TaxTMI 
TaxTMI 
2020 (5) TMI 241
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....] and [2] and Sections 4[3] of the 1959 Act amended by Sections 5 and 6 of the Karnataka Electricity [Taxation on Consumption] [Amendment] Act, 2013 ['Act, 2013' for short] insofar as levy of tax on consumption of electricity by captive generative units is concerned inter alia assailing the notification bearing No.EN 27 EBS 2013, Bengaluru dated 24.11.2014 published in the Karnataka gazette dated 19.03.2015 whereby the rate of electricity tax to be collected as electricity tax on captive consumption and auxillary consumption of electricity generated by the captive power generating plant/cogeneration plant is fixed and the consequential demand notices issued. FACTS IN BRIEF: 3. The petitioners are public limited companies registered under the provisions of the Companies Act, 1956. The petitioners assert that they have developed, designed, engineered, financed, constructed, operating and maintaining captive electric power generating stations at various places in Karnataka. 4. The respondent - Additional Chief Electrical Inspector has demanded the electricity tax on electricity generated and consumed by these petitioners from 19.03.2015. Being aggrieved by the levy of....
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.... 2. Amendment of Section 3. - Section 3 of the Karnataka Electricity [Taxation on Consumption] Act, 1959 [Karnataka Act 14 of 1959] shall be renumbered as sub-section [1] thereof, and, - [i] in the heading, after the words "electricity charges", the words "and energy generated" shall be inserted; and [ii] after sub-section [1] as so renumbered, the following sub-section shall be inserted, namely:- "[2] Subject to the provisions of this Act, there shall be levied and paid to the State Government, with effect from the date of commencement of Karnataka Electricity [Taxation on Consumption] [Amendment] Ordinance, 2003 and till the first day of July 2004, an electricity tax at the rate of fifty paise per unit on all the units of energy generated by any person not being a licensee who consumes the energy generated by himself or supplies to another person free of charge." KARNATAKA ACT No. 5 OF 2004: 2. Amendment of Section 3.- Section 3 of the Karnataka Electricity [Taxation on Consumption] Act, 1959 [Karnataka Act 14 of 1959] [hereinafter referred to as the principal Act] shall be renumbered as sub-section [1] thereof; and, ....
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.... paise per unit on auxiliary consumption in a generating station whether Captive Generating Plant or cogeneration plant or otherwise, for the auxiliary loads exceeding 50 Kilo Watts." 6. Amendment of section 4.- In section 4 of the principal Act,- (i) for sub-section (1), the following shall be substituted, namely:- "(1) Every licensee shall collect and pay to the State Government at the time and in the manner prescribed, the electricity tax payable under this Act,- (a) on the electricity charges included in the bill issued by him to the consumer. The tax so payable shall be a first charge on the amounts recoverable by the supplier for the electricity supplied by him and shall be a debt due by him to the State Government: Provided that where the licensee has been unable to recover the amounts due to him for the electricity supplied by him he shall not be liable to pay tax in respect of the electricity so supplied; (b) on the units of electricity supplied to consumers by non licensee through the licensee." (ii) for sub-section (3), the following shall be substituted, namely:- "(3) Every person who consumes elect....
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....eferred to catena of judgments which shall be discussed infra. SUBMISSIONS ON BEHALF OF THE STATE: 12. Learned Additional Advocate General Sri.Dhyan Chinnappa submitted that in view of the Constitutional validity of Sections 3[1] and [2] of the Amendment Act, 2013 being already upheld by this Court in the case of Vijaya Steels Limited Vs. Bangalore Electricity Supply Company Limited W.P.No.14434 of 2016 and allied matters (D.D.4.10.2016), further considered and reiterated in the case of ACC Limited V/s. The State of Karnataka and Others, W.P.No.12927/2017 [D.D.21.11.2019] the challenge to the Constitutional validity of Section 4[3] of the Amendment Act, 2013 is a mere formality since Section 4 of the Act, 2013 contemplates payment of tax in terms of Section 3 of the Act. Learned counsel argued that the incidence of tax is on the consumption not on the generation of electricity. Imposition of tax on consumption is held to be valid by the Division Bench of this Court in the case of Biocon1 supra relating to the earlier Amendment Act 4/2003. In view of the aforesaid decision, the provisions of Section 4[3] being identical requires to be upheld. It was submitted that the provisio....
