Karnataka High Court
The State Of Karnataka vs M/S Southern Ferro Ltd on 7 September, 2023
Author: S.R. Krishna Kumar
Bench: S.R. Krishna Kumar
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NC: 2023:KHC-D:10326-DB
WA No. 100223 of 2021
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 7TH DAY OF SEPTEMBER, 2023
PRESENT
THE HON'BLE MR JUSTICE S.R. KRISHNA KUMAR
AND
THE HON'BLE MR JUSTICE G BASAVARAJA
WRIT APPEAL NO. 100223 OF 2021 (GM-KEB)
BETWEEN:
1. THE STATE OF KARNATAKA
REPRESENTED BY ITS SECRETARY TO
GOVERNMENT DEPARTMENT OF ENERGY
VIKAS SOUDHA, DR. AMBEDKAR ROAD,
BENGALURU-560 001.
2. THE CHIEF ELECTRICAL INSPECTOR
TO GOVERNMENT OF KARNATAKA
NIRMANA BHAVAN 2ND FLOOR,
RAJAJINAGAR,
BENGALURU-560 010.
3. THE DY. CHIEF ELECTRICAL INSPECTOR
DHARWAD REGION, SANMATH MARG,
DHARWAD-580 008.
JAGADISH ...APPELLANTS
TR
Digitally signed (BY SRI.KESHAV REDDY, ADDL. ADV. GENERAL A/W
by JAGADISH T R
Date: 2023.12.15 SRI. PRAVEEN UPPAR, ADDL. GOVT. ADVOCATE)
16:43:02 +0530
AND:
1. M/S. SOUTHERN FERRO LTD.,
INDUSTRIAL ESTATE,
GOKUL ROAD, HUBLI REP. BY ITS
EXECUTIVE DIRECTOR,
SHRI. SANDEEP BIDASARIA,
S/O. SRI. MURARIAL BIDASARJA,
AGE: 59 YEARS,
RES: HUBBALLI-580030.
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WA No. 100223 of 2021
2. THE MANAGING DIRECTOR
HUBLI ELECTRICITY SUPPLY
COMPANY LIMITED., CORPORATE OFFICE,
NAVANAGAR, P,B ROAD,
HUBBALLI -580 025.
3. THE GENERAL MANAGER (TECHNICAL)
HESCOM, NAVANAGAR, P.B.ROAD,
HUBBALLI-580025.
4. THE EXECUTIVE ENGINEER (ELECTRICAL)
HESCOM, TABIB LAND,
HUBBALLI-580025.
5. THE ASSISTANT EXECUTIVE ENGINEER
ELECTRICAL, CITY SUB DIVISION 3,
HECOM, INDUSTRIAL ESTATE,
HUBBALLI.
...RESPONDENTS
(BY SRI.GURUDAS S.KANNUR, SENIOR COUNSEL FOR
SRI.N.G.RAALKAR, ADVOCATE FOR R1;
SRI.B.S.KAMATE, ADVOCATE FOR R2 TO R5)
THIS WRIT APPEAL IS FILED U/S.4 OF KARNATAKA HIGH COURT
ACT, 1961, PRAYING THIS HON'BLE COURT TO, A) CALL FOR THE
RECORDS; SET ASIDE THE JUDGMENT AND ORDER DATED 15.03.2021
PASSED BY THE LEARNED SINGLE JUDGE IN WRIT PETITION
NO.105054/2017(GM-KEB) BY ALLOWING THIS APPEAL; GRANT SUCH
OTHER AND FURTHER RELIEFS AS THIS HON'BLE COURT DEEMS FIT IN
THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF
JUSTICE AND EQUITY.
THIS WRIT APPEAL COMING ON FOR ORDERS, THIS DAY,
S.R.KRISHNA KUMAR J., DELEVERED THE FOLLOWING:
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NC: 2023:KHC-D:10326-DB
WA No. 100223 of 2021
JUDGMENT
This intra-court appeal by the State of Karnataka is directed against the impugned order dated 15.03.2021 passed in W.P.No.105054/2017, whereby the said petition filed by the 1st respondent - writ petitioner seeking quashing of the impugned Demand Note dated 24.04.2017 passed / issued by 5th respondent
- Assistant Executive Engineer (Ele.). HESCOM, demanding payment of Rs.94,47,534/- from the 1st respondent and other reliefs was allowed by the learned Single Judge.
