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CASE NO.: Appeal (civil)  2551 of 2007

PETITIONER: Southern Petrochemical Industries Co. Ltd

RESPONDENT: Electricity Inspector and E.T.I.O. & Ors

DATE OF JUDGMENT: 15/05/2007

BENCH: S.B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T  

CIVIL APPEAL NO.  2551 OF 2007 [Arising out of  SLP (Civil) No. 18220 of 2006] W I T H CIVIL APPEAL NO. 2552 OF 2007 @ S.L.P. (C) NO. 21701 OF 2006 CIVIL APPEAL NO. 2553 OF 2007 @ S.L.P. (C) NO. 21726 OF 2006 CIVIL APPEAL NO. 2554 OF 2007 @ S.L.P. (C) NO. 18308 OF 2006 CIVIL APPEAL NO. 2555 OF 2007 @ S.L.P. (C) NO. 18326 OF 2006 CIVIL APPEAL NO. 2556 OF 2007 @ S.L.P. (C) NO. 18329 OF 2006 CIVIL APPEAL NO. 2557 OF 2007 @ S.L.P. (C) NO. 18334 OF 2006 CIVIL APPEAL NO. 2558 OF 2007 @ S.L.P. (C) NO. 18499 OF 2006 CIVIL APPEAL NO. 2559 OF 2007 @ S.L.P. (C) NO. 21692  OF 2006 CIVIL APPEAL NO. 2560 OF 2007 @ S.L.P. (C) NO. 21719  OF 2006 CIVIL APPEAL NO. 2561 OF 2007 @ S.L.P. (C) NO. 20574 OF 2006 CIVIL APPEAL NO. 2562 OF 2007 @ S.L.P. (C) NO. 21689 OF 2006

CIVIL APPEAL NO. 2563 OF 2007 @ S.L.P. (C) NO. 21005  OF 2006 CIVIL APPEAL NO. 2564 OF 2007 @ S.L.P. (C) NO. 21039 OF 2006 CIVIL APPEAL NO. 2565 OF 2007 @ S.L.P. (C) NO. 21040  OF 2006 CIVIL APPEAL NO. 2566 OF 2007 @ S.L.P. (C) NO. 1021 OF 2007 CIVIL APPEAL NO. 2567 OF 2007 @ S.L.P. (C) NO. 1022 OF 2007 CIVIL APPEAL NO. 2568 OF 2007 @ S.L.P. (C) NO. 1023 OF 2007 CIVIL APPEAL NO. 2569 OF 2007 @ S.L.P. (C) NO. 1024 OF 2007 CIVIL APPEAL NO. 2570 OF 2007 @ S.L.P. (C) NO. 1025 OF 2007 CIVIL APPEAL NO. 2571 OF 2007 @ S.L.P. (C) NO. 1027 OF 2007 CIVIL APPEAL NO. 2572 OF 2007 @ S.L.P. (C) NO. 1028 OF 2007 CIVIL APPEAL NO. 2573 OF 2007

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@ S.L.P. (C) NO. 1029 OF 2007 CIVIL APPEAL NO. 2574 OF 2007 @ S.L.P. (C) NO. 21489 OF 2006 CIVIL APPEAL NO. 2575 OF 2007 @ S.L.P. (C) NO. 1030 OF 2007 CIVIL APPEAL NO. 2576 OF 2007 @ S.L.P. (C) NO. 1031 OF 2007 CIVIL APPEAL NO. 2577 OF 2007 @ S.L.P. (C) NO. 1032 OF 2007 CIVIL APPEAL NO. 2578 OF 2007 @ S.L.P. (C) NO. 1033 OF 2007 CIVIL APPEAL NO. 2579 OF 2007 @ S.L.P. (C) NO. 1034 OF 2007 CIVIL APPEAL NO. 2580 OF 2007 @ S.L.P. (C) NO. 1035 OF 2007 CIVIL APPEAL NO. 2581 OF 2007 @ S.L.P. (C) NO. 1036 OF 2007 CIVIL APPEAL NO. 2582 OF 2007 @ S.L.P. (C) NO. 1037 OF 2007 CIVIL APPEAL NO. 2583 OF 2007 @ S.L.P. (C) NO. 1038 OF 2007 CIVIL APPEAL NO. 2584 OF 2007 @ S.L.P. (C) NO. 1039 OF 2007 CIVIL APPEAL NO. 2585 OF 2007 @ S.L.P. (C) NO. 1040 OF 2007 CIVIL APPEAL NO. 2586 OF 2007 @ S.L.P. (C) NO. 1041 OF 2007 CIVIL APPEAL NO. 2587 OF 2007 @ S.L.P. (C) NO. 1042 OF 2007 CIVIL APPEAL NO. 2588 OF 2007 @ S.L.P. (C) NO. 1043 OF 2007 CIVIL APPEAL NO. 2589 OF 2007 @ S.L.P. (C) NO. 1045 OF 2007 CIVIL APPEAL NO. 2590 OF 2007 @ S.L.P. (C) NO. 1044 OF 2007 CIVIL APPEAL NO. 2591 OF 2007 @ S.L.P. (C) NO. 1046 OF 2007 CIVIL APPEAL NO. 2592 OF 2007 @ S.L.P. (C) NO. 1746 OF 2007 CIVIL APPEAL NO. 2593 OF 2007 @ S.L.P. (C) NO. 1747 OF 2007 CIVIL APPEAL NO. 2594 OF 2007 @ S.L.P. (C) NO. 1748 OF 2007 CIVIL APPEAL NO. 2595 OF 2007 @ S.L.P. (C) NO. 1749 OF 2007 CIVIL APPEAL NO. 2596 OF 2007 @ S.L.P. (C) NO. 1750 OF 2007 CIVIL APPEAL NO. 2597 OF 2007 @ S.L.P. (C) NO. 1751 OF 2007 CIVIL APPEAL NO. 2598 OF 2007 @ S.L.P. (C) NO. 1752 OF 2007 CIVIL APPEAL NO. 2599 OF 2007 @ S.L.P. (C) NO. 1753 OF 2007 CIVIL APPEAL NO. 2600 OF 2007 @ S.L.P. (C) NO. 1754 OF 2007 CIVIL APPEAL NO. 2601 OF 2007 @ S.L.P. (C) NO. 1755 OF 2007 CIVIL APPEAL NO. 2602 OF 2007 @ S.L.P. (C) NO. 1756 OF 2007 CIVIL APPEAL NO. 2603 OF 2007 @ S.L.P. (C) NO. 1757 OF 2007 CIVIL APPEAL NO. 2604 OF 2007 @ S.L.P. (C) NO. 1758 OF 2007 CIVIL APPEAL NO. 2605 OF 2007 @ S.L.P. (C) NO. 1759 OF 2007

