Madras High Court
Tvl. Ayyappan Textiles Limited, Rep. By ... vs The State Of Tamil Nadu, Rep. By The ... on 13 July, 2006
Equivalent citations: (2006)3MLJ1001
Author: M. Karpagavinayagam
Bench: M. Karpagavinayagam, S.R. Singharavelu
JUDGMENT M. Karpagavinayagam, J.
Page 2426
1. The validity of Section 3-A of the Tamil Nadu Electricity (Taxation on Consumption) Act, 1962, as amended by Tamil Nadu Act 32 of 1991, had been questioned in a batch of writ petitions before a learned single Judge.
2. By a common order dated 21.10.2003, the learned single Judge upheld the validity of the impugned Act, namely, Act 32 of 1991, and dismissed the batch of writ petitions.
3. Challenging the same, all these Writ Appeals have been filed by the appellants. The connected Writ Petitions, which were not listed for disposal before the learned single Judge, are also listed now, along with these Writ Appeals.
4. Section 3 of the parent Act 1962 provides for levy of tax on consumption of electrical energy. By the impugned enactment, namely, Act 32 of 1991, dated 01.10.1991, Section 3-A has been introduced, providing for levy and collection of additional tax, quantified as a percentage of the price of energy consumed. This is under challenge before this Division Bench.
5. The challenge to the above provision is broadly based on three points, which are as follows:
(i) From 1979, the price of electrical energy has been fixed by the Government by merging the erstwhile tax and there has been no separate levy of tax on electricity consumption. Therefore, there cannot be a levy of additional tax on such electricity consumption. In other words, unless there is a liability for payment of the main tax, there cannot be an additional tax.
(ii) Assuming the price fixed for electrical energy by the Government includes a tax component, the additional tax to be levied under Section 3-A Page 2427 cannot be on the entirety of the tariff fixed by the Government, but should be on such amount, excluding the tax component.
(iii) The impugned provision is vague and ambiguous. Therefore, it should be held as void and unenforceable.
6. On these points, various learned Senior Counsel, appearing for the appellants/petitioners, would make elaborate submissions.
7. On behalf of the appellants/petitioners, the following authorities have been cited:
(i) (H.R. Banthia v. Union of India) ;
(ii) (Murarilal Mahabir Prasad v. B.R. Vad) ;
(iii) (The Commissioner of Income-Tax, Lucknow. v. Sh. Madho Pd. Jatia) ;
(iv) (Khandelwal Metal & Engineering Works v. Union of India) ;
(v) (Kartar Singh v. State of Punjab) ;
(vi) 1997 WRIT L.R. 201 (Navbharath Ferro Alloys Ltd., Madras v. State of Tamil Nadu) ;
(vii) (Mathuram Agrawal v. State of Madhya Pradesh) ;
(viii) (State of Punjab v. Nestle India Ltd.); and
(ix) 2004 (10) Supreme Court Cases 200 (Rakesh Chandra Narayan v. State of Bihar).
8. Justifying the order of the learned single Judge, Mr. N.R.Chandran, learned Advocate General, appearing for the Government, and, Mr. R.Muthukumarasamy, learned Additional Advocate General, appearing for the Board, would refute the submissions made by the learned Senior Counsel for the appellants/petitioners and contend that the impugned Act, namely, Act 32 of 1991 is legally valid and enforceable.
9. On behalf of the respondents, namely, the Government and the Board, the following decisions have been cited:
(i) (Nand Lal v. State of Haryana) ;
(ii) 1993 Supp (2) Supreme Court Cases 674 (Polaki Motors v. State of Orissa) ;
Page 2428
(iii) (Godfrey Phillips India Ltd. v. State of U.P.) ; and
(iv) (Gujarat Ambuja Cements Ltd. v. Union of India).
10. We have heard the rival contentions, made on either side, and given our thoughtful consideration to the same.
11. Before dealing with the contentions raised by the learned Senior Counsel for the appellants/petitioners, it is necessary to point out that a taxation law, in order to be valid, should be made by a competent legislature, dealing with the matter, within its sphere.
12. The legislative entries in List I and II provide for the power of Parliament and the State Legislatures respectively, to deal with various taxation matters. It cannot be debated that the law in question, namely, Tamil Nadu Act 32 of 1991, seeking to levy additional tax on consumption of electricity is a law relatable to Entry 53 to List II of VII Schedule to the Constitution and hence it is within the legislative competence of the State.
13. Section 3-A was inserted by Tamil Nadu Electricity (Taxation on Consumption) Act, 1991, (Act 32 of 1991). Act 32 of 1991 received the assent of the Governor and it came into force with effect from 01.10.1991. In the Writ Petitions, challenge was made to the levy of additional tax on the consumption of energy in terms of Section 3-A, seeking for invalidation such section, introduced by Act 32 of 1991, and a consequent prayer has been made, seeking for refund of tax, collected from each one of the petitioners.
