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PETITIONER: DAMODAR VALLEY CORPORATION

       Vs.

RESPONDENT: STATE OF BIHAR & ORS.

DATE OF JUDGMENT05/08/1976

BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ UNTWALIA, N.L. SINGH, JASWANT

CITATION:  1976 AIR 1956            1977 SCR  (1) 118  1976 SCC  (3) 710

ACT:         Constitution of India, 1950---Art. 288(2)--Scope of.         Bihar   Electricity   Duty  Act,  1948   (as   amended)   S.         3(2)(e)--Scope of

HEADNOTE:             The proviso (v) to s. 3(1) of the Bihar Electricity Duty         Act,  1948 provided that no duty shall be leviable on  units         of  energy consumed by, or in respect of, or sold  for  con-         sumption  in  any mine or industrial undertaking  except  to         the  extent specified in the Second Schedule.  In 1963 s.  3         of  the Act was amended and a new s. 3 was. substituted  for         the old s. 3.  Sub-section (2)(e) of the new section  states         that  no duty shall be leviable on units of energy  consumed         by the Damodar Valley Corporation for the generation, trans-         mission or distribution of electricity by that  Corporation.         Item A of the First Schedule, as amended in 1963 states that         for  a mine or an industrial undertaking the  duty  leviable         shall  be at such rate or rates not exceeding 2  naya  paise         per  unit of energy fixed by the State Government with,  the         previous  consent  of the president.  The Amending  Act  re-         ceived the assent of the President.             In  response to notices issued by the Superintendent  of         Commercial   Taxes calling upon the appellant to  pay  elec-         tricity  duty  under  the Act  as   amended,  the  appellant         contended that it enjoyed immunity from payment of tax under         cl.  (1) of Art. 288 of the Constitution, no law  satisfying         the  requirement of cl. (2) of Art. 288. having  been  made.         warranting the levy of such duty.         The High Court dismissed the appellant’s writ petition.         Dismissing the appeal to this Court,             HELD:  (1)  What is required by cl. (2) of Art.  288  is         that the law made by the State legislature for imposing,  or         authorising the imposition of tax mentioned in cl. (1) shall         have effect only if (i) after having been  reserved  for the         consideration of the President, it receives his assent,  and         (ii) 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,

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       however,  not the effect of that clause that even  if  these         two requirements are satisfied, the provisions which  merely         deal  with  the mode and manner of the payment  of  the  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. [123 H; 124 A-B]  (2)         The  contention of the appellant that the amending  Act  did         not  contemplate  or contain any indication  regarding  the,         imposition of electricity duty upon the appellant is  plain-         ly, untenable, for it would have the effect of rendering  s.         3(2)(e)  to  be wholly redundant.  Under proviso (v)  to  s.         3(1) of the Principal Act, mines and industrial undertakings         were  exempt from levy of duty.  This exemption stood  with-         drawn  as a result of substitution of new s. 3 for  the  old         section by the amending Act.  The new charging s. 3(1) roped         in all industrial undertakings, including the Damodar Valley         Corporation,  for  the  purpose of levy  of  duty.   Section         3(2)(e),  introduced by the Amending Act of 1963,  expressly         granted exemption from levy of electricity  duty  on   units         of  energy  consumed by the appellant for  the,  generation,         transmission or distribution of electricity by that Corpora-         tion.   This provision, containing express reference to  the         appellant  Corporation, dearly warrants the inference   that         in respect of units of energy not covered by s. 3(2)(e)  the         exemption would not be available to the appellant.  [123  A-         B]         119             (3) There is no substance in the contention that  unless         s.  4  of  the principal Act was also  re-enacted  with  the         assent  of the President, the liability for payment of  duty         cannot  be  fastened upon the appellant.  Section 3  of  the         Amending Act which deals with the incidence of duty makes it         clear that such duty has to, be paid on the units of  energy         consumed  or sold and at the rate or rates specified in  the         schedule.   As  the duty is to be levied on  the  units   of         energy consumed or sold, it would follow that the duty would         have  to be paid by the consumer or seller as the  case  may         be.  Section 4 of the. principal Act merely provides for the         manner and mode of payment of the duty. [123 F-G]

