SOUIBERN PETROCHEMICAL INDUSTRIES CO. LTD. v. ELECTRICITY INSPECTOR AND E.T.1.0. AND ORS.

A REPEAL ISSUE

88Copy pinpoint88. Section 20 of the 2003 Act repeals the 1962 Act as well as the 1939 Act. The effect of 'repeal' is well known wherewith there does not appear to be any general controversy. Thus, before proceeding to advert to the rival contention of the parties, as noticed hereinbcfore, we may notice certain precedents of this Court operating in this behalf.

89Copy pinpoint89. In State of Punjab v. Mohar Singh. (1955] 1 SCR 893], this Court has stated:

" ... 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 case of a simple repeal there is scarcely any room for expression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject we would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention. The line of enquiry would be, not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. We cannot therefore subscribe to the broad proposition that Section 6 of the General Clauses Act is ruled out when there is repeal of an enactment followed E - by a fresh legislati0n. Section 6 would be applicable in such cases also unless the new legislation manifests an intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to be ascertained from a consideration of all the relevant provisions of the new law and the mere absence of a saving clause is by itself not material. It is in the light of these principles that we F now proceed to examine the facts of the present case." '( t

90Copy pinpoint90. In Jayantila/ Amrath/a/ v. Union of India, [1972] 4 SCC 174, this Court held:

"8. The above contention is untenable. There are no provisions in the G Gold (Control) Act, 1968 which are inconsistent with Rule 126(I)(IO) 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 H Clauses Act. But the provisions therein are not inconsistent with the

SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD.'· ELECTRICITY INSPECTOR [SB SINHA, J. J 997

provisions in Section 6 of the General Clauses Act. Hence the A 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 B 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 of the General Clauses Act, follow. For ascertaining whether there is a contrary intention, one has to look to the provisions of the Gold (Control) Act, 1968. In order to see whether the rights and liabilities under the repealed law have been put an end to by the new C enactment, the proper approach is not to enquire ifthe new enactment has by its new provisions kept alive the rights and liabilities under the repealed law but whether it has taken away those rights and liabilities. The absence of a saving clause in a new enactment preserving the rights and liabilities under the repealed law is neither material nor decisive of the question see State of Punjab v. Mohar Singh and T.S. D Baliah v. Income Tax Officer, Central Circle VI, Madras." T

91Copy pinpoint91. In India Tobacco Co. Ltd. v. The Commercial Tax Officer, Bhavanipore and Ors., [1975] 3 SCC 512, this Court held:

"15. The general rule of construction is that the repeal of a repealing E Act does not revive anything repealed thereby. But the operation of this rule is not absolute. It is subject to the appearance of a different intention in the repealing statute. Again such intention may be explicit or implicit. The questions, therefore, that arise for determination are: Whether in relation to cigarettes, the 1941 Act was repealed by the p 1954 Act and the latter by the 1958 Act? Whether the 1954 Act and 1958 Act were repealing enactments? Whether there is anything in the 1954 Act and the 1958 Act indicating a revival of the 1941 Act in relation to cigarettes?

16. It is now well-settled that repeal connotes abrogation or obliteration G of one statute by another, from the statute book as completely as if it had never been passed; when an Act is repealed, it must be considered (except as to transactions past and closed) as if:it had never existed. (Per Tindal, C.J .. in Kay v. Goodwin and Lord Tenterdon in Surtees v. Ellison cited with approval in State of Orissa v. MA. Tulloch & Co.). H

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A 17. Repeal is not a matter of mere form but one of substance, depending upon the intention of the legislature. If the intention indicated expressly or by necessary implication in the subsequent statute was to abrogate or wipe off the former enactment, wholly or in part, then it would be a case of total or pro tanto repeal. If the intention was merely to modify the former enactment by engrafting an exception or granting B an exemption, or 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, I Ith Edn. pp. 164, 390 based on Mount v. Taylor; Southerlands Statutory Construction c 3rd Edn. Vol. I, para2014 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 reje.:t clearly inconsistent enactments see Mohinder Singh v. Harbhajan Kaur."

92Copy pinpoint92. In T.S. Baliah v. T.S. Rangachari, Income Tax Officer, Central Circle D VJ, 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 statute. In the case of a simple repeal there is scarcely any room for expression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject the Court would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention. The question is not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. Section 6 of the General Clauses Act therefore will be applicable unless the new legislation manifests an intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to he ascertained from a consideration of all the relevant provisions of the new statute and the mere absence of a saving clause is by itself not material. In other words, the provisions of Section 6 of the General Clauses Act will apply to a case of repeal even ifthere H

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-~ is a simultaneous re-enactment unless a contrary intention can be A gathered from the new statute ... "

93Copy pinpoint93. In Gajraj Singh and Ors. v. State Transport Appellate Tribunal and Ors., [1997]1 SCC 650, this Court held:

"24. When there is a repeal and simultaneous re-enactment, Section B 6 of the GC Act would apply to such a case unless contrary intention can be gathered from the repealing Act. Section 6 would be applicable in such cases unless the new legislation manifests intention f inconsistent with or contrary to the application of the section. Such incompatibility would have to be ascertained from all relevant provisions of the new Act. Therefore, when the repeal is followed by c a fresh legislation on the same subject, the Court would undoubtedly have to look to the provisions of the new Act only for the purpose of determining whether the 1ew Act indicates different intention. The object of repeal and re-enal:lment is to obliterate the Repealed Act and to get rid of certain obsolete matters." D

