M/S MAGADH SUGAR & ENERGY LTD. versus THE STATE OF BIHAR & ORS.
[2021] 9 S.C.R. 284, Supreme Court of India, 2021
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
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M/S MAGADH SUGAR & ENERGY LTD.
v.
THE STATE OF BIHAR & ORS.
(Civil Appeal No. 5728 of 2021)
SEPTEMBER 24, 2021
[DR. DHANANJAYA Y CHANDRACHUD, VIKRAM NATH
AND BV NAGARATHNA, JJ.]
Constitution of India: Art. 226 – Writ jurisdiction of High
Court under – Exercise of – Dispute involving question of facts –
Amenability to writ jurisdiction of the High Court – On facts,
appellant company produced electricity for its own consumption
and the surplus energy was supplied to the Bihar State Electricity
Board (BSEB) – Issuance of notice to appellant demanding electricity
duty and penalty on electricity that it was supplying to BSES – Writ
petition by appellant challenging the imposition – Set aside by the
High Court holding that the dispute between the parties is factual
in nature and that the appellant should exercise alternate remedy
provided in the 1948 Act – On appeal, held: Existence of an
alternative remedy does not by itself bar the High Court from
exercising its jurisdiction in certain contingencies – In view of the
law on the rule of alternate remedy, the High Court can exercise its
writ jurisdiction if the order of the authority is challenged for want
of authority and jurisdiction, which is a pure question of law – Test
for the determination of a question of law is whether the rights of
the parties before the court can be determined without reference to
the facts of the case – Petitions challenged the power/jurisdiction
of the State Government to levy tax on sale of electricity to Electricity
Boards – Issues raised are questions of law which require a
comprehensive reading of the Electricity Act, and no adjudication
of facts is required – Thus, is amenable to the writ jurisdiction of
the High Court – High Court erred in declining to entertain the writ
petition – Judgment of the High Court is set aside – Bihar Electricity
Duty Act, 1948.
Art. 226 – Writ Jurisdiction of High Court – Exercise of, in
presence of alternative remedy – General Principles.
[2021] 9 S.C.R. 284
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Allowing the appeal, the Court
HELD: 1. The High Court would normally not exercise its
writ jurisdiction under Article 226 of the Constitution if an effective
and efficacious alternate remedy is available, the existence of an
alternative remedy does not by itself bar the High Court from
exercising its jurisdiction in certain contingencies. [Para 19][300-
E-F]
2. It is not the case of the appellant that the respondents
have miscalculated the duty and penalty imposed on it. The
appellant submitted that the State Government does not have
the power to levy tax on its sale of electricity to BSEB. Thus, the
plea strikes at the exercise of jurisdiction by the Government.
In view of the law on the rule of alternate remedy, the High Court
can exercise its writ jurisdiction if the order of the authority is
challenged for want of authority and jurisdiction, which is a pure
question of law. [Para 22][304-A-B]
3. There is no dispute about the nature of the transaction
between the appellant and BSEB. The appellant in the instant
case is a sugar mill that also produces electricity. The writ petition
filed by the appellant was dismissed by the impugned judgment.
The petitions challenged the power of the State Government to
levy tax on sale of electricity to Electricity Boards. [Para 23][304-
C-D]
4. The test to be applied for the determination of a question
of law is whether the rights of the parties before the court can be
determined without reference to the factual
scenario. In the instant
case, the High Court was entrusted with the determination of
the meaning of the phrases used in Section 3 of the Act to
determine if the supply of electricity by the appellant would fall
within its ambit. There is no adjudication on facts required here.
[Para 23][305-E-F]
5. The issues raised by the appellant are questions of law
which require, upon a comprehensive reading of the Bihar
Electricity Act, a determination of whether tax can be levied on
the supply of electricity by a power generator (which also
manufacture sugar) supplying electricity to a distributor; and
whether the first respondent has the legislative competence to
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levy duty on the sale of electricity to an intermediary distributor.
The question of whether the appellant is liable to file returns
under Sections 6(B)(1) and 5A of the Act is directly related to the
issue of whether the sale of electricity by the appellant to BSEB
falls under the charging provisions of Section 3(1). The questions
raised by the appellant can be adjudicated without delving into
any factual dispute. Thus, the present matter is amenable to the
writ jurisdiction of the High Court. The High Court made an error
in declining to entertain the writ petition. The judgment of the
High Court is set aside. The writ petition is restored to the file of
the High Court for fresh determination. [Para 24, 25][305-G-H;
306-A-B]
State of AP v. National Thermal Power Corporation Ltd.