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 104 of 1970.             (From  the  Judgment and Order dated 23-10-1967  of  the         Patna  High  Court  in  Civil  Writ  Jurisdiction  Case  No.         299/66).         L.M. Singhvi, U.P. Singh and S.N. Jha, for the Appellant.         Sarjoo Prasad and U.S. Prasad, for the Respondent.         The Judgment of the Court was delivered by             KHANNA, J.  The short question which arises for determi-         nation  in  this  appeal on certificate  by  Damodar  Valley         Corporation  against the judgment of Patna High  Court  dis-         missing the writ petition filed by the appellant is  whether         the appellant is liable to pay electricity duty under  Bihar         Electricity Duty Act,, 1948 as amended by Bihar  Electricity         Duty  (Amendment) Act, 1963.  The High Court  answered   the         question in the affirmative against the appellant.             The  appellant  is a corporation established  under  the         Damodar Valley Corporation Act, 1948 for the development  of         the  Damodar Valley in the States of Bihar and West  Bengal.         One  of the functions of the appellant is the promotion  and         operation of schemes  for  the generation, transmission  and         distribution of hydroelectric and thermal electrical energy.

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       Bihar  Electricity  Duty Act, 1948 (Bihar Act  36  of  1948)         (hereinafter referred to as the principal Act) was published         in the Bihar gazette; on October 1, 1948.  It was an Act for         the levy of duty on the sales and consumption of  electrical         energy   in  the province of Bihar.  Material part  of  sec-         tions. 3 and 4,. as they stood before the amendment made  in         1963, read as under:                    "3.  Incidence  of  duty.---(1)  There  shall  be                  levied and                    paid  to  the: State Government on the  units  of                  energy consumed or sold, excluding losses of energy                  in the transmission and  transformation, a duty  at                  the rates specified in  the  First   Schedule:                        Provided that no  duty  shall be leviable  on                  units  of energy :--                  (i) ........                  (ii)  ....                  (iii) ......                  (iv) .....                  120                      (v) consumed by, or in respect of, or sold  for                  consumption in any-                  (a) mine, as defined in the Indian Mines Act, 1923:                  (b) industrial undertaking;                  except  to  the  extent  specified  in  the  Second                  Schedule:                  (vi)......                  (2)  ....                        4.  Payment  of duty.--( I )  Every  licensee                  shall  pay every month to the State  Government  at                  the   time   and   in  the  manner  prescribed  the                  proper duty payable under section 3 on the units of                  energy  consumed by him or sold by him to the  con-                  sumer.                        (2)  Every  licensee  may  recover  from  the                  amount  which falls to be paid by the  licensee  as                  duty in respect of energy sold to the consumer.                         (3).......                         (4)  ....                         (4a)  ....                         (5)  ....                  The principal Act was amended by Bihar  Electricity                  Duty (Amendment) Act, 1963 (Bihar Act 20. of  1963)                  (hereafter  referred to as the amending Act).   The                  amending  Act received the assent of the  President                  on  December 4, 1963 and was published on  December                  17,  1963.  By section 2 of the amending  Act,  new                  section  3 was substituted for the old  section  3.                  Material part of new section 3 read  as under:                        "3.  Incidence  of duty.(1)  Subject  to  the                  provision of sub-section (2), there shall be levied                  and  paid to the State Government on the  units  of                  energy  consumed  or  sold,   excluding  losses  of                  energy  in transmission and transformation, a  duty                  at the rate or rates specified in the Schedule.                  (2) No duty shall be leviable on units of energy-                     (a)  ....                     (b)  ....                     (c)  ....                     (d)  ....                    (e)  consumed by the Damodar  Valley  Corporation                  for the generation, transmission or distribution of                  electricity by that Corporation;                    (f)  ....                    (3)  ....

