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2016 (12) TMI 1363
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.... Sr. Advocate Mr. R.K.Agrawal, Advocate Mr. Ravi Bharuka, Advocate Mr. Shive Kumar, Advocate For the State : Mr. Lalit Kishore (PAAG) Mr. Vikash Kumar, A.C. to PAAG Mr. S.K.Manal, SC-24 For BSEB : Mr. Vinay Kirti Singh, Advocate Mr. Anand Kumar Ojha, Advocate JUDGMENT ( Per : Honourable Mr. Justice Ramesh Kumar Datta ) Heard learned counsel for the petitioners in all the cases and learned counsels for the State and for the Bihar State Electricity Board (now the Bihar Power Holding Company Ltd.). All the writ applications raise a common issue and they have accordingly been heard together and are being disposed of by this common order with the consent of learned counsels for the parties at the stage of admission itself. The challenge in the writ applications is to the assessment orders of different dates and consequential demand notices passed and issued by the Commercial Tax Officer in the cases of both NTPC and Kanti Bijlee Utpadan Nigam. By way of amendment of relief sought, challenge was also made to certain provisions of the Bihar Electricity Duty (Amendment) Rules, 2015 as ultra vires the provisions of Section 10 of the Bihar State Electricity D....
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....-10 but as per the information available to audit, the BSEB had shown purchase of energy of 8451.60 MKWH from NTPC, Kahalgaon in their annual accounts during 2005-06 to 2009-10; thus it was evident that the assessee had concealed the sale of energy of the said amount for which duty was leviable as per the provisions of Sections 3 and 4 of the Bihar Electricity Duty Act, 1948 which also remained undetected by the assessing authority and therefore, the assessee is liable to pay the amount of duty on the concealed sale of energy besides minimum penalty leviable under the provisions of Section 6C (1) totaling to Rs. 2,21,57,80,452/-. The petitioners appeared before the Commercial Taxes Officer and filed their show causes disclaiming any liability to pay electricity duty on sale of energy to the BSEB. The Commercial Taxes Officer however, held that the petitioners were responsible for payment of duty under Sections 3 and 4 of the Act and liable to pay duty under Section 4A read with Rule 11 of the Rules and, therefore, had concealed the sale of energy to the respondent-BSEB; hence, in view of the objection of the Accountant General (Audit) Rs. 17,71,37,064/- was assessed as dut....
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....tricity Act, 1910 (IX of 1910) to supply energy, or any persons including a company or a local authority who has obtained sanction under Section 28 of the Act to engage in the business of supplying energy and includes the Bihar Electricity Board constituted under Section 5 of the Electricity (supply) Act, 1948 (54 of 1948). (ee) 'value of energy'- (i) in case of energy sold to a consumer by a licensee or by any person who generates energy, means the charges payable by the consumer, to the licensee or to any person who generates such energy, for the energy supplied by such licensee or person, as the case may be, but it shall not include the following charges, namely- (1) Meter charges (2) Interest on delayed payment (3) Fuse-off call charges and reconnection charges: Provided that where no energy has been consumed by a consumer, minimum charges payable by him shall not deemed to be the value of energy: Provided further that where the units of energy actually consumed by a consumer are less than the units of energy for which prescribed minimum charges are payable, the value of energy shall, in the case o....
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....e under this Act." It is pointed out that the insertion of the fresh definition of "value of energy" under clause (ee) of Section 2 was made with prospective effect 17.10.2002 on account of the provisions of Section 3(1) having been struck down on the ground that there was no guideline provided under the statute with regard to the payment of duty on the value of energy as to in which case the duty will be paid on the basis of the value of energy consumed or sold and for the same reasons the notification dated 21.10.2002 providing for payment of duty at 6% of the value of energy and the subsequent notification dated 4.3.2005 were also struck down in the following terms in paras 19 and 20 of the judgment in the case of Bihar Sugar Mills Association & Ors. Vs. The State of Bihar & Ors.: 2009 (4) PLJR 460:- "19. In view of the above discussion, the amendment of Section 3(1), so far as it provides for payment of duty "on the value of energy", is liable to be struck down as there is no guideline provided in the statute as to in which case the duty will be payable calculated on the basis of the value of energy consumed or sold. Similarly, the notification dated 21.10.2002 prov....
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.... of energy sold to a consumer by the licensee or by any person who generates energy. It is submitted that the petitioners neither sell energy to a consumer nor are they licensee rather the petitioners including NTPC and Kanti Bijli Utpadan Nigam are both generators of energy. It is submitted that the BSEB does not come within the definition of 'consumer'; rather the definition of consumer clearly excludes either licensee or distributing licensee which the Board is, and has been expressly included in the definition of 'licensee' under Section 2(d) of the Act. Thus on the same line of reasoning as adopted by this Court in the case of Bihar Sugar Mills Association (supra) the charging Section cannot be applied to the petitioners and thus the charge would fail and no assessment could have been made in the case of the petitioners. So far as the other category in the definition of value of energy is concerned, the same is not involved in the present writ applications which relate only to the supply of electricity by the petitioners to the BSEB. It is thus submitted by learned counsel for the petitioners that in view of the settled position with respect to strict interpreta....
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....alls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case." The observations of Lord Russel in the aforementioned case were also referred by the Privy Council in Bank of Chettinad Ltd. vs. CIT: AIR 1940 PC 183: (1940) 8 ITR 522. The Privy Council did not accept the suggestion that in revenue cases "the substance of the matter" may be regarded as distinguished from the strict legal position. 23. A similar view was taken in CWT V. Ellis Bridge Gymkhana: (1998) 1 SCC 384 in which it was observed: "5. The rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all." 24. Again in the case of Diwan Bros. V. Central Bank of India: (1976) 3 SCC 800, a three-Judge Bench of this Cou....