2. The brief facts giving rise to the present appeal are as follows:-
The 1st respondent - writ petitioner is a registered public limited company running Steel Re-roller Mill and Mini Steel Plant at Industrial Estate, Hubballi. In addition to purchasing energy / electricity from HESCOM, the 1st respondent purchases energy / electricity every month from Open Access Source i.e., from persons other than the HESCOM / licencee and pays necessary electricity charges to the seller / energy generator, who supplies it to the 1st respondent through HESCOM. The Karnataka Electricity (Taxation on Consumption or Sale) Act, 1959 (for short 'the said -4- NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 Act of 1959') provides for levy of tax on consumption of electrical energy in the State of Karnataka and came into force on 01.07.1959. By Act No.31 of 2013, various provisions of the said Act of 1959 were amended w.e.f. 05.03.2013 so as to include sale of electrical energy and also to levy tax on such sales from licencees - ESCOMs as well as from non-licencees including Open Access Sources. In pursuance of the same, the Karnataka Electricity (Taxation on Consumption or Sale) Rules, 2014 were framed vide Notification dated 19.08.2014. Section 3(1) of the said Act of 1959 provided for levy and payment of Electricity Tax on advolorem basis to the State Government at 6% on the charges payable on electricity sold to or consumed by, any consumers (excluding arrears) when electricity is supplied by licencee or non-
licencee through licencee or otherwise. The proviso to Section 3(1) enjoined that when the consumer consumes electricity at concessional rate or free of charge, the consumer shall be liable to pay on the rate of charges of electricity levied by the licencee to other consumers, subject to certain exceptions. Section 3 underwent an amendment vide Act No.24 of 2018 w.e.f. 19.07.2018. In this context, it is relevant to state that since the subject matter involved in the writ petition / appeal relates to the -5- NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 impugned Demand note dated 24.04.2017 prior to the amendment in 2018, it is the unamended provisions that would be relevant and germane for adjudication of the present appeal.
2.1 It was the specific contention of the 1st respondent - writ petitioner that the proviso to Section 3(1) of the said Act of 1959, requiring payment of tax at the rate levied by licencees to other consumers was not applicable to the 1st respondent, inasmuch as it did not purchase electricity at either at a concessional rate or free of charge from the Open Access Source. It was contended that the 1st respondent purchased electricity at a fluctuating rate from the electricity exchange and the rate at which it purchased was not a concessional rate within the meaning of the proviso to Section 3(1) of the said Act of 1959 and consequently, the HESCOM was not justified in demanding payment of tax on the charges payable at the rate at which HESCOM had sold / supplied it to other consumers.
2.2 It was further contended that the 1st respondent was only liable to pay tax at 6% on the rate at which it purchased from the Open Access Source and not at the rate at which HESCOM was selling electricity to the 1st respondent; in other words, it was contended that the 1st respondent was purchasing electricity from -6- NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 both HESCOM as well as Open Access Source at different rates and it was liable to pay tax at 6% on the electricity charges of the respective rates at which it purchased from HESCOM and Open Access Source and not at a flat rate of 6% for purchase of electricity from both HESCOM and Open Access Source. It was therefore contended that the impugned Demand note was illegal, arbitrary and without jurisdiction or authority of law in addition to being contrary to Section 3 of the said Act of 1959 and the same was liable to be quashed.
2.3 The appellants - State filed its statement of objections opposing the petition inter alia contending that the rate at which the 1st respondent - writ petitioner from the Open Access Source was at a concessional rate which was lesser / lower than the rate at which it was purchasing from HESCOM and consequently, in view of the proviso contained in Section 3(1) of the said Act of 1959, HESCOM was fully justified in demanding payment of tax at a flat rate of 6% on the charges of electricity levied by it to other consumers. It was therefore contended that there was no merit in the petition and that the same was liable to be dismissed.
