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PETITIONER: STATE OF MYSORE

       Vs.

RESPONDENT: WEST COAST PAPERS MILLS LTD. & ANR.

DATE OF JUDGMENT24/09/1974

BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ BEG, M. HAMEEDULLAH KRISHNAIYER, V.R.

CITATION:  1975 AIR    5            1975 SCR  (2) 127  1975 SCC  (3) 448

ACT: Mysore  Electricity  (Taxation  on  Consumption)  Act,  1959 (Mysore Act No. 14 of 1959, Sections 2(1), 3 and subsections (1)  and  (3) of Section 4-- Electricity tax  on  electrical energy   lost  in  the  course  of   transmission,   whether warranted-Respondent,  if liable to pay electricity  tax  on electrical   energy  used  by  it  for  generating   further electrical energy.

HEADNOTE: The  respondent  company is manufacturing  paper  and  other products.   Since the Mysore Electricity Board was not in  a position  to  supply  the entire quantity  required  by  the respondent   company,   the   company   started   generating electricity.   In 1966, the appellants made a demand of  Rs. 3,53,953.45 as arrears of electricity tax under the Act from the respondent for the period from July 1959 to March 19’66. The  respondent  company filed a writ petition in  the  High Court challenging the demand notice contending that, (1)  it was  not  liable to pay electricity tax on the  quantity  of electrical  energy lost in the course of transmission,  i.e. as  a  result of transmission or transformer loss;  and  (2) some  electrical  energy was used by it  for  generation  of further electrical energy and therefore, no electricity  tax was payable on the quantity of electrical energy utilised by it  for generation of further electrical energy.   The  High Court decided on both the points of controversy in favour of the  respondent company.  This appeal by certificate  under’ article 133(1)(a) has been filed by the appellant. Allowing the appeal with respect to the second contention, HELD : (1) (Per H. R. Khanna and V. R. Krishna Iyer, JJ.) The  entire  scheme of the Mysore Electricity  (Taxation  on Consumption)  Act,  1959,  is  to  tax  the  consumption  of electrical  energy.  Where some energy is not  consumed  but lost  before it reaches the point of consumption, the  ques- tion of levy of tax on consumption, of such energy would not in   the  very  nature  of  things  arise.   The  place   of consumption  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

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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.  To realise tax  on  all  the electrical  energy generated would be tantamount to  levying tax on generation or production of electrical energy and not on its consumption.  Such a tax on the generation or produc- tion  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 make no material difference. [131 B-F] Gokak  Mills-Ltd.  v.  State of Mysore  (1969)2  Mysore  Law Journal 99, approved. Per M. H. Beg J. (dismissing). No   distinction  is  made  anywhere  in  the  Act   between consumption  for  different purposes,  such  as  generation, transmission,  transformation or utilisation of  electricity for  any other purpose.  One who generates  electricity  and then  transmits  and transforms it before utilising  it  for another purpose may be said to be generating it for  several purposes.  Spending up or utilisation of energy for each  of the purposes, whether it be generation, or transmission, or. transformation,   or,   manufacture   of   some   particular commodity,  can be said to be a use which  must  necessarily fall  within the ordinary grammatical or dictionary  meaning of the word consumption.  The consumption begins immediately after  electricity can be said to be generated.  So long  as energy is spent or used up, 128 whatever be the process or purpose of such using up, it will be   consumption.   For  a  division  of  consumption   into effective  consumption and non-effective consumption,  there is  no warrant in the relevant provisions of the Act.   L134 F-H, 135 F-G, 136 A-Di It may be that the electricity tax is imposed upon a  person only  in the character or capacity of a consumer.   It  does not  follow  from this that the character or capacity  of  a consumer only begins when energy is used up for a particular purpose in which a consumer is consumer.  If he consumes  it is evident that the character of a consumer attaches to  him even  if  he is a generator or producer of energy.   He  has then  a dual character when he consumes and also  generates. What the Act does is simply to tax the using up of energy by a Person whatever be the capacity in which the use may  have been made.  It is really a tax on using up and not on use in any particular character or manner. [136 F-H] Indian  Aluminum  Co.   Ltd.  v.  The  C.I.T.  West  Bengal, Calcutta, 849 T-R 735 referred to. (2)  (By Full Court) : Electrical energy can be consumed for a  variety of purposes.  The fact that such energy has  been used  not  for  manufacturing some  other  article  but  for generating  further  electricity would not go to  show  that such  energy  has  not been consumed.   Sub-section  (3)  of section  4  makes  it clear that electricity  tax  would  be payable if a person consumes electrical energy generated the consumer  himself.  The definition of thee  word  "consumer" also  shows  that  it would include a  person  who  consumes energy generated by himself. [132 C-E, G-H]

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeal No.  124(N)  of 1971. Appeal from the judgment and order dated the August 5,  1970 of the Mysore High Court in W.P. No. 2058 of 1970.