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CIVIL APPEAL NO. 2606 OF 2007 @ S.L.P. (C) NO. 1760 OF 2007 CIVIL APPEAL NO. 2607 OF 2007 @ S.L.P. (C) NO. 1761 OF 2007 CIVIL APPEAL NO. 2608 OF 2007 @ S.L.P. (C) NO. 1762 OF 2007 CIVIL APPEAL NO. 2609 OF 2007 @ S.L.P. (C) NO. 1764 OF 2007 CIVIL APPEAL NO. 2610 OF 2007 @ S.L.P. (C) NO. 1765 OF 2007 CIVIL APPEAL NO. 2611 OF 2007 @ S.L.P. (C) NO. 1766 OF 2007 CIVIL APPEAL NO. 2612 OF 2007 @ S.L.P. (C) NO. 1767 OF 2007 CIVIL APPEAL NO. 2613 OF 2007 @ S.L.P. (C) NO. 1768 OF 2007 CIVIL APPEAL NO. 2614 OF 2007 @ S.L.P. (C) NO. 1769 OF 2007 CIVIL APPEAL NO. 2615 OF 2007 @ S.L.P. (C) NO. 1770 OF 2007 CIVIL APPEAL NO. 2616 OF 2007 @ S.L.P. (C) NO. 1772 OF 2007 CIVIL APPEAL NO. 2617 OF 2007 @ S.L.P. (C) NO. 387 OF 2007 CIVIL APPEAL NO. 2618 OF 2007 @ S.L.P. (C) NO. 1799 OF 2007 CIVIL APPEAL NO. 2619 OF 2007 @ S.L.P. (C) NO. 1792 OF 2007 CIVIL APPEAL NO. 2620 OF 2007 @ S.L.P. (C) NO. 1796 OF 2007 CIVIL APPEAL NO. 2621 OF 2007 @ S.L.P. (C) NO. 1977 OF 2007 CIVIL APPEAL NO. 2622 OF 2007 @ S.L.P. (C) NO. 1978 OF 2007 CIVIL APPEAL NO. 2623 OF 2007 @ S.L.P. (C) NO. 1980 OF 2007 CIVIL APPEAL NO. 2624 OF 2007 @ S.L.P. (C) NO. 2005 OF 2007 CIVIL APPEAL NO. 2625 OF 2007 @ S.L.P. (C) NO. 3003 OF 2007 CIVIL APPEAL NO. 2626 OF 2007 @ S.L.P. (C) NO. 3005 OF 2007 CIVIL APPEAL NO. 2627 OF 2007 @ S.L.P. (C) NO. 1995 OF 2007 CIVIL APPEAL NO. 2628 OF 2007 @ S.L.P. (C) NO. 3108 OF 2007 CIVIL APPEAL NO. 2629 OF 2007 @ S.L.P. (C) NO. 3109 OF 2007 CIVIL APPEAL NO. 2630 OF 2007 @ S.L.P. (C) NO. 3111 OF 2007 CIVIL APPEAL NO. 2631 OF 2007 @ S.L.P. (C) NO. 3112 OF 2007 CIVIL APPEAL NO. 2632 OF 2007 @ S.L.P. (C) NO. 2844 OF 2007 CIVIL APPEAL NO. 2633 OF 2007 @ S.L.P. (C) NO. 2064 OF 2007 CIVIL APPEAL NO. 2634 OF 2007 @ S.L.P. (C) NO. 2097 OF 2007 CIVIL APPEAL NO. 2635 OF 2007 @ S.L.P. (C) NO. 2099 OF 2007 CIVIL APPEAL NO. 2636 OF 2007 @ S.L.P. (C) NO. 2100 OF 2007 CIVIL APPEAL NO. 2637 OF 2007 @ S.L.P. (C) NO. 2136 OF 2007 CIVIL APPEAL NO. 2638 OF 2007

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@ S.L.P. (C) NO. 2138 OF 2007 CIVIL APPEAL NO. 2639 OF 2007 @ S.L.P. (C) NO. 3600 OF 2007 CIVIL APPEAL NO. 2640 OF 2007 @ S.L.P. (C) NO. 3599 OF 2007 CIVIL APPEAL NO. 2641 OF 2007 @ S.L.P. (C) NO. 3126 OF 2007 CIVIL APPEAL NO. 2642 OF 2007 @ S.L.P. (C) NO. 3610 OF 2007 CIVIL APPEAL NO. 2643 OF 2007 @ S.L.P. (C) NO. 3612 OF 2007 CIVIL APPEAL NO. 2644 OF 2007 @ S.L.P. (C) NO. 3618 OF 2007 CIVIL APPEAL NO. 2645 OF 2007 @ S.L.P. (C) NO. 3625 OF 2007 CIVIL APPEAL NO. 2646 OF 2007 @ S.L.P. (C) NO. 3626 OF 2007 CIVIL APPEAL NO. 2647 OF 2007 @ S.L.P. (C) NO. 3627 OF 2007 CIVIL APPEAL NO. 2648 OF 2007 @ S.L.P. (C) NO. 3628 OF 2007 CIVIL APPEAL NO. 2649 OF 2007 @ S.L.P. (C) NO. 3629 OF 2007 CIVIL APPEAL NO. 2650 OF 2007 @ S.L.P. (C) NO. 3548 OF 2007 CIVIL APPEAL NO. 2651 OF 2007 @ S.L.P. (C) NO. 3926 OF 2007 \005

S.B. SINHA, J :          1.      Leave granted. INTRODUCTION  2.     Validity and/ or application of Tamil Nadu Tax on Consumption or  Sale of Electricity Act, 2003 (for short "the 2003 Act") is in question in  these appeals which arise out of a common judgment dated 13.07.2006  passed by a Division Bench of the High Court of Madras.  LEGISLATIVE BACKGROUND

3.      Legislative competence in Central and Provincial Legislature in India  was for the first time provided for by reason of the Government of India Act,  1935 (for short "the 1935 Act").  Item 48-B of List II of the Seventh  Schedule of the 1935 Act provided for taxes on 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 \026         (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

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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  amount of the tax than the price charged to other  consumers of a substantial quantity of electricity."

4.      The 1935 Act did not contain any provision similar to Item No. 48-B  of the Seventh Schedule of the 1935 Act.  After coming into force of the  Constitution of India, ’Electricity’ was placed in List III of the Seventh  Schedule of the Constitution of India.  However, the matter relating to  imposition of taxes on the consumption or sale of electricity was provided  for under Entry 53 of List II of the Seventh Schedule of the Constitution of  India. STATUTORY PROVISIONS

5.      The then State of Madras in terms of Entry 48-B of the Seventh  Schedule of the 1935 Act, enacted Tamil Nadu Electricity Duty Act, 1939  (for short "the 1939 Act") levying a duty on certain sales and consumption  of electrical energy by the licensees in the State of Tamil Nadu.  At the  relevant time, licences used to be granted in terms of the Indian Electricity  Act, 1910 (for short "the 1910 Act").  Section 3 of the 1910 Act reads as  under:

"3. Grant of licenses.(1) The State Government  may, on application made in the prescribed form  and on payment of the prescribed fee (if any),  grant after consulting the State Electricity Board, a  licence to any person to supply energy in any  specified area, and also to lay down or place  electric supply lines for the conveyance and  transmission of energy, (a) where the energy to be supplied is to be  generated outside such area, from a generating  station situated outside such area to the boundary  of such area, or (b) where energy is to be conveyed or transmitted  from any place in such area to any other place  therein, across an intervening area not included  therein, across such area. (2) In respect of every such licence and the grant  thereof the following provisions shall have effect,  namely (a) any person applying for a license under this  Part shall publish a notice of his application in the  prescribed manner and with the prescribed  particulars, and the license shall not be granted \026  (i)     until all objections received by the State  Government with reference thereto have been  considered by it: Provided that no objection shall be so considered  unless it is received before the expiration of three  months from the date of the first publication of  such notice as aforesaid; and (ii)    until, in the case of an application for a  license for 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;