2.4 After hearing both sides, the learned Single Judge analysed the various provisions of the said Act of 1959 including -7- NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 Section 3 and its proviso and came to the conclusion that having regard to the aims and objects of the Act and its scheme coupled with the fact that the rate at which the 1st respondent purchased electricity from non-licencees / Open Access Source through the exchange and at fluctuating rates, the proviso appended to Section 3(1) of the said Act of 1959 was not applicable to the 1st respondent and consequently, the learned Single Judge quashed the impugned Demand Note and proceeded to allow the writ petition by passing the impugned order which is assailed in the present appeal.
3. Heard learned Additional Advocate General for the appellants - State and learned Senior counsel for the 1st respondent - writ petitioner as well as learned counsel for respondents - HESCOM and perused the material on record.
4. In addition to reiterating the various contentions urged in the appeal and referring to the material on record, learned AAG submitted that the learned Single Judge erred in allowing the petition by coming to the erroneous conclusion that the proviso to Section 3(1) of the said Act of 1959 was not applicable to the instant case. It was submitted that since the 1st respondent was -8- NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 purchasing electricity from the Open Access Source at a rate lower / lesser than the rate at which it purchased electricity from HESCOM, the Open Access Source rates are "concessional rates"
within the meaning of the proviso to Section 3(1) of the said Act of 1959, as a result of which, the 1st respondent would be liable to pay tax at the flat rate of 6% not on the rate at which it purchased from the Open Access Source but at the rate at which the licencee (HESCOM) supplied / sold electricity to other consumers.
4.1 It was submitted that the learned Single Judge failed to appreciate this aspect of the matter resulting in erroneous conclusion. It was also submitted that in the instant case, the proviso to Section 3(1) which was applicable to the 1st respondent had the effect of casting a liability upon it to pay tax at the rate at which HESCOM supplied / sold electricity to other consumers and consequently, the impugned order passed by the learned Single Judge deserves to be set aside. In support of his contentions, learned AAG relied upon the following judgments:-
1. Tahsildar Singh and another vs. State of U.P. - AIR 1959 SC 1012.
2. S.Sundaram Pillai and others vs. V.R. Pattabiraman and others - (1985) 1 SCC 591.-9-
NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021
3. J.K.Industries Ltd., and others vs. Chief Inspector of Factories and Biolers and others - (1996)6 SCC 665.
4. Kush Saigal and others vs. M.C.Mitter and others - (2000) 4 SCC 526.
5. Per contra, learned Senior counsel for the 1st respondent as well as learned counsel appearing for the HESCOM would support the impugned order and submit that there is no merit in the appeal and that the same is liable to be dismissed.
6. We have given our anxious consideration to the rival submissions and perused the material on record.
7. The dispute in controversy between the parties revolves around interpretation of the proviso to Section 3(1) of the said Act of 1959 prior to the same being amended vide Act No.24 of 2018 w.e.f. 19.07.2018; as stated supra, the impugned Demand Note was issued on 24.04.2017 and evidently, the aforesaid amendment to Section 3(1) would not apply to the facts of the instant case. According to the writ petitioner, the proviso to Section 3(1) would not apply, since he did not purchase electricity at a concessional rate or free of charge as contemplated in the proviso but had
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 purchased it under a contract entered into between him and a non- licencee electricity generator through the electricity / energy exchange. The said contention was repudiated by the appellants, who contended that the proviso was applicable to the writ petitioner and accordingly, they sought to uphold the impugned Demand note. After considering the rival contentions and analyzing the relevant statutory provisions, the learned Single Judge examined the aims and objects of the Act, in particular, the amendment vide Act No.31 of 2013 w.e.f. 05.03.2013 as well as the scheme of the Act and came to the conclusion that the proviso to Section 3(1) of the said Act of 1959 was not applicable by holding as under:-
" 8.The charging Section i.e., Section 3 of the Act reads as follows:
"3. Levy of tax on electricity charges etc.-
(1) Subject to the provisions of this Act, there shall be levied and paid to the State Government electricity tax on advolorem basis at six percent on the charges payable on electricity sold to or consumed by, any consumers (excluding arrears) when electricity is supplied by licensee or non-licensee through licensee or otherwise;
Provided that when the consumer consumes electricity at concessional rate or free of charge the consumer shall be liable to pay on the
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 rate of charges of electricity levied by the licenses to other consumers.
except,-
(i) the consumers under
agricultural (irrigation
pump sets upto and
inclusive of ten horse
power);
(ii) Bhagya Jyothi and
kutira jyothi categories
upto the extent of free
consumption allowed
by the State
Government from time
to time;
(iii) the consumers covered
under sub-section.