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S.   V. Gupte and M. Veerappa, for the appellant. V.   Krishna Murthy, P. C. Bhartari, J. B. Dadachanji O. C. Mathur and Ravinder Narain, for the respondent. V.  S.  Desai,  G.  S. Ullal and B.  R.  Agarwala,  for  the interveners. KHANNA, J.-This appeal by certificate under article 133  (1) (a)  of  the  Constitution has been filed by  the  State  of Mysore  and  the Electrical Inspector to the  Government  of Mysore  against the judgment of Mysore (now Karnataka)  High Court whereby that court in a petition under article 226  of the  Constitution quashed the demand made by  the  appellant State  calling  upon  the  West  Coast  Papers  Mills   Ltd. respondent  company to pay electricity tax under the  Mysore Electricity (Taxation on Consumption) Act, 1959 (Mysore  Act No.  14 of 1959) (hereinafter referred to as the Act).   The two  questions  which arise for determination in  this  case are, :               (1)   Whether electricity tax is chargeable on               the quantity of electrical energy lost in  the               course of transmission; and               (2)   Whether the respondent company is liable               to  pay  electricity tax on  the  quantity  of               electrical energy used by it for generation of               further electrical energy. The High Court answered both the questions in favour of  the respondent company and quashed the demand which included tax on  the  above two counts.  The State, it was held,  was  at liberty to make 129 a  fresh  assessment of the electricity tax payable  by  the respondent company "without taking into account transmission losses  and  the  quantity of  electrical  energy  used  for generation  of  further electrical energy".  The  State  was also  directed  to refund the excess amount realised  by  it from  the respondent company 4 Dr. to adjust it towards  the electricity tax lawfully due from the respondent company for subsequent years. The respondent company is manufacturing paper and other pro- ducts at Dandeli.  Since the Mysore State, Electricity Board was  not  in  a position to supply the  entire  quantity  of electricity required by the respondent company, the  company started  generating  electricity by installing  turbine  and other  machinery.   On June 18, 1966 the appellants  made  a demand  of  Rs. 3,53,953.45 as arrears  of  electricity  tax under  the  Act from the respondent company for  the  period from  July  1959  to March 1966.  On  August  29,  1966  the respondent  company  filed  writ  petition  challenging  the demand notice on the ground that the demand was illegal  and unjustified. Before  dealing with the respective contentions, it  may  be pertinent  to  set  out the relevant  provisions.   A  State legislature  is, competent to impose tax on  consumption  or sale  of  electricity under entry 53 of list II  of  Seventh Schedule  to the Constitution.  The Mysore  legislature  has enacted  the Act in exercise of the power conferred  by  the above  entry.   Section 2 of the Act  contains  definitions. Clause (1) of that section gives the definition of  consumer as under :               "(1)  "consumer" includes a  local  authority,               company  or  other person to  whom  energy  is               supplied  by a licensee on payment of  charges               or  otherwise, and a licensee or other  person               who consumes energy generated by himself,  but               does not include ’a license to whom energy  is               supplied  by the State Electricity  Board  for