94Copy pinpoint94. We may at this juncture also notice that whereas Section 6 of the

,. General Clauses Act provides for effect of repeal, Section 24 thereof provides for continuation of orders issued under the enactments repealed and re- enacted. They read as under: E "6 Effect ofrepeal.-Where this Act, or any Central Act or Regulation made after the commencement of this Act,

repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not-

(a) revive anything not in force or existing at the time at which the F ....,., 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 G 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 H

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A 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 ifthe 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 appointment, notification, order, scheme, rule, form or bye-law, made or issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force, and be deemed to have been made or issued under the provisions so re-enacted, unless and until it is superseded by any appointment, notification, order, scheme, rule, form or bye-law, made or issued under the provisions so re-enacted and when any Central Act or Regulation, which, by notification under section 5 or 5A of the Scheduled Districts Act, 1874, (14of1874) or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn from and re-extended to such area or any part thereof, the provisions of such Act or Regulation shall be deemed to have been repealed and re-enacted in such area or part within the meaning of this section."

95Copy pinpoint95. What, however, is the matter of moment would be that the expression "unless a different intention appears" occurring in Section 6 of the General F Clauses Act, 1897 has not been inserted in Sub-section (I) of Section 20 of the 2003 Act. Sub-sections (I) and (2) of Section 20 of the 2003 Act, thus, operate in different situations. Whereas the proviso appended to Sub-section (1) of Section 20 of the 2003 Act provides for the consequences flowing from the repeal of the 1939 Act and the 1962 Act; Section 20(2) provides for a legal G fiction for continuation of certain things/ proceeding on the premise as if the said Acts had not been repealed. Repeal of the 1939 Act and the 1962 Act would lead to repeal of notifications issued thereunder also. Proviso appended to Sub-section ( 1) of Section 20 of the 2003 Act, however, carves out an exception in regard to the consequences flowing therefrom.

96Copy pinpoint96. If Sub-sections (1) and (2) of Section 20 of the 2003 Act operate in .

SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD.'- ELECTRICITY INSPECTOR [S.B SINHA, J. l 00 J

different fields, as we have held, the marginal note of Section 20, viz., repeal and savings, in our opinion, would not be material. If both the Sub-sections of Section 20 of the 2003 Act are not dependant on each other and in particular having regard to the phraseology used therein, they need not be read together. One cannot proceed on the basis while reading the provisions of the statute that anomaly would be created and then urge that they should be read together.

97Copy pinpoint97. Submission of Mr. Andhyarujina that this Court must read the 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. ofA.P. and Anr., [2006] 13 SCALE 27]

98Copy pinpoint98. Proviso appended to Sub-section (I) of Section 20 of the 2003 Act although for all intent and purport incorporates Section 6 of the General E 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 same cannot be read as containing the words "unless a different intention appears". It may be that the provisions of the 2003 Act are demonstrably different from the 1962 Act but we must assume that the legislature did so deliberately. The intention of the legislature by making a r distinction between Sub-section (1) and Sub-section (2) of Section 20 of the • 2003 Act, in our opinion, is obvious. The fact that the significant words "unless a different intention appears" or the Act does not contain a provision inconsistent therewith were known to the legislature. Whereas in Sub-section (I) of Section 20 of the 2003 Act they did not introduce any such thing, they did so while enacting Sub-section (2) thereof.

99Copy pinpoint99. While construing the said words, we may require to construe Section 14 of the 2003 Act at the outset. The word "corresponding" may mean "to be in harmony with or to be similar or analogous to or to be identical with" H

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A as has been held in H. V. Mathai v. Subordinate Judge, Kottayam and Ors., )-- (1969] 2 sec 194.

I00. The word "correspond" as contained in Stroud's Judicial Dictionary, 2nd Edition, Ve:lume I, page 355, is to mean "to harmonize with" or "to be identical with". B 10 I. But, we may notice that whereas the 1939 Act did not contain any provision for exemption from payment of tax in respect of sale of electrical energy, Section 13 of the 1962 Act dealing with taxation on consumption of electrical energy expressly provided therefor. Section 14 of the 2003 Act, on the other hand, makes a provision for grant of exemption in respect of sale of energy as contra-distinguished from the provisions of the 1939 Act. It takes away the power of exemption on consumption of electrical energy which had been expressly provided under the 1962 Act. Can the 1939 Act and the 1962 Act, on the one hand, and the 2003 Act, on the other, be said to be containing similar or identical provisions? The answer thereto must be rendered in the negative. Once Section 14 of the 2003 Act is held to be not containing any provision corresponding to the relevant provisions of the 1939 Act and the 1962 Act, Sub-section (2) of Section 20 of the 2003 Act, in our opinion, will have no application. If Sub-section (2) of Section 20 of the 2003 Act would have no application, Sub-section ( 1) of Section 20 would apply. Once Sub-section (I) of Section 20 of the 2003 Act is 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 (I) 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 '1" 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 (l) 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] H 1 sec 591 in the following terms:

SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD '· ELECTRICITY INSPECTOR [S.B. SINHA, J. j 003

"43. (I) qualifying or excepting certain provisions from the main A - ..( enactment;

(2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; B (3) it may be so embedded in the Act itself as to become an integral pan of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and

(4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision."

(See also Swedish Match AB v. Securities & Exchange Board, India, (2004] 11 SCC641]

I 05. In a case of this nature, the proviso restricts the operation of the repeal clause. It seeks to protect the matter specified thereunder despite such repeal. Section 6 of the General Clauses Act seeks to achieve the same purpose, subject of course, to the repealing Act having no provision r· inconsistent with the repealed Acts.

