TMI Blog2003 (12) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 - R. Pal And P. Reddi,JJ. JUDGMENT Delay condoned. Leave granted in special leave petitions. The constitutional validity of the amendment to the Madhya Pradesh Upkar Adhiniyam 1981 (the 1981 Adhiniyam) is the subject matter of challenge in these matters. The amendment was initially made by an ordinance promulgated on 29th June 2001 by the State Government and entitled the "Madhya Pradesh Upkar (Sanshodhan) Adhyadesh, 2001" (hereafter referred to as the 'Ordinance'). By the amendment, a cess @ 20 paise per unit was imposed on the captive power producer on the total units of electrical energy produced. The Act which has subsequently replaced the Ordinance is known as the Madhya Pradesh Upkar (Sanshodhan) Adhiniyam, 2001 (hereinafter referred to as 'the Amending Act). The provisions of the 2001 Ordinance and Act are identical. The appellant in the first matter is an association representing the interest of its members who are cement manufacturers and owners of captive power plants. The connected appeals are by the captive power producers themselves. The amendment has been challenged broadly speaking on three grounds : first that by the amendment the Legislature s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y finding on the issue of discrimination. The High Court dismissed the writ petitions. According to the High Court the levy imposed by the impugned amendment was on sale and consumption of electricity and that "by mere use of word "production" in Section 3(2) it does not cease to be cess on the consumption of electrical energy". According to the High Court, "production is simply a measure of tax for the purpose of calculation of the amount of cess to be paid by the Captive Power Producer whose plant is located in the factory premises and whatever electrical energy is generated is consumed in the same premises and on the units so consumed". The High Court concluded that in substance, the impugned cess is on energy consumed and so falls under Entry 53, List II, and was not excise duty even if the measure of both is at the same stage. On the argument alleging violation of Section 12(3) of the Sudhar Adhiniyam, it was held:- "We find that imposition of cess was under consideration of the State for some time past. It was discussed with the Industry and formed part of Captive Power Policy before Ordinance was promulgated. In case the Respondents wanted to rush through the measure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electricity is significant. By the impugned amendment in 2001, Section 3 of the 1981 Adhiniyam was substituted to provide for payment of an Energy development cess by producers of electricity as well. While setting out the substituted section, we have highlighted those portions of the section which were introduced by way of amendment. "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 (b) sold or supplied to the Government of India or a railway company for consumption in the construction, maintenance or operation of any railway administered by the Government of India: (ii) sold or supplied in bulk to a Rural Electric Co- operative Society registered under the Madhya Pradesh Co-operative Societies Act, 1960 (No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and utilisation of energy including reduction of losses in transmission and distribution; (c) research in design, construction, maintenance, operation and materials of the equipment used in the field of energy with a view to achieve optimum efficiency, continuity and safety; (d) survey of energy sources including non- perennial sources to alleviate energy shortage; (e) Energy conservation programmes; (f) Extending such facilities and services to the consumers as may be deemed necessary; (g) Creation of a laboratory and testing facilities for testing of electrical appliances and equipments and other equipments used in the field of energy; (h) Programmes of training conducive to achieve any of the above objectives; (i) Transfer of Technology in the field of Energy; (j) Any purpose connected with improvement of generation, transmission, distribution or utilisation of electrical and other forms of energy, as the State Government may, by notification, specify. Explanation: In this sub-section 'energy' includes all conventional and non-conventional forms of energy. (5) If any questions arises as to whether the purpose for which the fund is being utilised is a purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trical energy. Were it not for the exception in the proviso to Section 3(2), what would be subjected to tax would be electrical energy produced by the five categories mentioned under the proviso. Although in categories (i), (ii), (iii) and (v) the exemption is granted with reference to the utilisation of the electrical energy produced, under exception (iv) significantly, all electrical energy produced by a Rural Electrical Co-operative Society registered under the M.P. Co-operative Societies Act, 1960 is exempted. The difference of language between the proviso to sub-section (2) of Section 3 and the proviso to sub-section (1) of Section 3 is also telling. Under the proviso to sub-section (1), the exception is of electrical energy sold or supplied to specified authorities. That the intention of the Legislature was to levy cess on the production of electricity is also borne out from the Statement of Objects and Reasons which accompanied the Act which replaced the Ordinance. It says: "With a view to impose cess on the electricity generated by the producers from their Captive Power Plants/Diesel Generating Sets for self consumption or for sale at the rate of 20 paise per unit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In any event, the practice which is actually followed in metering the generated electricity would not make the incidence of tax different. "The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. Whether