1961 JTR(SC) 352
1963 AIR(SC) 414 ; 1962 SCD 340 ; 1962 2 SCJ 145 ; 1962 Supp1 SCR 282 ; 1963 KHC 493
SUPREME COURT OF INDIA
31st October, 1961.
B.P. SINHA, C.J.I., J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH AND J.R. MUDHOLKAR, JJ.
Jiyajeerao Cotton Mills Ltd., Birlanagar, Gwalior, Appellant
Versus
State of M.P., Respondent.
Civil Appeal No. 582 of 1960.
Advocates appeared
Mr. A. V. Viswanatha Sastri, Senior Advocate (M/s. Rameshwar Nath, S. N. Andley and P. L. Vohra, Advocates of M/s. Rajinder Narain and Co. with him, for Appellant; Mr. B. Sen, Senior Advocate M/s. B. K B. Naidu and I. N. Shroff, Advocates, with him), for Respondent.
A levy on electricity consumed by the producer is a tax on consumption, not an excise duty on production. The term 'consumption' in the Constitution's legislative entries must be interpreted broadly to grant the widest possible power to the legislature.
Act
Referred
:CENTRAL PROVINCES AND BERAR ELECTRICITY DUTY ACT: S.2(d), S.3, S.2(a)
CONSTITUTION OF INDIA
: Sch.7 List.1 Entry.84, Sch.7 List.2 Entry.53
GOVERNMENT OF INDIA ACT: Sch.7 List.2 Item.48(b)
(A) Central Provinces and Berar Electricity Duty Act, 1944 - Section 3 - Constitution of India - Entry 84 List I and Entry 53 List II - Levy of electricity duty on self-consumption - Whether a producer who consumes electricity generated by himself is liable to pay duty - The charging section makes a producer liable for units consumed by himself; a producer consuming his own energy is a 'consumer' as per the definitions in the Act - The levy falls within the prescribed rates for electrical energy supplied for consumption. (Para 5)
(B) Constitution of India - Entry 84 List I and Entry 53 List II - Duty of excise vs. Tax on consumption - Whether levy on electricity consumed by the producer is a duty of excise - The taxable event for a duty of excise is 'manufacture' or 'production', whereas here the taxable event is 'consumption' - A producer is not liable for duty upon generation but only upon sale or consumption - Such a levy is not a duty of excise falling under Entry 84 List I. (Para 6)
(C) Interpretation of Legislative Entries - Meaning of 'consumption' - The term 'consumption' in Entry 53 List II must be interpreted broadly to mean 'use-up' or 'spend' - It cannot be restricted to the narrow meaning found in specific electricity statutes which might exclude producers - Language used in legislative entries must be interpreted in a broad way to give the widest amplitude of power to the Legislature and not in a narrow or pedantic sense. (Para 6)
Facts of the case:
A textile mill that generates electricity for its own use and does not sell it was levied electricity duty by the State Government. The mill challenged the validity of the levy on two grounds: first, that the Act did not prescribe rates for electricity consumed by the producer himself; and second, that if the Act permitted such a levy, it was ultra vires the Constitution as it was in substance a duty of excise, which is the exclusive competence of Parliament.
Findings of Court:
The court found that under the charging section and the definitions provided in the Act, a producer consuming the electricity generated by him is a consumer and is therefore liable to pay the duty. Furthermore, the court held that the levy is based on consumption rather than production, meaning it does not constitute an excise duty.
Issues: Whether a producer of electrical energy is liable to pay duty on energy consumed by himself under the Act, and whether such a levy is ultra vires the Constitution as a duty of excise.
Ratio Decidendi: A producer who consumes the electricity generated by him is a consumer under the Act. The taxable event for excise duty is manufacture or production, whereas the taxable event here is consumption. The term 'consumption' in the legislative entries of the Constitution must be interpreted broadly to include self-consumption to ensure the widest possible power for the State Legislature.
Result: Appeal dismissed.