(2002) 5 SCC 203 : [2002] 3 SCR 278; Raza Textiles
Ltd. v. ITO (1973) 1 SCC 633; State Trade Corporation
of India Ltd. v. State of Mysore AIR 1963 SC 548:
[1963] SCR 792; Radha Kishan Industries v. State of
Himachal Pradesh (2021) SCC OnLine SC 334;
Whirpool Corporation v. Registrar of Trademarks,
Mumbai (1998) 8 SCC 1 : [1998] 2 Suppl. SCR 359;
Harbanslal Sahni v. Indian Oil Corporation Ltd. (2003)
2 SCC 107; Radha Krishan Industries v. State of
Himachal Pradesh & Ors. (2021) SCC OnLine SC 334;
Assistant Commissioner of State Tax v. M/s Commercial
Steel Limited Civil Appeal No. 5121 of 2021; State of
HP v. Gujarat Ambuja Cement Ltd. (2005) 6
SCC 499 :
[2005] 1 Suppl. SCR 684; Executive Engineer v.
Seetaram Rice Mill (2012) 2 SCC 108 : [2011] 15 SCR
211; Union of India v. State of Haryana (2000) 10 SCC
482; Sree Meenakshi Mills Ltd. v. Commissioner of
Income Tax AIR 1957 SC 49 : [1956] SCR 691 -
referred to.
Case Law Reference
[2002] 3 SCR 278
referred to
Para 13
(1973) 1 SCC 633
referred to
Para 15
[1963] SCR 792
referred to
Para 15
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[1998] 2 Suppl. SCR 359
referred to
Para 19
(2003) 2 SCC 107
referred to
Para 19
[2005] 1 Suppl. SCR 684
referred to
Para 19
[2011] 15 SCR 211
referred to
Para 19
(2000) 10 SCC 482
referred to
Para 21
[1956] SCR 691
referred to
Para 23
CIVIL APPELLATE JURISDICTION: Civil Appeal No.5728 of
2021.
From the Judgment and Order dated 18.09.2017 of the High Court
of Judicature at Patna in Civil Writ Jurisdiction Case No.4300 of 2015.
S. K. Bagaria, Sr. Adv., Praveen Kumar, Kumar Ajit Singh, Ms.
Sunaina Kumar, Advs. for the Appellant.
Saket Singh, Mrs. Niranjana Singh, Advs. for the Respondents.
The Judgment of the Court was delivered by
DR DHANANJAYA Y CHANDRACHUD, J.
1. Leave granted.
2. This appeal arises out of the judgment of a Division Bench of
the Patna High Court dated 18 September 2017. The High Court declined
to entertain the writ petition instituted by the appellant on the ground that
the dispute between the parties is factual in nature and is suitable for
adjudication in terms of the statutory remedy provided in the Bihar
Electricity Duty Act 19481. The appellant had invoked the writ jurisdiction
of the High Court to challenge the imposition of electricity duty and
penalty on the electricity that it was supplying to Bihar State Electricity
Board2.
Facts of the case
3. The appellant is a sugar mill company operating in Narkatiaganj,
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
1 "Bihar Electricity Act'' or “the Act”
2 "BSEB''
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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 19483 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 paid to the State Government, either
on the units or on the value of energy consumed or sold,
excluding losses of energy in transmission and transformation, a
duty at the rate or rates to be specified by the State Government
in a notification.
Provided that, the State Government may, by notification, specify
different rates of duty in respect of different categories of
consumption or sale of energy.
Provided further that, the rate of duty shall not exceed twenty
paise per unit
incase the duty is levied on the basis of units
consumed or sold and ten percentum of the value of the energy
consumed or sold in case the duty is levied on the basis of the
value of energy.
(2) No duty shall be leviable on units of energy-
(a) consumed by the Government of India, or sold to the
Government of India, for consumption by that Government.
(b) consumed in the construction, maintenance, or operation of
any railway company operating that railway, or sold to that
Government or any such railway company for consumption in the
construction, maintenance or operation of any railway.
3 "The Act''
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(c) consumed by the licensee in the construction, maintenance
and operation of his electrical undertaking.
(d) consumed by or sold by any class of persons exempted from
payment of duty under section 9.
