TMI Blog1990 (4) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the business of supplying energy" [clause (b)]. Section 3 is the charging section. Sub-section (1) alone is relevant for our purposes, and may be set out in full: "3. Levy of duty in certain sales of electrical energy.-(1) Save as otherwise provided in sub-section (2), every licensee in the State of Andhra Pradesh shall pay every month to the State Government in the prescribed manner, a duty calculated at the rate of four paise per unit of energy, on and in respect of all sales of energy, except sales to the Government of India, for consumption by that Government or sales to the Government of India or a railway company operating any railway for consumption in the construction, maintenance or operation of that railway, effected by the licensee during the previous month, at a price of more than twelve paise per unit, and on and in respect of all energy which was consumed by the licensee during the previous month for purposes other than those connected with the construction, maintenance and operation of his electrical undertaking and which, if sold to a private consumer under like conditions, would have fetched a price of more than twelve paise per unit: Provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y until May 30, 1987, on which date it became a State). NTPC (the petitioner herein) was brought within the definition of "licensee" under section 2(b) of the Act, with effect from October 30, 1984, by virtue of Ordinance 32 of 1984, which was subsequently replaced by A.P. Act 10 of 1985. According to the Government of Andhra Pradesh, the result of this legislative action was that the sale of energy by NTPC, except the sales expressly exempted by section 3, became chargeable to duty. In other words, sales of energy by NTPC to Government of India, to Railways, and to A.P. State Electricity Board were exempted. But, says the Government of Andhra Pradesh, all sales of energy by NTPC to the Electricity Boards of other States, and all sales to any other consumer, became dutiable. Duty was, accordingly, demanded, and was paid till the year 1986. The petitioner (NTPC) says, it paid the duty under a bona fide mistake of law, and that when it realised that the said levy is not sanctioned by law and by the Constitution, it objected to the same. It refused to pay duty any further, and also called upon the Government of Andhra Pradesh to refund the amount of duty already paid by it. The Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine further, where does the sale take place. The State Legislature has no power to tax an inter-State sale, that being the exclusive prerogative of Parliament. Counsel relied upon the provisions in articles 269 and 286 of the Constitution in support of his argument. The learned Advocate-General for Goa, while supporting the contentions urged by the petitioner, urged certain further grounds. According to him, Goa was a Union Territory until May 30, 1987, on which date it became a State. In the case of a Union Territory, its Government is the Government of India. There is no separate Government for a Union Territory, notwithstanding that there is a legislature, an administration, and a Lt. Governor. For the said reason, the sale of energy to the Electricity Board of Goa till May 30, 1987, is exempt from duty, in terms of sub-section (1) of section 3 itself. The further contention urged by him is that section 3(1) of the Act is violative of article 303 of the Constitution and, therefore, void. Section 3(1) exempts sales of energy by the petitioner to the A.P. State Electricity Board from duty, but levies such duty upon sales to Electricity Boards of other States. This is a clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of repugnancy. This is so irrespective of the fact whether the Parliamentary legislation is anterior to, or subsequent to the State legislation. Clause (4) of article 246-which is not really relevant for our purposes-declares that Parliament alone shall have the power to make laws with respect to any matter for any part of the territory of India not included in a State, notwithstanding that such matter is a matter enumerated in the State List. In short, it empowers the Parliament to make laws for Union Territory in respect of all matters enumerated in the Seventh Schedule. Article 248 confers the residuary powers of legislation upon Parliament. The A.P. Electricity Duty Act is not relatable to any of the entries in List III. It is, therefore, unnecessary to go into the question of Parliament's primacy over the State Legislature, or for that matter, the theories relating to repugnancy. The said Act is primarily relatable to entry 53 in List II. Entry 53 does not contain the restrictive words as are contained in entry 54 of List II; while entry 54 in List II is expressly made subject to the provisions of entry 92-A of List I, no such restrictive words are to be found in entry 53. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty in the goods has, by reason of such sale or purchase, passed in another State. Clause (2) provided further that, except in so far as the Parliament may, by law, otherwise provide, no State shall be entitled to impose a tax on an inter-State sale, or on an inter-State purchase. Clause (3) provided that no law made by the Legislature of a State imposing a tax on the sale or purchase of "declared goods" shall have effect unless it is assented to by the President. For the purpose of this case, it is unnecessary to trace the controversy arising from the language of article 286. Suffice it to state that, as a result of the decision of the Supreme Court in Bengal Immunity Co. v. State of Bihar [1955] 6 STC 446 (SC); AIR 1955 SC 661, article 286 was amended by the Constitution (Sixth Amendment) Act. The article was totally recast. It now reads as follows: "286. Restrictions as to imposition of tax on the sale or purchase of goods.