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Judgment
P. Jyothimani, J.—Earlier writ petitions filed questioning the levy of electricity tax imposed under Tamil Nadu Act 32 of 1991 as well as
Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003 were dismissed, against which appeals were filed and the same were also
dismissed by the Division Bench on 13.07.2006. It was, against the said dismissal order, civil appeals were filed before the Supreme Court and the
Supreme Court has partially allowed the appeals by common order dated 15.05.2007 as reported in Southern Petrochemical Industries Co. Ltd.
v. Electricity Inspector and E.T.I.O. 2007 (3) CTC 273 (SC).
The Supreme Court has set aside the impugned common order in so far it relates to demand charges, holding that in respect of demand charges
no electricity tax is leviable. Based on the judgement of the Supreme Court, the petitioners have made representations and in spite of the same, the
Tamil Nadu Electricity Board has raised electricity bill, levying electricity tax on demand charges also. Some of the petitioners have also demanded
refund of the electricity tax paid on demand charges based on the Supreme Court order. In spite of repeated request by the petitioners, the Tamil
Nadu Electricity Board has not followed the orders of the Supreme Court under one pretext or the other. In view of the same, present writ
petitions are filed for direction to the respondent Electricity Board to give effect to the orders of the Supreme Court in Civil Appeal No. 2551 of
2007 etc. Batch dated 15.05.2007, by not levying electricity tax on demand charges and also to pass revised demand of electricity tax, excluding
tax on demand charges and corresponding Belated Payment Surcharge (in short ""BPSC"") for tax on demand charges and also for refund of the
electricity tax collected on demand charges with BPSC.
The petitioners in these writ petitions have not questioned the payment of consumption charges and their main challenge in these writ petitions is
relating to the levy of electricity tax on demand charges. The Supreme Court in the said case, viz., Southern Petrochemical Industries Co.Ltd. v.
Electricity Inspector and E.T.I.O. 2007 (3) CTC 273 (SC) has clearly held that there exists distinction between actual consumption and maximum
demand. The Supreme Court has also held that what is permissible for the purpose of framing a tariff need not necessarily be permissible for levy
of tax. Tariff for supply of High Tension energy is on two parts, viz., (i) units consumed and (ii) maximum demand, and ultimately it was held that
the maximum demand indicator installed in a factory premises of a consumer of High Tension electrical energy shows the maximum amount of
energy drawn during any consecutive 30 minutes in a total month of consumption of electrical energy. The maximum demand charge is fixed on that
basis although the connected demand may be much more, and in that view of the matter, the Supreme Court has set aside the judgement of the
High Court.
While it is the contention of the learned Counsel for the petitioners in these cases, including Mr. R. Muthukumarasamy, learned senior counsel
appearing for some of the petitioners that once the Supreme Court has categorically held that there cannot be any tax on demand charges, it is the
duty of the Board to fllow the same. It is also their submission that when exemption was granted under the old Act from payment of tax, the same
is not taken away by the advent of new law, with reference to Entry No. 53 of List II of the Constitution of India.
While admitting that a new Act has been enacted in Tamil Nadu Act 38 of 2007, viz., Tamil Nadu Tax on Consumption or Sale of Electricity
(Amendment) Act, 2007, by which amendments have been incorporated into Act 12 of 2003, viz., Tamil Nadu Tax on Consumption or Sale of
Electricity Act,2003, the learned senior counsel submitted that even after the Amendment Act has been introduced as a validating law, the same is
valid only if such law cures the defects pointed out by the Court and the same is within the legislative competency of the State.
According to the learned senior counsel, when the Supreme Court has clearly held that the tax levied on demand charges is not valid in law, by
virtue of the validating Act, viz., Act 38 of 2007, the definition ""consumption charge"" in Section 2(7) is substituted including within it, the charge on
maximum demand and power factor surcharge and therefore, it cannot be said that the validating Act intends to cure the defects pointed out by the
Supreme Court.
