TMI Blog2007 (5) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... n consumption or sale of electricity subject, however, to the provisions of Section 154-A of the 1935 Act which reads as under: 154-A. Save in so far as any Federal may otherwise provide, no Provincial law or law of a Federated State shall impose, or authorize the imposition of, a tax on the consumption or sale of electricity (whether produced by a Government or other persons ) which is (a) consumed by the Federal Government, or sold to the Federal Government for consumption by that Government ; or (b) consumed in the construction, maintenance or operation of a Federal Railway by the Federal Railway Authority or a railway company operating that railway, or sold to that authority or any such railway company for consumption in the construction, maintenance or operation of a Federal Railway ;and any such law imposing, or authorising the imposition of a tax on the sale of electricity shall secure that the price of electricity sold to the Federal Government for consumption by that Government, or to the Federal Railway Authority or any such railway company as aforesaid for consumption in the construction, maintenance or operation of a Federal Railway, shall be less by the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an area including the whole or any part of any cantonment aerodrome, fortress, arsenal, dockyard or camp or of any building or place in the occupation of the Government for defence purposes, the State Government has ascertained that there is no objection to the grant of the license on the part of the Central Government; (b) where an objection is received from any local authority concerned, the State Government shall, if in its opinion the objection is insufficient, record in writing and communicate to such local authority its reasons for such opinion; (c) no application for a license under this Part shall be made by any local authority except in pursuance of a resolution passed at a meeting of such authority held after one month's previous notice of the same and of the purpose thereof has been given in the manner in which notices of meetings of such local authority are usually given; (d) a license under this part (i) may prescribe such terms as to the limits within which, and the conditions under which, the supply of energy is to be compulsory or permissive, and generally as to such matters as the State Government may think fit; and (ii) save in cases in which u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h tax as is mentioned in Clause (1), but no such law shall have any effect unless it has, after having been reserved for the consideration of the President received his assent; and if any such law provides for the fixation of the rates and other incidents of such tax by means of rules or orders to be made under the law by any authority, the law shall provide for the previous consent of the President being obtained to the making of any such rule or order. 8. A bare perusal of Section 3 of the 1939 Act would show that taxes were levied on sale of electrical energy by the licensee. There was, thus, no provision under the 1939 Act for levy of tax on consumption of electrical energy. 9. In exercise of its power conferred upon it under Entry 38 of List III of the Seventh Schedule of the Constitution of India, the Parliament enacted the Electricity (Supply) Act, 1948 (for short the 1948 Act ). In terms of Section 5 thereof, each State was enjoined with a duty to constitute State Electricity Board. Section 12 of the 1948 Act provides for incorporation of such Boards constituted thereunder. 10. In the year 1962, the State of Tamil Nadu enacted Tamil Nadu Electricity (Taxation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final. 14. Section 13 of the 1962 Act, however, enabled the Government to make exemptions and impose restrictions by notification in the following terms: 13. Power of Government to notify exemptions and reductions. (1) The Government may, by notification, make an exemption or reduction in rate, in respect of the electricity tax payable under this Act by any specified class of persons, having regard to all or any of the following matters, namely:- (a) the nature of the business or industry carried on by such class of persons ; (b) the price of energy consumed in relation to the total cost of the manufacture or production of the principal product in any industrial undertaking owned or controlled by such class of persons ; (c) such other matters as may be prescribed. (2) Any exemption from electricity tax or reduction in the rate of electricity tax notified under sub-section (1) may be subject to such restrictions and conditions as may be specified in the notification. (3) The Government may, by notification, cancel or vary any notification issued under sub- section (1). 15. Section 14 of the 1962 Act provided that the said Act was in addition to and not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof every licensee and every person other than a licensee is required to pay every month to the Government in the prescribed manner, a tax on the electricity sold or consumed during the previous month at the rate specified thereunder. Section 4, however, contains a non-obstante clause stating that no electricity tax shall be payable under Section 3 on the sale of electricity by a licensee to the persons nominated thereunder. It contains almost an identical provision of the 1939 Act. The 2003 Act provides for a complete machinery for assessment of the electricity duty payable. It also provides for an appeal from an order of assessment of electricity tax. 19. Section 14 of the 2003 Act provides for general exemption which is in the following terms: Exemption and reduction of tax.