14. Section 3-A, which is impugned, reads thus:
3-A Levy of Additional Tax on consumption of energy:
(1) Save as otherwise provided in Sub-section (1) of Section 3, there shall be levied and paid to the Government every month, an additional tax on the consumption of energy calculated at the rate of four per centum of the price of energy consumed by the consumer:
Provided that no additional tax shall be levied under this sub section -
(a) On the energy consumed by any person for domestic connections including hut connections or for agricultural purposes; or
(b) On the energy consumed by any person (other than a licensee) who consumes energy generated by himself. (2) The additional tax under Sub-section (1) shall be levied in addition to any tax payable on the consumption of energy levied and collected under Sub-section (1) of Section 3. (3) The provisions of this Act shall apply in relation to the addition to the additional tax payable under Sub-section (1) as they apply in relation to the tax payable under Sub-section (1) of Section 3.
Page 2429
15. A perusal of the above section would indicate that the Government can impose a levy of additional tax on consumption of energy calculated at the rate of four per centum of the price of energy consumed by the consumer. However, there should be no additional tax on the energy consumed by any person for domestic connection, including hut connections or for agricultural purposes, so also, the energy generated and consumed by the consumers is not subject to additional tax. Sub-section (3) makes it clear that Section 3-A shall apply in relation to the addition to the additional tax payable under Sub-section (1) of Section 3.
16. Let us now deal with the various contentions, raised by the learned Senior Counsel for the appellants/petitioners.
17. The first contention is that there cannot be an additional tax, without a liability relating to the main tax.
18. According to the learned Senior Counsel appearing for the appellants, by G.O.Ms. No. 787, PWD, dated 30.04.1979, the State Government, by way of simplification and rationalisation of tariff structure, merged all duties or taxes, being additional levies, such as surcharge, metropolitan levy and electricity tax wherever applicable, depending upon the class of consumers, and also the Central Excise surcharge. When the tax has already been merged by virtue of the above G.O. under the policy of simplification and rationalisation, it is not open to the Government to levy additional tax, as the Government has no authority to levy the said additional tax under Section 3-A. In other words, it is submitted that when there is no levy of tax under Section 3 of Tamil Nadu Electricity (Taxation on Consumption) Act, 1962, there cannot be any question of levy of additional tax under Section 3-A. After merger, there being no identity of tax levied under Section 3, there could be no levy of additional tax under Section 3-A.
19. In reply, it is contended by Mr. N.R.Chandran, learned Advocate General, appearing for the State, that Section 3-A of the Act is an independent provision, which operates on its own strength and it is well within the legislative competence of the State Legislature. Since Section 3-A will operate independently, there could be a levy of additional tax under the said Section. The rate of levy has been increased and, as such, the earlier merger of tax, which was leviable under Section 3, has no consequence.
20. A careful reading of Section 3-A, which is the impugned provision, would make it clear that additional tax is an independent levy, which is payable as a percentage of the price paid for the energy. The 'price of energy' has been defined in Section 2(9) of the Tamil Nadu Electricity (Taxation on Consumption) Act, 1962, which reads as follows:
Price of energy" means the money consideration paid by a consumer to a licensee for the energy supplied by the licensee and in cases where a person (other than a licensee) consumes energy generated by himself or where a licensee consumes energy whether generated by himself or supplied to him or where a person (whether a licensee or other than a licensee) supplies energy to any other person free of charge or at a concessional rate (other than tariff concession), the price at the highest Page 2430 tariff at which energy is supplied to any other similar consumer in the locality, but does not include -
(i) meter charges ;
(ii) interest on delayed payments ;
(iii) fuel surcharge ; and
(iv)fuse-off call charges and reconnection charges.
21. The above provision would make it clear that 'price of energy' means the consideration paid by a consumer to a licensee for the energy supplied, excluding the four components mentioned in the said provision. The said provision has come for consideration before a Division Bench. The question before the Division Bench was, whether the tariff, if changed under the Tamil Nadu Revision of Tariff on Supply of Electrical Energy Act, 1978, from time to time and including in the price of energy, the energy tax payable can be considered to be the money consideration paid by a consumer to the licensee ? The said Division Bench has ultimately held that the price of energy will mean the total consideration paid for energy, which includes tax. This is reported in 1997 WRIT L.R.201, Navbharath Ferro Alloys Ltd., Madras-6 and Ors. v. The State of Tamil Nadu, rep. by the Secretary to Government, PWD (Electricity) Madras-9. The relevant portion of the said judgment is as follows:
5. ... Whatever may be the contents of the tariff, as long as it answers the requirement of the definition of price of energy as meaning, the money consideration paid by a consumer to a licensee, excluding items (i) to (iv) of Clause (9) of Section 2 of the Tamil Nadu Act 4 of 1962, would be the price of energy. Therefore, we are of the view that it is not possible to accede to the contention of the petitioner that in the tariff revised by G.O.Ms. No. 787, dated 30.4.1979, the tax payable on the tariff as it stood prior to 1.5.1979 should be excluded for the purpose of determining the energy tax, because the said tax payable on the tariff has been made as part and parcel of the price or the money consideration payable by the energy consumer to the licensee.