In addition to that, Mr. Sivanandham, learned Counsel appearing for one of the writ petitioners has referred to the judgement of the Supreme
Court, wherein it was held that the demand charge cannot be construed as a sale and therefore, relying upon the judgement of the Supreme Court
in Gujarat Ambuja Cements Ltd. and Another Vs. Union of India (UOI) and Another, stating that the object of the validating Act would in effect
nullify the decision of the Supreme Court rendered in Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and E.T.I.O. 2007 (3)
CTC 273 (SC) and the same is not permissible and according to him, there is no legislative competency on the State Government to make such
law. It is his submission that in spite of the validating Act having come into existence, it is still open to the petitioners to maintain the writ petitions
without challenging the vires of the validating Act.
Mr. R. Muthukumarasamy, learned senior counsel would also submit that even by the validating Act, the effect of Section 3(1) of the Act as it
was in existence in Act 12 of 2003 has not been effectively cured and therefore, there is no necessity to challenge the new Act. By the validating
Act, the change effected u/s 3(1) of the Act 12 of 2003 is in respect of the meaning of expression ""net charge"" and the same stood changed as
consumption charge"" and the term ""consumption charge"" is defined in the newly incorporated Section 2(7) of Act 38 of 2007. By relying upon the
judgment of the Supreme Court in Southern Pharmaceuticals & Chemicals v. State of Kerala AIR 1981 SC 1863, it is also contended that it is the
pith and substance of a statute, which has to be considered and the consequences are immaterial.
On the other hand, Mr. P.S. Raman, learned Additional Advocate General appearing for the respondent Electricity Board has contended that
when by virtue of the validating Act 38 of 2007 changes have been effected to the Tamil Nadu Act 12 of 2003, which was consequent to the
judgment of the Supreme Court and the definition of the term ""consumption charge"" has been newly incorporated and as long as the definition of
the word exist in the statute book as on today, no mandamus can be issued against the said provisions. It is his contention that unless and until the
newly created law is set aside in the manner known to law, the presumption being always in favour of the constitutionality of any law passed, the
writ petitions filed for direction cannot be entertained. He would also submit that it is always open to the petitioners to challenge the validating Act.
I have heard the learned Counsel for the respective petitioners as well as learned Additional Advocate General for the respondent Electricity
Board and perused the entire records.
It is true that the Hon''ble Supreme Court while construing the provisions of Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003
(Tamil Nadu Act 12 of 2003) has held that there cannot be levy of tax on demand and it can be only as per the consumption and the expression
demand means readiness to supply. It was held that the term ''actual consumption'' and ''maximum demand'' are not one and the same as held by
the Supreme Court in para-158 of the judgement in Southern Petrochemical Industries Co.Ltd. v. Electricity Inspector and E.T.I.O. 2007 (3)
CTC 273 (SC) , which reads as under.
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.
The State Government has enacted Act 38 of 2007, which was assented by the Governor on 12.11.2007 to amend the Tamil Nadu Tax on
Consumption or Sale of Electricity Act, 2003. The amendments to the said Act sought to be effected by the Tamil Nadu Act 38 of 2007 except
Section 6 are deemed to have come into force on 16th July, 2003.
Under the Amendment Act 38 of 2007, a new Clause has been introduced in Section 2(2-A) in respect of the term ''charge on maximum
demand''. The newly introduced Section 2(2-A) is as follows:
2(2-A). ''charge on maximum demand'' means the charge levied on the highest value of the average kilovolt-Amperes delivered at the point of
supply to the consumer during any consecutive thirty minutes in a month.
Section 2(7) of Act 12 of 2003, which defined the term ""energy charge"" was as follows:
2(7). ""energy charge"" means the amount charged (whether as energy charge or other charge) by a licensee for the supply of electricity to a
consumer before deduction of rebate, if any, allowed by the licensee for payment on or before such date as may be specified by the licensee, but
does not include-
(i) meter charges;
(ii) interest on delayed payment;
(iii) fuel surcharge; or
(iv) fuse off call charges and reconnection charges.
Explanation I.- If electricity is supplied to any person free of charge or at a concessional rate (other than tariff concession), the energy charge
would mean the tariff fixed by the Tamil Nadu Electricity Regulatory Commission in its Tariff Order to similar consumer.
Explanation II.- ""other charges"" shall include demand charge and power factor surcharge;
The above said sub-section is substituted by Act 38 of 2007, in the following words.