in a particular case the tax ceases to be in essence an excise duty, and the rational connection between the duty and the person on whom it is imposed ceased to exist, is to be decided on a fair construction of the provisions of a particular Act"4. Section 3(2) of the amendment speaks of cess on electrical energy generated and that must be taken as conclusive of the object and nature of the levy. Had matters stood there, the appeals would have had to be allowed and the decision of the High Court reversed. But after the decision of the High Court, there was a further amendment effected to the 1981 Adhiniyam by the Madhya Pradesh Upkar (Sanshodhan) Adhiniyam, 2003. The 2003 amendment introduced an Explanation at the end of Section 3 of sub-Section (2). The Explanation is as follows:- " Explanation. For the purpose of this sub-section, the Cess shall be levied on units of electrical energy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer an impermissible discretion and the third alternative would mean that the vice of constitutional incompetence would continue to attach to the impugned levy. The respondents have argued that the decision of the High Court with regard to the interpretation put to Section 3(2) is correct. Indeed, they could hardly contend otherwise. We have not agreed with the interpretation of Section 3(2) put by the High Court judgment. Section 3(2) continues to be the charging Section. The Explanation, according to the respondents served the purpose of merely clearing up any ambiguity in Section 3(2) and reaffirmed the object of the cess levied thereunder. The expression used by the Explanation is "for the purpose of sub-section (2) of Section 3, the cess shall be levied on units of electrical energy sold or supplied". Since the purpose of sub-section (2) of Section 3 continues to be a levy on production, the word 'levied' in the context would at the highest mean 'assessment' and not 'imposition'. It is not the respondents' case that any new or additional or alternative cess was sought to be introduced by the Explanation. Thus despite the Explanation, the charge in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Madhya Pradesh Gazette (Extra-Ordinary) on 20.2.2001 after receiving the assent of the President. It came into force on 3.7.2001. By the Sudhar Adhiniyam, the State Electricity Regulatory Commission has been set up and various provisions have been made for the following avowed objects: "(i) restructuring of the Electricity Industry; (ii) rationalisation of Generation, Transmission, Sub-Transmission, Distribution and Supply of Electricity in the State; (iii) Regulating the licensing of transmission and supply of electricity; (iv) regulating the purchase, Transmission, Sub- Transmission, Distribution, Supply and utilisation of electricity; (v) providing quality of service and the tariff and other charges considering the interest of the consumers and utilities; (vi) taking measures conducive to the development and management of the electricity industry in the State in an efficient, economic and competitive manner." Section 12(3), which is allegedly violated by the respondent State, reads as under: "12 (3). The State Government shall consult the Commission in relation to any policy directive which it proposes to issue or any legislation is proposed to be enacted affec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y take into account the recommendation, if any, given by the Commission". It was and is open to the State Legislature to repeal this law. As long it continues to be operative, it must be assumed that it was not a mere exercise in futility and some effect must be given to the words of the sub-section (3) of Section 12. As we read the sub-section, it is a mandate to the policy makers who, before proposing legislation, are required to consult the State Regulatory Commission. Under the Sudhar Adhiniyam, the State Commission is a juristic entity [Section 3(1)]. The Members of the Commission, according to Section 5 of the Sudhar Adhiniyam, shall be persons of ability, integrity and standing who have adequate knowledge and experience of, or have shown capacity in dealing with problems relating to engineering, economics, commerce, finance, law, administration or management ". Under Section 9 of the Sudhar Adhiniyam, the Commission has been vested with the powers inter alia (a) to regulate the purchase, distribution, supply and utilization of electricity, the quality of service, the tariff and charges payable considering the interest of the consumer and the Electricity Industry both; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government." In our opinion, the consequence of non-consultation in terms of Section 12 (3) of the Sudhar Adhiniyam would not be an incompetent piece of legislation but a legislation introduced in breach of a salutary requirement to consult an expert statutory body. The statutory requirement for consultation with a body of experts before proposing legislation will serve as an in-built safeguard against a challenge under Article 14 of the Constitution apart from anything else. Nevertheless, we do not propose to decide whether by reason only of such non-consultation, Section 3(2) of the 1981 Adhiniyam is violative of Article 14, nor do we propose to decide whether the cess of 20 paise is excessive, nor the other grounds urged by the appellants pertaining to Article 14. We have referred to the provisions of Sudhar Adhiniyam so that the State Government may in future act in consonance with Section 12(3). An additional challenge has been raised to the constitutional validity of sub-sections (3), (4) and (5) of Section 3 in Civil Appeal No.2003 of 2002 alleging violation of Articles 202, 204, 207, 260 and 267 of the Constitution. In order to appreciate the submission, we may re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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