106. The 1962 Act provided for grant of exemption from payment of electricity tax levied on consumption of electricity. When a notification was issued by the appropriate authority, the same had to be given a purpose. A notification issued thereunder could be an act which would come within the purview of the words "anything duly done".

I 07. In our opinion, it would not be correct to contend that only because Sub-section (2) of Section 20 of the 2003 Act refers to notification, the same would not mean that wherever the word notification has been issued, Sub-section {I) thereof will have no application.

108. We are also unable to agree with Mr. Andhyarujina that exemption from tax is a mere concession defeasible by Government and does not confer any accrued right to the recipient. Right of exemption with a valid notification issued gives rise to an accrued right. It is a vested right. Such right had been granted to them permanently. 'Permanence' would mean unless altered by statute. H

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A. 109. Thus, when a right is accrued or vested, the same can be taken away only by reason of a statute and not otherwise. "Thus, a notification }-- which was duly issued would continue to govern unless the same is repealed.

110. Mr. Andhyarujina, however, would submit that reference to the words "anything duly done" should be given a restrictive meaning. He referred B to ~Statutory Interpretation~ A Code" by F.A.R. Bennion, Third Edition, page 229, wherein it was stated:

"Paragraph (ii) This derives from Interpretation Act 1978 s 16( I )(b ). The reference to 'anything duly done' avoids the need for procedural matters, such ~ the giving of notices, to be done over again. t: c ·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 111."

D 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. . . I

112. Mr. Andhyarujina also relied upon Maxwell on the Interpretation -"\__ of Statutes, 12th edition, page 18, wherein it was stated: E "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." F .. i !"3. The statement of law therein does not militate against our findings . aforementioned. Construction would vary from statute to statute. .... '[

114. It is profitable to notice at this stage a decision of this Court in G J.Us. Universal Imports Agency (supra). In that case under the Indo-French Agreement entered into by and between the two nations on !st November, 1954, the entire Administration of French Settlement vested in the Government of India. The territory of Pondicherry, thus, became a free port without any restriction in case of most imports. However, by reason of a notification dated 30th October, 1954, the importers in Pondicherry were required to obtain H validation of licences held by them to import goods as petitioners thereof did

• SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD '· ELECTRICITY INSPECTOR (S.B. SINHA, J ] J005

--1 not have any merchandise imported by them stood confiscated. A

115. Clause 6 of the Agreement reads, thus:

"Unless otherwise specifically provided in the Schedule, all laws in force in the French Establishments immediately before the commencement of the Order, which correspond to enactments specified B in the Schedule, shall cease to have effect, save as respect things done or omitted to be done before such commencement."

116. Analyzing the said provision, this Court held:

" ... The words things done in para 6 must be reasonably interpreted and, if so interpreted, they can mean not only things done but also c the legal consequences flowing therefrom. If the interpretation suggested by the learned counsel for the respondents be accepted, the saving clause would become unnecessary. If what it saves is only the executed contracts i.e. the contracts whereunder the goods have been imported and received by the buyer before the merger, no further protection is necessary as ordinarily no question of enforcement of the contracts under the pre-existing law would arise. The phraseology .,.... used is not an innovation but is copied from other statutory clauses . Section 6 of the General Clauses Act (I 0 of 1897) says that unless a different intention appears, the repeal of an Act shall not affect anything duly done or suffered thereunder ..."

I 17. Thus, a liberal and extensive construction was given by this Court.

118. To the same effect is also a decision of this Court in Shri Ram Prasad (supra) wherein power to make rule was held to be a thing done within the meaning of Article 357(2) of the Constitution of India. y

• 119. In Harnek Singh (supra), this Court held:

"16. The words anything duly done or suffered thereunder 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, --r 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- H

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A existing !aw 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. Nature of such a right would depend upon and also vary from statute to statute. It has been so held by this Court, while construing Section 6 of the General Clauses Act, in Mis. Gurcharan Singh Baldev Singh v. Yashwant Singh and Ors., [1992] 1 SCC 428 in the following terms:

D " ... The objective of the provision is to ensure protection of any right or privilege acquired under the repealed Act. The only exception to it is legislative intention to the contrary. That is, the repealing Act may expressly provide or it may impliedly provide against continuance of such right, obligation or liability ..."

E 121. We are, however, in a case of this nature, not really concerned with the question as to whether even an inchoate right can be subject matter of a saving clause. Such a question, in our opinion, does not arise for consideration herein.

122. We have noticed the legislative history of the Act. Whereas the F 1939 Act did not contain any provision for grant of exemption from payment of electricity tax on sale of electrical energy, the 1962 Act contained two provisions in relation thereto. One, contained in Section 12 relating to High Tension Supply in the matter of principal production and another contained in Section 13 being a general power of exemption.

G 123. After the 1962 Act came into force, as noticed hereinbefore, the Government issued the notification bearing GOMs No. 787 dated 30.04.1979 merging the electricity tax with the basic tariff. ln 1991, the 1962 Act was amended whereby additional tax was levied at 5%. y

124. On or about 22.10.1991, the Union Ministry of Power, Government H

SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD ''· ELECTRICITY INSPECTOR [S.B SINHA, J J J007

--( of India published a policy for private participation in the power sector as a A result whereof provisions were made in the 1948 Act allowing setting up of generating companies and captive power plants. Indisputably, the Government of Tamil Nadu constituted a committee to go into the issue of cogeneration of electricity in the sugar mills and other industries and to make recommendations therefor; the terms of reference being "to evolve a methodology for pricing of electricity purchased by Tamil Nadu Electricity B Board from sugar Mills Cogenerating electricity", etc. as stated therein. It is not in dispute that a cogenerating sugar mill is not similar to other captive ..,,, power plant insofar as a typical cogenerating sugar mill would consume only 30% of the power generated and balance 70% thereof is to be sold.

