Case: Southern Petrochemical Industries Co.Ltd Vs. Electricity Inspector And E.T.I.O.

Validity of the provisions of the 2003 Act and/or application thereof in respect of the generating companies as also the consumers of electrical energy being purchasers from the Tamil Nadu Electricity Board came to be questioned before the Madras High Court in a large number of writ petitions. The matter was heard by a Division Bench of the said High Court. By reason of a judgment and order dated 13.07.2006, the Division Bench dismissed the writ petition.HIGH COURT JUDGMENT23. The High Court noticed seven arguments raised before it. It decided all the issues against the writ petitioners. Before us, only argument Nos. 1, 3, 4, 5 and 7 have been pressed.24. We may notice the same at theThe Tamil Nadu Act 12 of 2003 levying tax on consumption or sale of electricity is invalid for want of assent of the President of India, in view of Article 288(2) of the Constitution of India.(2) ***(3) The impugned Act is repugnant to Section 29 of the Electricity Regulatory Commissions Act, 1998. The Central Act, 1996 provided for the fixation of tariff for electricity to vest with the Commission. The tariff so fixed should be held to include the entire price payable for the energy. Thus, the impugned State Act which imposes a tax on the sale or consumption of electricity is repugnant to the Central Law. Since the State Act had not received the assent of the President, it is not saved by Article 254(2) of the Constitution. Hence, it is invalid in law.(4) Under the Tamil Nadu Electricity Taxation on Consumption Act, 1962, some of the appellants were exempted from payment of tax on consumption of self-generated energy. Even though this Act 1962 has been repealed by the present Act, in view of Section 20(2)(a) of the impugned Act, their rights are protected. Therefore, they are entitled to continue the exemption from payment of tax.(5) ***(6) ***(7) The tax on consumption should be actual consumption. It cannot include the maximum/sanctioned demand charges. As such, the tax on consumption cannot be levied on such electricity which is lost in transmission. The tax on consumption of electricity should be based on the electricity consumed and not on the electricity lost in transmission.In regard to argument No. 1, the High Court opined that Article 288 of the Constitution of India being applicable in respect of those which are the authorities within the meaning of the provisions thereof, assent of the President was necessary only in their case and not in case of consumers like the appellants.26. It was furthermore held that in terms of Section 4 of the 2003 Act, the State of Tamil Nadu covered all persons except the Government, Railways and authorities dealing with the development of inter-state river and, thus, the constitutional obligation laid down under Article 288 of the Constitution of India stands satisfied. It wasThus, it is clear that this Article imposes a total ban against a State from imposing any tax on the purchase outside a State. This prohibition is absolute. Whereas under Article 288 of the Constitution, the State is not prevented from enacting a law, but it is made clear that the law shall not have any effect against the authority mentioned in Article 288 of the Constitution of India unless it receives the assent of the President. Thus, the purpose of the article is to give protection only in respect of the authorities generated, consumed, etc. of the electricity as referred to under Article 288. Therefore, as correctly held by the learned single Judge, the appellants, who are not such authorities described in the article, cannot take umbrage under the said article and consequently, they cannot resist the enforcement of Act 12 of 2003. Hence, the first submission would fail.As regards argument No. 3, the High Court opined that as the tax is levied on the tariff, the same being not a part of tariff, the provisions of the Electricity Regulatory Commissions Act, 1998 (for short "the 1998 Act") cannot be said to have any application whatsoeverSimilarly, the contention of repugnancy is also baseless. The question of repugnancy would arise only when both the laws are enacted on the same entry. The question of repugnancy between one law and another would arise only if both the laws of the Parliament and the State Legislature are referable to an Entry in List III. As indicated above, the Central Law is referable to Entry 38 List III while the State Law falls under Entry 53 List II. In these circumstances, no question of repugnancy would arise.On argument No. 4, the High Court opined that as the exemption provision contained in Section 14 of the 2003 Act is inconsistent with the provisions of Sections 12 and 13 of the 1962 Act, Section 20(2)(a) of the 2003 Act will have no applicationHowever, in this case, as indicated above, there is an exemption as provided in Section 14 only with reference to the tax on the sale of electricity and not on the tax on consumption of electricity. Thus, it is clear that there is clear inconsistency between the Acts that have been repealed and the repealing Act of 2003. In these circumstances, in view of Section 20(2)(a) of the impugned Act, the exemption orders would cease to be valid on the coming into force of the new Act. Hence, the appellants cannot take advantage of Section 20(1) of the Act.In relation to argument No. 7, the High Court held that there being two types of consumers, viz., Low Tension consumers and High Tension consumers, tax being payable only on High Tension consumers and as tariff is collected on the permitted demand, levy thereof on maximum demand is permissible in lawWith regard to the High Tension connections, a twin tariff system is adopted, one rate as per KVA for each unit consumed, the other rate is on permitted demand as per KVA. It is pointed out that as per the definition of maximum demand, the same is determined on the energy delivered at a point of supply. Even though the tariff is collected on the permitted demand, the tax is levied only on the maximum demand, that is, on the energy consumed.A statement made by the learned Advocate General as to actually on what basis tax is collected was recorded in the followingNow, it is submitted by the learned Advocate General that the maximum demand is what is really consumed by them as against the permitted demand and therefore, the taxes are imposed only on the demand charges and it is based on actual consumption.One of the appellants before us in Civil Appeal arising out of SLP (C) No. 21689 of 2006 filed an application for raising additional grounds. Permission to raise additional grounds was granted by an order dated 12.02.2007. Pursuant thereto or in furtherance of such leave granted, the constitutionality of Section 14 of the 2003 Act was questioned.