22. Reliance has been placed by the appellants/petitioners upon the judgment of the Supreme Court in Ashok Service Centre and Anr. v. State of Orissa 1983 Vol. 53 STC (SC) 1. That was a case where the Orissa Legislature had passed a sales tax law, which was followed by another separate law, providing for levy of additional sales tax. The additional sales tax law was passed in the year 1975. Later, it was amended in the year 1979, providing for levy and collection of additional sales tax on such dealers, whose turnover was more than Rs. 50,000/- per annum.
23. Under the Sales Tax Act, the levy of sales tax was to be on the taxable turnover and on a single point in view of Sections 5 and 8 of the said Act. The stand of the Government with reference to Additional Sales Tax Act in that case was that the levy of additional sales tax was to be on the gross turnover and as a multipoint levy and that Sections 5 and 8 of the parent Act would not apply to additional sales tax.
Page 2431
24. The Supreme Court, while dealing with the said issue in the above case, held that in view of Section 3(2) of the parent Act, all the provisions of the said Act would apply to the Additional Sales Tax Act also, which would include Sections 5 and 8. While holding so, the Supreme Court observed that additional sales tax could be levied only as a single point levy and not as a multi-point levy.
25. The said finding was given by the Supreme Court, having regard to the wordings of the provisions to the effect that the liability to pay additional sales tax under the Additional Sales Tax Act would be co-extensive with the liability to pay sales tax under the parent Act. Consequently, the Supreme Court held that if there is no liability to pay sales tax under the parent Act, there can be no liability to pay additional sales tax, under the new Act.
26. The above judgment of the Supreme Court would not apply to the present case, where Section 3-A, which is impugned, provides for independent levy, as indicated above. In this context, it is also appropriate to point out that after the above judgment of the Supreme Court, the Orissa Additional Sales Tax Act was amended, to provide for a multipoint levy on the gross turnover, by excluding the operation of Sections 4, 5 and 8 of the main Act. When the said amendment was challenged, the Supreme Court upheld the same in Polaki Motors v. State of Orissa 1993 Supp (2) Supreme Court Cases 674. By virtue of the said amending Act, the assessment, levying additional tax on gross turnover, became valid and was upheld. Thus, it would be seen that the question of liability to pay tax or additional tax would depend upon the statutory provision, read with the competence of the State to levy such tax.
27. Under the circumstances, it is clear that the additional tax is payable on the gross turnover, excluding the four components, as contained in the definition of 'price of energy' and the same would be valid, in the light of the view expressed by the Division Bench of this Court with reference to the definition of 'price of energy' and also the declaration of law, made by the Supreme Court in Polaki Motors v. State of Orissa.
28. The above discussion and conclusion would apply to the second contention also, as it is concluded that the additional tax could be levied, independent of the main tax.
29. The fact that from 1979 there was no independent tax shown in the price of energy fixed would not invalidate Section 3-A, which provides for levy of additional tax. Even if the price of energy fixed by the Government is inclusive of tax, additional tax can still be levied on the price so fixed, which includes tax component.
30. In view of the above conclusion, both first and second contentions would fail.
31. The third contention is that the impugned provision is vague and ambiguous.
Page 2432
32. While dealing with the said contention, it is appropriate to refer to the judgment of the Supreme Court in Nand Lal v. State of Haryana AIR 1980 Supreme Court 2097. The relevant portion is as follows:
A statute enacted by a Legislature falling within its competence which did not offend any fundamental rights guaranteed by Part III of the Constitution and which did not contravene any other provision of the Constitution could not be declared ultra vires either on the ground that its provisions were vague or uncertain or ambiguous or mutually inconsistent.... Courts could not declare a statute invalid on the ground that it contained vague, uncertain, ambiguous or mutually inconsistent provisions and it was the duty and function of the Court, in relation to each forensic situation, to examine the language of the law, the context in which it was made, to discover the intention of the Legislature and to interpret the law to make effective and not to frustrate the legislative intent....
33. A reading of the above judgment would clearly indicate that a legislative provision can be struck down only on three grounds, namely, (i) lack of legislative competence; (ii) violation of Part III of the Constitution; and (iii) contravention of any other Constitutional provision.
34. In the above judgment, the Supreme Court has clearly held that a provision of Law should not be held to be vague or uncertain and every effort should be taken by the Court to harmonize and give effect to the provision.
35. In the case on hand, there is no reason to hold that the impugned provision is vague or uncertain. On the other hand, the provision contained in Section 3-A of the Act 32 of 1991 is clear and specific, indicating that additional sales tax is leviable on the consumption of electrical energy, quantified as a percentage of the price of energy. There is no ambiguity either in the part of the section, creating liability, or, in the part, quantifying liability, as a percentage of the price of energy. Thus, it would be seen that the impugned provision is clear and it is not liable to be struck down on any ground, including the ground of vagueness.
36. In view of what is stated above, there are no merits in this batch of Writ Appeals and Writ Petitions, as the learned single Judge had correctly decided the issue, regarding the validity of the impugned provision. Accordingly, all Writ Appeals and Writ Petitions are dismissed. No costs. Consequently, the connected W.A.M.Ps., W.P.M.Ps. and W.V.M.P. are closed.