TaxTMI 
TaxTMI 
2021 (10) TMI 691
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....j, Bihar. It is engaged in the business of manufacture and sale of white crystal sugar. The waste of sugarcane (bagasse) produced in the process of manufacturing sugar is used for the production of electricity for its own consumption and the surplus energy is supplied to BSEB. The appellant has been supplying electricity to BSEB since 6 March 2008. 4 The Bihar Electricity Duty Act 1948, "The Act" in its initial form empowered the State Government (the first respondent) to levy electricity duty under Section 3 (1) on the units of energy consumed or sold, excluding the losses of energy in transmission and transformation at the rates specified by the first respondent. Rates of duty were specified in the Schedule to the Act. The Bihar Electricity Act was amended in 2002 which led to the deletion of the Schedule and amendment of Section 3(1). The amendment allowed the first respondent to levy tax on the basis of the units or the value of energy consumed or sold at rates specified by the State Government by a notification. Section 3 (1) in its current form provides as follows: "3. Incidence of duty-(1) Subject to the provisions of sub-section (2), there shall be levied and pa....
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....y captive power plants would be six per cent of the value of energy, which shall be equivalent to the energy tariff as fixed by the BSEB. It is also relevant to note that a notification dated 14 January 2011, SO 1 was issued by the first respondent exercising its powers under Section 9 of the Act, Power of the State Government to grant exemption from the duty payable under this Act. granting a blanket exemption from payment of electricity duty on electricity generated by captive plants for self-consumption. 6 The appellant through the Bihar Sugar Mills Association challenged the notifications dated 21 October 2002 and 4 March 2005 in the High Court by filing a writ petition, CWJC No 13614 of 2006. The High Court by its judgement dated 16 September 2009 struck down the notifications and the amendment to Section 3 (1) of the Bihar Electricity Act on the ground that there were no guidelines in the statute or the notifications for construing the expression 'value of energy'. The relevant extract of the judgment is reproduced below: "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 liab....
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....tuted under section 5 of the Electricity (Supply) Act, 1948 (Act 54 of 1948) in respect of energy supplied by the Bihar State Electricity Board within the area where the consumer is located;" (emphasis supplied) The appellant challenged the amendment by invoking the writ jurisdiction, CWJC No 11126 of 2012 of the High Court. The petition is pending. 8 On 3 January 2015, the fourth respondent issued a notice to the appellant for its failure to file returns under Section 6B (1) of the Act, concealment of the sale of electricity of approximately Rs. 56 crores and for raising a demand of electricity duty and penalty of about Rs. 67 crores. The notice was issued on the basis of the report dated 24 December 2014 of the Accountant General (Audit) Bihar. In its reply dated 5 February 2015, the appellant contended that no tax can be levied on the supply of electricity by the appellant to BSEB for the following reasons: (i) Under Section 3 of the Act, tax is levied on the 'value of energy'. Section 2(ee) only brings the sale to a consumer within the ambit of the phrase 'value of energy'; (ii) BSEB is a 'licensee' and not a 'consumer' in view of the definition of 'l....
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.... as the provision of Section 6B(1) and 5A of the Act is not attracted in the case of the Petitioner and was not liable to pay electricity duty on supply of electricity to the Bihar State Electricity Board." 12 In the meantime, National Thermal Power Corporation Limited, NTPC had filed a writ petition, CWJC No 17306 of 2014 before the High Court challenging the imposition of electricity duty on its supply of electricity to various electricity boards including BSEB. NTPC was supplying electricity exclusively to the Electricity Boards. On 2 December 2015, the High Court passed an order tagging the writ petitions filed by the appellant and NTPC on the ground that the issue raised in both the petitions was substantially similar. Thereafter, on 20 October 2016, the High Court de-tagged the writ petitions holding that the matters are not similar since NTPC is a power generation company, while the appellant is a company which runs a sugar mill and also generates electricity from molasses. The relevant portion of the order is extracted below: "On an examination of the facts of the present matter as also of the other two writ petitioners in the batch of cases it is found that the....
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....ts 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." Second, the High Court observed that in terms of the provisions of the Bihar Electricity Act, a power generation company is liable to pay duty only if it is selling electricity to the consumer, as defined in the legislation. The High Court held that: "We are also in agreement with the submission of learned counsel for the petitioners on the basis of the provisions of Section 3(1) read with Section 2(b),(d) and ( ee) of the Act. It is evident from the definition of value of energy in Section 2(ee) which is th....