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....e to do the needful in the matter." Learned counsel also submits that it is the charging section and the computation provisions which together constitute an integrated code in most taxing statutes and in a case where computation provision may not apply then it has to be held that such case was not within the charging section. It is submitted that the same is true of Section 3(1) (b) in which charging section the definition of 'value of energy' being the computation provision and since the petitioners do not come within the purview of the computation provision, which does not apply to the case of the petitioners, the charging section must fail. In support of the same, learned counsel relies upon a decision of the Supreme Court in the case of CIT, Bangalore & Ors. Vs. B.C. Srinivasa Setty & Ors.: (1981) 2 SCC 460, in para-10 of which it has been held as follows:- "10. Section 45 charges the profits or gains arising from the transfer of a capital asset to income tax. The asset must be one which falls within the contemplation of the section. It must be that quality which brings Section 45 into play. To determine whether the goodwill of new business is such an asset, it is p....
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.... case it was held that electricity being goods, it is covered both by Entry Nos. 53 and 54 of list II of Schedule VII to the Constitution of India which provides taxes on the consumption or sale or purchase of goods including electricity other than newspaper subject to the provisions of entry 92-A of List I. It is submitted that it was pointed out by the Apex Court that the consumption of electricity is simultaneous to the supply and the word 'supply' should therefore be interpreted as including sale or consumption of electricity and Entry 53 should be read as "taxes on the consumption or sale for consumption of electricity". It is thus submitted by learned counsel that the same characteristics should be considered under Entry 53 or Entry 54 of list II and therefore the meaning of 'sale' in both the Sections would be same and the tax leviable whether under Entry 53 or 54 can only be on the consumption or sale for consumption of electricity. Since admittedly the petitioners did not sell the energy to the BSEB for its consumption, hence the very levy of sales tax on such a transaction would be outside the constitutional purview and hence the charging Section 3(1) of th....
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....tric energy is that its generation or production coincides almost instantaneously with its consumption. To quote from Aiyar's Law Lexicon (Second Edition, 2000) - 'Electricity in physics is "the name given to the cause of a series of phenomena exhibited by various substances, and also to the phenomena themselves." Its true nature is not understood. Imperial Dict. (quoted in Spensley v. Lancashire Ins. Co., 54 Wis. 433, 442, 11 NW 894, where the court, quoting from the same authority, said, "We are totally ignorant of the nature of this cause whether it be a material agent or merely a property of matter. But as some hypothesis is necessary for explaining the phenomena observed, it has been assumed to be a highly subtle, imponderable fluid, identical with lightning, which pervades the pores of all bodies, and is capable of motion from one body to another." This characteristic quality of electric energy was judicially noticed in Indian Aluminium Co. etc.etc. v. State of Kerala and Ors. [1996]2SCR23. Vide para 25 this Court has noted. "Continuity of supply and consumption starts from the moment the electrical energy passes through the meters and....
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....d and read together. Because electricity is goods it is covered in Entry 54 also. It is not disputed that duty on electricity is tax. Tax on the sale or purchase of goods including electricity but excluding newspapers shall fall within Entry 54 and shall be subject to provisions of Entry 92A of List I. Taxes on the consumption or sale for consumption of electricity within the meaning of Entry 53 must be consumption within the State and not beyond the territory of the State. Any other sale of electricity shall continue to be subject to the limits provided by Entry 54. Even purchase of electricity would be available for taxation which it would not be if electricity was not includible in the meaning of term 'goods'. A piece of legislation need not necessarily fall within the scope of one entry alone; more than one entry may overlap to cover the subject-matter of a single piece of legislation. A bare consumption of electric energy even by one who generates the same may be liable to be taxed by reference to Entry 53 and if the State Legislature may choose to impose tax on consumption of electricity by the one who generates it, such tax would not be deemed to be a tax necessarily....
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.... State, on the other hand, submits that as per the Rule 2(b) of the Bihar Electricity Duty Rules, 1949 the petitioners are admittedly assessees as has been defined thereunder to mean licensees or any other person who is liable to pay duty under the Act. It is further submitted that it is not in dispute that the petitioners are sellers at first point to the BSEB. Thus it is urged on the basis of Section 4A of the Act that the duty is to be levied at each point in a series of sales of energy in the State of Bihar and duty paid would be adjusted against the amount due and payable at each subsequent stage of sale. It is therefore, submitted that since the petitioner has made a sale at the first point, therefore duty would be leviable at the said point. It is further submitted that under the Rules the levy of duty and imposition of penalty is required and since the Accountant General had rightly pointed out the concealment of turnover by the petitioners, therefore action under Section 6(c ) (i) is also warranted. It is urged that Section 4A of the Act has been introduced for the purpose that the State is able to generate revenue on the entire amount of electricity that is sold, as th....
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.... of electricity has been clarified in para 23 of the said judgment where it has been said that if the State Legislature chooses to impose tax on consumption of electricity it will not be possible to do so under Entry 54, because it does not provide for taxes on consumption whereas Entry 53 permits the same. Thus, the charging Section 3(1) of the Act when it speaks of levy of duty on either units or on the value of energy consumed or sold, has to be similarly read as the Constitutional Entry 53 providing the power to the State Legislature, to levy electricity duty either on the unit or on the value of energy consumed or sold for consumption. In the said circumstances, any sale of electricity which is not a sale for consumption would be beyond the purview of the State Legislature to enact and thus the charging Section 3(1) of the Act has to be read in the said light as levy of electricity duty for consumption or sale for consumption of electricity. Reliance in this regard by learned counsel for the State upon the provisions of Section 4A for levy of duty at each stage of sales would again not be of any assistance in view of the fact that interpretation has to be given to the....