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             supply to others; and the word "consume"  with               its grammatical variations shall be  construed               accordingly;               Explanation :-Where a licensee to whom  energy               is supplied by the State Electricity Board for               supply to others, himself consumes any part of               the  energy,  he  shall  be  deemed  to  be  a               consumer in respect of energy so consumed." Section  3 of the Act contains the charging  provision,  and material part of it at the relevant time read as under :               "Subject  to the provisions of the Act,  there               shall   be  levied  and  paid  to  the   State               Government  on  the units of  energy  consumed               every month, a tax (hereinafter referred to as               "electricity  tax") calculated at a  rate  not               exceeding three naye paise per unit of  energy               as  may, by notification, be specified by  the               State  Government, and different rates may  be               specified  in respect of different classes  of               consumers;" Section  4 deals with the payment of electricity tax.   Sub- sections (1) and (3) of that section read as under :               "(1)  Every licensee shall collect and pay  to               the  State Government at the time and  in  the               manner prescribed, the 1C-               L251SupCI/75               130               electricity tax payable under this Act on  the               units of energy supplied by him to  consumers.               The tax so payable shall be a first charge  on               the  amounts recoverable by the  supplier  for               the energy supplied by him and shall be a debt               due by him to the State Government :               Provided  that  where the  licensee  has  been               unable to recover the amounts du-. to him  for               the  energy  supplied by him he shall  not  be               liable to pay the tax in respect of the energy               so supplied.               (3)   Every   person,  who   consumes   energy               generated  by himself, or who supplies  energy               to any other person free of charge, shall pay,               or collect and pay, as the case may be, to the               State  Government,  at  the time  and  in  the               manner prescribed, the electricity tax payable               under  section  3  on  the  units  of   energy               consumed by himself or supplied to such  other               person. It  would at this stage be appropriate to advert briefly  to the  process of generation and distribution of  electricity. The  process of generation of electricity normally  consists of  converting  mechanical  energy  into  electrical  energy through  what is known as the "generator".  Such  mechanical energy  is  normally supplied by turbine or  piston  engine. The  motive  power  for such turbine  or  piston  engine  is supplied.  by  falling  water, steam, gas,  mineral  oil  or nuclear fuel.  Electrical energy so generated is transmitted through  metal conductors to places where-it is to be  used. Some   loss  of  electrical  energy  takes  place   in   the transmission.  Such loss is described as transmission  loss. Electricity   is   transmitted  over   long   distances   at comparatively  high  voltage to  minimise  the  transmission loss.   If  electricity is generated at low  voltage  before transmission,  it is stepped up to relatively  high  voltage through  what  is  known as  "transformer.  When  electrical energy reaches the place where it is be used, the voltage of

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electric  current  is  brought down  through  a  transformer before it is put to use.  The reason for that is that it  is more safe and convenient to have low voltage at the point of consumption.  Some energy is lost in the process of stepping up  and stepping down of the voltage  through  transformers. Such loss is described as the transformer loss. According  to the case set up by the respondent company,  it was  not  liable to pay electricity tax on the  quantity  of electrical energy lost in the course of transmission,  i.e., as  a  result of transmission or transformer loss.   It  was further  the  case  of  the  respondent  company  that  some electrical  energy was used by it for generation of  further electrical   energy.    The  respondent  claimed   that   no electricity  tax was payable on the quantity  of  electrical energy  utilised by it for generation of further  electrical energy.   The High Court, as mentioned earlier,  decided  on both  the points of controversy in favour of the  respondent company. In  appeal before us Mr. Gupte on behalf of  the  appellants has challenged the correctness of the view taken by the High Court  on the two points of controversy.  As  against  that, Mr. Krishnamurthy on 131 behalf of the respondent company and Mr. Desai on behalf  of the  intervener  have canvassed for the correctness  of  the view taken by the High Court. 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  consump- tion,  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  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. A  similar  question arose before a Division  Bench  of  the Mysore High Court in Gokak Mills Ltd. v. State of Mysore(1). The Division Bench, while holding that no tax is payable  in respect  of the energy lost between the point of  generation

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and the point of consumption, observed as under:               "In  the case before us, the company  occupies               both  the role of a supplier and  a  consumer.               It is a supplier when it generates electricity               and  supplies  it for its own purposes  to  be               consumed  by it after it reaches the point  of               consumption.   The supply which it makes  from               the point of generation after it is generated,               to  the  point  of  consumption  where  it  is               received by it for purposes of consumption, is               transmitted by the company not in the role  of               a consumer but in the role of a supplier, and,               if during the process of transmission which is               made by the company in the role of a  supplier               some  part  of the energy is lost-and  we  are               informed that such loss is in-               (1)   (1969) 2 Mysore Law Journal 99.               132               evitable-it  would  not, in  our  opinion,  be               correct  to say that that energy which  is  so               lost  is energy consumed by the company  which               generated it" The  above  observations,  in  our  opinion,  represent  the correct  position  in law.  It may be stated that  the  High Court declined to grant a certificate of fitness for  appeal to  the  State  of  Mysore in the  above  case.   The  State thereupon  sought  special  leave of this  Court  to  appeal against  the judgment of the High Court but its  application was rejected. It is not necessary to express opinion on the legal position in a case where a person receives supply, in bulk, of energy from  a licensee and while transmitting or  transforming  or distributing  the  same within his area, suffers  losses  as such a question does not arise in the present case We are. however, unable to agree with the High Court that no electricity  tax  is payable by the  respondent  company  in respect  of the electrical energy used by it for  generating further electrical energy Electrical energy can be  consumed for  a variety of purposes.  The fact that such  energy  has been  used not for manufacturing some other article but  for generating  further  electricity would not go to  show  that such  energy, has not been consumed.  What we  are  actually concerned   with  under  the  Act  is  the  consumption   of electrical energy.  The use of electrical energy would  none the  less be consumption of such energy even though  it  has been consumed in operating the apparatus for generating further electrical energy.  The purposes for which the energy has been consumed would not make any material difference for the  purposes  of the levy of tax under the Act. It  is  not disputed on behalf of the respondent company that if it  had used  electrical energy, generated by the State  Electricity Board  for generating further electrical energy, the use  of such energy generated by the Board would have’ attracted the provisions of the Act for liability to pay electricity  tax. It  would,  in  our opinion, make  no  difference  that  the electrical  energy  used  by  the  respondent  company   for generating further electrical energy was that which had been generated   by  itself.   Sub-section  (3)  of   section   4 reproduced  above makes it clear that electricity tax  would be payable if a person consumes electrical energy  generated by  himself.’ The sub-section thus puts the  consumption  of energy  generated  by the consumer himself at par  with  the consumption  of  energy  generated  by  someone  else.   The definition  of the word "consumer" also shows that it  would include a person, who consumes energy generated by  himself.