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(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 \026  (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 under section 10,  clause (b), the provisions of sections 5 and 6, or  either of them, have been declared not to apply,  every such licensee shall declare whether any  generating station to be used in connection with  the undertaking shall or shall not form part of the  undertaking for the purpose of purchase under  section 5 or section 6; (e) the grant of a licence under this Part for any  purpose shall not in any way hinder or restrict the  grant of a licence to another person within the  same area of supply for a like purpose; (f) the provisions contained in the Schedule shall  be deemed to be incorporated with, and to form  part of, every licence granted under this Part, save  insofar as they are expressly added to, varied or  excepted by the licence, and shall, subject to any  such additions, variations or exceptions which the  State Government is hereby empowered to make,  apply to the undertaking authorised by the licence: Provided that where a licence is granted in  accordance with the provisions of clause IX of the  Schedule for the supply of energy to other  licensees for distribution by them, then, insofar as  such licence relates to such supply, the provisions  of clauses IV, V, VI, VII, VIII and XII of the  Schedule shall not be deemed to be incorporated  with the licence."   6.      It did not contain any provision for exemption.  However, after  coming into force of the Constitution of India, the Act was to have effect,  subject to the provisions of Article 288 of the Constitution of India.   

7.      Article 288 of the Constitution of India reads as under:

"(1) Save insofar as the President may by order  otherwise provide, no law of a State in force  immediately before the commencement of this  Constitution shall impose, or authorise the  imposition of, a tax in respect of any water or  electricity stored, generated, consumed, distributed  or sold by any authority established by any  existing law or any law made by Parliament for  regulating or developing any inter-State river or  river-valley.  

Explanation \026 The expression "law of a State in

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force" in this clause shall include a law of a State  passed or made before the commencement of this  Constitution and not previously repealed,  notwithstanding that it or parts of it may not be  then in operation either at all or in particular areas.

(2) The Legislature of a State may by law impose,  or authorise the imposition of, any such 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 Consumption) Act, 1962 (Act No. IV of 1962) (for  short "the 1962 Act") to provide for the levy of tax on the consumption of  electrical energy in the State of Madras.

11.    "Consumer" and "energy intensive industries" have been defined in  Sections 2(1) and 2(3) respectively of the 1962 Act in the following terms:

"(1) "consumer" with its grammatical variations  and cognate expressions includes any person who  consumes energy whether generated by himself or  supplied to him.

(3) "energy intensive industries" means industries  in which the price of energy used in the process of  manufacturing or producing the principal product  of the industry concerned exceeds 15 per centum  of the total cost of the manufacture or production  of that product and includes the industries  manufacturing or producing the following  namely:-

(i)     aluminium ; (ii)    bleaching powder ; (iii)   calcium carbide ; (iv)    caustic soda ; (v)     synthetic gem ;"

12.    Section 3 of the 1962 Act provides for levy of tax on consumption of  energy, referred to therein as electricity tax computed as percentage of the  "price of energy consumed" by the consumer.  Section 3-A provided for levy  of additional tax on consumption of energy calculated at the rate of four per

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centum of the "price of energy consumed" by the consumer.  The proviso  appended thereto, however, inter alia provides for exemption from levy of  some additional tax on the energy consumed by any person (other than a  licensee) who consumes energy generated by himself.

13.     Section 12 of the 1962 also provided for exemption of tax in the  following terms:

"12. Exemption from tax. \026 (1)  Where energy  under High Tension Supply is consumed in the  process of manufacturing or producing the  principal product in any industrial undertaking  licensed under the Industries (Development and  Regulation) Act, 1951 (Central Act LXV of 1951),  no electricity tax shall be payable on the energy so  consumed for a period of three years from the date  of the commencement of the manufacture or  production of the principal product in such  undertaking.

(2)  For the purposes of sub-section (1), if any  question arises in regard to the date of the  commencement of the manufacture or production  of the principal product, the question shall be  decided by the prescribed officer in accordance  with such procedure as may be prescribed and his  decision thereon shall be 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. \026 (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 in derogation of the 1939 Act.  Section 18 of the 1962 Act also

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contained a provision that the same shall be subject to Article 288 of the  Constitution of India.   

16.     The 1939 Act and the 1962 Act were repealed by the 2003 Act.   Incidentally, the 2003 Act was not to consolidate and amend the levy of tax  on consumption or sale of electricity but to consolidate and rationalize the  same.   

17.     "Captive generating plant", "consumer", "generating company" and  "tariff" were defined in Section 2 of the 2003 Act as under:          "(2)    "captive generating plant" means power  plant set up by any person or association of  persons or any Co-operative society to generate  electricity primarily for his own use or for the use  of members, and includes the power plants that are  permitted to sell the surplus power so generated;

(5)     "consumer" with its grammatical variations  and cognate expression means any person who is  supplied with electricity on payment of charges, or  free of cost or otherwise by a licensee or by the  Government or by any other person engaged in the  business of supplying electricity to the public  under the Indian Electricity Act, 1910 or any other  law for the time being in force and includes-

(i)     a licensee who consumes electricity  whether generated by himself or supplied to him  by any other licensee; and

(ii)    actual use of power or any other  person who consumes electricity generated by  himself;

Explanation I.-   Where a licensee consumes  electricity, whether generated by himself or  supplied to him, such licensee shall be deemed to  be a consumer only in respect of the electricity so  consumed,

Explanation II -  Where a licensee or other person  consumes energy for purposes connected with the  construction, maintenance and operation of the  generating, transmitting and distributing system,  such licensee or person shall not be deemed to be a  consumer in respect of the energy so consumed;

(9)    "generating company" means any company  or body corporate or association or body of  individuals, whether incorporated or not or  artificial juridical person, which owns or operates  or maintains a generating station;

(14)    "tariff" means a rate of tariff leviable upon  the consumption of electricity in the State supplied  by the licensee and as fixed by the Tamil Nadu  Electricity Regulatory Commission;"

18.     Section 3 of the 2003 Act is the charging provision in terms whereof  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

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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 used exclusively for purposes of public charity; (iv) vessel whether seagoing or inland."

20.     The repeal and saving clause is contained in Section 20 thereof.

21.     Section 20 and 21 of the 2003 Act read as under:

"20(1)  :-      The Tamil Nadu Electricity Duty Act,  1939 and the Tamil Nadu Electricity (Taxation and  Consumption) Act, 1962 is hereby repealed.

       Provided that such repeal shall not affect:

(a)  the previous operation of the said Acts or  anything duly done or suffered  thereunder;

(b)  any right, privilege, obligation or liability  acquired, accrued or incurred under the  said Acts;

(c)  any penalty, forfeiture or punishment  incurred in respect of any offence  committed against the said Acts;

(d)  any investigation, legal proceeding  (including assessment proceeding) or  remedy in respect of any such right,  privilege, obligation, liability, 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 this  Act has not been passed;   

(2)     Notwithstanding such repeal;

(a)     anything done or any action taken or  purported to have been done or taken  including any rule, notification,  inspection order or notice made or issued  or any direction given under the repealed  laws, shall so far as it is not inconsistent  with the provisions of this Act be deemed

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to have been done or taken under the  corresponding provisions of this Act.

