Case: M.P. Cement Manufacturers' Asson Vs. State Of M.P.

of Section 12. As we read the sub-section, it is a mandate to the policy makers who, before proposing legislation, are required to consult the State Regulatory Commission. 33. Under the Sudhar Adhiniyam, the State Commission is a juristic entity [Section 3(1)]. The Members of the Commission, according to Section 5 of the Sudhar Adhiniyam, shall be persons of ability, integrity and standing who have adequate knowledge and experience of, or have shown capacity in dealing with problems relating to engineering, economics, commerce, finance, law, administration or management.... Under Section 9 of the Sudhar Adhiniyam, the Commission has been vested with the powers inter alia - (a) to regulate the purchase, distribution, supply and utilization of electricity, the quality of service, the tariff and charges payable considering the interest of the consumer and the Electricity Industry both; (c) to determine the tariff for electricity, wholesale, bulk, grid or retail in accordance with the provisions of this Act. 34. In particular the Commission has been given the power to determine the tariff under Section 26 of the Sudhar Adhiniyam, 2000. For discharging its functions, the Commission has been given wide ranging powers to carry out the objects for which it has been set up including the powers of a Civil Court in certain specified matters [Section 10]. 35. It is true that the Sudhar Adhiniyam, 2000 although published in the Official Gazette prior to the promulgation of the impugned Ordinance, came into force after such promulgation. Nevertheless, the Act which replaced the Ordinance was introduced as a Bill when the Sudhar Adhiniyam was operative and was certainly in place when the Explanation was added to Section 3(2) in 2003. There was admittedly no consultation by the State Government with the Commission at any stage though the levy of cess by the impugned legislation affects the electricity industry. 36. We are not concerned with why the legislature provided for this mandate of prior consultation but the important of consultation at a pre-decisional stage has been recognised by Narayan Shankaran Mooss vs. State of Kerala and another [(1974) 2 SCR 60, page 70]:- "... First impressions and provisional judgments have a tendency to become ultimate ideas and final judgments. They would settle unconsciously on the investigators mind as the imperceptible dust-particles on an optical lens. They would dim his understanding and obfuscate his observation. Facts which will dovetail with them would arrest his attention; facts which will conflict with them would flit his observation. If by any chance he happens to notice refractory facts, he would seek to reconcile them with his first impressions and provisional judgment. This understanding of human psychology seems to have persuaded Parliament to interpose the condition of the Boards consultation to the Governments action. The Board is an independent body. It consists of three members. One of them is a technical expert, the other is financial expert, and the third an administrative expert. While considering the facts presented to it by the Government and by the licensee in his explanation, the Board will undoubtedly act with an open and unconditioned mind and will be able to offer unbiased counsel to the Government...." 37. In our opinion, the consequence of non-consultation in terms of Section 12(3) of the Sudhar Adhiniyam would not be an incompetent piece of legislation but a legislation introduced in breach of a salutary requirement to consult an expert statutory body. The statutory requirement for consultation with a body of experts before proposing legislation will serve as an in-built safeguard against a challenge under Article 14 of the Constitution apart from anything else.38. Nevertheless, we do not propose to decide - whether by reason only of such non-consultation, Section 3(2) of the 1981 Adhiniyam is violative of Article 14, nor do we propose to decide whether the cess of 20 paise is excessive, nor the other grounds urged by the appellants pertaining to Article 14. We have referred to the provisions of Sudhar Adhiniyam so that the State Government may in future act in consonance with Section 12(3)39. An additional challenge has been raised to the constitutional validity of sub-sections (3), (4) and (5) of Section 3 in Civil Appeal No. 2003 of 2002 alleging violation of Articles 202, 204, 207, 260 and 267 of the Constitution.40. In order to appreciate the submission, we may recapitulate briefly the effect of these sub-sections. Under sub-section (3), the proceeds of the cess levied under sub-section (1) and (2) are required to be credited to the Consolidated Fund of the State. The State Government may then withdraw an amount equivalent to the proceeds of cess realised in the preceding financial year and place it to the credit of a separate fund called the Energy Development Fund. Such credit to the fund would be an expenditure charged on the Consolidated Fund. The State Government has also the discretion to use the amount in the credit for the various purposes specified in sub-section (4). A further discretion is given to the State Government under sub-section (5) to finally and conclusively decide whether the funds were in fact being utilised for a purpose falling under sub-section (4).41. Apart from the submission that the respondents had not disclosed any information as to what had been done by the State after collecting the cess from its consumers and how the cess collected in fact been utilised since 1981 although called upon to do so, it is argued by the appellants that no fund could be earmarked or appropriated or expended from the Consolidated Fund of the State except in accordance with the provisions of Articles 196, 198, 199 and 200 of the Constitution which requires the expenditure to be passed by the State Legislature and it cannot be left to the State Executive to determine the expenditure at its discretion. This argument was raised before the High Court but not dealt with. Nor do we do so since we have upheld the appellants contentions on the very imposition of the cess under Section 3(2).