2(7). ''consumption charge'' means the amount charged by a licensee for the supply of electricity to a consumer before deduction of rebate, if any,
allowed by the licensee for payment on or before such date as may be specified by the licensee, but does not include,-
(i) meter charges;
(ii) interest on delayed payment;
(iii) fuel charges; and
(iv) fuse off call charges and re-connection charges:
Provided that in the case of High Tension supply of electricity, consumption charge includes the charge on maximum demand and power factor
surcharge.
Explanation.- If electricity is supplied to any person free of charge or at a concessional rate (other than tariff concession), the consumption charge
would mean the tariff fixed by the Tamil Nadu Electricity Regulatory Commission in its Tariff order to similar consumer.
Further, the definition clauses in Section 2(8) ''gross charge'' and Section 2(12) ''net charge'' have been omitted.
Section 3 under Act 12 of 2003 stood as follows:
Tax on the consumption or sale of electricity.- (1) Save as otherwise provided in this Act, every licensee and every person other than a licensee
shall pay every month to the Government in the prescribed manner, a tax on the electricity sold or consumed during the previous month at the rates
specified hereunder:
(a) In the case of licensees other than captive generating plants, the rate shall not be less than 5% and not more than 10% of the net charge, as may
be notified in the Government
Provided that no tax shall be paid on sale of electricity for agricultural purposes and hut service connections;
(b) In the case of licensees who are captive generating plants, the rate shall be not less than 10 paise and not more than 20 paise per unit of
electricity on the consumption for own use, and shall be not less than 5% and not more than 10% of the net charge on the sale of surplus electricity
as may be notified by the Government:
Provided that no tax shall be paid on the sale of electricity to the Board;"" In that Section, viz., Section 3(1)(a) and 3(1)(b), instead of expression
''net charge'', the expression ''consumption charge'' has been substituted.
In Section 6 of the Principal Act, in the explanation to Sub-section (1), the expression ''consumption charge'' is substituted for the expression
''energy charges''.
In Section 20 of Act 12 of 2003, which is a repealing section, in the proviso to Sub-section (1), instead of the expression ''provided that such
repeal shall not affect'', the expression ''provided that, unless a different intention appears, such repeal shall not affect'' has been substituted.
A reading of Act 38 of 2007, which is the validating Act by way of amendment introduced to the Principal Act 12 of 2003, viz., Tamil Nadu
Tax on Consumption or Sale of Electricity Act, 2003 shows that the term ''energy charge'' in Section 2(7) of the original Act 12 of 2003 stands
totally changed as ''consumption charge''. In the proviso, it is made clear that in case of High Tension supply of electricity, consumption charge
includes the charge on maximum demand and power factor surcharge.
That apart, a new definition clause ''charge on maximum demand'' has been introduced as Section 2(2-A). In the charging Section, viz.,
Section 3, instead of the expression ''net charge'', ''consumption charge'' has been substituted. Therefore, as on the date of the amending Act, the
charging section viz., Section 3 imposed charge on consumption charge, which includes the charge on minimum demand and power factor
surcharge.
The Supreme Court in Southern Petrochemical Industries Co.Ltd. v. Electricity Inspector and E.T.I.O. 2007 (3) CTC 273 (SC) while dealing
with the earlier decision in Northern India Iron and Steel Co. and Others Vs. State of Haryana and Another, , where it was held that the price of
energy in two part tariff system would mean and include the energy charge as also demand charge, has held that in that case there was no term like
''net energy''.
The Supreme Court in Gujarat Ambuja Cements Ltd. and Another Vs. Union of India (UOI) and Another, has dealt with the validity of an
Amendment Act. While dealing with the said Amendment Act, it was held that the object of the Finance Act, 2003, which has in effect amended
Section 65(5), 66(3) and 68 of Finance Act, 1994 was to nullify the earlier decision in Laghu Udyog Bharati and Another Vs. Union of India and
Others, by amending retrospectively and therefore, held that the validating provisions are illegal. The operative portion of the judgment is as
follows:
There cannot be any doubt that the object of these sections is to nullify the effect of this Court''s decision in Laghu Udyog Bharati and Another
Vs. Union of India and Others, by retrospectively amending and validating provisions held to be illegal. It is a well-settled principle that validation
of a tax declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax
thus made legal (vide Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, Indian Aluminium Co. v. State of Kerala, K. Sankaran Nair
v. Devaki Amma Malathy Amma, B. Krishna Bhat v. State of Karnataka and National Agricultural Co. op. Marketing Federation of India Ltd. v.