(e) consumed by the Damodar Valley Corporation for the
generation, transmission or distribution of electricity by that
Corporation.
(f) consumed for any purpose which the state Government may,
by notification, in this behalf declare to be a public purpose and
such exemptions may be subject to such conditions and exemptions
if any, as may be mentioned in the said notification.
(3) when a licensee holds more than one licence, duty shall be
payable separately in respect of each license.”
(emphasis supplied)
5. In pursuance of its power under Section 3(1) of the Act, the
first respondent issued a notification dated 21 October 20024 which
stipulated that the rate of duty applicable on the consumption or sale of
electricity would be fixed at six per cent of the value of energy consumed
or sold for any other purposes other than irrigation. The notification was
amended by another notification dated 4 March 20055 which provided
that the rate of duty to be levied on consumption of electrical energy
generated by 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
20116 was issued by the first respondent exercising its
powers under
Section 9 of the Act7 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 petition8. The High Court by its judgement
4 SO 137
5 SO 14
6 SO 1
7 Power of the State Government to grant exemption from the duty payable under this
Act.
8 CWJC No 13614 of 2006
M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF
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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 liable to be struck down as there is no guideline provided
in the statute as to in which case the duty will payable calculated
on the basis of the value of energy consumed or sold. Similarly
the notification dated 21.10.2002 providing for payment of duty at
6 per centum of the value of energy is liable to be quashed as
there is no guidelines provided for the ascertaining the value of
energy. The subsequent Notification SO no. 14 dated 04.03.2005
is also liable to be struck down on the self-same ground. Since the
amendment as the notification is found to be inoperative, it is
obvious that the duty will be payable as per the schedule which
was in vogue by virtue of the Bihar Electricity (Amendment) Act,
1993.”
7. The first respondent aggrieved by judgment of the High Court
filed a special leave petition9 before this Court. While the matter was
pending before this Court, the first respondent amended the Act through
the Bihar Finance Act 2012 with retrospective effect from 17 October
2002 for defining the term ‘value of energy’. Consequent to the insertion
of Section 2 (ee) in the Act, the expression reads as follows:
“(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
9 Consequent to the grant of special leave, it was converted to Civil Appeal No 2570 of
2010.
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(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 of such consumer, mean the charges for the
units of energy actually consumed by him and not the prescribed
minimum charges:
(ii) in case of energy consumed by the person generating such
energy, means the charges payable by any other consumer for
such quantum of power to the Bihar State Electricity Board
constituted 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
jurisdiction10 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 ‘licensee’ provided under Section 2(d) of the
Act; and
10 CWJC No 11126 of 2012
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(iii) The resolution dated 12 September 2006 issued by the first
respondent announced various incentives for establishment
and development of sugar and other allied industries including
exemption from payment of electricity duty for cogeneration
for five years.
9. The definition of the term ‘consumer’ has a bearing on the
present appeal since the appellant has argued that the term ‘value of
energy’ used in Section 3 for the levy of tax is not applicable to it because
the definition of ‘consumer’ excludes a licensee. The term ‘consumer’
has been defined in Section 2 (b) of the Bihar Electricity Act in the
following terms:
“(b) ‘consumer’ means any person who is supplied with energy
but does not include either a licensee or the ‘distributing
licensee’ as described in clause1 (a) of clause IX of the Schedule
to the [3] Indian Electricity Act, 1910 (9 of 1910), or a person
who obtained sanction under section 28 of the said Act.”
(emphasis supplied)
The appellant supplies electricity to BSEB which is undertaking
the business of distributing electricity. The appellant is not supplying
electricity to any other person. Thus, the appellant has submitted that it
cannot be charged electricity duty under Section 3 (1) of the Bihar
Electricity Act for supplying electricity to a licensee.
10. On 8 February 2015, the Assistant Commissioner of
Commercial Tax, Bettial rejected the objection raised by the appellant
and passed an
assessment order confirming the demand of electricity
duty and penalty of about Rs 67 crores on the following grounds:
(i) It has been conceded by the appellant that it sells electricity in
excess of its consumption. Duty is levied on every sale of
electricity; and
(ii) The notification dated 14 January 2011 only exempts the energy
generated by a Generator or Captive Power Plant for self-
consumption.