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....Kilowatt in total shall pay to the State Government an energy development cess at the rate of 20 paise per unit on the total units of electrical energy produced whether for sale or supply to a consumer or for consumption by himself or his employees during any month: Xxxxx 14. A plain reading of Sub-Section (2) of Sub-Section 3 introduced by the amendment to the 1981 Adhiniyam makes it clear that the levy of cess was "on the electrical energy produced". The phrase "whether for sale or supply" merely clarified that all electricity produced irrespective of its destination would be liable to cess at the specified rate. The use of the word "whether" after the phrase "energy produced" means that the cess would apply on units produced whichever of the alternatives mentioned after the word "whether", namely, sale or supply or consumption is the case. There is no reason to assume that the words used did not reflect the intention of the Legislature. The imposition envisaged was on the production of electricity units. The charge was on generation and not on the sale or consumption of electricity. There is a conscious linguistic departure from the language used in Section 3 of t....
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....iberate change in language reflects an intention to alter the subject matter of levy as far as producers were concerned." Section 3 of the Assam Electricity Duty Act, 1964, reads as under: Assam Assam Electricity Duty Act, 1964 Section-3 Levy of electricity duty 3. [1] There shall be levied and paid to the State Government a duty, to be called the "electricity duty", at the rate of ten paise per unit of energy,- [a] xxxxx [b] xxxxx [c] generated by a person or a company or a firm or any organization for own use or consumption 15. In the case of National Hydroelectric Power Corporation Ltd., and Another V/s. State of Jammu and Kashmir and Others 2005 [2] JKJ 5, the Hon'ble High Court of Jammu & Kashmir at Srinagar while considering the levy of tax by the State in exercise of the powers conferred under Section 3[1] Jammu and Kashmir Electricity [Duty] Act, 1963 on generation of electric energy in Hydroelectric Power Projects has observed thus: "33. As a matter of fact, the petition is fit to succeed on a short point that the power to impose levy on production/generation of electricity is the preserve of Parliament in terms of Entry 84 of List I and, t....
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....ss at the specified rate. The use of the word 'whether' after the phrase 'energy produced' means that the cess would apply on units produced, whichever of the alternatives mentioned after the word 'whether', namely, sale or supply or consumption is the case. There is no reason to assume that the words used did not reflect the intention of the legislature. The imposition envisaged was on the production of electricity units. The charge was on generation and not on the sale or consumption of electricity......." 16. The Hon'ble High Court of Punjab and Haryana in the case of Rana Sugars Limited and Others V/s. State of Punjab and Others MANU/PH /3167/2013 while dealing with the notifications issued by the State of Punjab imposing duty on the sale of electricity from the independent/captive power plants to customers situated outside the state of Punjab under the various segments considering the Constitutional Bench Judgment of the Hon'ble Apex Court in State of A.P. V/s. National Thermal Power Corporation Ltd., and Others AIR 2002 SC 1895, has held thus: "15. IN OUR VIEW, AFORESAID LEAVES NO MANNER OF DOUBT THAT THE FOLLOWING ASPECTS EMERGE FROM THE A....
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....y and consumers and since electricity cannot be stored production and consumption is simultaneous and tax levied is in fact on production only and not on consumption, cannot be accepted." [emphasis supplied] 18. The Cognate Bench of this Court in Vijaya Steels Limited., upholding the Constitutional Validity of the Amended Sub-sections [1] and [2] of Section 3 of the Act, 2013 has observed thus: "20. In the light of the above discussion, it is pertinent to state that the action of the respondents is not arbitrary or illegal in amending the 2013 Act or levying the tax on the consumption of electricity. The state is empowered by Entries 53 and 54 of List II of VII Schedule. Since the Act has legislated well within the provisions of Constitution, it has to be held that it is constitutional and not ultra vires or illegal. What is levied is on the consumption of electricity but not for supply of electricity. No matter whether a person generates electricity on his own or takes it from outside the State through open access system, but levying of tax is on consumption. As is held by the Hon'ble Supreme Court in the case of ANDHRA PRADESH v. NATIONAL THERMAL....
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....ery person generating electricity by himself, and or who supplies electricity free of charge or otherwise to any other person through his own system. 22. The electricity tax is payable as per Section 3, the charging Section. Section 4[3] is the payment of tax to be made by different class of persons. In the case of Biocon1, the Division Bench of this Court while dealing with the levy of tax on consumption has categorically observed that such levy is permissible. The State has legislative competence to impose the consumption tax under Entry 53 of List II to the Seventh Schedule to the Constitution of India. The very question inasmuch as the levy of tax on consumption by the producers of electricity was considered, analyzed and decided in paragraph 22 of the judgment extracted supra. The consumers also the producers of electricity are not exonerated from the levy of tax since electricity cannot be stored. Production and consumption being simultaneous, the argument that tax levied is in fact on production only and not on consumption, was negated. In the said judgment, the Division Bench has considered the decision of M.P.Cement Manufacturers Association2. rendered by the Hon'ble Ap....