--The Government may, by notification, make an exemption or reduction in rate in respect of the electricity tax payable under this Act on electricity sold for consumption by or in respect of any-- (i) institution or class of person; (ii)place of public worship, public burial or burning ground or other place for the disposal of the dead; (iii) premises declared by the State Government to be use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd came to be questioned before the Madras High Court in a large number of writ petitions. The matter was heard by a Division Bench of the said High Court. By reason of a judgment and order dated 13.07.2006, the Division Bench dismissed the writ petition. HIGH COURT JUDGMENT 23. The High Court noticed seven arguments raised before it. It decided all the issues against the writ petitioners. Before us, only argument Nos. 1, 3, 4, 5 and 7 have been pressed. 24. We may notice the same at the outset: (1) The Tamil Nadu Act 12 of 2003 levying tax on consumption or sale of electricity is invalid for want of assent of the President of India, in view of Article 288(2) of the Constitution of India. (2) *** (3) The impugned Act is repugnant to Section 29 of the Electricity Regulatory Commissions Act, 1998. The Central Act, 1996 provided for the fixation of tariff for electricity to vest with the Commission. The tariff so fixed should be held to include the entire price payable for the energy. Thus, the impugned State Act which imposes a tax on the sale or consumption of electricity is repugnant to the Central Law. Since the State Act had not received the assent of the President, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail. 27. As regards argument No. 3, the High Court opined that as the tax is levied on the tariff, the same being not a part of tariff, the provisions of the Electricity Regulatory Commissions Act, 1998 (for short the 1998 Act ) cannot be said to have any application whatsoever holding: 30. Similarly, the contention of repugnancy is also baseless. The question of repugnancy would arise only when both the laws are enacted on the same entry. The question of repugnancy between one law and another would arise only if both the laws of the Parliament and the State Legislature are referable to an Entry in List III. As indicated above, the Central Law is referable to Entry 38 List III while the State Law falls under Entry 53 List II. In these circumstances, no question of repugnancy would arise. 28. On argument No. 4, the High Court opined that as the exemption provision contained in Section 14 of the 2003 Act is inconsistent with the provisions of Sections 12 and 13 of the 1962 Act, Section 20(2)(a) of the 2003 Act will have no application stating: 37. However, in this case, as indicated above, there is an exemption as provided in Section 14 only with reference to the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause contained in Article 14 of the Constitution of India being a basic structure of the Constitution must in a situation of this nature be enforced and in that view of the matter, it was obligatory on the part of the State to treat all the consumers on equal footing. In view of the fact that Section 14 of the 2003 Act per se is arbitrary, it was urged, the burden of proof was on the State to show that the classification is a valid classification. It was contended that in such an event, the validity of the 2003 Act can be read down for the purpose of upholding its constitutionality and according to the learned counsel the following words should be declared to be ultra vires on electricity sold for consumption by . 33. Relying on the decision of a Constitution Bench of this Court in D.S. Nakara and Others v. Union of India [(1983) 1 SCC 305], the learned counsel would contend that for the aforementioned purpose, the court may take into consideration the historical facts that the exemption which had all along been granted could not have been taken away all of a sudden particularly when the appellants altered their position relying on or on the basis of the representations made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to provide meaningful context to the semantic interplay between the words by and the phrase sold for consumption . If the aforementioned part of the provision, viz., sold for consumption by is to be treated as superfluous, the same may as well be read down for the purpose of upholding the exemption granted in favour of the appellants, pursuant to the notifications issued under the 1939 Act and the 1962 Act, particularly when such exemptions were to be granted 'permanently'. 38. Such a construction is permissible having regard to the fact that the 2003 Act is not a consolidating and amending statute but one for consolidation and rationalization. Having regard to the new economic policy, the statute encourages more private participation in the private sector and thereby a literal or narrow interpretation will defeat the same. In any event, Section 14 should be construed in such a manner so as to make it consistent with Article 14 of the Constitution of India. 