(B) Constitution of India - Entry 84 List I and Entry 53 List II - Duty of excise vs. Tax on consumption - Whether levy on electricity consumed by the producer is a duty of excise - The taxable event for a duty of excise is 'manufacture' or 'production', whereas here the taxable event is 'consumption' - A producer is not liable for duty upon generation but only upon sale or consumption - Such a levy is not a duty of excise falling under Entry 84 List I. (Para 6)
(C) Interpretation of Legislative Entries - Meaning of 'consumption' - The term 'consumption' in Entry 53 List II must be interpreted broadly to mean 'use-up' or 'spend' - It cannot be restricted to the narrow meaning found in specific electricity statutes which might exclude producers - Language used in legislative entries must be interpreted in a broad way to give the widest amplitude of power to the Legislature and not in a narrow or pedantic sense. (Para 6)
Facts of the case:
A textile mill that generates electricity for its own use and does not sell it was levied electricity duty by the State Government. The mill challenged the validity of the levy on two grounds: first, that the Act did not prescribe rates for electricity consumed by the producer himself; and second, that if the Act permitted such a levy, it was ultra vires the Constitution as it was in substance a duty of excise, which is the exclusive competence of Parliament.
Findings of Court:
The court found that under the charging section and the definitions provided in the Act, a producer consuming the electricity generated by him is a consumer and is therefore liable to pay the duty. Furthermore, the court held that the levy is based on consumption rather than production, meaning it does not constitute an excise duty.
Issues: Whether a producer of electrical energy is liable to pay duty on energy consumed by himself under the Act, and whether such a levy is ultra vires the Constitution as a duty of excise.
Ratio Decidendi: A producer who consumes the electricity generated by him is a consumer under the Act. The taxable event for excise duty is manufacture or production, whereas the taxable event here is consumption. The term 'consumption' in the legislative entries of the Constitution must be interpreted broadly to include self-consumption to ensure the widest possible power for the State Legislature.
Result: Appeal dismissed.
A.V.VISHWANATHA SASTRI, B.K.B.Naidu, B.SEN, I.M.SHROFF, P.L.VOHRA, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY
Judgment:
MUDHOLKAR, J. : This is an appeal on a certificate of fitness granted by the High Court of Madhya Pradesh under Art. 133(1)(a) of the Constitution.
2. The appellant is a textile mill at Gwalior in Madhya Pradesh. It generates electricity for the purpose of running its mills and for other purposes connected therewith. It does not sell electrical energy to any person.
3. Under the provisions of the CENTRAL PROVINCES AND BERAR ELECTRICITY DUTY ACT , 1944 (No. X of 1949) as amended by the Madhya Pradesh Taxation Laws Amendment Act, 1956 (Act No. VII of 1956) the Government of Madhya Pradesh levied upon the appellant electricity duty amounting to Rs. 2,78,417 for a certain period. The appellant paid it under compulsion and thereafter preferred a writ petition to the High Court of Madhya Pradesh under Art. 226 of the Constitution in which it challenged the validity of the levy on two grounds. The first ground was that upon a proper construction of S. 3 of the C.P. & Berar Electricity Duty Act, 1949 as amended by the Madhya Pradesh Taxation Laws Amendment Act, 1956 the appellant would not be liable to pay any duty at all. The second ground was that if the Act permitted the levy of duly on electricity consumed by the producer himself it was ultra vires the Constitution because in substance it would be a duty of excise which can be levied only by Parliament under Entry 84 of List I and that even if it was not excise duty it was beyond the competence of the Madhya Pradesh Legislature to levy it in the absence of any appropriate entry in List II. The petition was summarily rejected by the High Court, but upon an application made by the appellant it granted to it certificate of fitness, as already stated.
4. Mr. Viswanatha Sastri has reiterated before us the same grounds which were urged in the High Court.
5. For the purpose of appreciating the first ground it would be useful to reproduce in terms of S. 3 of the Act. The section runs thus:
"Levy of duty on sale or consumption of electrical energy - Subject to the exceptions specified in S. 3-A every distributor of electrical energy and every producer shall pay every month to the State Government at the prescribed time and in the prescribed manner a duty calculated at the rates specified in the Table below on the units of electrical energy sold or supplied to a consumer or consumed by himself or his employees during the preceding month.