125. The Committee furnished a report recommending exemption from c 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. D

126. The State, however, did not accept the recommendations made by the said Committee in their entirety. By reason ofa 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: E

"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. 43of1994, with a view to rationalize the rate F ..,, of tax on consumption, rate ()f additional tax was increased from 4 % to 5%

• without repealing GOMs. No. 230 dated 16.06.1993 .

128. On 9.10.1995, the Ministry of Power, Union of India wrote to all State Electricity Boards and State Governments urging them to take steps to tap the potential in captive/ cogeneration power plants as energy shortage G was visualized at 15% and peaking shortage at 30%. The State Governments, therefore, were urged to create an institutional mechanism to meet the said shortage.

129. On or about 23rd September, 1996, the Government of Tamil Nadu H

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A issued the following exemption notification bearing GOMs. No. 126: "In exercise of the powers conferred by sub-section (I) of Section 13 of the Tamil Nadu Electricity (Taxation on Consumption) Act I 962 (Tamil Nadu Act 4of1962), the Governor of Tamil Nadu hereby direct that the consumption of self-generated electrical energy for captive B generators by the Paper, Textile, Chemical and Sugar Industries irrespective of the fuel they use be exempted permanently from the electricity tax payable under the said Act. The Governor also direct that the consumption of energy generated through Non-Conventional Energy Sources like Sun, Wind etc., be exempted from th~ Electricity c Tax payable under the above Act."

4 Rajshree Sugars & Chemicals Ltd 86.64

Total : 745.64 Grasim Industries alone is said to have invested about Rs. 37 crores. G

131. Appellants contend that a lower rate of tariff was purposively fixed as the State intended to grant exemption from payment of electricity tax permanently which, according to them, would be evident from the following

SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. '·ELECTRICITY INSPECTOR [S.B. SINHA, I.] } OQ9

--{ chart: A "Date TNEB Rate HT-I Assumed Tariff Tax Net Rate Season Off-season on consumption (Rs. P) (Rs. P) (Rs. P) (Rs. P) (Rs. P) B 01.04.1995 225 2.40 0.05 235 01.04.1996 236 2.80 0.05 2.75 01.04.1997 2.48 2.80 0.05 2.75 01.04.1998 2.60 2.80 0.06 2.74 20.07.1998 2.60 3.20 0.06 3.14 c 01.04.1999 2.73 3.20 0.07 3.13 01.042000 2.73 2.48 3.40 0.07 333 01.042001 2.87 2.60 3.40 0.07 333 01.042002 2.88 2.73 3.20 0.07 3.13 16.032003 3.01 2.73 3.50 0.08 3.42 D Notes: I. After 16.3.2003, the same rate continued as the TNEB rate is restricted to 90% of the HT-I Tariff as per TNEB Board r 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% E on consumption therefore approximates to 2.14% on the power exported to TNEB. The tax as above is calculated on that basis."

PROMISSORY £STOPPEL ISSUE

132. It is in the aforementioned context, the doctrine of promissory F y 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 (I) of Section 13 of the 1962 Act was subject to cancellation or G variation under Sub-section (2) of Section 13 thereof.

134. In regard to the evolution of the said doctrine, it may not be necessary for us to notice all the decisions cited at the bar as most of them have recently been taken into consideration by this Court in Mis. A.P. Steel H

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A Re-Rolling Mill Ltd. v. State of Kera/a & Ors., (2006) 14 SCALE 162. )--

135. The doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy B decision on the part of the State shall not only be expressed by reason of notifications issued under the statutory provisions but also under the executive instructions. Appellants had undoubtedly been enjoying the benefit of payment of tax in respect of sale/ consumption of electrical energy in relation to the cogenerating power plants. c 136. Unlike an ordinary estoppel, promissory estoppel gives rise to a cause of action. It indisputably creates a right. It also acts on equity. However, its application against constitutional or statutory provisions is impermissible in law. This aspect of the matter has been considered in State of Bihar and Ors. v. Project Uchcha Vidya, Sikshak Sangh and Ors., [2006] 2 SCC 545 D stating:

"77. We do not find any merit in the contention raised by the learned counsel appearing on behalf of the respondents that the principle of ..., equitable estoppel would apply against the State of Bihar. It is now well known, the rule of estoppel has no application where contention as regards a constitutional provision or a statute is raised. The right of the State to raise a question as regards its actions being invalid under the constitutional scheme of India is now well recognised. If by reason of a constitutional provision, its action cannot be supported or the State intends to withdraw or modify a policy decision, no exception thereto can be taken. It is, however, one thing to say that such an action is required to be judged having regard to the fundamental rights of a citizen but it is another thing to say that by y , applying the rule of estoppel, the State would not be permitted to • raise the said question at all. So far as the impugned circular dated 18-2-1989 is concerned, the State has, in our opinion, a right to support the validity thereof in terms of the constitutional framework."