-(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce." In exercise of the authority conferred upon the Parliament by article 286 and article 269 (3), the Parliament enacted the Central Sales Tax Act, 1956. Section 3 of the said Act defined "inter-State sale", as envisaged by clause (3) of article 269. Section 4 sets out when does a sale or purchase take place outside a State [as envisaged by clause (a) of article 286 (1)], and section 5 specifies when does a sale or purchase take place in the course of import or export [as envisaged by clause (b) of article 286 (1)]. It may be remembered that in all these three situations, a State Legislature has no power to levy a tax. According to section 3, a sale or purchase of goods is deemed to take place in the course of inter-State trade or commerce, if it (a) occasions the movement of goods from one State to another, or (b) is effected by transfer of documents of title to the goods during their movement from one State to another. Section 6 is the charging section. It levies a tax "on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce". In short, it levies tax on all inter-State sales except sales of electrical energy. The words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment, and (d) taxes, duties, etc., and any other charge within the purview of the agreement. It is unnecessary to notice the other provisions of the agreement, except the one already noticed, viz., clause B. 5.1 of annexure-B (Rate Schedule), which provides that the rate for supply of power shall be exclusive of any statutory duty, cess or levy imposed by the Central Government or State Government on generation and/or sale of electrical energy which shall be payable additionally through monthly bills. Yet another circumstance before we express ourselves on the question at issue. In each of the States in India there is an Act imposing duty upon sale and consumption of electricity. Confining our attention to the Southern States, there is the Tamil Nadu Electricity Duty Act, 1939. It is the same Madras Act which is continued in Andhra Pradesh. The only difference appears to be that the said Act does not expressly treat NTPC as a licensee, nor does it exempt the sale of energy by NTPC to the Tamil Nadu Electricity Board. In Karnataka and Maharashtra also there are similar Acts. We are noticing these Acts just to show that in all concerned Southern States the sale of energy by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment, which introduced the aforementioned restrictive words into entry 54 and also inserted entry 92-A in List I, besides amending articles 286 and 269, pertains only to sale or purchase of goods, and has nothing to do with taxes on consumption or sale of electricity. The concept of inter-State sale was evolved only under unamended article 286, and is now referable to article 269(3) read with article 286. The concept of interState sale cannot be read into, and is not relevant in the context of sale of electricity. Just as article 286 read with article 269(3) places certain restrictions on the Legislature of the State in the matter of imposing taxes on sale or purchase of goods, article 287 too places certain restrictions on the State Legislature in the matter of levy of taxes on consumption or sale of electricity. Article 287, and for that matter, article 288, are in no way concerned with sale of goods. Conversely, articles 286 and 269(3) are in no way connected with, or relevant in the case of levy of taxes on sale of electricity. In view of this basic constitutional position, the State Legislature is competent to levy tax on sale of energy which is generated within that State a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, inter-State sale of electricity was exempted from Central sales tax; but for the said words, an inter-State sale or purchase of electricity would be liable to Central sales tax under section 6 of the Central Sales Tax Act. The objects and reasons appended to the Bill [which was enacted into the Central Sales Tax (Amendment) Act (61 of 1972)] also affirm this reasoning. After giving our earnest consideration to rival points of view, we are inclined to agree with the point of view propounded by the petitioner, supported as it is by other Southern States. Electricity is "goods", as held by the Supreme Court in Commissioner of Sales Tax v. Madhya Pradesh Electricity Board [1970] 25 STC 188. Sale of electricity can be taxed by the State Legislature, and such an enactment can be related either to entry 54, or to entry 53 in List II of the Seventh Schedule. Merely because the A.P. Electricity Duty Act, 1939, calls the levy imposed by it as "duty", it does not cease to be a tax. In so far as the said Act provides for levy of duty on sale of electricity, it is relatable both to entry 53 and entry 54 in List II. Precisely because the sale of electricity is subjected to tax by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthern States in pursuance of contracts of sale entered into between NTPC and the purchasing States. Neither in the counter nor in the course of arguments, inter-State character of sale has been seriously disputed. We may also point out the peril of accepting the other point of view. In such a case, it would be open to the Legislatures of both the A.P. State and the purchasing States to levy the tax on such sale/purchase of electrical energy relying upon the theory of territorial nexus. By way of illustration, the sale of electrical energy by the A.P. State to Karnataka State would be taxed by the Legislature of this State on the ground that the electricity is generated in this State, and being transmitted from this State. Simultaneously, the Legislature of Karnataka State would equally be competent to tax the purchase of electricity by its Electricity Board on the ground that Karnataka is the delivery State. This would be a repetition of the situation obtaining in this country with respect to sales tax prior to the coming into force of the Constitution. Such a situation was found to be prejudicial to the interest of trade and commerce, and the unity and integrity of the countr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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