the Bihar Electricity Duty Act, 1948, specifically the terms 'value of energy' and 'consumer.'3. Legislative competence of the State to levy tax on the sale of electricity by a generator to a licensee.4. Applicability of the principle of double taxation.5. Requirement for the appellant to file returns under Sections 6B(1) and 5A of the Act.Issue-wise detailed analysis:1. Jurisdiction of the High Court:The High Court declined to entertain the writ petition on the grounds that the appellant had an alternate statutory remedy under Section 9A of the Bihar Electricity Duty Act and that the dispute involved questions of fact. The Supreme Court, however, emphasized that the existence of an alternate remedy does not bar the High Court from exercising its jurisdiction in certain contingencies, such as when the taxing authorities have acted beyond their jurisdiction. The Court cited precedents, including *Whirpool Corporation v. Registrar of Trademarks, Mumbai* and *Radha Krishan Industries v. State of Himachal Pradesh & Ors*, to underscore that the High Court can exercise its writ jurisdiction if the order of the authority is challenged for want of authority and jurisdiction, which is a pure question of law.2. Interpretation of Section 3 of the Bihar Electricity Duty Act:The appellant argued that under Section 3 of the Act, tax is levied on the 'value of energy' consumed or sold, and Section 2(ee) defines 'value of energy' as the charge payable by the consumer to the licensee or the generator. Since the Bihar State Electricity Board (BSEB) is a 'licensee' and not a 'consumer,' the sale by the generator to the licensee does not fall under the taxable category. The Supreme Court noted that the High Court needed to determine the meaning of the phrases used in Section 3 of the Act to decide if the supply of electricity by the appellant would fall within its ambit. The Court emphasized that the issues raised by the appellant are questions of law and do not require adjudication on facts.3. Legislative competence of the State:The appellant contended that Entry 53 of List II of the Seventh Schedule of the Constitution provides for taxes on consumption or sale of electricity, and as per the judgment in *State of AP v. National Thermal Power Corporation Ltd*, the sale of electricity means it is being consumed because electricity cannot be stored. Therefore, the State does not have the legislative competence to levy a tax on the sale of electricity that is not for consumption. The Supreme Court recognized this argument as a question of law that needed to be addressed by the High Court.4. Principle of double taxation:The appellant argued that BSEB pays electricity duty for the electricity sold to consumers, including the electricity supplied by the appellant to the Board, and thus, the levy of tax on the electricity supplied by the appellant would amount to double taxation. The Supreme Court noted this argument but did not delve into its merits, leaving it for the High Court to address upon remand.5. Requirement to file returns:The appellant contended that the question of filing a return under Sections 6B(1) and 5A of the Act does not arise when it is not liable to pay the tax. The Supreme Court observed that the question of whether the appellant is liable to file returns is directly related to whether the sale of electricity by the appellant to BSEB falls under the charging provisions of Section 3(1). This issue, being a question of law, is amenable to the writ jurisdiction of the High Court.Conclusion:The Supreme Court held that the High Court made an error in declining to entertain the writ petition and restored the proceedings back to the High Court for a fresh disposal. The appeal was allowed, and the judgment of the High Court dated 18 September 2017 was set aside. The writ petition was restored to the file of the High Court for fresh determination, with no order as to costs. The application for amendment of the cause title was also allowed, and any pending applications were disposed of.