(2) Subject to the provisions of this
Act, there shall be levied and paid to the State Government by every non licensee electricity tax on all the units of electricity consumed by himself at such rates specified by the State Government, by notification, from time to time but not exceeding the rate specified below, namely:-
(a) electricity tax not exceeding 50 paise per unit on captive consumption;
(b) electricity tax not exceeding 25 paise per unit on auxiliary consumption in a generating station whether Captive Generating Plant or cogeneration plant or otherwise, for the auxiliary loads exceeding 50 Kilo Watts."
9. As could be seen from Section 3 of the Act, electricity tax is levied on advolorem basis at 6% on the charges payable on electricity sold to or consumed by any consumers when electricity supplied by licensee or a non-licensee through a licensee or otherwise. Thus, whenever electricity is
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 sold to a consumer or it is consumed by a consumer, electricity tax is attracted. The intent of the said Section is clear that whenever electricity is consumed by a consumer within the State of Karnataka, the consumer is bound to pay electricity tax on that on advolorem basis at the rate of 6% on the charges payable on the electricity sold or consumed.
10. A careful reading of Section 3 of the Act indicates that the tax of 6% is to be calculated on the charges payable on the electricity sold or charges payable onelectricity consumed by the consumers.
11. It is to be borne in mind that the Legislature was conscious of the fact that after the electricity reforms ushered in, it was open for a consumer of electricity to either purchase electricity from a licensee such as HESCOM or from the Open Access Source. It, therefore, categorically stated in Section 3 that the tax had to be paid at 6% on the charges payable on the electricity sold or the electricity charges payable on the electricity consumed.
12. This deliberate use of the expression 'charges payable on electricity sold to or consumed by any consumers' would indicate that the charges for the electricity sold and for the electricity consumed could be different.
13. The Legislature was conscious that electricity sold by the licensee could be at a lower rate and the electricity consumed by the consumer for the electricity supplied through the licensee could be at a higher rate or vice versa. In case, the electricity procured by the licensee from Open Access Source is costlier than the electricity supplied through the licensee, obviously, higher revenue would yield to the State. The corollary of this would also have to be given effect to. In other words, if a consumer is to pay electricity tax on charges higher than the one supplied by the licensee,
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 necessarily, whenever, the licensee procures through Open Access Source, electricity at a lower rate, the charges would have to be calculated on the rate at which the consumer had purchased the electricity.
14. If it was the intent of the State that irrespective of the rate at which the electricity was purchased by the consumer, the rate of tax would be on the charges payable by the consumer to the licensee, then the charging Section would have clearly stated so. In other words, the charging Section would have simply stated that there would be levied and paid to the State Government the electricity tax on advolorem basis at 6% on the charges payable on electricity sold to by the licensee. The fact that there is a clear distinction made between the electricity sold to and consumed by the consumers leads to an inescapable conclusion that the rate at which the electricity was purchased would be the basis for calculating the tax.
15. This is made further clear from the proviso to Section 3 of the Act, which reads as under:
"Provided that when the consumer consumes electricity at concessional rate or free of charge the consumer shall be liable to pay on the rate of charges of electricity levied by the licensee to other consumers."
16. As could be seen from the proviso, if the consumer consumed electricity at a concessional rate or for that matter, free of charge, then the consumer was bound to pay on the rate of charges of electricity levied by the licensee to other consumers. This indicates that if electricity is sold at a concessional rate, the consumer cannot take advantage of a lower rate and he would have to pay electricity tax at the rate at which the electricity is sold by the licensee to other consumers inthe normal course.
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17. Sub-section (2) of Section 3 of the Act also gives a clear indication that the source of electricity consumed by consumers would be the yardstick for determination of the electricity charges on the basis of which an advolorem rate have to be calculated. Sub- section (2) of Section 3 of the Act states that electricity tax at 50 paise per unit is payable by the non-licensee at a sum not exceeding 50 paise per unit on captive consumption and at the rate of 25 paise per unit on auxiliary consumption. In other words, if electricity is generated by the licensee by way of captive consumption of the electricity generated by captive generating plant or electricity is consumed by any electrical apparatus situated within the generating station for generating electricity, a tax at the rates not exceeding 50 paise and 25 paise per unit would have to be paid. It is to be noticed here that in case of either captive consumption or auxiliary consumption, the electricity would be generated by the consumer himself and in such an event, notwithstanding the fact that the electricity was not generated and supplied by the licensee, the consumer would still have to pay tax on consumption.