39. It was submitted that the 'privilege' is superior to the right and in that view of the matter even if the appellants have not acquired any right, they having enjoyed privilege, the same is saved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 45. The learned counsel would argue that as tax can be levied in terms of Article 265 of the Constitution of India, no taxable event occurred for levy of electricity duty on the quantum of electrical energy which has not been consumed or sold. Our attention in this behalf has been drawn to a decision of this Court in State of Mysore v. West Coast Papers Mills Ltd. and Another [(1975) 3 SCC 448] for the proposition that no electricity duty was payable at transmission loss. 46. Mr. A.R.L. Sundrasan, learned senior counsel appearing on behalf of the appellants in Civil Appeal arising out of SLP (C) No. 18220 of 2006 would submit that having regard to the Entry 38, List III of the Seventh Schedule of the Constitution of India, in terms whereof the Parliament had enacted the 1998 Act, the State could not have made any law in terms of Entry 58, List II of the Seventh Schedule of the Constitution of India as the entire filed of electricity is covered thereby and, thus, the impugned Act should he held to be repugnant to the 1998 Act. 47. The learned counsel appearing on behalf of the appellants in Civil Appeal arising out of SLP (C) No. 3600 of 2007, would submit that in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of five years. Some of the appellants established their cement plants and applied for High Tension Energy connection in the year 1998 and set up captive power plants in 2000 and started drawing energy from its captive power plant only from the year 2000 and, thus, the exemption notifications would remain valid despite enactment of the 2003 Act. SUBMISSIONS ON BEHALF OF THE STATE 52. Mr. T.R. Andhyarujina, learned senior counsel appearing on behalf of the State of Tamil Nadu, on the other hand, would submit: (i) The exclusive right of the State Legislature to legislate matters under entries enumerated in List II being exclusive, Entry 53 thereof would not be subservient to Entry 38 of List III of the Seventh Schedule of the Constitution of India. (ii) No material has been placed on record to show that the State Legislature has transgressed its legislative power in covert or indirect manner or otherwise over-stepped its limits. (iii) The functions of the State Electricity Regulatory Commission constituted under the 1998 Act refer to a non-taxing entry dealing with general aspects of electricity excluding taxation and, thus, the 1998 Act cannot prevail over Entry 53 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o being practically the incorporation of Section 6 of the General Clauses Act, the words unless a different intention appears must be read thereinto although not expressly contained therein. (b) The words anything duly done contained in proviso (a) to Sub-section (1) of Section 20 of the 2003 Act cannot have the meaning of keeping alive a notification for exemption of electricity tax on consumption which is prohibited by Section 14 and negatived by Section 20(2)(a) and, thus, it must receive a restricted and contextual construction. (c) An exemption, by its very nature, does not create a right and it is always defeasible and susceptible to be withdrawn. (x) In absence of necessary pleadings, a challenge to the constitutionality of the Act on the purported ground of discrimination must fail. In matters of taxation including exemption, the State is given wide discretion and is allowed to pick and choose objects for taxation and exemption and in that view of the matter the notifications cannot be held to be ultra vires. (xi) The doctrine of promissory estoppel will have no application in the instant case as the State cannot be prevented from extending the exemption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax ordinarily would not be deduced from a general entry as an ancillary power. In List II, entries 1 to 44 form one group providing for the legislative competence of the State on subjects specified therein, whereas entries 45 to 63 form another group dealing with taxation. We, however, do not mean to suggest that in regard to the validity of a taxation statute, the same, by itself, would be a determinative factor as in a case where the Parliament may legislate an enactment under several entries, one of them being a tax entry. 56. A bare perusal of Entry 53 of List II and Entry 38 of List III, however, clearly suggests that they are meant to operate in different fields. 57. In National Thermal Power Corpn. Ltd (supra), this Court has clearly held that the power of the State Legislature to enact law to levy tax by reference to List II of the Seventh Schedule has two limitations: one, arising out of the entry itself, and the other, flowing from the restriction embodied in the Constitution. 