2021 (10) TMI 691 - SC - Indian Laws

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

The SC held that the High Court erred in declining to entertain the writ petition challenging the imposition of electricity duty and penalty. While ... Levy of electricity duty on sale to a licensee - Value of energy - Charging provision under Section 3(1) - Entry 53 List II - taxes on consumption or sale for consumption of electricity - Alternate statutory remedy and writ jurisdiction - Jurisdictional challenge to taxing action - Remand for fresh adjudicationAlternate statutory remedy and writ jurisdiction - Jurisdictional challenge to taxing action - Whether the High Court erred in declining to entertain the writ petition and directing the appellant to pursue the statutory remedy under the Act - HELD THAT: - The Court held that the High Court declined jurisdiction on two grounds - availability of an alternate statutory remedy under the Act and that the dispute involved questions of fact. Applying settled principles governing the exercise of writ jurisdiction where an alternate remedy exists, the Court observed that exceptions permit direct invocation of Article 226 where the challenge goes to the authority or jurisdiction of the taxing body or where the controversy involves pure questions of law. The core controversy here - whether the levy under Section 3(1) applies to a generator selling to a licensee and whether the State has legislative competence to tax such sale in light of Entry 53 - are questions of law capable of determination without adjudication of disputed facts. The Court therefore concluded that the High Court erred in declining to entertain the writ petition and in treating the dispute as one requiring factual inquiry precluding writ relief. [Paras 17, 18, 23, 24]The High Court erred in declining jurisdiction; the writ petition is amenable to adjudication on questions of law and jurisdiction.Levy of electricity duty on sale to a licensee - Value of energy - Charging provision under Section 3(1) - Entry 53 List II - taxes on consumption or sale for consumption of electricity - Remand for fresh adjudication - Whether the question of liability to pay electricity duty on supply to BSEB should be adjudicated afresh by the High Court - HELD THAT: - The Court recorded the rival submissions bearing on the interpretation of Section 3(1) read with the definitions of 'consumer', 'licensee' and the statutory definition of 'value of energy', as well as the constitutional argument based on Entry 53 that sale to an intermediary distributor may fall outside the State's competence. Rather than resolving the merits, the Court held that these are determinations of law which can be decided without further factual inquiry and that the High Court should adjudicate the matter on its merits. Consequently, the Supreme Court set aside the impugned judgment and restored the writ petition to the High Court for fresh disposal, leaving the parties' substantive arguments open for consideration by the High Court. [Paras 24, 25]Proceedings restored to the High Court for fresh determination of liability to pay duty and related issues; merits to be considered afresh.Final Conclusion: The appeal is allowed; the Patna High Court's order dated 18 September 2017 is set aside and the writ petition is restored to the file of the High Court for fresh adjudication on the legal questions concerning levy of electricity duty on supplies to the Bihar State Electricity Board. No order as to costs. 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.