Union of India. As a proposition of law, this cannot be and is not disputed. The question is whether by enacting Sections 116 and 117 of the
Finance Act, 2000 and Section 158 of the Finance Act, 2003, the bases on which this Court struck down Rules 2(1)(d)(xii) and (xvii) of the
Service Tax Rules, 1994 have been displaced or removed.
It is well-settled that there is a presumption of constitutionality in favour of a law unless it is set aside in the manner known to law. The said
established principle has been reiterated by the Supreme Court in Greater Bombay Co-op. Bank Ltd. Vs. United Yarn Tex. Pvt. Ltd. and Others,
, which is as follows:
As observed by this Court in CST v. Radhakrishnan in considering the validity of a statute the presumption is always in favour of
constitutionality and the burden is upon the person who attacks it to show that there has been transgression of constitutional principles. For
sustaining the constitutionality of an Act, a court may take into consideration matters of common knowledge, reports, preamble, history of the
times, objection of the legislation and all other facts which are relevant. It must always be presumed that the legislature understands and correctly
appreciates the need of its own people and that discrimination, if any, is based on adequate grounds and considerations. It is also well settled that
the courts will be justified in giving a liberal interpretation in order to avoid constitutional invalidity. A provision conferring very wide and expansive
powers on authority can be construed in conformity with legislative intent of exercise of power within constitutional limitations. Where a statute is
silent or is inarticulate, the court would attempt to transmutate the inarticulate and adopt a construction which would lean towards constitutionality
albeit without departing from the material of which the law is woven. These principles have given rise to rule of ""reading down"" the provisions if it
becomes necessary to uphold the validity of the law.
In State of Bihar v. Bihar Distillery Ltd. this Court indicated the approach which the court should adopt while examining the
validity/constitutionality of a legislation. It would be useful to remind ourselves of the principles laid down, which read: (SCC p. 466, para 17)
The approach of the court, while examining the challenge to the constitutionality of an enactment, is to start with the presumption of
constitutionality. The court should try to sustain its validity to the extent possible. It should strike down the enactment only when it is not possible to
sustain it. The court should not approach the enactment with a view to pick holes or to search for defects of drafting, much less inexactitude of
language employed. Indeed, any such defects of drafting should be ignored out as part of the attempt to sustain the validity/constitutionality of the
enactment. After all, an Act made by the legislature represents the will of the people and that cannot be lightly interfered with. The
unconstitutionality must be plainly and clearly established before an enactment is declared as void. The same approach holds good while
ascertaining the intent and purpose of an enactment or its scope and application.
In the same para, this Court further observed as follows: (SCC p.466)
The court must recognise the fundamental nature and importance of legislative process and accord due regard and deference to it, just as the
legislature and the executive are expected to show due regard and deference to the judiciary. It cannot also be forgotten that our Constitution
recognises and gives effect to the concept of equality between the three wings of the State and the concept of ''checks and balances'' inherent in
such scheme.
Therefore, the constitutional validity of a provision can be decided only when it is put to challenge. In these circumstances, I do not agree with the
contentions of the learned Counsel for the petitioners that by virtue of the Amending Act 38 of 2007, in effect, no change has been effected to
charging section viz., Section 3 and therefore, it is still open to the petitioners to insist for the direction prayed for.
It is always open to the petitioners to challenge the validity or otherwise of the validating Act, viz., Act 38 of 2007 and till the said provisions of
the validating Act remain in the statute book without being set aside in the manner known to law, I do not think that the prayer sought for in these
writ petitions, viz., for direction against the respondent Electricity Board to levy electricity tax excluding tax on demand charges and corresponding
BPSC on demand charges and refund the electricity charges collected on demand charges with BPSC can be granted. In fact certain writs have
been filed challenging the validity of the said Act 38 of 2007. In view of the same, the writ petitions are dismissed giving liberty to the petitioners to
challenge the validating Act, 38 of 2007 in the manner known to law. No costs. Consequently, connected miscellaneous petitions are closed.