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"3. Levy of energy development cess: (1) Every distributor of electricity energy shall pay to the State Government at the prescribed time and in the prescribed manner an energy development cess at the rate of one paise per unit on the total units of electrical energy sold or supplied to a consumer or consumed by himself or his employees during any month:
Provided that no cess shall be payable in respect of electric energy, -
(i) (a) sold or supplied to the Government of India for consumption by that Government; or

[2]. Every producer producing electrical energy by his captive power unit or diesel generator set of capacity exceeding 10 Kilowatt in total shall pay to the State Government an energy development cess at the rate of 20 paise per unit on the total units of electrical energy produced whether for sale or supply to a consumer or for consumption by himself or his employees during any month:

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14. A plain reading of Sub-Section (2) of Sub-Section 3 introduced by the amendment to the 1981 Adhiniyam makes it clear that the levy of cess was "on the electrical energy produced". The phrase "whether for sale or supply" merely clarified that all electricity produced irrespective of its destination would be liable to cess at the specified rate. The use of the word "whether"
Power Corporation Ltd., and Another V/s. State of Jammu and Kashmir and Others6, the Hon'ble High Court of Jammu & Kashmir at Srinagar while considering the levy of tax by the State in exercise of the powers conferred under Section 3[1] Jammu and Kashmir Electricity [Duty] Act, 1963 on generation of 2005 [2] JKJ 5
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electric energy in Hydroelectric Power Projects has observed thus:
"33. As a matter of fact, the petition is fit to succeed on a short point that the power to impose levy on production/generation of electricity is the preserve of Parliament in terms of Entry 84 of List I and, therefore, legislature of the state of Jammu and Kashmir has no jurisdiction to make law with respect to such an imposition. The point is squarely covered by a recent decision in M.P. Cement Manufactures Association v. State of Madhya Pradesh, (2004) 2 SCC 249, wherein the Supreme Court categorically held that electricity being goods, the Parliament has exclusive legislative competence to legislate in respect of levy of duty on production of electricity. The Madhya Pradesh Electricity Duty Act, 1949 provided for levy of duty on the consumption or sale or electrical energy. Under Section 3 of the Act, subject to certain Statutory exceptions, every distributor and producer or electric energy was required to pay a monthly duty "on the electrical energy sold or supplied to a consumer or consumed by himself for his own purpose or for purposes of his township or colony". By Upkar Adhiniyam 1981, an energy development cess at the rate of one paisa per unit "on the total units of electrical energy sold or supplied to a consumer or consumed by himself or his employees during any month was levied. As the Supreme Court observed, the similarity in the phraseology used in both these statutes in describing the incidence of tax, namely, sale
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or supply of electricity, was significant. By the impugned amendment in 2001, Section 3 of the Upkar Adhiniyam was substituted to provide for payment of energy development cess @ 20 paise by producers of electricity as well. The relevant clause was "on the total units of electrical energy produced whether for sale or supply to a consumer or for consumption by himself or his employees during any month". Responding to the challenge to the constitutional validity of the amended provision, an attempt was made to justify the levy on production. It was submitted that the term "produced" in the impugned amendment had been used in conjunction with the phrase "whether for sale or supply to......." and was therefore intended to relate only to sale and consumption of electricity and hence saved by Entry 53 of List II. Rejecting the submission, the Supreme Court observed-