Electricity tax on open access exchange purchases is barred for inter-State transactions, while captive self-consumption remains taxable.

State electricity tax cannot be extended to inter-State open access purchases through exchanges because constitutional limits on inter-State trade and the charging provision do not clearly authorise that levy. Intra-State open access purchases through exchanges also fall outside the existing charging provision, so collection on that basis is unsustainable without legislative amendment. By contrast, electricity tax remains leviable on captive generation consumed for own use, as the statutory scheme and machinery provisions support that levy. G.O.Ms.No.121, which designates officers for collection, is consistent with the Act and Rules and is upheld, and collection through the licensee is valid where the statute provides a complete recovery mechanism.

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Issues: (i) Whether the State of Tamil Nadu can levy and collect electricity tax on electricity supplied and consumed through inter-State open access purchases through exchanges; (ii) whether, in the absence of any amendment to the charging provision, the State can levy and collect tax on intra-State open access purchases through exchanges; (iii) whether electricity tax is leviable on captive generation and consumption for own use; (iv) whether G.O.Ms.No.121, dated 23.12.2010, is liable to be quashed; and (v) whether collection of tax through the licensee is impermissible for want of a statutory mechanism.

Issue (i): Whether the State of Tamil Nadu can levy and collect electricity tax on electricity supplied and consumed through inter-State open access purchases through exchanges.

Analysis: Entry 53 of List II permits taxation on consumption or sale of electricity, but that power must be read consistently with the constitutional restrictions governing inter-State supply. Open access transactions through exchanges involve trading, transmission and consumption across State boundaries, and the later constitutional regime under Articles 269A and 286 limits State taxation where the supply is in the course of inter-State trade or commerce. The incidence of consumption within the State does not by itself sustain a levy where the transaction is inter-State in character.

Conclusion: The State has no power to levy tax on inter-State open access purchases through exchanges; the levy is invalid to that extent.

Issue (ii): Whether, in the absence of any amendment to the charging provision, the State can levy and collect tax on intra-State open access purchases through exchanges.

Analysis: A taxing provision is construed strictly, but it is technology-neutral where the language fits the later transaction. However, Section 3(1)(c) uses the expression "consumption for own use" in the context of persons other than licensees and does not extend to open access consumers merely because they fall within the broad definition of consumer. The charging language does not clearly cover the impugned open access collection by the licensee for exchange-based purchases, and the impugned order attempted to expand the levy without a matching amendment to the charging provision.

Conclusion: The State cannot collect tax on intra-State open access purchases through exchanges under the existing charging provision; the impugned order on that aspect is unsustainable.

Issue (iii): Whether electricity tax is leviable on captive generation and consumption for own use.

Analysis: The statutory scheme separately contemplates captive generating plants and taxation of electricity consumed for own use. The definitions of captive generating plant and consumer, read with Section 3(1)(c), support levy on captive generation consumed by the generator for its own use. The machinery provisions for registration, returns, assessment and recovery also align with that levy.

Conclusion: Electricity tax is leviable on captive generation and consumption for own use, and the State is entitled to collect it.

Issue (iv): Whether G.O.Ms.No.121, dated 23.12.2010, is liable to be quashed.

Analysis: G.O.Ms.No.121 only designates officers for collection of tax already imposed under the Act, particularly in relation to captive generating plants. The Act and Rules contain machinery provisions for registration, books of account, returns, inspection, assessment and recovery. The order does not contradict the statutory scheme.

Conclusion: G.O.Ms.No.121 is valid and is upheld.

Issue (v): Whether collection of tax through the licensee is impermissible for want of a statutory mechanism.

Analysis: The Act and Rules provide a complete machinery for collection, including billing, recovery, returns, inspection, assessment, appeal and recovery as arrears. The designation of TANGEDCO and its officers as collection machinery does not amount to an abdication of statutory power. The procedural challenge therefore fails.

Conclusion: The collection mechanism through the licensee is supported by the statute and rules.

Final Conclusion: The challenge succeeds only to the extent that the State cannot levy or collect electricity tax on inter-State open access purchases through exchanges, while the levy and collection framework relating to captive generation and the machinery order for such collection remain valid.

Ratio Decidendi: A State tax on electricity consumption cannot be extended to inter-State open access exchange transactions in the absence of a charging provision that clearly authorises such levy and in view of the constitutional limitations on State taxation of inter-State supplies, whereas captive consumption remains taxable under the existing statutory scheme.

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