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The   proposition  that  in  the  matter  of  the  levy   of electricity tax the court should differentiate between cases wherein  the energy consumed has been generated  by  someone other  than the consumer and those wherein such energy  ha,, been generated by the consumer himself cannot, therefore, be countenanced. We,  therefore,  partially accept the appeal and  hold  that electricity  tax  under  the Act is payable  in  respect  of electrical   energy   consumes   for   generating    further electricity.  No such tax is, however, payable in respect of electrical energy lost as a result of transmission loss and 133 transformer  loss.   The  judgment  of  the  High  Court  is modified accordingly.  The parties in the circumstances  are left to bear their own costs throughout. BEG,  J.-I  have  had the advantage  of  going  through  the opinion  of my learned Brother Khanna with which my  learned Brother  Iyer  concurs.  I entirely agree  with  my  learned Brother’s  observations  : "What we are  actually  concerned with  under the Act is the consumption of electricity.   The purposes  for which electricity has been consumed would  not make any material difference for the purpose of levy of  tax under the Act".  I also agree that sub.  S. (3) of Section 4 of the Act makes it clear that tax would be payable even  if a  person consumes electrical energy generated  by  himself. The sub-section equates the consumption of energy  generated by  the  consumer  himself with the  consumption  of  energy generated  by  someone  else.  The definition  of  the  word ’consumer’ also shows that it would include all persons  who consume  energy  generated by themselves.  It seems  to  me, with  great respect, that all this reasoning adopted  by  my learned  Brother  applies with equal  force  to  electricity which  may  be consumed in the process  of  transmission  or transformation  of electricity generated so that it  may  be consumed at points at which or in a form in which it may  be possible to use it for one who wants to utilise  electricity for a particular manufacturing process. With  great  respect,  I fail to  see  the  distinction,  in principle, between consumption of electricity for generation and  what  has  been ’called "loss"  of  electricity  in-the course   of  its  transmission  and   transformation.    The Electricity  Act,.  with which we are- concerned,  makes  no distinction  between  a  use  for  generation,  a  use   for transmission  or  supply,  and  a  use  for  transformation. Transmission seems to me a process district from generation. It   may   be  covered  by  the  heading  of   "supply"   or "distribution".  Transformation is akin to generation in  as much as it results in the conversion of electrical power  of a certain voltage into one of a higher or lower voltage.  It is  a  part  of the process  which  makes  electricity  more suitable for use for one of the several purposes or even the main purpose of a generator of electricity.  The  generation is  also  for  the  same purpose  as  are  transmission  and transformation   of   electrical  energy   into   power   of appropriate voltage.  Therefore, if electricity used upon in generation  is taxable as consumption, it should,  logically speaking,  follow that electricity used up for  transmission and transformation is also consumption even though it may be described  as  a  "loss" which seems to me to  be  a  rather misleading  term  invented  by those  engaged  in  supplying electricity. The problem before us is one of statutory construction which appears to me to be capable of solution by applying  certain well-known rules of interpretation.  The relevant provisions have been set out in