137. Yet again in Mahabir Vegetable Oils (P) Ltd. and Anr. v. State of Haryana and Ors., [2006] 3 SCC 620, it was stated: y- "38. The promises/representations made by way of a statute, therefore, continued to operate in the field. It may be true that the appellants

SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD. '· ELECTRICITY INSPECTOR [S.B. SINHA. J. ] 1Q11

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 B 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 ;r issuing Note 2 to the notification dated 16-12-1996 whereby and whereunder solvent extraction plant was for the first time inserted in C 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. Nestle India Ltd. and Anr., [2004] 6 sec 465 wherein the Jaw has been stated in the following terms: D "25. In other words, promissory estoppel long recognised as a legitimate defence in equity was held to found a cause of action against the Government, even when, and this needs to be emphasised, the representation sought to be enforced was legally invalid in the sense that it was made in a manner which was not in conformity with the procedure prescribed by statute." E

139. Referring to Motilal Padampat Sugar Mills Co. Ltd. v. State of UP. [ 1979] 2 SCC 409, this Court observed:

"29. As for its strengths it was said: that the doctrine was not limited only to cases where there was some contractual relationship or other pre-existing legal relationship between the parties. The principle would be applied even when the promise is intended to create legal relations or affect a legal relationship which would arise in future. The Government was held to be equally susceptible to the operation of the doctrine in whatever area or field the promise is made contractual, administrative or statutory. To put it in the words of the Court:

The Jaw may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government H

p. 1012 Copy page pinpoint

A would be held bound by the promise and the promise would be ~~ enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. (SCC p. 442, para 24)

B ••• [E]quity will, in a gtven case where justice and fairness demand, prevent a person from insisting on strict legal rights, even where they arise, not under any contract, but on his own title deeds or under statute. (SCC p. 425, para 8) -,.., " c ••• Whatever be the nature of the function which the Government is discharging, the Government is subject to the ru~ of promissory estoppel and if the essential ingredients of this rule are satisfied, the D Government can be compelled to carry out the promise made by it. (SCC p. 453, para 33)"

J40. This Court distinguished its earlier decision in Kasinka Trading v. Union ofIndia, [1995] I SCC 274, whereupon Mr. Andbyarujina placed strong "(

reliance, in the following terms: .E "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 ,pr 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) H

SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. '· ELECTRICITY INSPECTOR [S.B. SINHA. J. J I0 I3

The burden of customs duty etc. is passed on to the consumer and A -~ therefore the question of the appellants being put to a huge loss is not understandable.

(See also Shrijee Sales Corpn. v. Union of India and STO v. Shree Durga Oil Mills.) We do not see the relevance of this decision to the facts of this case. Here the representations are clear and unequivocal." B

141. In MRF Ltd., Kottayam v. Asst. Commissioner (Assessment) Sales Tax and Ors.. [2006] 8 SCC 702, wherein one of us (Katju, J.) was a member, Kasinka Trading (supra) has also been held to be inapplicable where a right has already accrued; for instance, in a case where the right to exemption of tax for a fixed period accrues and the conditions for that exemption have also c been fulfilled, the withdrawal of that exemption cannot affect the already accrued right.

142. In MRF Ltd (supra), it was held that the doctrine of promissory estoppel will also apply to statutol) notifications. D

143. We may also notice an interesting observation made by Beg, J. in Madan Mohan Pathak and Anr. v. Union of India and Ors., [ 1978] 2 SCC 50 .,. wherein the learned Judge in his concurrent judgment while striking down the Life Insurance Corporation (Modification of Settlement) Act, 1976, opined:

"Furthermore, I think that the principle laid down by this Court in E Union of India v. Indo-Afghan Agencies Ltd. can also be taken into account in judging the reasonableness of the provision in this case. It was held there (at p. 385):

Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and F ...,, it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim "' to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen.

In that case, equitable principles were invoked against the Government. G It is true that, in the instant case, it is a provision of the Act of . Parliament and not merely a governmental order whose validity is challenged before us. Nevertheless, we cannot forget that the Act is the result of a proposal made by the Government of the day which, instead of proceeding under Section 11 (2) of the Life Insurance H

p. 1014 Copy page pinpoint

A Corporation Act, chose to make an Act of Parliament protected by emergency provisions. I think that 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." B

144. We, therefore, are of the opinion that doctrine of promissory estoppel also pmerves 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 has enacted a statute. As, according to us, the legislature in this case allowed the parties to take benefit of their existing rights having regard to· the repeal and saving clause contained in Section 20(1) of the 2003 Act, the same would apply. If, thus, principle of promissory estoppel would apply, there may not be any reason as to why the doctrine of legitimate expectation would not. F

147. Legitimate expectation is now considered to be a part of principles of natural justice. If by reason of the existing state of affairs, a party is given to understand that the other party shall not take away the benefit without complying with the principles of natural justice, the said doctrine would be G applicable. The legislature, indisputably, has the power to legislate but where the law itself recognizes existing right and did not take away the same expressly or by necessary implication, the principles of legitimate expectation of a substantive benefit may be held to be applicable.

148. We may notice the applicability of the said doctrine in respect of H a substantive legislation, which is of some academic interest.

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149. In R v. North and East Devon Health Authority, ex parte Coughlan, A (2001) I QB 213, Lord Woolf identified three categories of legitimate expectations:

(i) "The court may decide that the public authority is only required to bear fri mind its previous policy or other representation, giving it the weight it thinks right, but no more, before deciding whether to change course. Here the court is confined to reviewing the decision on Wednesbury grounds. This has been held to be the effect of changes of policy."