Rates of Duty
(i) Electrical energy supplied for consumption for lights, fans or any other appliances normally connected to a lighting circuit 6 no per unit of energy.
(ii) Electrical energy supplied for purposes other than those specified in item (i) above 1 nP per unit of energy.
This is the charging section. It is not disputed by Mr. Sastri that under this provision a producer of electrical energy is made liable to pay duty for the units of electrical energy consumed by himself. He, however, contends that rates of duty have been prescribed in the Table below S. 3 only with respect to electrical energy supplied for consumption" to others and that no rates have been prescribed with respect to electrical energy consumed by the producer himself. Section 2(a) of the Act defines "consumer". The definition, so far as relevant, runs thus :
"Consumer" means any person who consumes electrical energy sold or supplied by a distributor of electrical energy or a producer."
Producer as defined in S.2(d-1) of the Act means a person who generates electrical energy at a voltage exceeding hundred volts for his own consumption or supplying to others." If we read the two definitions together omitting the non-essentials, consumer would include "any person who consumes electrical energy supplied by a person who generates electrical energy for his own consumption." Under S. 3 a person who generates electrical energy over hundred volts for his own consumption is liable to pay duty on the units of electrical energy consumed by himself. A producer consuming the electrical energy generated by him is also a consumer, that is to say, he is a person who consumes electrical energy supplied by himself. The Table prescribes rates of duty payable with respect to electrical energy supplied for consumption and, therefore, the levy on the appellant falls squarely within the Table under S. 3 of the Act and Mr. Viswanatha Sastri s argument is devoid of substance.
6. It is difficult to see the levy of duty upon consumption of electrical energy can be regarded as duty of excise falling within Entry 84 of List 1. Under that Entry what is permitted to Parliament is levy of duty of excise on manufacture or production of goods (other than those excepted expressly by that entry). The Taxable event faith respect to a duty of excise is "manufacture" or production. Here the taxable event is not production or generation of electrical energy but its consumption. If a producer generates electrical energy and stores it up, he would not be required to pay any duty under the Act. It is only when he sells it or consumes it that he would be rendered liable to pay the duty prescribed by the Act. The Central Provinces and Berar Electricity Act was enacted under Entry 48-B of List 11 of the Government of India Act, 1935. The relevant portion of that Entry read thus:
"Taxes on the consumption or sale of electricity......"
Entry 53 of List II of the Constitution is to the same effect. The argument of Mr. Sastri is that the word "consumption" should be accorded the meaning which it had under the various electricity Acts, including the Indian Electricity Act 1910. Under that Act and under the various Provincial and State Acts consumption of electricity means, according to him, consumption by persons other than producers and that both in the Government of India Act and under the Constitution the word consumption must be deemed to have been used in the same sense. The Acts in question deal only with a certain aspect of the topic "electricity , and not with all of them. Therefore, in those Acts the word "consumption" may have a limited meaning, as pointed out by learned counsel. But the word "consumption" has a wider meaning. It means also "use- up", "spend" etc. The mere fact that a series of laws were concerned only with a certain kind of use of electricity, that is consumption of electricity by persons other than the producer cannot justify the conclusion that the British Parliament in using the word "consumption" in Entry 48-B and the Constituent Assembly in Entry 53 of List II wanted to limit the meaning of "consumption" in the same way. The language used en the legislative entries in the Constitution must be interpreted in a broad way so as to give the widest amplitude of power to the Legislature to legislate and not in a narrow and pedantic sense. We cannot, therefore, accept either of the two grounds urged by Mr. Viswanatha Sastri challenging the vires of the Act.
7. The appeal fails and is dismissed with costs.
Appeal dismissed.
For Citation : AIR 1963 SC 414