(b)    Any duty levied under the repealed  Tamil Nadu Electricity Duty Act, 1939  and the rules made thereunder during the  period prior to the commencement of this  Act, but not collected, may be recovered  in the manner provided under the  repealed Act and rules made thereunder.

(c)     Any tax levied under the repealed Tamil  Nadu Electricity (Taxation on  Consumption) Act, 1962 and the rules  made thereunder during the period prior  to the commencement of this Act, but not  collected, may be recovered in the  manner provided under the repealed Act  and the rules made thereunder.

21. This Act shall have effect subject to the  provisions of Article 288 of the Constitution"

 WRIT PETITIONS

22.    Validity of the provisions of the 2003 Act and/ or application thereof  in respect of the generating companies as also the consumers of electrical  energy being purchasers from the Tamil Nadu Electricity Board 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, it is  not saved by Article 254(2) of the Constitution.  Hence, it is invalid in law. (4) Under the Tamil Nadu Electricity Taxation on  Consumption Act, 1962, some of the appellants  were exempted from payment of tax on  consumption of self-generated energy. Even  though this Act 1962 has been repealed by the  present Act, in view of Section 20(2)(a) of the

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impugned Act, their rights are protected.  Therefore, they are entitled to continue the  exemption from payment of tax. (5) *** (6) *** (7) The tax on consumption should be actual  consumption. It cannot include the  maximum/sanctioned demand charges. As such,  the tax on consumption cannot be levied on such  electricity which is lost in transmission. The tax on  consumption of electricity should be based on the  electricity consumed and not on the electricity lost  in transmission."

25.     In regard to argument No. 1, the High Court opined that Article 288 of  the Constitution of India being applicable in respect of those which are the  authorities within the meaning of the provisions thereof, assent of the  President was necessary only in their case and not in case of consumers like  the appellants.  

26.     It was furthermore held that in terms of Section 4 of the 2003 Act, the  State of Tamil Nadu covered all persons except the Government, Railways  and authorities dealing with the development of inter-state river and, thus,  the constitutional obligation laid down under Article 288 of the Constitution  of India stands satisfied.  It was held:

"22. Thus, it is clear that this Article imposes a  total ban against a State from imposing any tax on  the purchase outside a State. This prohibition is  absolute. Whereas under Article 288 of the  Constitution, the State is not prevented from  enacting a law, but it is made clear that the law  shall not have any effect against the authority  mentioned in Article 288 of the Constitution of  India unless it receives the assent of the President.  Thus, the purpose of the article is to give  protection only in respect of the authorities  generated, consumed, etc. of the electricity as  referred to under Article 288. Therefore, as  correctly held by the learned single Judge, the  appellants, who are not such authorities described  in the article, cannot take umbrage under the said  article and consequently, they cannot resist the  enforcement of Act 12 of 2003. Hence, the first  submission would fail."

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

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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 on the sale of  electricity and not on the tax on consumption of  electricity. Thus, it is clear that there is clear  inconsistency between the Acts that have been  repealed and the repealing Act of 2003. In these  circumstances, in view of Section 20(2)(a) of the  impugned Act, the exemption orders would cease  to be valid on the coming into force of the new  Act. Hence, the appellants cannot take advantage  of Section 20(1) of the Act."

29.     In relation to argument No. 7, the High Court held that there being  two types of consumers, viz., Low Tension consumers and High Tension  consumers, tax being payable only on High Tension consumers and as tariff  is collected on the permitted demand, levy thereof on maximum demand is  permissible in law stating:

"52. With regard to the High Tension connections,  a twin tariff system is adopted, one rate as per  KVA for each unit consumed, the other rate is on  permitted demand as per KVA. It is pointed out  that as per the definition of maximum demand, the  same is determined on the energy delivered at a  point of supply. Even though the tariff is collected  on the permitted demand, the tax is levied only on  the maximum demand, that is, on the energy  consumed."  

30.     A statement made by the learned Advocate General as to actually on  what basis tax is collected was recorded in the following terms:

"53. Now, it is submitted by the learned Advocate  General that the maximum demand is what is  really consumed by them as against the permitted  demand and therefore, the taxes are imposed only  on the demand charges and it is based on actual  consumption."

ADDITIONAL GROUND

31.     One of the appellants before us in Civil Appeal arising out of SLP (C)  No. 21689 of 2006 filed an application for raising additional grounds.   Permission to raise additional grounds was granted by an order dated  12.02.2007.  Pursuant thereto or in furtherance of such leave granted, the  constitutionality of Section 14 of the 2003 Act was questioned.

SUBMISSIONS ON BEHALF OF THE APPELLANTS

32.     Mr. K.K. Venugopal, learned senior counsel appearing on behalf of  the appellants, in support of the appellants pressing the aforementioned  additional grounds, would contend that the consumers of electrical energy  form a homogenous class and, thus, could not have been discriminated in the  matter of grant of exemption.  The learned counsel would contend that the  equality 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

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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 by the State that in the event, such captive  generating plant or cogenerating units are set up, they would be granted  perennial exemption from payment of electricity tax.   

34.     It was submitted that in view of the decision of this Court in  Manekagandhi v. Union of India [(1978) 1 SCC 248], the Act can be struck  down not only on the ground of being discriminatory in nature but also on  the ground of being arbitrary.   

35.     Mr. R.F. Nariman, learned counsel appearing on behalf of the  appellants in Civil Appeals arising out of SLP (C) Nos. 2100, 2844, 2099,  2097, 3108, 3109, 3111 and 3112 of 2007 would submit that the High Court  committed a manifest error in interpreting Sub-sections (1) and (2) of  Section 20 of the 2003 Act together.  They are independent of each other and  operate in different fields.  Whereas the proviso appended to Section 20(1)  of the 2003 Act provides for savings that follow from the repeal of the 1962  Act and the 1939 Act; Section 20(2) thereof provides for a legal fiction for  continuation of certain things as if the Acts of 1962 and 1939 had not been  repealed.  It was pointed out that Sub-section (1) of Section 20 does not  contain any statement which occurs in Section 6 of the General Clauses Act  being "unless a different intention appears".  In that view of the matter, all  rights and privileges obtained by a consumer in terms of the provisions of  the 1939 Act or the 1962 Act are safeguarded.   

36.     It was urged that whereas Sub-section (1) of Section 20 of the 2003  Act contains a similar provision as Section 6 of the General Clauses Act,  Clauses (a) and (b) of Sub-section (1) of Section 20 of the 2003 Act are  clearly attracted.  Reliance in this behalf has been placed on M/s. Universal  Imports Agency and Another v. The Chief Controller of Imports and Exports  and Others [(1961) 1 SCR 305], Shri Ram Prasad (Deceased) By His Legal  Representative v. The State of Punjab [(1966) 3 SCR 486] and State of  Punjab v. Harnek Singh [(2002) 3 SCC 481].

37.     It was urged that the words "sold for consumption" would amount to  ’tautology’ as electrical energy can never be stored.  Reliance in this behalf  has been placed on State of A.P. v. National Thermal Power Corpn. Ltd. and  Others [(2002) 5 SCC 203] and BSES Ltd. v. Tata Power Co. Ltd. and  Others [(2004) 1 SCC 195].  In that view of the matter, this is a fit case for  applying purposive construction 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.

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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 under Clause (b) of Sub-section  (1) of Section 20 of the 2003 Act.