18. The principal requirement for the electricity tax, therefore, would be consumption of electricity. In other words, whenever electricity was consumed by a consumer, the consumer would become liable to pay electricity tax. The question that would follow from this is as to whether the State can tax consumption of electricity at the rate at which the consumer had not purchased the electricity.
19. Section 4 of the Act reads as under:
"4. Payment of electricity tax.- (1) Every licensee shall collect and pay to the State Government at the time and in the manner prescribed, the electricity tax payable under thisAct,-
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(a) on the electricity charges included in the bill issued by him to the consumer. The tax so payable shall be a first charge on the amounts recoverable by the supplier for the electricity supplied by him and shall be a debt due by himto the State Government:
Provided that where the licensee has beenunable to recover the amounts due to him for the electricity supplied by him he shall not be liable to pay tax in respect of the electricity so supplied;
(b) on the units of electricity supplied to consumers by non licensee through the licensee.
(2) A licensee may be granted a rebate of such amount, as may from time to time be determined by the State Government regard being had to the cost of collection of the electricity tax incurred by such licensee:
Provided that the amount of rebate shall not exceed two per cent of the electricity tax collected by the licensee.
(3) Every person who consumes electricity generated by himself, and or who supplies electricity free of charge or otherwise to any other person through his own system, shall pay, or collect and pay, as the case may be, to the State Government, at the time and in the manner prescribed, the electricity tax payable under section 3.
(4) When any consumer fails or neglects to pay at the time and in the manner prescribed, the amount of electricity tax due from him, the licensee or, as the case may be, the person supplying energy, may without prejudice to the right of the State Government to recover the amount under section 7, after giving not less than seven clear days' notice in writing to such person, cut off supply of energy to such person; and he may, for that purpose, exercise the power conferred on a licensee by sub-section (1) of section 56 of the Electricity Act, 2003 (Central Act 36 of 2003), for the recovery of any charge or sum due in respect of energy supplied by him.
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 (5) Nothing in this section shall apply,-
(i) to any person who generates energy for the purpose of supplying it for the use of vehicles or vessels;
(ii) to the consumption of energy generated by means of generators not exceeding ten kilowatts in capacity."
20. As could be seen from Clause (a) of Sub- section (1) of Section 4 of the Act, licensee is required to collect and pay to the State Government the electricity tax payable under the Act on the electricity charges included in the bill issued by him to the consumers. Thus, Clause (a) of Sub-section (1) of Section 4 of the Act would be applicable in respect of electricity sold by the license.
21. Clause (b) of Sub-section (1) of Section 4 of the Act clearly states that the licensee shall collect and pay to the State Government the electricity tax payable on the units of electricity supplied to consumer by a non- licensee through a licensee. Thus, in respect of electricity supplied to consumers by a non-licensee through a licensee, a clear distinction is made on the manner in which the electricity tax is to be paid.
22. In respect of electricity supplied to the consumers by a non-licensee through a licensee, the electricity tax payable is on the units of the electricity supplied. Obviously, the unit of electricity supplied is the indicator of the quantum of electricity consumed and since the electricity was procured through Open Access Source, electricity tax can be calculated only on the rates at which the electricity was procured from the Open Access Source.
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23. It is not in dispute that electricity that is purchased through Open Access Source is not a purchase which is shrouded in mystery. In fact, it is the admitted case of both parties that electricity is purchased through an electricity exchange where the consumer makes a purchase on the previous day at the rate prevailing in the exchange and at the end of the month, the units of electricity sold by the consumers is intimated to the State Load Dispatching Centre. It can, therefore, be easily gathered as to the quantum of electricity purchased by the consumer and the rate at which the consumer had purchased the electricity. It is quite obvious that electricity tax would have to be levied and collected at a particular rate at which the consumers had purchased the electricity from the electricity exchange.