58. Entry 53 does not contain any such restriction and, thus, Clause (3) of Article 254 of the Constitution of India will have no application in the instant case. 59. Legislative comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be resorted to only when there exists direct conflict between two provisions and not otherwise. Once it is held that the law made by Parliament and the State Legislature occupy the same field, the subsequent legislation made by the State which had received the assent of the President of India indisputably would prevail over the parliamentary Act when there exists direct conflict between two enactments. Both the laws would ordinarily be allowed to have their play in their own respective fields. However, in the event there does not exist any conflict, the parliamentary Act or the State Act shall prevail over the other depending upon the fact as to whether the assent of the President has been obtained therefor or not. (See Bharat Hydro Power Corpn. Ltd. v. State of Assam) 64. The 2003 Act is, thus, not repugnant to the 1948 Act. ARTICLE 288 ISSUE 65. It is no doubt true that Section 18 of the 1962 Act as also Section 21 of the 2003 Act provided that they would be subject to the provisions of Article 288 of the Constitution of India. It deals with exemption from taxation by States in respect of water or electricity in certain cases. Clause (2) of the said Article mandates th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , are to be read in their entirety. The same have to be read so as to give effect to the provisions contained in Article 287 of the Constitution of India. It is meant to be acted upon in the context of the heading of Part XII of the Constitution of India and not for dealing with a situation of the nature prevalent in the instant case. 68. The State Electricity Board has been given the exemption under the 2003 Act which by itself would not mean that those who purchase electrical energy from them would also be so exempted. Had that been so, the same could have been explicitly provided for. The principle of construction of statute, that the exemption provisions would be attracted only when requisite conditions precedent therefor are satisfied, would apply in a case of constitutional interpretation also. 69. The learned counsel for the appellants would, however, submit that Article 265 of the Constitution read with Article 288 thereof would mandate compliance of the latter provision. 70. The expression subject to stated that the same would imply that the provisions of Article 288 will have to be complied with. It is no doubt true that ordinarily the expression subject to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en before the High Court, we are not in a position to agree with the learned counsel appearing on behalf of the appellants that only because Section 13 of the repealed Act is inconsistent with Section 14 of the 2003 Act, the same would be arbitrary by reason of being discriminatory in nature and ultra vires Article 14 of the Constitution of India on the premise that charging section provides for levy of tax on sale and consumption of electrical energy, while the exemption provision purports to give power to exempt tax on electricity sold for consumption and makes no corresponding provision for exemption of tax on electrical energy self-generated and consumed. SHOULD WE READ IT DOWN 77. This leaves to the question as to whether the provisions of Section 14 of the 2003 Act should be read in such a manner so as to make it in consonance with Article 14 of the Constitution of India. The learned counsel would contend that Section 14 is loosely worded. We do not agree. The premise on which the said submission was made is that electricity cannot be stored. It has been held to be so in National Thermal Power Corpn. Ltd (supra) in the following words: In this observation we agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. But, it is another thing to say that it is necessary or proper to resort to or consider the earlier legislations on the subject only because the consolidating Act re-enacts in an orderly form the various statutes embodying the law on the subject. [See Williams v. Permanent Trustee Co. of New South Wales, (1906) AC 249, p. 252 and N.S. Bindra's Interpretation of Statutes, 10th edition, pages 1071- 1072] 82. The words consolidate and amend furthermore often occur in a statute in repealing provision. Such a statute is not intended to alter the law. 83. In The Union of India v. The Mohindra Supply Co. [AIR 1962 SC 256], this Court observed: 7 The Arbitration Act of 1940 is a consolidating and amending statute and is for all purposes a code relating to arbitration. In dealing with the interpretation of the Indian Succession Act, 1865, the Privy Council in Norendra Nath Sircar v. Kamlabasini Desai observed that a code must be construed according to the natural meaning of the language used and not on the presumption that it was intended to leave the existing law unaltered. The Judicial Committee approved of the observations of Lord Herschell in Bank of England v. Vagl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onger valid. It is only in certain exceptional situations that the language used in the earlier Act can be resorted to. 87. In G.P. Singh's 'Principles of Statutory Interpretation', Tenth Edition, pages 315-316, it is stated: The distinction between consolidating statutes and other statutes for purposes of interpretation is being obliterated. Recent decisions have emphasised that a consolidation Act should be interpreted according to normal canons of construction and recourse to repealed enactments can be taken only to solve any ambiguity, for the process of consolidation would lose much of its point if, whenever a question as to construction of a consolidating Act arose, reference had to be made to the statutes which it has consolidated and repealed. The primary rule of construction of a consolidation Act is to examine the language used in the Act itself without any reference to the repealed statutes. It is only when the consolidation Act gives no guidance as to its proper interpretation that it is permissible to refer to the repealed enactments for guidance and it is never legitimate to have