40.     The parties have set up their industries relying on the promises made  by the State.  In particular sugar industries have spent about Rs. 745.64  crores in that behalf.  Taking account of this substantial spin-off, doctrine of  promissory estoppel should be attracted in this case and in that view of the  matter, the State is estopped from demanding the electricity duty from the  captive power plants including the appellants.  Reliance in this behalf has  been placed on MRF Ltd., Kottayam v. Assistant Commissioner  (Assessment) Sales Tax and Others. [(2006) 8 SCC 702] and State of Punjab   v. Nestle India Ltd. and Another [(2004) 6 SCC 465].

41.     Our attention in this behalf has also been drawn to the observations of  Beg, J. in his concurrent judgment in Madan Mohan Pathak and Another v.  Union of India and Others [(1978) 2 SCC 50] wherein the Life Insurance  Corporation (Modification of Settlement) Act, 1976 was struck down inter  alia on the premise that the statute resiled from the earlier promise made by  the Government.   

42.     Mr. A.K. Ganguli, learned senior counsel appearing on behalf of the  appellants, had supplemented the submissions of Mr. K.K. Venugopal and  Mr. R.F. Nariman, urging that no previous sanction having been obtained  from the President of India as is required under Article 288 of the  Constitution of India, the 2003 Act is ultra vires particularly when Section  21 of the 2003 Act as also Section 18 of the 1962 Act specifically refer  thereto.

43.     The High Court, Mr. Ganguli would contend, has mis-interpreted the  provisions of Article 288 of the Constitution of India insofar as it failed to  take into consideration that it is in two parts.  Reference to inter-State river  authority has nothing to do with the first part of the said provision.  Also, as  Tamil Nadu Electricity Board which was constituted by reason of the  provisions of the 1948 Act, does not pay any tax, it cannot realize any tax  from the consumers to whom electricity is supplied.  

44.     It was further submitted that the maximum demand charges cannot be  made a basis for demanding electricity tax as maximum demand charges  have been levied for a different purpose which is penal in nature.  Reliance  in this behalf has been placed on Orissa State Electricity Board and Another  v. IPI Steel Ltd. and Others [(1995) 4 SCC 320]

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  of Article 288 of the Constitution of India, the focus is on the law which  enables the State to impose tax and not the individual event of levy thereof

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and, thus, even if such actual levy might not have been levied, the Act  authorizing imposition of such tax on river valley authorities, is bad in law.   

48.     The impugned Act suffers from callous exercise of power inasmuch as  the State, by imposing tax, intended to give the State Electricity Board such  amount which it could not get from the hands of the Electricity Regulatory  Commission.  A provision of the Act cannot be exercised in such a way to  defeat the provisions of another Act.  Burden of collection of tax from the  consumer where it does not have any captive generation plant is on the  licensee and, thus, it should be held to be the part of the tariff and in that  view of the matter, the impugned legislation is ultra vires Article 246 of the  Constitution of India.

49.     Mr. K.V. Viswanathan, learned counsel would submit that tariff is not  only a price but also all which is taken for sale or consumption of electrical  energy.  

50.     In certain matters, including Civil Appeals arising out of SLP(C) Nos.  1746 to 1762 of 2007, the validity of provisions of the 1962 Act, as amended  by Act 32 of 1991, have also been challenged on the ground that in view of  insertion of Section 3-A, the Government of Tamil Nadu issued a  notification bearing No. GOMs No. 787 dated 30.04.1979 so as to simplify  the process of tariff and all taxes, thus, having been merged, fresh levy of  additional tax would be prohibited.

51.    In respect of certain factories involving products like cement,  involving inter alia Grasim Industries Ltd. [Civil Appeal arising out of SLP  (C) No. 2064 of 2007], we may notice that the Government of Tamil Nadu  issued GOMs No. 2072 dated 19.11.1969 under Section 13(1) of the 1962  granting exemption for consumption of energy under High Tension Supply  for a period of two years in addition to the exemption specified in Sub- section (1) of Section 12, i.e., five years.  By GOMs. No. 1201 dated  18.06.1970, the Government of Tamil Nadu again, in exercise of its power  under Section 13(1) of the 1962 Act, granted exemption to those ’who  consume energy generated by themselves’ for a period of two years in  addition to the exemption specified in the notification issued through GOMs.  No. 2404, i.e., for a period 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 List II of the Seventh  Schedule of the Constitution of India and, thus, in that view of the  matter Article 254 of the Constitution of India cannot have any  application. (iv)    Article 288 of the Constitution of India would be attracted only  when the following things are established:

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(a)     Existence of an authority established by any law made by the  Parliament; (b)     The Authority must be established for regulating or developing  any inter-state river or river valley and only in such case no  State would make a law imposing or authorizing the imposition  of tax in respect of any water or electricity stored, generated,  consumed, distributed or sold by such authority; and in that view of the matter, only when a State makes a law on  such an authority, the assent of the President would be required in  terms of Clause (2) of Article 288 of the Constitution of India and  not otherwise. (v)     Whereas the 1939 Act having contained no provision for  exemption and the 1962 Act providing for exemption only from  consumption of electrical energy, the 2003 Act granted exemption  only for sale; the provisions of the latter being inconsistent with  the provisions of the earlier acts, the exemption notifications do  not survive having regard to the fact that Section 20 of the 2003  Act repeals both the 1962 Act as well as the 1939 Act. (vi)    Sub-sections (1) and (2) of Section 20 of the 2003 Act must be  read together and having regard to the fact that the notifications are  referred to under Sub-section (2) of Section 20 only, in view of the  inconsistencies between the 2003 Act, on the one hand, and the  1939 Act and the 1962 Act, on the other, they do not survive. (vii)   The words "corresponding provisions" contained in Section 20 of  the 2003 Act need not mean exactly similar but "to be in harmony  with or to be similar, analogous to or to be identical with" and in  that view of the matter, Section 14 of the 2003 Act containing an  exemption provision must be held to have covered the subject. (viii)  As the notifications for exemption from payment of electricity duty  under the 1962 Act are held to be saved under Sub-section (1) of  Section 20 of the 2003 Act, the same would lead to anomalous  situation. (ix)    (a)     The words "unless a different intention appears" must  necessarily be read in the context of Sub-section (1) of Section 20  of the 2003 Act and the proviso appended thereto 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 electricity tax on consumption under the 2003 Act on  the basis thereof or otherwise, inasmuch as there cannot be any  estoppel against the exercise of legislative power to repeal any Act  and to re-enact it.  The exemption granted under Section 13(1) of  the 1962 Act was otherwise subject to cancellation or variation  under Section 13(2) thereof. (xii)   Electricity tax is levied on a licensee under the 2003 Act in terms  of Clauses (a) and (b) of Sub-section (1) of Section 3 thereof.  In  view of the definition of "net charge" contained in Section 2 (12)  read with Explanation II of Section 2(7), the tax must be held to be  levied on actual consumption and not on demand charges.

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CONSTITUTIONAL SCHEME AND THE VIRES ISSUE          53.     Article 245 of the Constitution of India vests the Parliament with  power of legislation on all matters enumerated in List I and also the matters  enumerated in List III of the Seventh Schedule of the Constitution of India.   The State Legislature, however, has the exclusive right to legislate matters  specified in the Entries contained in List II.   

