TaxTMI 
TaxTMI 
1996 (2) TMI 590
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....fice in the district of Hazaribagh and petitioner No. 2 is its Deputy Manager (Accounts). The petitioner-company is manufacturer of alloys, tool and special steel and it purchases electricity from Damodar Valley Corporation (hereinafter to be referred to as 'DVC), which is a licensee within the meaning of Section 2(d) of the Act for the purpose of its industry under an agreement executed between DVC being licensee and the petitioner-company as consumer. According to Clauses 17 of the agreement, the petitioner-company, which was a consumer, was liable to pay electricity duty (hereinafter to be referred to as 'duty') to the Government of Bihar on the electricity purchased by it from the DVC. The petitioner-company under ill advice applied for its registration as an assessee under the provisions of the Bihar Electricity Duty Rules, 1949 (hereinafter to be referred to as 'the Rules') and it was registered as an assessee. Later on, the petitioner-company having realised its mistake filed an application before the respondent-Deputy Commissioner, Commercial Taxes, for cancellation of the registration. 3. The petitioner-company received a notice issued by the respond....
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....visions of the Act; as such, the same are invalid. Learned Counsel appearing on behalf of the State, on the other hand, contended that the petitioner-company is liable to pay duty as well as surcharge under the provisions of the Act and no illegality was committed in issuance of orders of attachment, which have been issued after following the procedure prescribed under law. 5. Now the first question, which falls for consideration, is as to whether the petitioner-company is liable to payment of duty to the State of Bihar. For appreciating this point, it would be useful to quote provisions of Sections 2(b) to 2(b), 3, 3A and 4 of the Act, which read thus: 2(b) 'consumer" means any person who is supplied with energy by a licensee, but does not include either a licensee or the 'distributing licensee' as described in Clause l(a) of Clause IX of the Schedule to the Indian Electricity Act, 1910), or a person who obtained sanction under Section 28 of the said Act. (c) 'energy' means electrical energy when generated, transmitted, supplied or used for any purpose except the transmission of a message. (d) 'licensee' m....
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....son who is liable to pay surcharge, shall be entitled to collect the amount of this surcharge as such from the consumer; (3) All provisions of this Act and the Rules framed there under, relating to the payment, assessment, recovery and refund of the duty shall also apply to the payment, assessment, recovery and refund of the surcharge." 4. Payment of duty.- (1) Every licensee shall pay every month to the State Government at the time and in the manner prescribed the proper duty payable under Section 3 on the units of energy consumed by him or sold by him to the consumer. (2) Every licensee may recover from the consumer the amount which falls to be paid by the licensee as duty in respect of the energy sold to the consumer. (3) The licensee may, for the purpose of Sub-section 2, exercise the power conferred on a licensee by Sub-section (1) of Section 24 of the Indian Electricity Act, 1910 (9 of 1910) for the recovery of any charge or sum due in respect of energy supplied by him. (4) Every person including any department of the State Government other than a licensee, who generates energy for his own use or for t....
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....n (2) of Section 3A. 7. Under Section 4(1) every licensee is required to pay every month the duty Payment under Section 3 to the State Government at the time and in the manner described on the units of energy consumed by him or sold by him to the consumer. Sub-Section (2) lays down that every licensee may recover from the consumer the amount which falls to be paid by the licensee as duty in respect of energy gold to the consumer. Sub-Section (3) prescribes the mode of recovery of duty by the licensee from the consumer. Under Sub-section (4) of Section 4 every person other than a licensee who generates energy for his own use or for the use of his employees or partly for such use and partly for sale is liable to pay duty payable under Section 3 on the units of energy consumed or sold. Under Sub-section (4a) every person other than the licensee, who obtains, for sale or partly for his own use and partly for sale, bulk supply of energy generated by licensee or other person shall pay every month to the State Government at the time and in the prescribed manner the duty payable under Section 3 on the units of energy so obtained and sold or partly sold and partly consumed by him. 8. ....
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....s liable to pay duty to the State Government as required under Sub-section (4) of Section 4 of the Act. 9. Further question, which arises, is as to whether the petitioner-company is liable to pay duty under Sub-section (4a) of Section 4 of the act. Undisputedly, the petitioner-company is obtaining bulk supply of energy generated by DVC, which is a licensee. It has been stated on behalf of the State that out of energy obtained by the petitioner-company from DVC substantial part of it is being utilized by the petitioner-company for its own use and the rest is being used in making supply to its employees on payment of electrical charge at the rate of twenty-five paise per unit after giving certain amount of electricity free of charge and this activity of the petitioner-company, according to the State, amounts to sale of energy to its employees. According to the petitioner-company; electricity is supplied by it to its employees up to certain quantity free of charge and thereafter, they are required to pay electrical maintenance charges at the rate of twenty-five paise per unit. The position as admitted by the State in its supplementary counter affidavit is that the petitioner-compan....