24. If the argument of the State is accepted that electricity tax is payable at the rate at which the licensee sell the electricity to consumers, it would fundamentally defeat the very purpose for which the electricity reforms were initiated which enabled the consumers to procure electricity from private purchasers and through Open Access Source. It is to be borne in mind that the person who sells the electricity would necessarily pay the wheeling and access charges to the licensee and the seller of electricity would be basically using the infrastructure of the licensee and paying for the distribution. The licensee, therefore, would have no preferential right.
25. Learned Additional Advocate General vehemently contended that the validity of Sections 3 and 4 of the Act had been upheld in W.P.No.14434/2016 and connected matters disposed of on 04.10.2016 and therefore, the petitioner could not challenge the demand notice.
26. It is to be stated here that the petitioner
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 admits that it is liable to pay tax under Section 3 of the Act and since, the liability of the petitioner to pay tax is admitted, reliance placed by learned Additional Advocate General on the judgment which upheld the validity of Section 3 of the Act would not be of any sustenance.
27. I am, therefore, of the view that the demand made by HESCOM by computing the tax at the rate at which it was selling electricity to its consumers cannot be the basis for levying and collecting the electricity tax. Annexure-A is, therefore, quashed. HESCOM shall now calculate the electricity tax at the rate at which the petitioner had purchased the electricity from Open Access Source and issue a revised demand within a period of two weeks from the date of receipt of a certified copy of this order."
8. As can be seen from the impugned order, the learned Single Judge noticed that the deliberate use of the expression "charges payable on electricity sold or consumed by any consumer" would indicate that the charges for electricity sold and for electricity consumed could be different; further, if it was the intent of the State that irrespective of the rate at which electricity was purchased by the consumer, the rate of tax would be on the charges payable by the consumer to the licencee, then the charging section would have clearly stated that there would be levied and paid tax on advolorem basis at 6% on the charges payable on electricity sold by HESCOM and the fact that there was
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 a clear distinction made between electricity sold to consumers and consumed by consumers leads to the conclusion that the rate at which electricity was purchased would be the basis for calculating tax. The learned Single Judge also held that the expression "concessional rate" contained in the proviso to Section 3(1) of the said Act of 1959, cannot be construed or interpreted so as to include electricity purchased by the writ petitioner through Open Access Source from non-licencees other than HESCOM and consequently, held that the proviso was not applicable to the writ petitioner.
9. A perusal of Section 3(1) of the said Act of 1959 will clearly indicate that while the main provision is applicable to consumers who purchase electricity from HESCOM or from Open Access Source, albeit at different rates, the proviso merely refers to a small category of consumers, who consume electricity at concessional / discounted rates or free of charge which clearly indicates that electricity at the said concessional / discounted rates or free of charge would necessarily have to be supplied by HESCOM and not by the Open Access Source; the expression, 'concessional rate or free of charge' cannot obviously refer to
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 supply by Open Access Source, since it is inconceivable that a private electricity generator would sell / supply electricity at a concessional rate or free of charge; further, 'concession' means a rate lower than the rate ordinarily quoted by HESCOM and cannot be construed, treated or equated with the rate at which supply is made by the Open Access Source; in other words, the proviso to Section 3(1) of the said Act of 1959 obviously refers to those consumers to whom under some Government scheme, programme, policy, etc., the licensees/ HESCOM supplies electricity by giving some concession / discount or free of cost as the case may be; insofar as such consumers are concerned, who would be entitled to the benefit of concessional / discounted rates of supply of electricity or free of charge, they would however be liable to pay electricity tax at 6% p.a which is the rate at which other consumers who are not covered by the said concessional / discounted rates or free of charge and purchase electricity from HESCOM at the prevailing rate to whom, no concession is given or free of charge by HESCOM. It is therefore clear that the learned Single Judge was fully justified in coming to the conclusion that the impugned Demand note was illegal, arbitrary and without
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 jurisdiction or authority of law and the same deserves to be quashed.