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                121                  Amendment  was also made in the First  Schedule  of                  the principal Act. The relevant part of the  sched-                  ule read as ’under  :                             THE SCHEDULE                           (See section 3.)         RATES OF DUTY         A. For a mine or an industrial under-      Such rateor rates         taking,  save in  respect  of its       not exceeding 2 naya         premises used for residential or   paisa per unit of  office         purpose                               energy  as  may,  from                                               time to time, be fixed                                              by  the  State   Govern                                              ment  with  the   previ                                              ous   consent  of   the                                              President,   by   order                                              in this  behalf".                     In  the writ petition the appellant  prayed  for                  quashing  three  notices dated  February  10,  1965                  issued  by the Superintendent of  Commercial  Taxes                  Giridih  as also his orders dated March 24 and  29,                  1966.   By the impugned notices the  Superintendent                  of  Commercial Taxes called upon the  appellant  to                  show cause as to why penal action under the princi-                  pal  Act as amended,, should not be  taken  against                  the  appellant  for  having failed  to  get  itself                  registered under that Act.  The appellant was  also                  called  upon  to apply for  registration.   By  the                  impugned  orders the Superintendent  of  Commercial                  Taxes  directed. the appellant to  pay  electricity                  duty  under the: Act as amended.  The case  of  the                  appellant was that it enjoyed immunity from payment                  of  tax  under  clause (1) of article  288  of  the                  Constitution.  No law satisfying the requirement of                  clause  (2) of article 288, it was  contended,  had                  been made warranting the levy of such a duty.   The                  High Court repelled this contention, and we find no                  sufficient ground to take a different view.                  Article 288 of the Constitution reads as under:                        "288(1)  Save in so far as the President  may                  by  order otherwise provide, no law of a  State  in                  force  immediately before the comencement  of  this                  Constitution shall impose, or authorise the imposi-                  tion of, a tax in respect of any water or electric-                  ity  stored,  generated, consumed,  distributed  or                  sold by any authority established by any   existing                  law  made by Parliament for regulating or  develop-                  ing any inter-State river or river-valley.                       Explanation.--The  expression ’law of a  State                  in  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

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                President  being  obtained to the  making  of   any                  such rule or order."         10--1003 SCI/76         122             Article 288 grants exemption from tax under any law of a         State in respect of any water or electricity stored,  gener-         ated,  consumed, distributed or sold by any authority estab-         lished by any existing law or any law made by Parliament for         regulating  or  developing  any inter-State river or  river-         valley,  except in certain  cases.  According to clause  (1)         of  the  article, this exemption would not be  available  in         respect  of  such tax imposed under any law of  a  State  in         force  immediately before the commencement of the  Constitu-         tion  if the: President by order so provides.  Although  the         principal  Act  is a pre-Constitution law, being an  Act  of         1948,  no order was admittedly made  by the President  with-         drawing the exemption in respect of the appellant from  levy         of such, tax under the principal Act.  Indeed, there was  no         question  of issue of any such order because  the  principal         Act  did not provide for the imposition of electricity  duty         upon  a corporation like the appellant.  Clause (v)  of  the         proviso.  to sub-section (1 ) of section 3 of the  principal         Act expressly stated that no duty shall be leviable on units         of  energy consumed by, or in respect of, or. sold for  con-         sumption  in any mine, as defined in the Indian Mines   Act,         or  industrial undertakings, except to the extent  specified         in  the  Second Schedule.  The appellant  is  admittedly  an         industrial undertaking, and as such, was not liable. to  pay         electricity duty under  the- principal Act.             The case of the respondentS is that the bar to the  levy         of the said duty was removed and the levy of the duty on the         appellant was, put on a sound legal basis as a result of the         amendment  made.  in  the principal Act by the amending  Act         of 1963.  The amending Act, we find, satisfies the  require-         ments  of  clause  (2) of article 288.   According  to  that         clause,  the  legislature of a State may by law  impose,  or         authorise the imposition of, any tax mentioned in clause (1)         of  that  article,  but no such law shall  have  any  effect         unless it has,  after having been reserved for the consider-         ation of the President, received his assent; and if any such         law  provides for the fixation of the rates and other  inci-         dents  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.  The amending Act of 1963,         as  already mentioned, received the assent of the  President         before its  publication. The exemption which was granted  to         mines  and  industrial  undertakings from payment  of  elec-         tricity duty under the principal Act was withdrawn under the         amending Act, except to  some  extent  with which we are not         concerned.  The new schedule, substituted for the old sched-         ule  by the amending Act, prescribed the rates of  duty  for         mines and industrial undertakings, and it was provided  that         the rate of duty shall be such rate or rates not exceeding 2         naya paise per unit of energy as may, from time to time,  be         fixed  by the State Government with the previous consent  of         the President, by order in this behalf.              It  has  been argued by Dr. Singhvi on  behalf  of  the         appellant that the scheme of article 288 is to grant general         exemption  from the levy of tax in respect of any  water  or         electricity  stored,  generated,  consumed,  distributed  or         sold’ by any authority established by any, existing         123         law or any law made by Parliament for regulating or develop-         ing any inter-State river or river-valley.  If any law  made