Court's reasoning:
77. This leaves to the question as to whether the provisions of Section 14 of the 2003 Act should be read in such a manner so as to make it in consonance with Article 14 of the Constitution of India. The learned counsel would contend that Section 14 is loosely worded. We do nothave to give a new meaning which would amount to judicial legislation. We do not see any need therefor as thereby the taxation provision would be given a new dimension, by reason whereof not only exemption provisions will have to be understood in the context of sale of electricity but also consumption thereof.80. We are not unmindful of the fact that the 2003 Act was enacted not only to consolidate but also to rationalize the Act. Mr. Nariman takes us to various authorities in regard to the construction of a consolidating statute including IRC v. Hinchy [1960] 1 All ER 505, Beswick v. Beswick [1967] 2 All ER 1197, Dir. Of Public Prosecutions v. Schildkamp [1969] 3 All ER 1640], Maunsell v. Olins [1975] 1 All ER 16 and Farrell v. Alexander [1976] 2 All ER 721, to suggest that a consolidating statute is not meant to alter law. But, in these decisions, it has also been suggested that a consolidating statute may also be an amending act.Submission of Mr. Andhyarujina that this Court must read the words "unless a different intention appears" in(1) of Section 20 of the 2003 Act, in our opinion, is impermissible in law. We have rejected a similar contention of Mr. Nariman urging us to read down and apply the purported rule of purposive construction while construing Section 14 of the 2003 Act. We do not intend to apply different tests in the matter of construction of Section 20 of the 2003 Act. Omission of words in a particular statute may play an important role. The intention of the legislature must be, as is well known, gathered from the words used in the statute at the first instance and only when such a rule would give rise to anomalous situation, the court may take recourse to purposive construction. It is also a well settled principles of law that casus omissus cannot be supplied. [See J. Srinivasa Rao v. Govt. of A.P. and Anr. 2006 (13) SCALEIf the legislature has used different words, or has omitted certain words, in our opinion, the same cannot be read as containing the words "unless a different intention appears". It may be that the provisions of the 2003 Act are demonstrably different from the 1962 Act but we must assume that the legislature did so deliberately.The High Court, therefore, in our opinion, committed a manifest error in opining that both the provisions relate to the same scenario. Furthermore,(2) of Section 20 of the 2003 Act uses the expression "notwithstanding such repeal" and, thus, the same cannot be construed to be notwithstanding anything contained in(1) of Section 20 thereof.In our opinion, it would not be correct to contend that only because(2) of Section 20 of the 2003 Act refers to notification, the same would not mean that wherever the word notification has been issued,(1) thereof will have no application.We are, however, in a case of this nature, not really concerned with the question as to whether even an inchoate right can be subject matter of a saving clause. Such a question, in our opinion, does not arise for consideration herein.Referring to Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [(1979) 2 SCC 409] , this CourtAs for its strengths it was said: that the doctrine was not limited only to cases where there was some contractual relationship or otherlegal relationship between the parties. The principle would be applied even when the promise is intended to create legal relations or affect a legal relationship which would arise in future. The Government was held to be equally susceptible to the operation of the doctrine in whatever area or field the promise is made contractual, administrative or statutory. To put it in the words of the Court:The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. (SCC p. 442, paraWe, therefore, are of the opinion that doctrine of promissory estoppel also preserves a right. A right would be preserved when it is not expressly taken away but in fact has expressly been preserved.145. In view of the application of doctrine of promissory estoppel in the case of the appellants, their right is not destroyed and in that view of the matter although the Scheme under the impugned Act is different from the 1939 Act and the 1962 Act and furthermore in view of the phraseology used in Section 20(1) of the 2003 Act, right of the appellants cannot be said to have been destroyed. The legislature in fact has acknowledged that right to be existing in the appellants.From the definitions of aforementioned types of demand, it would appear that maximum demand in a month means the highest value of the energy delivered at the point of supply of the consumer during any consecutive thirty minutes in a month. It is, therefore, incorrect to contend that there does not exist any distinction between actual consumption and maximum demand. The High Court itself has noticed a distinction between Low Tension consumption and High Tension consumption. There indeed exists such a definition. Therefore, in our opinion, such a construction would not be correct.Our attention has been drawn to a simple bill, from a perusal whereof it appears that although permitted MD was 350 KVA, the recorded demand being 144 KVA, electricity tax was charged only on the basis of 144 KVA and not on the basis of 350 KVA. Keeping in view the fact that the maximum demand postulates something other than actual delivery of electricity, the question of imposition of any tax thereupon does not arise. The decision of this Court in M/s. Northern India Iron & Steel Co. (supra) did not assign any reason. The said decision did not take into consideration the provisions of Article 366 (12) of the Constitution of India or the effect of Entry 53 of List II of the Seventh Schedule of the Constitution of India. It has also not been taken into consideration that the State cannot impose tax only because the State Electricity Board would be entitled to levy tax on certain services. It would bear repetition to state that the concept of tariff and tax is different. Whereas tariff would include a list of charges, the tax must be on actual basis. It is also not the case nor can it be that imposition of tax on actual sale or consumption of electrical energy was impossible keeping in view of the particular fact situation. As noticed hereinbefore, two different meters are installed; one, for the purpose of actual consumption of electrical energy and another being a trivector, the same merely records the maximum demand.170. A decision, as is well known, is an authority for what it decides and not what can logically be deduced therefrom. A decision is not an authority on a point which has not been considered.