54.     Federal supremacy no doubt recognizes that the State’s power to  legislate with regard to any matters in List III would be subject to any Act of  the Parliament; however, Clause (3) of Article 246 of the Constitution of  India gives the legislature of the State an exclusive power with respect to  any matters in List II, subject to restriction imposed in the entry itself, as for  example, Entries 1, 2, 12, 13, 17, 22, 23, 24, 32 and 33.  Entry 53 of List II  does not contain any such restriction and has not been made subject to any  of the entry made in List I or List III.   

55.     Various entries in the three Lists provide for the fields of legislation.   They are, therefore, required to be given a liberal construction inspired by a  broad and generalize spirit and not in a pedantic manner.  A clear distinction  is provided for in the scheme of the Lists of the Seventh Schedule between  the general subjects of legislation and heads of taxation.  They are separately  enumerated.  Taxation is treated as a distinct matter for purposes of  legislative competence vis-‘-vis the general entries.  Clauses (1) and (2) of  Article 248 of the Constitution of India also manifests the aforementioned  nature of the entries of the List, and, thus, the matter relating to taxation has  been separately set out.  The power to impose 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 competence of the State of Tamil Nadu to legislate the  impugned Act is beyond any dispute.  It cannot, therefore, be said that the  State’s action in enacting the Act suffers from colourable exercise of any  power.  Thus, it can be safely concluded that the State has not over-stepped  its limits of power.  [See K.C. Gajapati Narayan Deo and Others v. The State  of Orissa, 1954 SCR 1 and R.S. Joshi, Sales Tax Officer, Gujarat and Others  v. Ajit Mills Limited and Another, (1977) 4 SCC 98]

60.     In the decision of this Court in Raja Jagannath Baksh Singh v. State of  Uttar Pradesh [AIR 1962 SC 1563], it has been held:

"21\005 Though the validity of a taxing statute  cannot be challenged merely on the ground that it  imposes an unreasonably high burden, it does not  follow that a taxing statute cannot be challenged  on the ground that it is a colourable piece of

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legistation and as such, is a fraud on the legislative  power conferred on the legislature in question. If,  in fact, it is shown that the Act which purports to  be a taxing Act is a colourable exercise of the  legislative power of the legislature, then that would  be an independent ground on which the Act can be  struck down. Colourable exercise of legislative  power is not a legitimate exercise of the said  power and as such, it may be open to challenge.  But such a challenge can succeed not merely by  showing that the tax levied is unreasonably high or  excessive, but by proving other relevant  circumstances which justify the conclusion that the  statute is colourable and as such, amounts to a  fraud."

61.     Entry 53 of List II provides for a taxation entry; whereas Entry 38 of  List III provides for a non-taxation entry dealing with general aspects of  electricity excluding taxation.  The 1998 Act empowers the Commission  only to fix the electricity tariff or the charges for consumption of electricity.   The legislation made by the State is independent of actual tariff of electricity  charges.  Tariff would mean a cartel of commerce and normally it is a book  of rates.  [BSES Ltd (supra) at page 208]

62.     Article 254 deals with methods of resolving conflict between the law  made by the Parliament and law made by the State in respect of the matters  enumerated in the concurrent list.

63.     In M.P. Vidyut Karamchari Sangh v. M.P. Electricity Board [(2004) 9  SCC 755], it was held: "28. Recourse to the said principles, however,  would 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 that when a State makes a law for  imposition of tax and if any such law provides for fixation of the rates and  other incidents of tax, the assent of the President would be required.

66.     A plain reading of Clause (2) of Article 288 of the Constitution of  India raises no doubt that the application thereof was meant to be only in  respect of the river valley authorities like Damodar Valley Corporation  constituted in the year 1948 by the Damodar Valley Corporation Act, 1948.  

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The question came up for consideration before this Court in Damodar Valley  Corporation v. State of Bihar and Others [(1976) 3 SCC 710] wherein it was  stated:

"9. What is required by clause (2) of Article 288 is  that the law made by the State Legislature for  imposing, or authorising the imposition of tax  mentioned in clause (1) shall have effect only if  after having been reserved for the consideration of  the President it receives his assent. Another  requirement of that clause is that if 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. It is, however, not the effect of that  clause that even if the abovementioned two  requirements are satisfied, the provisions which  merely deal with the mode and manner of the  payment of the aforesaid tax should also receive  the assent of the President and that in the absence  of such assent, the provisions dealing with the  incidence of tax, which have received the assent of  the President, would remain unenforceable."

67.     It may be true that in a case of this nature, it was not necessary to lay  down a clear provision of applicability of Article 288 of the Constitution of  India, but then it must have been done ex maori cautela (by way of abundant  caution).  Only because a provision of the Constitution has been mentioned  in the Act, the same, in our opinion, would not necessarily mean that the  same is required to be taken into consideration for the purpose of judging the  constitutionality thereof.  Submission of Mr. Ganguli and other learned  counsel appearing on behalf of the appellants, that the same was meant to  give effect to the 1948 Act under which the State Electricity Boards are  created, does not appeal to us.  The provisions, it is trite, 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" conveys the idea of a provision  yielding place to another provision or other provisions subject to which it is  made as has been held in Surinder Singh v. Central Government and Others  [AIR 1986 SC 2166, para 6], South India Corporation (P) Ltd. v. Secretary,  Board of Revenue, Trivandrum and another [AIR 1964 SC 207], Ashok  Leyland Ltd. v. State of Tamil Nadu & Anr. [(2004) 3 SCC 1] and S.N.  Chandrashekar and another v. State of Karnataka and Others, [(2006) 3 SCC  208].  But, keeping in view the nature of exemption granted, the subject  matter and nature of the recipient of such exemption, in our opinion, Article

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288 has no application in the instant case.

ARTICLE 14 ISSUE

71.     The issue that the 2003 Act in violation of the equality clause  contained in Article 14 of the Constitution of India was not raised before the  High Court.  Only in one of the civil appeals, prayer was made for urging  additional ground and the same having been directed, additional ground has  been taken to urge the said question.  A ground taken, however, must be  based on a factual foundation.  For attracting Article 14, necessary facts  were required to be pleaded.  The foundational facts as to how Section 14 of  the 2003 Act would be discriminatory in nature have not been stated at all.   The Government of Tamil Nadu has also not been given any opportunity to  meet the said contention.

72.     It is now trite that such factual foundation, unless is apparent from the  statute, itself, cannot be permitted to be raised and that too for the first time  before this Court.

73.     In Orient Weaving Mills (P) Ltd. v. The Union of India [(1962) Supp  3 SCR 481], this Court has stated:

"\005It is one thing to attack the constitutionality of  the provisions of the Act authorising the levy of  the excise duty on the petitioners; it is quite a  different thing to complain of the exemption  granted in respect of the goods produced by the 5th  respondent. As the vires of the Act itself has not  been challenged, we need not say anything more  on that aspect of a possible controversy which has  not been actually raised in the petition."  

74.     Furthermore, in the matter of taxation, the State is given wide  discretion and is allowed to pick and choose objects for taxation and  exemption.

75.     We do not think that it is advisable for us to go into the said question.

76.     In absence of necessary pleadings and grounds taken 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:

"\005In this observation we agree with Grover, J. on  all other characteristics of electric energy except  that it can be stored and to the extent that electric  energy can be stored, the observation must be held  to be erroneous or by oversight. Science and  technology till this day have not been able to

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evolve any methodology by which electric energy  can be preserved or stored."