recourse to repealed enactments to make obscure or ambiguous that whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles that we now proceed to examine the facts of the present case. 90. In Jayantilal Amrathlal v. Union of India [(1972) 4 SCC 174], this Court held: 8. The above contention is untenable. There are no provisions in the Gold (Control) Act, 1968 which are inconsistent with Rule 126(I)(10) of the Rules. That being so, action taken under that rule must be deemed to be continuing in view of Section 6 of the General Clauses Act, 1897. It is true that Gold (Control) Act, 1968 does not purport to incorporate into that Act the provisions of Section 6 of the General Clauses Act. But the provisions therein are not inconsistent with the provisions in Section 6 of the General Clauses Act. Hence the provisions of Section 6 of the General Clauses Act are attracted in view of the repeal of the Gold (Control) Ordinance, 1968. As the Gold (Control) Act does not exhibit a different or contrary intention, proceedings initiated under the repealed law must be held to continue. We must also remember that by Gold (Control) Ordinance, the Rules were deemed as an act of Parliament. Hence on the repeal of the Rules and the Gold (Control) Ordinance, 1968 the consequences mentioned in Section 6 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by super- adding conditions, or by restricting, intercepting or suspending its operation, such modification would not amount to a repeal (see Craies on Statute Law, 7th Edn. pp. 349, 353, 373, 374 and 375; Maxwells Interpretation of Statutes, 11th Edn. pp. 164, 390 based on Mount v. Taylor; Southerlands Statutory Construction 3rd Edn. Vol. I, para 2014 and 2022, pp. 468 and 490). Broadly speaking, the principal object of a repealing and amending Act is to excise dead matter, prune off superfluities and reject clearly inconsistent enactments see Mohinder Singh v. Harbhajan Kaur. 92. In T.S. Baliah v. T.S. Rangachari, Income Tax Officer, Central Circle VI, Madras [1969 (3) SCR 65], this Court held: The principle of this section is that unless a different intention appears in the repealing Act, any legal proceeding can be instituted and continued in respect of any matter pending under the repealed Act as if that Act was in force at the time of repeal. In other words, whenever there is a repeal of an enactment the consequences laid down in Section 6 of the General clauses Act will follow unless, as the section itself says, a different intention appears in the repealing statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless a different intention appears, the repeal shall not-- (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 24 Continuation of orders, etc., issued under enactments repealed and re-enacted.--Where any Central Act or Regulation, is, after the commencement of this Act, repealed and re- enacted with or without modification, then, unless it is otherwise expressly provided any appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e words unless a different intention appears in Sub-section (1) of Section 20 of the 2003 Act, in our opinion, is impermissible in law. We have rejected a similar contention of Mr. Nariman urging us to read down and apply the purported rule of purposive construction while construing Section 14 of the 2003 Act. We do not intend to apply different tests in the matter of construction of Section 20 of the 2003 Act. Omission of words in a particular statute may play an important role. The intention of the legislature must be, as is well known, gathered from the words used in the statute at the first instance and only when such a rule would give rise to anomalous situation, the court may take recourse to purposive construction. It is also a well settled principles of law that casus omissus cannot be supplied. [See J. Srinivasa Rao v. Govt. of A.P. and Anr. 2006 (13) SCALE 27] 98. Proviso appended to Sub-section (1) of Section 20 of the 2003 Act although for all intent and purport incorporates Section 6 of the General Clauses Act but a significant departure therefrom must be borne in mind. If the legislature has used different words, or has omitted certain words, in our opinion, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to have application, the absence of the words unless a different intention appears will assume great significance. 102. If that be so, then there is no conflict between the proviso appended to Sub-section (1) of Section 20 and Sub-section (2) thereof. In that view of the matter, Sub-section (2) of Section 20 of the 2003 Act would prevail. 103. The High Court, therefore, in our opinion, committed a manifest error in opining that both the provisions relate to the same scenario. Furthermore, Sub-section (2) of Section 20 of the 2003 Act uses the expression notwithstanding such repeal and, thus, the same cannot be construed to be notwithstanding anything contained in Sub-section (1) of Section 20 thereof. 104. Once the aforementioned conclusion is arrived at, it would not be necessary to construe the proviso appended to Sub-section (1) of Section 20 in its own language. Proviso, as is well known, has four functions, as has been noticed by this Court in S. Sundaram Pillai v. V.R. Pattabiraman, [(1985) 1 SCC 591 in the following terms: 43. (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Interpretation Act 1978 s16(1)(b). The reference to 'anything duly done' avoids the need for procedural matters, such as the giving of notices, to be done over again. Example 89.3 The Interpretation Act 1978 s 16 preserved the effect of a noise nuisance notice served under the Control of Pollution Act 1974 s 58(1) before its repeal and replacement by the Environmental Protection Act 1990 ss 162 and 164(2) and Sch 16 Pt III. 111. The treatment of the law, in our opinion, is not exhaustive as different consequences are required to be taken into consideration and applied having regard to the nature of the statutory provision. 