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....1996 department-wise showing recovery of electric maintenance charge from the employees. The said charts have been relied upon by the State and annexed as Annexures F, G an H to its supplementary counter affidavit and specifically it has been mentioned therein that deductions have been made from the salary of the employees towards electrical maintenance changes. 11. Thus, on the basis of the aforesaid facts, it has been submitted on behalf he petitioners that dominant object of supplying electricity by the tioner-company to its employees is by way of rendering services as a are measure as such, the said activity cannot constitute 'sale' within the meaning of the aforesaid Sub-section (4a). Reference in this connection may be le to a decision of the supreme court in the case of . Northern India Caterers (India) v. Lt. Governor of Delhi [1979]1SCR557 . In case the Court was considering the question if service of meals to casual visitors in restaurant located in a hotel in which lodging and means are provided to residents is sale and taxable as such under the provisions of Bengal Finance (Sales Tax) Act, 1941. It was laid down that the supply of meals was essential in the n....
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....od-stuffs and other items served in canteen of a factory sold on non-profit basis at approved prices would constitute sale and it was laid down that as dominant object of running canteen was rendering services to its employees as a welfare measure, the said activity would not constitute sale. The Court observed thus: The aforesaid provisions contained in Section 46 read with the rules referred to above, leave no room for doubt that the dominant object of running the canteen is rendering service as a welfare measure under the Factories Act and the Rules. Consequently, the substance of the transaction in canteen sales, evidenced by its dominant object, is not sale of food, but rendering of services as a welfare activity as enjoined by the Factory Act and the State Rules. The fixation of price of food articles supplied by the canteen on non-profit basis as required under Rule 80 of the M.P. Factories Rules is in conformity with the dominant object of service and welfare and excludes the intention of sale of food as business activity. 14. Before Bombay High Court in the case of Commissioner of Sales Tax v. Cutchi Dasha Oswal Mahjan Grah Udyog Committee (1975) 36 S.T.C....
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....D.P. Dube, Sales Tax Officer and Anr. [1964]1SCR481 ) held that the words "sale of goods under Entry 48, List II, in Schedule VII of the Government of India Act, 1935 have the same meaning as in the Indian Sale of Goods Act, 1930 and, therefore, any transaction of sale of goods, which is liable to be taxed, there must be concurrence of four elements viz. (i) the parties competent to contract; (ii) mutual assent; (iii) a thing, the absolute or general property in which is transferred from one seller to the buyer and (iv) a price in money paid or promised. A transaction which does not conform to the traditional concept of sale cannot be regarded as one in respect of which the State Legislature is competent to enact an Act imposing liability for payment of tax. The Court laid down thus: Consumption by an owner of goods in which he deals is therefore not a sale within the sale of the Goods Act and, therefore, it is not a 'sale of goods' within the meaning of Entry 54, List II, Schedule VII of the Constitution of India. The legislative power for levying tax on sale of goods being restricted to enacting legislation for levying tax on transactions which conforms to ....
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....a) of Section 4 of the Act. 18. Merely because the DVC as a licensee is entitled to recover from the petitioner-company, which is a consumer, the amount of duty in respect of electrical energy sold to the consumer according to the provision of Sub-Section (2) of Section 4 of the Act, it cannot be said that the petitioner-company is liable to pay duty to the State Government. The said Sub-section shows that the licensee alone is entitled to recover the amount of duty on the quantum of energy sold to the consumer and the petitioner-company is liable to pay the same to the licensee alone and not to the State Government. If there is an agreement between the petitioner-company and DVC to pay the amount of duty to the State on the energy purchased by the petitioner-company from it, the same is internal arrangement between them and on the basis of same, no liability can be fastened on the petitioner-company to pay duty to the State Government. On the basis of that agreement, if the petitioner-company pays duty, it will be treated that it is paying duty to the State Government on behalf of DVC at its agent and not in its individual capacity. Since under law, the petitioner-company is no....
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....chaser are usual features of the sales tax legislation. But it is not an essential characteristic of the sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making a provision for seller to collect the tax from the purchaser. Whether a law should be enacted imposing sales tax or validating the imposition of sales tax, when the seller is not in a position to pass it on to the consumer is a matter of police and does not affect the competence of the Legislature. In view of foregoing discussions, I have no difficulty in holding that the petitioner-company is not liable to pay duty under the provisions of the Act to the State Government but the DVC is entitled to recover duty from the petitioner-company in respect of energy sold to it even by enforcing Clauses 17 of the agreement requiring the petitioner-company to deposit duty with the State Government on the amount of energy sold to it and in that event, the petitioner-company shall be depositing duty as a representative of DVC. 21. The next question, which has to be considered, is as to whether the petitioner-company is liab....