11. Notices of demand dated 14 February 2015 were issued to
the appellant demanding electricity duty and penalty for 2010-11, 2011-
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12 and 2012-13. Challenging the notices, the appellant filed a writ
petition11 before the High Court praying for the following reliefs:
“For quashing the notices dated 14.2.2015 issued to the Petitioner
raising demand for payment of duty and further that the Petitioner
is not liable to file return 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
Limited12 had filed a writ petition13 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 other writ
petitioners are power generating companies, whereas
the petitioner is a Sugar Mill Company which also generates
electricity from molasses.
Moreover, the case of the petitioner along with the association of
Bihar Sugar Mills Association was allowed by this Court by a
judgment dated 16.09.2009, by which certain amendments in the
Bihar Electricity Duty Act have been struck down but subsequently
on an appeal filed by the State of Bihar in the Supreme Court, the
Supreme Court has remanded the matter to this Court.
For the aforesaid reasons, the present matter shall not be heard
along with the other writ petitions.”
11 CWJC No 4300 of 2015
12 NTPC
13 CWJC No 17306 of 2014
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13. On 14 December 2016,the High Court rendered its decision in
the writ proceedings instituted by NTPC, holding that electricity duty
cannot be imposed under Section 3 (1) of the Bihar Electricity Act on a
power generation company supplying electricity to a licensee like the
Electricity Board. The High Court’s decision was premised on two
reasons. First, it relied on the judgment of this Court in State of AP v.
National Thermal Power Corporation Ltd14 to arrive at the
conclusion that it is beyond the legislative competence of the State to
impose a tax on the sale of electricity which is not a sale for consumption.
In this regard, the High Court observed that:
“…the Apex Court has interpreted Entry 53 [of List II of the
Constitution] to be read as taxation on the consumption or sale for
consumption of electricity. That being the position whether the
tax levied is under Entry 53 of List II as a tax on consumption or
sale for consumption of electricity, or under Entry 54 of List II as
taxes on sale or purchase of goods, it will make no difference
since the goods which are to be taxed, that is, ‘electricity’ remains
the same under both the circumstances and the levy can only be
on the consumption or sale for consumption of electricity in terms
of what has been laid down by the Apex Court in the NTPC’s
case(supra). The distinction between the two entries in respect
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.”
14 (2002) 5 SCC 203; referred to as “State of AP’’
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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 the
computation provision brought in by amendment, after the earlier
provisions and notifications had been struck down by the Court as
providing no guidelines, that it provides for only two type of cases
under sub-clause (i) that is, firstly, energy sold to a consumer by a
licensee and, secondly, energy sold to a consumer by a person
who generates energy. Since we are not concerned with the 2nd
type of case mentioned in sub-clause (ii) with regard to the person
generating energy consuming the same, the only circumstance
under which a generation company like the petitioners or any other
person who generates energy would be liable for payment of
electricity duty would be when it sells the energy, to the consumer
itself. The petitioners are evidently not a licensee in the matters in
hand, they are certainly not selling energy to the consumer; rather
they are selling it to the BSEB, which is a licensee under Section
2(d) and which in turn sells the energy
for ultimate consumption.
…
Therefore, even on the ground of the applicability of the charging
provision it has to be held that the charging provision under Section
3(I) read with the definition of ‘consumer’, ‘licensee’ and ‘value
of energy’ as provided in the Act cannot be used to levy any tax
on a generating company supplying energy to a licensee like the
Electricity Board as in the present matter, as no tax can be
computed in their cases.”
Aggrieved by the judgement of the High Court, the respondents
filed special leave petitions15 before this Court. By an order dated 3 July
2017, the special leave petitions were summarily dismissed by a two-
judge Bench of this Court.