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]37. In our opinion, the consequence ofin terms of Section 12(3) of the Sudhar Adhiniyam would not be an incompetent piece of legislation but a legislation introduced in breach of a salutary requirement to consult an expert statutory body. The statutory requirement for consultation with a body of experts before proposing legislation will serve as ansafeguard against a challenge under Article 14 of the Constitution apart from anything else.38. Nevertheless, we do not propose to decidewhether by reason only of suchSection 3(2) of the 1981 Adhiniyam is violative of Article 14, nor do we propose to decide whether the cess of 20 paise is excessive, nor the other grounds urged by the appellants pertaining to Article 14. We have referred to the provisions of Sudhar Adhiniyam so that the State Government may in future act in consonance with Section 12(3)39. An additional challenge has been raised to the constitutional validity of(3), (4) and (5) of Section 3 in Civil Appeal No. 2003 of 2002 alleging violation of Articles 202, 204, 207, 260 and 267 of the Constitution.40. In order to appreciate the submission, we may recapitulate briefly the effect of theseon (3), the proceeds of the cess levied under(1) and (2) are required to be credited to the Consolidated Fund of the State. The State Government may then withdraw an amount equivalent to the proceeds of cess realised in the preceding financial year and place it to the credit of a separate fund called the Energy Development Fund. Such credit to the fund would be an expenditure charged on the Consolidated Fund. The State Government has also the discretion to use the amount in the credit for the various purposes specified in(4). A further discretion is given to the State Government under(5) to finally and conclusively decide whether the funds were in fact being utilised for a purpose falling under(4).41. Apart from the submission that the respondents had not disclosed any information as to what had been done by the State after collecting the cess from its consumers and how the cess collected in fact been utilised since 1981 although called upon to do so, it is argued by the appellants that no fund could be earmarked or appropriated or expended from the Consolidated Fund of the State except in accordance with the provisions of Articles 196, 198, 199 and 200 of the Constitution which requires the expenditure to be passed by the State Legislature and it cannot be left to the State Executive to determine the expenditure at its discretion. This argument was raised before the High Court but not dealt with. Nor do we do so since we have upheld the appellants contentions on the very imposition of the cess under Section 3(2).A plain reading ofion 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 the Electricity Duty Act, 1949 and indeed the language used in Section 3(1) of the same Act where the cess is levied on the total units of electrical energy sold or supplied by distributors of electrical energy. When dealing with producers under(2) of the same section, the cess is required to be paid on the total units of electrical energy produced. If, as is contended by the respondents, the incidence of levy under Section (1) and(2) were identical, the same language should have been used in bothThe deliberate change in language reflects an intention to alter the subject matter of levy as far as producers were concerned.14. Our interpretation of(2) of Section 3 is buttressed by and in keeping with the language and effect of the proviso to the saidIt has been held that the normal function of the proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of theThat the intention of the Legislature was to levy cess on the production of electricity is also borne out from the Statement of Objects and Reasons which accompanied the Act which replaced the Ordinance. It says:"With a view to impose cess on the electricity generated by the producers from their Captive Power Plants/Diesel Generating Sets for self consumption or for sale at the rate of 20 paise per unit on all generated electricity units, it has been decided to amend the Madhya Pradesh Upkar Adhiniyam, 1981 (No.1 of 1982)) refers to "any policy directive which it proposes to issue" or "any legislation proposed to be enacted affecting the Electricity Industry".It does not stop the State from enacting the legislation but merely states that prior to any legislation being proposed, the Government shall "duly take into account the recommendation, if any, given by the Commission". It was and is open to the State Legislature to repeal this law. As long it continues to be operative, it must be assumed that it was not a mere exercise in futility and some effect must be given to the words of the(3) of Section 12. As we read theit is a mandate to the policy makers who, before proposing legislation, are required to consult the State Regulatory Commission.