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....warrants consideration based on enquiry of facts and once there is a statutory remedy available to the petitioner we are not inclined to allow this petition. However, granting liberty to the petitioner to take recourse to the remedy of appeal we dispose of the writ petition." The judgment of the High Court has given rise to the present appeal. Notice was issued on 4 January 2018. Submissions of the Parties 15 We have heard Mr SK Bagaria, learned Counsel appearing on behalf of the appellant sugar mill and Mr Saket Singh, learned Senior Counsel appearing on behalf of the respondent State. On behalf of the appellant, the following submissions have been urged: (i) On a combined reading of Section 3 with Sections 2(b), 2(d) and 2(ee) of the Act, the sale of electricity by a generator to a licensee would not attract the levy of tax for the following reasons: (a) Section 3 of the Act is the charging provision of the statute which states that tax shall be levied either on the units or on the value of the energy consumed or sold; (b) Section 2(ee) defines the phrase 'value of energy' as the charge payable by the consumer to the licensee or by the consu....
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....t Entry 53 of List II of the Seventh Schedule which deals with 'Taxes on consumption or the sale of electricity' must be read as 'Taxes on consumption or sale for consumption of electricity'. Since the appellant does not sell the electricity to BSEB for consumption but rather for distribution, such sale cannot be taxed in view of the interpretation of Entry 53 rendered in State of AP (supra). Thus, the State does not have the legislative competence to enact a law that levies tax on the supply of electricity by the generator to the licensee; and (vii) The facts of the decision in NTPC and the facts giving rise to the writ petition filed by the appellant before the High Court were substantially similar. The High Court erroneously de-tagged the writ petitions and then dismissed the appellant's writ petition while entertaining the writ petition filed by NTPC. 16 On behalf of the respondent, the following submissions have been urged referring to the scheme of the statute: (i) Section 3 has two parts (i) levy of tax on the 'value of energy' consumed; and (ii) levy of tax on the 'units' of energy sold. Under Section 2(ee) which defines the phrase 'value of energy', on....
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.... (i) The first respondent is only empowered to levy tax on the value of energy consumed or sold under Section 3(1). Section 2(ee) defines 'value of energy' as the energy sold to a consumer by a licensee or by any other person. The definition of consumer under Section 2(b) specifically excludes a licensee while Section 2(d) defines a licensee to include the BSEB. Since, the appellant is supplying electricity to the licensee which is not the consumer, tax cannot be levied under Section 3(1) of the Act; and (ii) Entry 53 of List II of the Seventh Schedule of the Constitution provides for taxes on consumption or sale of electricity. In terms of the judgement of this Court in State of AP (supra), the meaning assigned to the word 'sale' and 'consumption' would be the same since the very act of sale of electricity means that it is being consumed because electricity can neither be preserved nor stored. Entry 54 of List II dealt (at the material time) with the levy of taxes on the sale or purchase of goods including electricity but excluding newspapers and was subject to provisions of Entry 92-A of List I. The meaning of 'sale' of electricity under Entry 54 would mean the sal....
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....ided by law; (v) When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion; and (vi) In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with." (emphasis supplied) The principle of alternate remedies and its exceptions was also reiterated recently in the decision in Assistant Commissioner of State Tax v. M/s Commercial Steel Limited, Civil Appeal No. 5121 of 2021. In State of HP v. Gujarat Ambuja Cement Ltd, (2005) 6 SCC 499 this Court has held that a writ petition is maintainable before the High Court if the taxing authorities have acted beyond the scope of their jurisdiction. This Court observed: "23. Where und....
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....cts of a given case. We are of the considered view that interest of administration of justice shall be better subserved if the cases of the present kind are heard by the courts only where they involve primary questions of jurisdiction or the matters which go to the very root of jurisdiction and where the authorities have acted beyond the provisions of the Act. 82. It is argued and to some extent correctly that the High Court should not decline to exercise its jurisdiction merely for the reason that there is a statutory alternative remedy available even when the case falls in the above stated class of cases. It is a settled principle that the courts/tribunal will not exercise jurisdiction in futility. The law will not itself attempt to do an act which would be vain, lex nil frustra facit, nor to enforce one which would be frivolous-lex neminem cogit ad vana seu inutilia-the law will not force anyone to do a thing vain and fruitless. In other words, if exercise of jurisdiction by the tribunal ex facie appears to be an exercise of jurisdiction in futility for any of the stated reasons, then it will be permissible for the High Court to interfere in exercise of its jurisdiction....
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....ns of law and facts. Justice T. L. Venkatarama Aiyar writing for the Bench observed that: "9. [..] To take an illustration, let us suppose that in a suit on a promissory note the defence taken is one of denial of execution. The court finds that the disputed signature is unlike the admitted signatures of the defendant. It also finds that the attesting witnesses who speak to execution were not, in fact, present at the time of the alleged execution. On a consideration of these facts, the court comes to the conclusion that the promissory note is not genuine, Here, there are certain facts which are ascertained, and on these facts, a certain conclusion is reached which is also one of fact. 10. In between the domains occupied respectively by questions of fact and of law, there is a large area in which both these questions run into each other, forming so to say, enclaves within each other. The questions that arise for determination in that area are known as mixed questions of law and fact. These questions involve first the ascertainment of facts on the evidence adduced and then a determination of the rights of the parties on an application of the appropriate principles of....