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14. By its judgement dated 18 September 2017,the High Court
dismissed the writ petition instituted by the appellant, holding that the
liability of the appellant to file returns would require a factual determination
on the nature of the supply of electricity made to BSEB. It further
observed that the appellant should exercise the alternative statutory
remedy provided in the Act. The High Court observed:
“Having considered the contentions we find the question as to
whether the petitioner itself liable to file the return and what is the
nature of supply made by the petitioner to the Bihar State Electricity
Board and the nature of transaction is a dispute which 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 consumer to the person who generates the energy;
(c) Section 2(d) defines the term ‘licensee’ to include the
Bihar Electricity Board;
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(d) The phrase ‘value of energy’ states that it is the charge
payable by the consumer to either the licensee or the
generator. Since the BSEB is a ‘licensee’ under Section
2(d) of the Act and not a consumer, the sale by the generator
of the electricity (the appellant ) to the licensee (BSEB) is
not covered in the phrase ‘value of energy’ and is not taxable
under Section 3 of the Act;
(ii)
BSEB pays electricity duty for the electricity sold by it to
consumers, including the electricity supplied by the company
to the Board. The levy of tax on the electricity supplied by
the company would thus amount to double taxation;
(iii)
The question of filing a return under Sections 6B(1) and 5A
of the Act does not arise when the appellant is not liable to
pay the tax;
(iv)
Without prejudice to the above submissions, even if it is
conceded that the State has the power to levy tax on the
supply of electricity by the generator to the licensee under
Section 3 of the Act, the Government of Bihar has not
exercised its power since under Section 3, a notification
must be issued for specifying the rate of charge. The
notification issued on 21 October 2002 by the State
Government is the only notification providing the rate of
duty on ‘consumption or sale of electricity’. The notification
states that for the electricity energy that is consumed or
sold for any purpose other than irrigation, the rate of duty
shall be sixper centum of the ‘value of energy’. However,
the definition
of the term value of energy only includes
supply to the consumer;
(v)
There is no dispute on facts. BSEB is a licensee and not a
consumer. If power is exercised without jurisdiction, then
the rule of alternate remedy will not apply (relied on Raza
Textiles Ltd. v.ITO16, State Trade Corporation of India
Ltd. v. State of Mysore17and Radha Kishan Industries
v.State of Himachal Pradesh18). Since the power
16 (1973) 1 SCC 633
17 AIR 1963 SC 548
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M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF
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exercised by the State under Section 3 of the Act to levy
electricity duty on sale of electricity by the appellant to
BSEB is a jurisdictional issue, the rule of alternate remedy
would not apply;
(vi)
A Constitution Bench of this court in State of AP (supra)
held that 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’,
only a sale to the consumer is included. Though
the sale to a licensee is not covered by the first part, it is
covered by the second portion of Section 3, which refers to
the ‘units’ of energy sold;
(ii)
Section 3(2)(c) provides that no duty shall be leviable on
the units of energy consumed by the licensee in the
construction, maintenance and operation of its electrical
undertaking. Section 4 provides that every licensee shall
pay duty to the State Government on the ‘units of energy
consumed or sold by him’. Section 4A provides that duty
shall be leviable ‘at each point in a series of sales of energy’.
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If Section 3 is read in a restricted manner by excluding the
‘units’ of energy sold in the definition, then it would render
Sections 3(2)(c), 4 and 4A of the Act redundant;
(iii)
Section 4A(2) states that the amount of duty paid at ‘each
preceding stage of sale’ shall be adjusted at the subsequent
stage. Therefore, levy of tax on the sale by the generator
to the licensee would not amount to double taxation;
(iv)
The Patna High Court in the judgement rendered in NTPC
interpreted Section 3 only with reference to the definition
clauses and the statute was not read as a whole. The
judgement constrained itself to the interpretation of the
phrase ‘value of energy’ and no reference was made to
the phrase ‘unit of energy’; and
(v)
The Constitution Bench of this Court in State of AP (supra)
read Entry 53 of List II to include ‘Tax on sale’ to mean
‘Tax on sale for consumption’ on the ground that the
electricity can neither be stored nor preserved, and thus,
there can be no sale except for its consumption. In view of
the above reasoning, Entry 53 must purposively be construed
to include the sale by the generator to a licensee for eventual
consumption. The judgment does not exclude the sale to
the ‘intermediary distributor’ for eventual consumption.
Analysis
17. The rival submissions fall for our consideration. The High
Court in the judgement impugned in the appeal declined to entertain the
writ petition on two counts: (i) the appellant has an alternate statutory
remedy under Section 9A of the Act; and (ii) the dispute involves questions
of fact which are not amenable to the writ jurisdiction of the High Court.
18. The appellant has challenged the imposition of electricity duty
and penalty, inter alia, on primarily two grounds:
(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
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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 sale for consumption of electricity
in view of the decision of this Court in State of AP(supra).
Thus, irrespective of the provisions of the Bihar Electricity
Act, the first respondent does not have the legislative
competence to levy a tax on the sale of electricity that is
not for consumption. The appellant is not selling electricity
to BSEB for the consumption of BSEB; rather it is BSEB
which is distributing electricity for the consumption of the
end users.