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       by  a State legislature, according to the submission,  seeks         the  imposition  of any such tax, such  law  should  contain         clear  indication  to  that effect before  it  receives  the         assent  of the President.  The amending Act of   1963,  :ac-         cording  to  the learned counsel, did not contain  any  such         indication.  This  contention,  in our  opinion,  is  wholly         devoid of  force.  Under proviso (v) to section 3(1) of  the         principal Act, mines and industrial undertakings were exempt         from  levy  of duty.  This exemption stood  withdrawn  as  a         result  of, substitution of new section 3 for the  old  sec-         tion  by the amending Act.  The new charging section 3 (1  )         roped in all industrial undertakings, including the  Damodar         Valley Corporation, for the purpose of levy of duty.  Clause         (e) of sub-section (2) of new section 3 which was introduced         by  the  amending Act of 1963. expressly  granted  exemption         from levy of electricity duty on units of energy consumed by         the appellant corporation for  the  generation, transmission         or  distribution of electricity by that  corporation.   This         provision.  containing  express reference to  the  appellant         corporation, clearly warrants the inference that in  respect         of units of energy not covered by clause (e) of  sub-section         (2) of section 3 the exemption would not be available to the         appellant.  The contention advanced on behalf of the  appel-         lant  that the amending Act did not contemplate  or  contain         indication regarding the imposition of electricity duty upon         the  appellant is plainly untenable, for it would  have  the         effect   of Tendering clause (e) of sub-section (2) of  sec-         tion  3  to be wholly redundant.  The courts,  it  is  well-         settled,  should be loath to accept an argument which  would         have  the effect of rendering redundant the provision  of  a         statute.             Lastly, it has been argued that though there has been an         amendment of section 3 of the principal Act by its substitu-         tion by a new section under the amending Act of 196.3, there         has  been no amendment of section 4 with the assent  of  the         President.   As such,  no liability to pay electricity  duty         can  be fastened upon the appellant. This submission too  is         bereft  of force.  Section 3, as inserted by  the  ’amending         Act of 19’63, is the charging section.  According to  clause         (1) of that section, subject to the provision of sub-section         (2), there shall be: levied and paid to the State Government         on the: ’units  of energy consumed or sold, excluding losses         of energy in transmission and transformation, a duty at  the         rate  or rates specified in the Schedule.  The section  thus         deals  with the incidence of duty, and makes it  clear  that         such  duty h.as. to be paid on the units of energy  consumed         or sold and at the rate or rates specified in the  schedule.         It  is further made clear by the section that the duty is to         be levied and -paid to the State Government.  As the duty is         to.  be levied on the units of energy consumed or  sold,  it         would  follow  that the duty would have to be  paid  by  the         consumer or seller,, as the case may be.  Section 4- of  the         principal  Act  merely provides for the manner and  mode  of         payment of the duty, and we find no substance in the conten-         tion  that  unless section 4 of the principal Act  was  also         re-enacted  with the assent of the President, the  liability         for payment of duty cannot be fastened upon the appellant.         124             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

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       of such tax by means of rules or orders to be made under the         law by any authority, the law shall.. provide for the previ-         ous  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 above mentioned two require-         ments  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.             Some  other  aspects were also dealt with  by  the  High         Court,  but  in the light of the view we have taken  in  the         matter, it is not necessary to deal with those aspects.             The  appeal consequently fails and is dismissed  but  in         the circumstances without costs.         P.B.R.                                         Appeal   dis-         missed.         125