112. Mr. Andhyarujina also relied upon Maxwell on the Interpretation of Statutes, 12th edition, page 18, wherein it was stated: When an Act is repealed, any delegated legislation made under the Act falls to the ground with the statute unless it is expressly preserved. Where the subordinate legislation is continued in force, however, the general rule is that its scope and construction are determined according to the repealed Act under which it was made. 113. The statement of law therein does not militate against our findings aforementi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er used in clause (b) of Section 6 are often used by the legislature in saving clause which is intended to provide that unless a different intention appears, the repeal of an Act would not affect anything duly done or suffered thereunder. This Court in Hasan Nurani Malak v. S.M. Ismail, Asstt. Charity Commr., Nagpur has held that the object of such a saving clause is to save what has been previously done under the statute repealed. The result of such a saving clause is that the pre- existing law continues to govern the things done before a particular date from which the repeal of such a pre-existing law takes effect. In Universal Imports Agency v. Chief Controller of Imports and Exports this Court while construing the words things done held that a proper interpretation of the expression things done was comprehensive enough to take in not only the things done but also the effect of the legal consequence flowing therefrom. 120. Furthermore, exemption from payment of tax in favour of the appellants herein would also constitute a right or privilege. The expression privilege has a wider meaning than right. A right may be a vested right or an accured right or an acquired right. Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70% thereof is to be sold. 125. The Committee furnished a report recommending exemption from generation tax both from power consumption and as also the power supplied to the grid/ third parties. It was also recommended that the Tamil Nadu Electricity Board may pay a price equal to HT-I tariff charged for industrial consumers less 2% for transmission cost. 126. The State, however, did not accept the recommendations made by the said Committee in their entirety. By reason of a notification dated 16.06.1993, the State while accepting a part of the said report, directed that the Tamil Nadu Electricity Board shall pay a price equal to HT-I tariff charged for industrial consumers less 2% for transmission cost. However, an exemption provision was made from payment of Electricity General Tax therein stating: Cogenerating sugar mills shall be exempted from the Electricity Generation Tax both for power consumed captively as well as power supplied to the Tamil Nadu Electricity Board and other third parties. 127. By reason of Act No. 43 of 1994, with a view to rationalize the rate of tax on consumption, rate of additional tax was increased from 4% to 5% without repealing GOMs. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .73 3.20 0.07 3.13 01.04.2000 2.73 2.48 3.40 0.07 3.33 01.04.2001 2.87 2.60 3.40 0.07 3.33 01.04.2002 2.88 2.73 3.20 0.07 3.13 16.03.2003 3.01 2.73 3.50 0.08 3.42 Notes: 1. After 16.3.2003, the same rate continued as the TNEB rate is restricted to 90% of the HT-1 Tariff as per TNEB Board proceedings dated 11.1.2000. 2. In co-generation, out of the total power generated, 30% is used for captive consumption and 70% is exported to TNEB. Tax of 5% on consumption therefore approximates to 2.14% on the power exported to TNEB. The tax as above is calculated on that basis. PROMISSORY ESTOPPEL ISSUE 132. It is in the aforementioned context, the doctrine of promissory estoppel is sought to be invoked. We will notice hereinafter that even a right can be preserved by reason of invocation of doctrine of promissory estoppel. 133. Submission of Mr. Andhyarujina, however, is that there cannot be an estoppel against a statute and, in any event, an exemption granted under Sub-section (1) of Section 13 of the 1962 Act was subject to cancellation or variation under Sub-section (2) of Section 13 thereof. 134. In regard to the evolution of the said doctrine, it may not be necessary fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Another v. State of Haryana and Others [(2006) 3 SCC 620], it was stated: 38. The promises/representations made by way of a statute, therefore, continued to operate in the field. It may be true that the appellants altered their position only from August 1996 but it has neither been denied nor disputed that during the relevant period, namely, August 1996 to 16-12-1996 not only have they invested huge amounts but also the authorities of the State sanctioned benefits, granted permissions. Parties had also taken other steps which could be taken only for the purpose of setting up of a new industrial unit. An entrepreneur who sets up an industry in a backward area unless otherwise prohibited, is entitled to alter his position pursuant to or in furtherance of the promises or representations made by the State. The State accepted that equity operated in favour of the entrepreneurs by issuing Note 2 to the notification dated 16-12-1996 whereby and whereunder solvent extraction plant was for the first time inserted in Schedule III i.e. in the negative list. 138. We may, however, notice that a survey of the earlier decisions has also been made by this Court in State of Punjab v. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereupon Mr. Andhyarujina placed strong reliance, in the following terms: 40. The case of Kasinka Trading v. Union of India cited by the appellant is an authority for the proposition that the mere issuance of an exemption notification under a provision in a fiscal statute such as Section 25 of the Customs Act, 1962, could not create any promissory estoppel because such an exemption by its very nature is susceptible to being revoked or modified or subjected to other conditions. In other words, there is no unequivocal representation. The seeds of equivocation are inherent in the power to grant exemption. Therefore, an exemption notification can be revoked without falling foul of the principle of promissory estoppel. It would not, in the circumstances, be necessary for the Government to establish an overriding equity in its favour to defeat the petitioners plea of promissory estoppel. The Court also held that the Government of India had justified the withdrawal of exemption notification on relevant reasons in the public interest. Incidentally, the Court also noticed the lack of established prejudice to the promises when it said: (SCC p. 289, para 22) The burden of customs duty etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the prospects held out, the representations made, the conduct of the Government, and equities arising therefrom, may all be taken into consideration for judging whether a particular piece of legislation, initiated by the Government and enacted by Parliament, is reasonable. 144. We, therefore, are of the opinion that doctrine of promissory estoppel also preserves a right. A right would be preserved when it is not expressly taken away but in fact has expressly been preserved. 145. In view of the application of doctrine of promissory estoppel in the case of the appellants, their right is not destroyed and in that view of the matter although the Scheme under the impugned Act is different from the 1939 Act and the 1962 Act and furthermore in view of the phraseology used in Section 20(1) of the 2003 Act, right of the appellants cannot be said to have been destroyed. The legislature in fact has acknowledged that right to be existing in the appellants. LEGITIMATE EXPECTATION 146. We may also notice the emerging doctrine in this behalf, viz., Legitimate Expectation of Substantive Benefit. Ordinarily, the said principle would not have any application where the legislature ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expectation is so unfair that to take a new and different course will amount to an abuse of power. Here, once the legitimacy of the expectation is established, the court will have the task of weighing the requirements of fairness against any overriding interest relied upon for the change of policy. (See also para 57-59) 150. In R v Home Secretary, ex parte Hindley [2001] 1 AC 410 it is interesting to note the leading speech of Lord Steyn which is more reserved. Court of Appeal also considered the aforementioned concept in R (on the application of Bibi) v London Borough of Newham [2001] EWCA Civ 607. In Bibi's case (supra), the court accepted that it had jurisdiction to protect a substantive legitimate expectation but adopted a somewhat different approach from the approach taken in Coughlan (supra). In a joint judgment the court said: In all legitimate expectation cases, whether substantive or procedural, three practical questions arise. The first question is to what has the public authority, whether by practice or by promise, committed itself; the second is whether the authority has acted or proposes to act unlawfully in relation to its commitment; the third is what t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, operate in different fields. If it is to be held that the power of the Electricity Regulatory Commission to fix tariff does not include a power to impose tax, axiomatically, the same principle would apply also when a tax is sought to be levied on consumption or sale of electrical energy and not on tariff. Power of taxation, as noticed hereinbefore, operates differently from power to impose tariff. A tariff validly framed by the licensee, in exercise of its statutory power, may lay down a higher rate on the sale of power to various types of consumers having regard to the necessity to maintain infrastructure. A maximum demand charge, when levied, does not contemplate a sale or consumption of electrical energy. Maximum tariff is provided for various reasons. It has been noticed by this Court in IPI Steel Ltd. (supra) in the following terms: From this circumstance, however, one cannot jump to the conclusion that it is an arbitrary way of levying consumption charges. Normally speaking, a factory utilises energy at a broadly constant level. May be, on certain occasions, whether on account of breakdowns, strikes or shutdowns or for other reasons, the factory may not utilise energy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the agreement between the Board and consumer (like the respondent) specifies only the maximum demand and not the