19. While a High Court would normally not exercise its writ
jurisdiction under Article 226 of the Constitution if an effective and
efficacious
alternate remedy is available, the existence of an alternate
remedy does not by itself bar the High Court from exercising its jurisdiction
in certain contingencies. This principle has been crystallized by this Court
in Whirpool Corporation v. Registrar of Trademarks, Mumbai19
and Harbanslal Sahni v. Indian Oil Corporation Ltd20. Recently, in
Radha Krishan Industries v.State of Himachal Pradesh & Ors21 a
two judge Bench of this Court of which one of us was a part of (Justice
DY Chandrachud) has summarized the principles governing the exercise
of writ jurisdiction by the High Court in the presence of an alternate
remedy. This Court has observed:
19 (1998) 8 SCC 1
20 (2003) 2 SCC 107
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“28. The principles of law which emerge are that:
(i) The power under Article 226 of the Constitution to issue writs
can be exercised not only for the enforcement of fundamental
rights, but for any other purpose as well;
(ii) The High Court has the discretion not to entertain a writ petition.
One of the restrictions placed on the power of the High Court is
where an effective alternate remedy is available to the aggrieved
person;
(iii) Exceptions to the rule of alternate remedy arise where (a) the
writ petition has been filed for the enforcement of a fundamental
right protected by Part III of the Constitution; (b) there has been
a violation of the principles of natural justice; (c) the order or
proceedings are wholly without jurisdiction; or (d) the vires
of a legislation is challenged;
(iv) An alternate remedy by itself does not divest the High Court
of its powers under Article 226 of the Constitution in an appropriate
case though ordinarily, a writ petition should not be entertained
when an efficacious alternate remedy is provided 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 Limited22. In State of HP v. Gujarat
Ambuja Cement Ltd23 this Court has held that a writ petition is
22 Civil Appeal No. 5121 of 2021
23 (2005) 6 SCC 499
M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF
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maintainable before the High Court if the taxing authorities have acted
beyond the scope of their jurisdiction. This Court observed:
“23. Where under a statute there is an allegation of infringement
of fundamental rights or when on the undisputed facts the taxing
authorities are shown to have assumed jurisdiction which they do
not possess can be the grounds on which the writ petitions can be
entertained. But normally, the High Court should not entertain
writ petitions unless it is shown that there is something more in a
case, something going to the root of the jurisdiction of the officer,
something which would show that it would be a case of palpable
injustice to the writ petitioner to force him to adopt the remedies
provided by the statute. It was noted by this Court in L. Hirday
Narain v. ITO [(1970) 2 SCC 355: AIR 1971 SC 33] that if the
High Court had entertained a petition despite availability of
alternative remedy and heard the parties on merits it would be
ordinarily unjustifiable for the High Court to dismiss the same on
the ground of non-exhaustion of statutory remedies; unless the
High Court finds that factual disputes are involved and it would
not be desirable to deal with them in a writ petition.”
20. The above principle was reiterated by a three-judge Bench of
this Court in Executive Engineer v. Seetaram Rice Mill24. In that
case, a show cause notice/provisional assessment order was issued to
the assessee
on the ground of an unauthorized use of electricity under
Section 126 (1) of the Electricity Act 2003 and a demand for payment of
electricity charges was raised. The assessee contended that Section
126 was not applicable to it and challenged the jurisdiction of the taxing
authorities to issue such a notice, before the High Court in its writ
jurisdiction. The High Court entertained the writ petition. When the
judgement of the High Court was appealed before this Court, it held that
the High Court did not commit any error in exercising its jurisdiction in
respect of the challenge raised on the jurisdiction of the revenue
authorities. This Court made the following observations:
“81. Should the courts determine on merits of the case or should
they preferably answer the preliminary issue or jurisdictional issue
arising in the facts of the case and remit the matter for
consideration on merits by the competent authority? Again, it is
24 (2012) 2 SCC 108
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somewhat difficult to state with absolute clarity any principle
governing such exercise of jurisdiction. It always will depend upon
the facts 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. This issue is no
longer res integra and has been settled by a catena of judgments
of this Court, which we find entirely unnecessary to refer to in
detail...”
(emphasis supplied)
21. In Union of India v State of Haryana25 the assessing
authorities imposed sales tax on the rentals charged for supply of
telephones. Writ petitions were filed in the High Court challenging the
levy. The writ petitions were dismissed on the ground that an alternative
remedy of a statutory appeal was available. An appeal against these
orders was filed before this Court. The appeal was allowed and the
matter was remanded back to the High Court for determination since it
involved a question of law on whether the supply of telephones amounted
to sale.