10. In our considered opinion, the reasons assigned by the learned Single Judge and the findings recorded by him are correct and proper and the same do not warrant interference in the present appeal. In this context, it is relevant to extract Section 3(1) of the said Act of 1959 prior to amendment w.e.f. 19.07.2018 and after amendment w.e.f. 19.07.2018 as under:-
Amended vide Act No.31 of 2013 Amended vide Act No. 24 of 2018 w.e.f.05.03.2013 w.e.f.19.07.2018
3. Levy of tax on (electricity 3. Levy of tax on (electricity charges etc.,) [(1) ] Subject to the charges etc.,) [(1) ] Subject to the provisions of this Act, there shall provisions of this Act, there shall be levied and paid to the State be levied and paid to the State Government electricity tax on Government electricity tax on advolorem basis at six percent on advolorem basis at six percent on the charges payable on electricity the charges payable on electricity sold to or consumed by, any sold to or consumed by, any consumers (excluding arrears) consumers (excluding arrears) when electricity is supplied by when electricity is supplied by licensee or non-licensee through licensee or non-licensee through licensee or otherwise. licensee or otherwise.
Provided that when the Provided that when any person,- consumer consumes electricity at (a) consumes electricity generated concessional rate or free charge by himself, the person shall be the consumer shall be liable to pay liable to pay the electricity tax on on the rate of charges of electricity the rate of charges of electricity levied by the licenses to other levied by the licensee to other consumers. similar category of consumers; Except,- (b) supplies at the rate less than
(i) the consumers under the rate of charges of electricity agricultural (irrigation pump sets up levied by the licensee to other to and inclusive of ten horse consumers or free of cost, the
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 power) consumer shall be liable to pay the
(ii) Bhagya Jyothi and Kutira jyothi electricity tax on the rate of categories up to the extent of free charges of electricity levied by the consumption allowed by the State licensee to other similar category Government from time to time; and of consumers.
(iii) the consumers covered under (i) the consumers under sub-section. agricultural (irrigation pump sets upto and inclusive of ten horse power)
(ii) Bhagya Jyothi and Kutira jyothi categories up to the extent of free consumption allowed by the State Government from time to time; and
(iii) the consumers covered under sub-section.
11. A perusal of the proviso to Section 3(1) of the said Act of 1959 before and after the amendment in 2018 will clearly indicate that the rate of tax at 6% p.a would not be applicable to consumers, who purchased electricity prior to 2018 from the Open Access Source at a rate less than the rate at which HESCOM supplied electricity to consumers; the new / fresh liability of consumers to pay similar rate of tax of 6% p.a on purchase of electricity at a rate less than HESCOM rates was created for the first time vide Act No.24 of 2018 w.e.f.19.07.2018 and the said new / fresh liability which creates corresponding new / fresh vested right in favor of the appellants to charge tax at 6% p.a on consumers purchasing at the rates lower than HESCOM rates cannot be said
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 to be retrospective so as to affect consumers and consumption of electricity prior to 19.07.2018; to put it differently, the undisputed fact that the appellants themselves thought it expedient and necessary to amend the proviso to Section 3(1) so as to create a liability upon consumers from Open Access Sources to pay tax on the electricity charges at HESCOM rates subsequent to 19.07.2018 is a clear pointer to the fact that the unamended proviso prior to 19.07.2018 did not bring within its scope or ambit consumers, who purchased from Open Access Sources at rates different from HESCOM rates; in the instant case, it is an undisputed fact that the impugned Demand Note was issued on 24.04.2017 and evidently, the amendment to the proviso to Section 3(1) w.e.f 19.07.2018 was not applicable to the writ petitioner, who consequently could not be called upon to pay tax at 6% p.a on HESCOM rates and not at the rates purchased by it. Viewed from this angle also, we are of the view that the learned Single Judge has come to the correct conclusion that the claim of the writ petitioner deserves to be upheld.
12. Insofar as the various judgments relied upon by the appellants are concerned, a perusal of the same will indicate that
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NC: 2023:KHC-D:10326-DB WA No. 100223 of 2021 they relate to interpretation and effect of a proviso in a statutory provision; as stated supra, we have already come to the conclusion that the proviso to Section 3(1) of the said Act of 1959 is not applicable to the 1st respondent - writ petitioner as well as to the facts of the instant case and consequently, the principles enunciated in the said judgments cannot be made applicable to the case on hand and as such, the same are not dealt with elaborately for the purpose of the present appeal.
13. In the result, we do not find any merit in the appeal and the same is accordingly dismissed.
Sd/-
JUDGE Sd/-
JUDGE Srl.