total units allowed to be consumed. The agreement concerned herein prescribes the maximum demand at 7778 KVA but does not prescribe the total number of units of energy allowed to be consumed. This is for the reason, explains Shri Hegde, that the total number of units of energy consumed is determined by the load/level at which power is drawn. The formula, taking the case of the respondent is stated to be 100% unrestricted energy requirement of the respondent = contract demand in KVA x power factor x load factor x total number of hours in a year. In concrete terms, it means 7778 KVA x 0.90 x 0.611 x 8760 = 37,467,590 KWH (Units) = 37.467.59 MU (Million Units). This formula, as it states expressly, is premised on unrestricted supply. Problems arise only when restrictions are placed on consumption on account of fall in production of electricity by the Board, as would be explained hereinafter. 155. Thus, 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 in two pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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. 159. A taxing statute, as is well known, must receive strict interpretation. [See Manish Maheshwari v. Asstt. Commissioner of Income Tax and Anr., 2007 (3) SCALE 627] 160. A taxing statute, therefore, must be made in consonance with Article 265 of the Constitution of India. Mr. Andhyarujina draws our attention to Sub-clause (d) of Clause 29A of Article 366 of the Constitution of India to submit that the Constitution itself has envisaged an expanded meaning of the term. Clause 29A is subject to the other provisions. It has been included for the purpose of defining the tax on the sale or purchase of goods as envisaged under Entry 54 of List II of the Seventh Schedule of the Constitution of India and not for the purpose of Entry 53. 161. The reason for insertion of such an explanation is to get over the decision of this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery, etc. would continue to be defined according to known legal connotations. This does not mean that the content of the concepts remain static. The courts must move with the times. But the Forty-sixth Amendment does not give a licence, for example, to assume that a transaction is a sale and then to look around for what could be the goods. The word goods has not been altered by the Forty-sixth Amendment. That ingredient of a sale continues to have the same definition. The second respect in which Gannon Dunkerley has survived is with reference to the dominant nature test to be applied to a composite transaction not covered by Article 366(29-A). Transactions which are mutant sales are limited to the clauses of Article 366(29-A). All other transactions would have to qualify as sales within the meaning of the Sales of Goods Act, 1930 for the purpose of levy of sales tax. While noticing the said case, it has been held: 105. The amendment introduced fiction by which six instances of transactions were treated as deemed sale of goods and that the said definition as to deemed sales will have to be read in every provision of the Constitution wherever the phrase tax on sale or pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods but the goods must be available at the time of transfer, must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods by the respondents, are not deliverable at all by the service providers to the subscribers, the question of the right to use those goods, would not arise. It was furthermore held that only because the Board keeps itself ready for supply of electrical energy, the same by itself would not mean that there had been deliverable goods and the goods have been delivered. 163. We are not concerned with the user of the goods and, therefore, deliverability of the goods is not in question. 164. It may be that electricity has been considered to be 'goods' but the same has to be considered having regard to the definition of goods contained in Clause (12) of Article 366 of the Constitution of India. When this Court held electricity to be 'goods' for the purpose of application of sales tax laws and other tax laws, in our opinion, the same would have nothing to do with the construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the demand charge when the supply is governed by a two-part tariff. In that case, no term like net energy existed. 168. We may notice that this Court in West Coast Papers Mills Ltd (supra), held that no tax can be invoked on transmission loss stating: 7. We have set out the relevant provisions of the Act, and it would appear therefrom that electricity tax is payable on the units of energy consumed. The one question with which we are concerned in this appeal is whether electricity tax is payable in respect of the electrical energy which is lost in transmission as a result of transmission loss or transformer loss. So far as this question is concerned, we are of the view that no tax is payable on the electricity so lost. The entire scheme of the Act is to tax the consumption of electrical energy. Where some energy is not consumed but lost before it reaches the point of consumption, the question of levy of tax on consumption of such energy would not in the very nature of things arise. The place of consumption of electrical energy is normally at some distance from the place where electrical energy is generated. Electrical energy has consequently to be transmitted through ..... X X X X Extracts X X X X X X X X Extracts X X X X
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