(ii) "On the other hand the court may decide that the promise or practice induces a legitimate expectation of, for example, being consulted before a particular decision is taken. Here it is uncontentious that the court itself will require the opportunity for consultation to be given unless there is an overriding reason to resile from it in whir.h case the court will itself judge the adequacy of the reason auvanced for the change of policy, taking into account what fairness requires."

{ill) "Where the court considers that a lawful promise or practice has induced a legitimate expectation of a benefit which is substantive, J not simply procedural, authority now establishes that here too the court will in a proper case decide whether to frustrate the 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 1'1nterest relied upon for the change of policy."

(See also para 57-59) F

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 Bibij v. London Borough of Newham, (2001) EWCA Civ 607. G 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 H

p. 1016 Copy page pinpoint

A 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 the court should do."

B 151. In detennining whether an authority has acted "unlawfully", the court expressed its discontent with the standard laid down in Coughlan. It will be in the fitness of the continuing theme, to refer to Coughlan on this point:

The traditional view has been that the Wednesbury categories were ~ exhaustive of what was an abuse of power. However in Coughlan the c court preferred "to regard the Wednesbury categories as the major instances (not necessarily the sole ones), of how public power may be misused" (para.81 ).

In Coughlan the court followed R v. Inland R<(Venue Commissioners ex parle Unilever, (1996) S.T.C.681, in asking itself whether the reneging by an authority on its promise was "so unfair as to amount to an abuse of power" (para. 78). It concluded that it was. However, without refinement, the question whether the reneging on a promise would be so unfair as to amount to an abuse of power is an uncertain guide. ....

After having established such an abuse the court may ask the decision taker to "take the legitimate expectation properly into account in the decision making process." It does not necessarily follow that a legitimate expectation of a substantive benefit will be satisfied. (See also Barratt v. Howard (2000) FCA 190].

F 152. We may, however, do not mean to lay down a law that the said principle is to be applied even on the face of the exercise of legislative power by the State in tenns of the entries made in List II of the Seventh Schedule ,.. of the Constitution oflndia. Our observations must necessarily be understood in the context of the aforementioned decisions.

G DEMAND CHARGE

153. We have noticed hereinbefore that the legislative field carved out by reason of Entry 53 of List II and Entry 38 of List III of the Seventh Schedule of the Constitution oflndia operate in different fields. The 1948 Act was enacted to provide for the rationalization of the production and supply H of electricity, and generally for taking measures conducive to electrical

17 SOUTHERN PETROCHEMICAL INDUSTRIES CO. l TD v. ELECTRICITY INSPECTOR [S.B. SINHA, I ] } Q

-~ development. A

154. Tariff is framed by the State Electricity Boards under Sections 46 and 49 of the 1948 Act. They may have different considerations for imposition of tariffs. We have noticed hereinbefore, the definition of 'tariff' in BSES Ltd. (supra), whereupon Mr. Andhyarujina himself relied upon. A tax on tariff and a tax on consumption or sale of electrical energy, thus, operate in different B fields. If it is to be held that the power of the Electricity Regulatory Commissiori 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 c 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 /Pl Steel Ltd. (supra) in the following terms: D "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 E at the requisite level over certain periods, but these are exceptions. Every factory expects to work normally. So does the Electricity Board expect and accordingly produces energy required by the factory and keeps it in readiness for that factory keeping it ready on tap, so to speak. As already emphasised, electricity once generated cannot be F ..,., stored for future use. This is the reason and the justification for the demand charges and the manner of charging for it. There is yet another justification for this type of levy and it is this: demand charges and consumption charges are intended to defray different items. Broadly speaking, while demand charges are meant to defray the capital costs, consumption charges are supposed to meet the G running charges. Every Electricity Board requires machinery, plant, equipment, sub-stations, transmission lines and so on, all of which require a huge capital outlay. The Board like any other corporation has to raise funds for the purpose which means it has to obtain loans. The loans have to be repaid, and with interest. Provision has to be H

p. 1018 Copy page pinpoint

A made for depreciation of machinery, equipment and buildings. Plants, y~~ machines, stations and transmission lines have to be maintained, all of which require a huge staff. It is to meet the capital outlay that demand charges are levied and collected whereas the consumption charges are levied and collected to meet the running charges.

B 11. Pausing here for a moment, we may explain the importance and significance of maximum demand. The maximum demand of a given plant/factory determines the type of lines to be laid and the power of transformers and other equipment to be installed for the purpose. A factory having a maximum demand of say 1000 KVA and a factory having a maximum demand of 10,000 KVA require different type of c lines and other equipment for providing supply to them. In the case of latter, lines have to be of a more load-bearing variety. Transformers have to be installed and of more capacity. Sometimes in the case of bulk consumers even a sub-station may have to be established exclusively for such factory/plant. Very often these industries are D situated away from power stations and main transmission lines which means laying special power lines over considerable distances to give the supply connection. As a matter of fact, the significance of the maximum demand would be evident from the fact 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. E 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 I00% unrestricted energy requirement of the respondent = contract demand in KV A 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 0.611x8760 = 37,467,590 KWH (Units)= 37.467.59 MU (Million Units). This formula, as it stat~s 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 H Tension energy is in two parts, viz., (a) units consumed and (b) maximum

SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD "· ELECTRICITY INSPECTOR (S.B. SINHA, J. ) JQJ9

-~-{ demand. The High Court proceeded on a wrong premise to hold that the tax is levied only on the maximum demand, i.e., on the energy consumed. It is now accepted 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 thirty minutes in a total month of consumption of electrical energy. Maximum demand charge is fixed on that basis although the connected demand may be much more.