       [See also BSES Ltd (supra), para 16 & 18]

78.     However, the editorial note in National Thermal Power Corpn. Ltd  (supra) itself suggests that now electricity, at least to some extent is possible  to be stored and that aspect of the matter had not been considered therein.   Furthermore, the words "sold for consumption", only because the electricity  cannot be stored, cannot be held to be mere tautology as urged or at all.

79.     The doctrine of purposive construction can be taken recourse to  provided there exists any ambiguity.  If we have to agree with the  submission of the learned counsel and in particular, Mr. Nariman, we will  have to not only ignore the words "for consumption" occurring immediately  after the word "sold" but also ignore the word "by" occurring immediately  after the word "consumption".  We have to give a new meaning which  would amount to judicial legislation.  We do not see any need therefor as  thereby the taxation provision would be given a new dimension, by reason  whereof not only exemption provisions will have to be understood in the  context of sale of electricity but also consumption thereof.

80.     We are not unmindful of the fact that the 2003 Act was enacted not  only to consolidate but also to rationalize the Act.  Mr. Nariman takes us to  various authorities in regard to the construction of a consolidating statute  including IRC v. Hinchy [1960] 1 All ER 505, Beswick v. Beswick [1967] 2  All ER 1197, Dir. Of Public Prosecutions v. Schildkamp [1969] 3 All ER  1640], Maunsell v. Olins [1975] 1 All ER 16 and Farrell v. Alexander  [1976] 2 All ER 721, to suggest that a consolidating statute is not meant to  alter law.  But, in these decisions, it has also been suggested that a  consolidating statute may also be an amending act.

81.     It is one thing to say that where the words or expressions in a statute  are plainly taken from an earlier statute in pari materia, which have received  judicial interpretation, it must be presumed that the Parliament was aware  thereof and intended to be followed in latter enactment.  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\005The 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. Vagliano Brothers to the following effect: I think ... the proper course is in the first instance  to examine the language of the statute and to ask  what is its natural meaning, uninfluenced by any  considerations derived from the previous state of

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the law, and not to start with enquiring how the  law previously stood, and then, assuming that it  was probably intended to leave it unaltered, to see  if the words of the enactment will bear an  interpretation in conformity with this view. If a  statute, intended to embody in a code a particular  branch of the law, is to be treated in this fashion, it  appears to me that its utility will be almost entirely  destroyed, and the very object with which it was  enacted will be frustrated. The purpose of such a  statute surely was that on any point specifically  dealt with by it, the law should be ascertained by  interpreting the language used instead of, as  before, by roaming over a vast number of  authorities in order to discover what the law was,  extracting it by a minute critical examination of the  prior decisions.... The court in interpreting a statute must therefore  proceed without seeking to add words which are  not to be found in the statute, nor is it permissible  in interpreting a statute which codifies a branch of  the law to start with the assumption that it was not  intended to alter the pre-existing law; nor to add  words which are not to be found in the statute, or  for which authority is not found in the statute. But  we do not propose to dispose of the argument  merely on these general considerations. In our  view, even the legislative history viewed in the  light of the dictum of the Privy Council in Hurrish  Chander case, does not afford any adequate  justification for departing from the plain and  apparent intendment of the statute."

84.     Such construction is to be put only when it is a pure consolidating  statute but there cannot be any doubt whatsoever that the same has to yield  to plain words to the contrary.  [See Beswick (supra) and Grey v. IRC,  (1959) 3 All ER 603]

85.     However, there is no constitutional or statutory embargo that a  consolidating Act must also be an amending Act.  When different terms are  used in the new Act, it would not be proper for the Court to refer to the  provisions of a repealed statute.

86.     We may furthermore notice that the distinction between consolidating  statute and other statutes is no longer 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

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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  which is clear  in the consolidation Act.     It is  only when there is a real or substantial difficulty  or ambiguity that the court is to attempt to  resolve the difficulty or ambiguity by reference  to the legislation which has been repealed and re- enacted in the consolidation Act.  This rule  applies to all types of consolidation Acts which  are now three: (1) Pure consolidation. i.e. re- enactment, (2) Consolidation with correction and  minor improvement, and (3) Consolidation with  Law Commission amendments.   But when "the  provisions of the Act itself invited reference to  the earlier law and in some cases were  unintelligible without them" recourse to the  earlier law for construing the Act becomes  inevitable."

REPEAL ISSUE

88.     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 hereinbefore, we may notice certain  precedents of this Court operating in this behalf.

89.     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 by a fresh  legislation. 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 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

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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 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 enactment, the  proper approach is not to enquire if the 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. Baliah v. Income Tax  Officer, Central Circle VI, Madras."   91.     In India Tobacco Co. Ltd. v. The Commercial Tax Officer,  Bhavanipore and Others [(1975) 3 SCC 512], this Court held:  

"15. The general rule of construction is that the  repeal of a repealing 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 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 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. M.A. Tulloch & Co.). 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

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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 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, 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:

"\005The 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 be 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 if there is a  simultaneous re-enactment unless a contrary  intention can be gathered from the new statute\005"

93.     In Gajraj Singh and Others v. State Transport Appellate Tribunal and  Others [(1997)1 SCC 650], this Court held: "24. When there is a repeal and simultaneous re- enactment, Section 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 inconsistent with or  contrary to the application of the section. Such  incompatibility would have to be ascertained from

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all relevant provisions of the new Act. Therefore,  when the repeal is followed by 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 new  Act indicates different intention. The object of  repeal and re-enactment is to obliterate the  Repealed Act and to get rid of certain obsolete  matters."

94.     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:

"6 Effect of repeal.--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 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  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, (14

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of 1874) 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."

95.    What, however, is the matter of moment would be that the expression  "unless a different intention appears" occurring in Section 6 of the General  Clauses Act, 1897 has not been inserted in Sub-section (1) of Section 20 of  the 2003 Act.  Sub-sections (1) 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 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.

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

97.     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. 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 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  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 (1) of Section 20 of the 2003 Act they did not introduce any such  thing, they did so while enacting Sub-section (2) thereof.   

99.     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 to be similar or analogous to or to be  identical with" as has been held in H.V. Mathai v. Subordinate Judge,   Kottayam and Others [(1969) 2 SCC 194].  

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100.   The word "correspond" as contained in Stroud’s Judicial Dictionary,  2nd Edition, Volume I, page 355, is to mean "to harmonize with" or "to be  identical with".

101.    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 (1) 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 (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  intendment of the enactment by insisting on certain  mandatory conditions to be fulfilled in order to  make the enactment workable; (3) it may be so embedded in the Act itself as to  become an integral part 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 SCC 641]

105.    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  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

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notification issued thereunder could be an act which would come within the  purview of the words "anything duly done".

107.    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 (1) 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.  

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 to  "Statutory Interpretation \026 A Code" by F.A.R. Bennion, Third Edition, page  229, wherein it was stated:

"Paragraph (ii) This derives from 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  aforementioned.  Construction would vary from statute to statute.        

114.    It is profitable to notice at this stage a decision of this Court in M/s.  Universal Imports Agency (supra).  In that case under the Indo-French  Agreement entered into by and between the two nations on 1st 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 validation of licences held by them to import goods as  petitioners thereof did not have any merchandise imported by them stood  confiscated.