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134 the judgment of my learned Brother Khanna so that I need not repeat them.  I will only refer to them in explaining them. Section  2,  cl. (1) seems to have three  objects  in  view. Firstly,  it makes it clear that the word "  consumer"  does not  exclude  but "includes" authorities and  persons,  both natural  and  artificial, to whom energy  may  be  supplied, either  gratis  or on payment of a charge, as also  one  Who generates  energy  as  well as consumes  it.   Secondly,  it excludes "a licensee to whom energy is supplied by the State Electricity  Board  for the purposes of  supply  to  other". Every  supplier  of electricity is not  excluded.   It  only excludes   an   intermediate  supplier  "licensed   by   the Electricity  Board for purposes of supply to others".   Such an  intermediate  supplier  is thus placed  in  an  exempted category  because  his use of electricity is  apparently  on behalf  of the State Electricity Board- Other  suppliers  of Electricity  would  not be excluded from the  definition  of "consumer"  if they undertake the service of supply  without being  licensed  to do so by the  State  Electricity  Board. Furthermore,  the  explanation  makes  it  clear  that   any consumption of energy, even by a licensed supplier, would be covered  by consumption for purposes of taxation.   Thirdly, the definition itself contains the explanation that the word "consumed" shall, for all purposes not specially  mentioned, be interpreted "with its grammatical variation".  This means that we are referred to the ordinary dictionary meanings  of the  word  "consumers"  for its variants all  of  which  are covered. The Shorter Oxford English Dictionary (Third  Edition-Vol.I) contains the following meanings of "Consume" : (1) "To  make away with, destroy, as by fire, evaporation,  decomposition, disease, or the like; (2) to waste, squander; (3) to use up, esp.  to  eat up, drink up; (4) to take up,  spend,  waste". Some  additional  connotations  of  it  will  be  found   in Webster’s Third International Dictionary.  But, the meanings given  above are primary and uniform.  They are  necessarily included   in  the  variations  expressly  covered  by   the statutory definition of it in Sec. 2(1). It seems clear to me that no distinction is made anywhere in the Act between consumption for different purposes, such  as generation,  transmission, transformation or utilisation  of electricity  for  any  other  purpose.   One  who  generates electricity  and  then transmits and  transforms  it  before utilising  it  for  another  purpose  may  be  said  to   be generating   it  for  several  purposes.   Spending  up   or utilisation  of energy for each of the purposes, whether  it be  generation,  or, transmission, or,  transformation,  or, manufacture of some particular commodity, can be said to  be a  use  which  must necessarily  fall  within  the  ordinary grammatical  or dictionary meaning of the word  consumption. S.-)  long  as energy is spent or used up, whatever  be  the process or purpose of such using up, it will be consumption. Speaking  for  myself, I find it impossible to  reject  the, argument of Mr. Gupte, that, immediately after the point  of generation,  begins the process of consumption  whether  the electricity, or, to use the term employed in the definition, "energy" is used up or lost in transmission 135 or  transformation  or manufacture.  The use  of  energy  or electricity  is  necessarily  a  process  of  using  up   or destroying it in the course of such use.  The mere fact that it  is called "transmission loss" or "transformation  loss", would,  in my opinion, make no difference whatsoever to  the result.   In  each  case, the result  is  consumption.   The