25 (2000) 10 SCC 482
M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF
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22. It is not the case of the appellant that the respondents have
miscalculated the duty and penalty imposed on it. The appellant contends
that the State Government does not have the power to levy tax on its
sale of electricity to BSEB. Thus, the plea strikes at the exercise of
jurisdiction by the Government. In view of the law discussed above on
the rule of alternate remedy, the High Court can exercise its writ
jurisdiction if the order of the authority is challenged for want of authority
and jurisdiction, which is a pure question of law.
23. The appellant is admittedly a sugar mill producing electricity
from bagasse (a by-product of sugar production). The electricity that is
produced is used for running the mill and the excess is sold to BSEB.
There is no dispute about the nature of the transaction between the
appellant and BSEB. The petition before the High Court was initially
tagged with the petition filed by NTPC since it involved similar issues.
However, it was subsequently de-tagged and heard separately on the
ground that the appellant in this case is a sugar mill that also produces
electricity, while NTPC is a power generation company. The writ petition
filed by the appellant was dismissed by the impugned judgment. Both
the petitions - filed by the appellant and NTPC before the High Court
challenged the power of the State Government to levy tax on sale of
electricity to Electricity Boards. A three judge Bench
of this court in
Sree Meenakshi Mills Ltd. v Commissioner of Income Tax26
succinctly explained the tests for the identification of questions of fact,
questions of law and mixed questions 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
26 AIR 1957 SC 49
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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 law to the facts ascertained. To
take an example, the question is whether the defendant has
acquired title to the suit property by adverse possession. It is found
on the facts that the land is a vacant site that the defendant is the
owner of the adjacent. residential house and that he has been
drying grains and cloth and throwing rubbish on the plot. The
further question that has to be determined is whether the above
facts are sufficient to constitute adverse possession in law. Is the
user continuous or fugitive? Is it as of right or permissive in
character? Thus, for deciding whether the defendant has acquired
title by adverse possession the court has firstly to find on an
appreciation of the evidence what the facts are. So far, it is a
question of fact. It has then to apply the principles of law regarding
acquisition of title by adverse possession, and decide whether on
the facts established by the evidence, the requirements of law are
satisfied. That is a question of law.”
The test that is to be applied for the determination of a question of
law is whether the rights of the parties before the
court can be determined
without reference to the factual scenario. In this case, the High Court
was entrusted with the determination of the meaning of the phrases
used in Section 3 of the Act to determine if the supply of electricity by
the appellant would fall within its ambit. Unlike a dispute on the execution
of a promissory note or a plea of adverse possession, there is no
adjudication on facts required here. There is also no dispute on the nature
of the transaction involved.
24. The issues raised by the appellant are questions of law which
require, upon a comprehensive reading of the Bihar Electricity Act, a
determination of whether tax can be levied on the supply of electricity
by a power generator (which also manufactures sugar) supplying
electricity to a distributor; and whether the first respondent has the
legislative competence to levy duty on the sale of electricity to an
intermediary distributor in view of the decision of this Court in State of
AP (supra). The question of whether the appellant is liable to file returns
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under Sections 6B(1) and 5A of the Act is directly related to the issue of
whether the sale of electricity by the appellant to BSEB falls under the
charging provisions of Section 3(1). The questions raised by the appellant
can be adjudicated without delving into any factual dispute. Thus, the
present matter is amenable to the writ jurisdiction of the High Court.
25. We are of the considered view that the High Court made an
error in declining to entertain the writ petition and it would be appropriate
to restore the proceedings back to the High Court for a fresh disposal.
In order to facilitate the decision on remand, we have recorded the broad
submissions of the parties on merits but leave the matter open for a
fresh evaluation by the High Court. We accordingly allow the appeal
and set aside the judgement of the High Court dated 18 September 2017
arising out of CWJC No 4300 of 2015. The writ petition is restored to
the file of the High Court for fresh determination. The appeal is disposed
of in the above terms with no order as to costs.
26. The appellant had filed an application27 for amendment of the
cause title since pursuant to a merger the right to contest the appeal
survived with Magadh Sugar and Energy Ltd, the application is allowed.
27. Pending application, if any, are disposed of.
Nidhi Jain
Appeal allowed.
27 IA No 75651 of 2021