156. Mr. Andhyarujina himself has produced before us the terms and conditions of supply of Tamil Nadu Electricity Board wherein 'demand' has .:< been defined in the following terms:

"(vii) "Demand" - c (a) "Average Demand" for the month means the ratio of the total kilowatt-hours consumed in the month to the total hours in the month.

(b) "Maximum Demand" in a month means the highest value of the average Kilowatt- amperes delivered at the point of supply of the D consumer during any consecutive thirty minutes in the month.

(c) "Permitted Demand" means the demand permitted by the competent _7 authority of the Board taking into account the constraints in the Board's transmission and distribution network. (This definition does not apply to the demand quota permitted under the "Restriction and E Control" orders).

(d) "Sanctioned Demand or Contracted Demand" means the demand sanctioned by the competent authority of the Board and specified in the agreement"." F 'Load' has been defined in clause 2(ix)(a) in the following terms: y -- . "(ix) "Load" -

(a) "Connected Load" means the aggregate of the manufacturer's rating of all the equipment connected in the consumer's installation G and of all the portable equipments;

This is expressed in KW or HP. If the rating is in KVA, it is converted to KW by multiplying it by a power factor of 0.9. If the rating is in HP, it is converted to KW by multiplying it by 0-.746. H

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A (b) "Contracted Load" means the load which is specified in the agreement;"

157. Similar definition has been provided in Tamil Nadu Electricity Distribution Code.

B 158. 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 c 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. D [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-cl~use (d) of Clause 29A of Article 366 of the Constitution of India E to submit that the Constitution itself has envisaged an expanded meaning of the tenn. 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.

F 161. The reason for insertion of such an explanation is to get over the decision of this Court in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1959] SCR 379 wherein it has been held that tax cannot be imposed on sale of materials transferred in execution of a works contract . - stating:

G "In our opinion, that is not the inference to be drawn from the absence of words linking up the meaning of the word "sale" with what. it might bear in the Sale of Goods Act. We think that the true legislative intent is that the expression "sale of goods" in Entry 48 should bear the precise and definite meaning it has in law, and that that meaning should not be left to fluctuate with the definition of "sale" in laws H

SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. v. ELECTRICITY INSPECTOR [S.B. SINHA, J.] ] Q2J

relating to sale of goods which might be in force for the time being. A It was then said that in some of the Entries, for example, Entries 31 and 49, List II, the word "sale" was used in a wider sense than in the Sale of Goods Act, 1930. Entry 31 is intoxicating liquors and narcotic drugs, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors, opium and other narcotic drugs ... ". The argument is that "sale" in the Entry must be interpreted as including barter, as the policy of the law cannot be to prohibit transfers of liquor only when there is money consideration -I / therefor. But this argument proceeds on a misapprehension of the principles on which the Entries·are drafted. The scheme of the drafting is that there is in the beginning of the Entry words of general import, and they are followed by words having reference to particular aspects thereof. The operation of the general words, however, is not cut down by reason of the fact that there are sub-heads dealing with specific aspects ... "

162. Gannon Dunkerley & Co. (Madras) Ltd (supra) has been noticed by a 3-Judge Bench of this Court in Bharat Sanchar Nigam Ltd and Anr. v. Union of India and Ors., [2006) 3 SCC I in the following terms:

"43. Gannon Dunkerley survived the Forty-sixth Constitutional Amendment in two respects. First with regard to the definition of sale for the purposes of the Constitution in general and for the purposes of Entry 54 of List II in particular except to the extent that the clauses in Article 366(29-A) operate. By introducing separate categories of deemed sales, the meaning of the word goods was not altered. Thus the definitions of the composite elements of a sale such as intention of the parties, goods, 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 sal~ 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 H

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A 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:

"I 05. The amendment introduced fiction by which six instances of B 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 purchase of goods occurs. This definition changed the law declared in the ruling in Gannon Dunkerley & Co. only with regard to those transactions of ;,~

deemed sales. In other respects, law declared by this Court is not c neutralised. Each one of the sub-clauses of Article 366(29-A) introduced by the Forty-sixth Amendment was a result of ruling of this Court which was sought to be neutralised or modified. Sub-clause (a) is the outcome of New India Sugar Mills Ltd. v. CST and Vishnu Agencies (P) Ltd. v. CTO. Sub-clause (b) is the result of Gannon Dunkerley & D Co. Sub-clause (c) is the result of K.L. Johar and Co. v. CTO. Sub- clause (d) is consequent to A. V. Meiyappan v. CCT. Sub-clause (e) is the result of CTO v. Young Mens Indian Assn. (Regd.). Sub-clause (f) is the result of Northern India Caterers (India) Ltd. v. Lt. Governor '( of Delhi, and State of Punjab v. Associated Hotels of India Ltd.