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process  is,  in each case, one  which  entails  consumption whatever be its object. It seems to me that the definition discussed above does  not certain  any  exemption for any use of electricity  for  any particular purpose except possibly where a licensee is  said to  be  transmitting it on behalf of the  State  Electricity Board.  Such a licensee can charge or collect, under Section 4(1)  and (3) of the Act, the tax on what  he  supplies.This necessarily  implies  a deduction, so far as those  to  whom energy is supplied are concerned, of the quantity of  energy lost  or used up in the process of supplying from the  total quantity consumed after it is generated.  It may be possible to  contend that such a licensee supplier comes  within  the class  excluded from the definition of "consumer"  given  in Section 2, cl. (1) of the Act, although perhaps the Explana- tion  to the provision would bring in even  an  intermediate licensee  consumer  within  the net  of  taxation  when  his consumption  or  use  of  energy  is  for  the  purposes  of transmission.   The  deduction of the quantity  consumed  in providing  the service of supplying, it could be argued,  is meant only to exclude the collection of tax upon it from the ultimate consumers.  However, as no case of such a  licensee is before us, it is quite unnecessary for us to consider his hypothetical  case.   I mention it only for the  purpose  of showing  that  the  character  in  which  the  activity   of consumption is carried on is only relevant for, the purposes of exclusion from the definition of "consumer" when we  have "a  licensee to whom energy is supplied by  the  Electricity Board  for  supply  to others".  In every  other  case,  the character of a supplier or generator is not relevant at  all in  deciding  whether he is also a consumer.  In  all  other cases,  the  only  question to be determined is  :  Does  he consume  energy  : The only character or capacity  which  is relevant for purposes or taxation, if character is  relevant at  all,  is  that  of  a  consumer.   In  my  opinion,  the consumption begins immediately after electricity can be said to  be  generated.   We understand that it  is  on  such  an interpretation of the Act that the meter is installed at the point of supply by the Company to itself of the  electricity generated by it.  It seems to me be quite immaterial whether the energy is consumed in transmission or transformation  or a  particular manufacturing process.  It  is,  nevertheless. energy  consumed. it is, so far as the definition  goes,  on par with electricity consumed for purposes of generation. In  order to meet what appears to me to have been  correctly put  forward  by  Mr.  Gupte  as  the  ordinary  meaning  of "consumer",  subject to the qualification in the  definition given in Sec. 2, cl. (1) of the Act, learned counsel for the Respondents  tried  to  rely upon the view  adopted  by  the Madras High Court that transmission and transformation  must be construed as substantial parts of the process of  genera- tion.  Even if we were to accept such an argument for  Which no 136 ground, justifiable from a technical point of view, has been put  forward before us, I think that, upon the view  adopted by  my  learned Brother Khanna with regard  to  taxation  of energy   consumed  on  generation,  what  is  consumed   for transmission and transformation of the energy would also  be taxable  because  that would then be energy used up  in  the process of generation.  But, as I have, said above, I do not find any acceptable basis for such a concept of the  process of generation which was used by the Karnataka High Court  in the judgment under appeal before us. Another  contention advanced by the learned Counsel for  the

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Respondents before us was that "effective" consumption  must be:   deemed  to  begin  only  after  a   transmission   and transformation  of energy so that it is put in a  consumable form.  This contention rests upon a division of  consumption into effective consumption and noneffective consumption.   I do  not find any warrant in the relevant provisions  of  the Act for such a distinction for two kinds of consumption.  To introduce it would imply introduction of words which are not there  in  the  statutory  provision.   Such  a  method   of construction  or  interpretation is not  permissible  except under  the compelling necessity to avoid an absurdity  which does not seem to be present here at all. Lastly,  learned  Counsel for the respondents had  tried  to argue.  that  the  Act imposed a tax upon a  person  in  his "character"  as  a consumer and not in his  character  as  a generator.   As already indicated above, such a  distinction is   based  on  the  supposedly  different   characters   of consumption  seems  to  me  to  be  quite  misleading.   The confusion  and difficulties to which such a distinction  can give  rise and the time it took to clear them up in  another field   of   taxation,  where  the  question   was   whether expenditure  in  a  particular character  is  a  permissible deduction, under Section 10(XV) of the Indian Income-tax Act may be gathered from what this Court said in Indian Aluminum Co. Ltd. v. the C.I.T. West Bengal Calcutta.(1) It may be that the electricity tax is imposed upon a  person only  ill the character or capacity of a consumer.  It  does not  follow  from this that the character or capacity  of  a consumer only begins when energy is used up for a particular purpose  in which a consumer is a consumer.  If he  consumes it  is evident that the character of a consumer attaches  to him even if he is a generator or producer of energy.  He has then  a dual character when he consumes and also  generates. What the Act does is simply to tax the using up of energy by a  person  whatever the capacity in which the use  may  have been made.  It is really a tax on using up and not on use in any particular character or manner.  This seems to me to  be the  clear  import of words to be  construed.   These  have, ordinarily to be given their full effect. Although  the arguments of the respondents  mentioned  above seem to have found complete acceptance in the High Court,  I find  myself,  with due respect, unable to accede  to  them. Logically speaking, I find no way of escaping the conclusion that a tax imposed on (1)  84 I.T.R. 735 137 consumption cannot be avoided even when the consumer uses up energy either in generating or producing it or  transmitting it   or  transforming  it  before  utilising  it  for   some manufacturing process.  It is consumption that is taxed.  1, therefore, regret my inability to accept the conclusions  of my  learned Brother Khanna on taxation of energy used up  in its  transmission  or transformation before its  use  for  a manufacturing purpose. In  my opinion, the appeal before us must be allowed  wholly with costs.                            ORDER In  view  of  the decision of the majority,  the  appeal  is allowed in part and the judgment of the High Court modified. The parties are left to bear their own costs throughout. V. M. K. 138