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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 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:

"\005The words things done in para 6 must be  reasonably interpreted and, if so interpreted, they  can mean not only things done but also 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 (10  of 1897) says that unless a different intention  appears, the repeal of an Act shall not affect  anything duly done or suffered thereunder\005"

117.    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.

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,  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.  Nature of such a right would depend

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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 M/s. Gurcharan  Singh Baldev Singh v. Yashwant Singh and Others [(1992) 1 SCC 428] in  the following terms: "\005The 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\005"   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 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.

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.  In 1991, the  1962 Act was amended whereby additional tax was levied at 5%.

124.    On or about 22.10.1991, the Union Ministry of Power, Government of  India published a policy for private participation in the power sector as 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  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  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. 230 dated 16.06.1993.   

128.    On 9.10.1995, the Ministry of Power, Union of India wrote to all State

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Electricity Boards and State Governments urging them to take steps to tap  the potential in captive/ cogeneration power plants as energy shortage 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  issued the following exemption notification bearing GOMs. No. 126:   "In exercise of the powers conferred by sub- section (1) of Section 13 of the Tamil Nadu  Electricity (Taxation on Consumption) Act 1962  (Tamil Nadu Act 4 of 1962), the Governor of  Tamil Nadu hereby direct that the consumption of  self-generated electrical energy for captive  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 the Electricity  Tax payable under the above Act."

130.    Appellants contend that relying on or on the basis thereof, a huge sum  was invested by them for installing power generation plants.  Sugar  industries, by way of example, alone are said to have invested about Rs.  745.64 crores in that behalf; the details whereof are as under:

Sl No Name of the Sugar Mill Project Cost Rs. in crores

1 EID Parry (India) Limited 265.00

2 Thiru Arooran Sugars Ltd/

Terra Energy Limited 104.00

3 Shree Ambika Sugars Limited 160.00

4 Rajshree Sugars & Chemicals Ltd 86.64

5 Sakthi Sugars Limited

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96.00

6 Kothari Sugars & Chemicals Ltd. 33.00

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

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  chart:

"Date TNEB Rate HT-I  Tariff Assumed  Tax             on  consumption Net Rate

Season Off-season

(Rs. P) (Rs. P) (Rs. P) (Rs. P) (Rs. P) 01.04.1995 2.25

2.40 0.05 2.35 01.04.1996 2.36

2.80 0.05 2.75 01.04.1997 2.48

2.80 0.05 2.75 01.04.1998 2.60

2.80

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0.06 2.74 20.07.1998 2.60

3.20 0.06 3.14 01.04.1999 2.73

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  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 M/s. A.P. Steel Re- Rolling Mill Ltd. v. State of Kerala & Ors. [2006 (14) SCALE 162].

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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 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.   

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  Others v. Project Uchcha Vidya, Sikshak Sangh and Others [(2006) 2 SCC  545] 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  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 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."

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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  Another [(2004) 6 SCC 465] wherein the law has been stated in the  following terms:

"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."

139.    Referring to Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.  [(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 law 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 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) *** [E]quity will, in a given 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) *** Whatever be the nature of the function which the  Government is discharging, the Government is  subject to the rule of promissory estoppel and if  the essential ingredients of this rule are satisfied,  the Government can be compelled to carry out the  promise made by it. (SCC p. 453, para 33)"

140.    This Court distinguished its earlier decision in Kasinka Trading v.  Union of India [(1995) 1 SCC 274], whereupon 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

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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. is passed on to the  consumer and 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."

141.    In MRF Ltd., Kottayam v. Asst. Commissioner (Assessment) Sales  Tax and Others [(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 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 statutory notifications.

143.    We may also notice an interesting observation made by Beg, J. in  Madan Mohan Pathak and Another v. Union of India and Others [(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 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 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. 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.

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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 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."   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 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.   

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  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 a  substantive legislation, which is of some academic interest.  

149.    In R v North and East Devon Health Authority, ex parte Coughlan  [2001] 1 QB 213, Lord Woolf identified three categories of legitimate  expectations:  (i)     "The court may decide that the public authority is only required  to bear in 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 which case the court will itself judge the  adequacy of the reason advanced for the change of policy,  taking into account what fairness requires."

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(iii)   "Where the court considers that a lawful promise or practice has  induced a legitimate expectation of a benefit which is  substantive, 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 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 the  court should do."  

151.    In determining 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 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  Revenue Commissioners ex parte 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]

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 terms of the entries made in List II of the Seventh  Schedule of the Constitution of India.  Our observations must necessarily be  understood in the context of the aforementioned decisions.

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 of India operate in different fields.  The 1948 Act was

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enacted to provide for the rationalization of the production and supply of  electricity, and generally for taking measures conducive to electrical  development.  

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 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 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  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 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 made for depreciation of  machinery, equipment and buildings. Plants,  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. 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

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maximum demand of say 1000 KVA and a factory  having a maximum demand of 10,000 KVA  require different type of 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 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. 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 parts, viz., (a) units consumed and (b) maximum 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" \026  (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 consumer  during any consecutive thirty minutes in the  month. (c)     "Permitted Demand" means the demand  permitted by the competent authority of the Board  taking into account the constraints in the Board’s

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transmission and distribution network. (This  definition does not apply to the demand quota  permitted under the "Restriction and Control"  orders). (d)     "Sanctioned Demand or Contracted  Demand" means the demand sanctioned by the  competent authority of the Board and specified in  the agreement"."

       ’Load’ has been defined in clause 2(ix)(a) in the following terms: "(ix) "Load" \026  (a)     "Connected Load" means the aggregate of  the manufacturer’s rating of all the equipment  connected in the consumer’s installation 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. (b)     "Contracted Load" means the load which is  specified in the agreement;"

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

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  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 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:

"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 relating to sale of  goods which might be in force for the time being.  It was then said that in some of the Entries, for

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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 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\005"

162.    Gannon Dunkerley & Co. (Madras) Ltd. (supra) has been noticed by a  3-Judge Bench of this Court in Bharat Sanchar Nigam Ltd. and Another v.  Union of India and Others [(2006) 3 SCC 1] 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 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 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

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respects, law declared by this Court is not  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 & 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. 106. 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. 107. While the true scope of the amendment may  be appreciated by 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  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: The operative provisions of the several parts of  Article 286, namely, clause (1)(a), clause (1)(b),  clause (2) and clause (3) are manifestly intended to  deal with different topics and, therefore, one  cannot be projected or read into another. (S.R. Das,  Actg. C.J.) 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-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 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.  

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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 construction of Entry 53 of List II of the Seventh  Schedule of the 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  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 of  this Court in M/s. Northern India Iron & Steel Co. v. State of Haryana and  Another [(1976) 2 SCC 877] wherein it has been held:

"10. 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 it is clear, and this was fairly conceded to by  the Solicitor General 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. 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  (1) 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 (1) says: The duty under clauses (iii) and (iv) of sub-section  (1) 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.   

168.    We may notice that this Court in West Coast Papers Mills Ltd (supra),

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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 metal conductors to the place  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 100 units of  electrical energy and loses 10 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 a case would be only for 90  units and not 100 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."

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 KVA  and not on the basis of 350 KVA.  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 of this Court in M/s. 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 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

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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.