E I06. In the background of the above, the history prevailing at the time of the Forty-sixth Amendment and pre-enacting history as seen in the Statement of Objects and Reasons, Article 366(29-A) has to be interpreted. Each fiction by which those six transactions which are not otherwise sales are deemed to be sales independently operates only in that sub-clause. ,._ F

107. While the true scope of the amendment may be appreciated by 1' overall reading of the entirety of Article 366(29-A), deemed sale under each particular sub-clause has to be -determined only within the parameters of the provisions in that sub-clause. One sub-clause cannot be projected into another sub-clause and fiction upon fiction is not G permissible. As to the interpretation of fiction, particularly in the sales tax legislation, the principle has been authoritatively laid down in Bengal Immunity Co. Ltd. v. State of Bihar, SCR at p. 647: y The operative provisions of the several parts of Article 286, namely, clause (l)(a), clause (l)(b), clause (2) and clause (3) are manifestly H

SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. " ELECTRICITY INSPECTOR [S.B. SINHA, I. J JQ2J .. .r-i intended to deal with different topics and, therefore, one cannot be A projected or read into another. (S.R. Das, Actg. CJ.)

We can also see pp. 720 and 721 (N.P. Bhagwati, J.)."

It was categorically held therein:

"75. In our opinion, the essence of the right under Article 366(29- B A)(d) is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time ,,:r of transfer, must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the c 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 D for supply of electrical energy, the same by itself would not mean that there had been deliverable goods and the goods have been delivered. _J 163. We are not concerned with the user of the goods and, therefore, deliverability of the goods is not in question. E

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 construction of Entry 53 of List II of the Seventh Schedule of the F r Constitution of India.

165. Supply does not mean sale. A' fortiori it does not also mean consumption.

166. A 'goods' may be a tangible property or an intangible one. It would G become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of transmitted, transferred, delivered, stored and possessed.

167. Strong reliance has been placed by Mr. Andhyarujina on a decision H

p. 1024 Copy page pinpoint

A of this Court in Mis. Northern India Iron & Steel Co. v. State of Haryana and Anr., [1976] 2 SCC 877 wherein it has been held:

"l 0. Coming to the question of duty, we have no hesitation in an outright rejection of the extreme contention put forward on behalf of the appellants that no duty is liviable at all on the demand charge. But B it is clear, and this was fairly conceded to by the Solicitor Generai appearing for the State of Haryana, that the amount of duty payable will be on the actual amount of demand charge realisable from the consumer after the proportionate reduction under clause 4(f) of the tariff. c 11. Section 3 of the Duty Act says that there shall be levied and paid to the State Government on the energy supplied by the Board to a consumer a duty to be called the electricity duty, computed at the rates indicated in the various clauses of sub-section (I) of Section 3. The expression used in the various clauses is where the energy is supplied to a particular type of consumer, then the rate of duty will be as specified therein. On the basis of the said expression the argument put forward on behalf of the appellant was that the duty could be levied only on the energy charges for the actual amount of energy supplied. Such an argument is too obviously wrong to be accepted. Reading the clauses as a whole it would be seen that the duty is chargeable on the price of energy supplied in a month. The price of energy in a two-part tariff system would mean and include the energy charge as also the demand charge. This is made further clear by the manner of calculation provided in Rule 3 of the Punjab Electricity (Duty) Rules, 1958. Sub-rule(!) says:

F The duty under clauses (iii) and (iv) of sub-section(!) of Section 3 of the Act shall be calculated on the price of the energy recoverable at the net rate of the Board which will include the demand charge when the supply is governed by a two-part tariff."

In that case, no term like "net energy" existed. G

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 H

SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. •·. ELECTRICITY INSPECTOR [S.B SISHA. J ] J025

>---<; 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 metal conductors to the place c where it is consumed. Such transmission admittedly entails loss of some electrical energy and what is lost can plainly be not available for consumption and as such would not be consumed. If a person, for example, generates I00 units of electrical energy and loses I0 units in the process of transmission from the point of generation to the point of consumption, he would in the very nature of things be able to supply only 90 units of electrical energy to the consumers. The tax which would be payable on the electrical energy consumed in such 'r a case would be only for 90 units and not I00 units. To hold otherwise and to realise tax on 100 units of electrical energy would be tantamount to levying tax on the generation or production of electrical energy and not on its consumption. Such a tax on the generation or production of electrical energy is plainly not permissible under the Act. The fact that the consumer happens in the present case to be the same Company which generated the electrical energy would, in our opinion, make no material difference." F T' 169. Our attention has been drawn to a simple bill, from a perusal whereof it appears that although permitted MD was 350 KVA, the recorded demand being 144 KVA, electricity tax was charged only on the basis of 144 KV A and not on the basis of 350 KV A. Keeping in view the fact that the maximum demand postulates something other than actual delivery of electricity, the question of imposition of any tax thereupon does not arise. The decision G of this Court in Mis. Northern India Iron & Steel Co. (supra) did not assign any reason. The said decision did not take into consideration the provisions of Article 366 ( 12) of the Constitution of India or the effect of Entry 53 of List II of the Seventh Schedule of the Constitution of India. It has also not been taken into consideration that the State cannot impose tax only because the H

p. 1026 Copy page pinpoint

A State Electricity Board would be entitled to levy tax on certain services. It would bear repetition to state that the concept of tariff and tax is different. Whereas tariff would include a list of charges, the tax must be on actual basis. It is also not the case nor can it be that imposition of tax on actual sale or consumption of electrical energy was impossible keeping in view of the particular fact situation. As noticed hereinbefore, two different meters are installed; one, for the purpose of actual consumption of electrical energy and another being a trivector, the same merely records the maximum demand.

170. A decision, as is well known, is an authority for what it decides and not what can logically be deduced therefrom. A decision is not an authority on a point which has not been considered.

171. For the reasons aforementioned, we are of the opinion that the impugned judgment cannot be sustained which is set aside accordingly. The appeals are allowed to the extent mentioned hereinbefore. No costs.

GN. Appeal partly allowed.