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PETITIONER: SWAROOP VEGETABLE PRODUCTS INDUSTRIES ETC,

       Vs.

RESPONDENT: STATE OF U. P. AND OTHERS ETC.

DATE OF JUDGMENT19/08/1983

BENCH: THAKKAR, M.P. (J) BENCH: THAKKAR, M.P. (J) FAZALALI, SYED MURTAZA VARADARAJAN, A. (J)

CITATION:  1984 AIR   20            1983 SCR  (3) 666  1983 SCC  (4)  24        1983 SCALE  (2)167

ACT:      U.P. Electricity  (Duty) Act,  1952-Sec. 3(1)  (a), (b) and (c)  and sec.  4(1) (a), (b) and (c)-Levy and payment of electricity   duty-Interpretation   of.   Person   consuming electrical energy  from own  source and also purchasing from another source is liable to pay duty on energy consumed from own source.      U. P.  Electricity (Duty)  Act, 1952-Notification dated 17.3.1973 under  see. 3(4)-Exemption from payment of duty to persons consuming  electrical  energy  from  own  source  of generation installed after 2.1.1973-Validity of.

HEADNOTE:      The appellants  who had  their own source of generation of  electrical  energy  (generating  machinery  having  been installed and  commissioned before  2.1.1973) and  were also purchasing electrical  energy from another source challenged the correctness  of the decision of a Full Bench of the High Court reversing the decision of a Division Bench and holding that a  user of  electricity was  liable to  pay electricity duty on  consumption of energy from his own source of supply regardless of  whether or  not he also purchased electricity from some  other source  indicated in sec. 3(1) (a) and (b). The appellant  contended that  in view  of the  user of  the expression ’another  person’ in  sec. 3(1) (c) and sec. 4(1) (c) only  those consumers  who wholly fell outside the orbit of sec.  3(1) (a)  and (b) were exigible to electricity duty under sec.  -3(1) (c).  The appellant  submitted that  under Notification dated  March 17, 1973 exemption must be granted to all  persons  having  their  own  source  of  electricity regardless of  the date  on which  the source  generation is installed to  save it  from challenge  under Art.  14 of the Constitution of  India. In  Civil Appeal  1312 the  State of U.P. challenged  the correctness  of  the  decision  of  the Division Bench.      Allowing the  Appeal  No.  1312  and  dismissing  other appeals, ^      HELD: The  duty was  chargeable in  respect  of  energy consumed by  a person  from his  own  source  of  generation regardless of  the fact that he ’also’ purchased electricity

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from other  source indicated  in sec. 3(1) (a) and sec. 4(1) (a). [671 G]      On a  plain reading of sec. 3(1) (c) it is evident that duty has been levied on the energy consumed by a person from his own source of generation without anything more. The fact that  the  user  of  electricity  from  his  own  source  of generation purchases  electricity from  some other source as well, is  an altogether  irrelevant factor  from  the  stand point of  liability imposed  by the  said provisions.  Be it realized that  duty is  levied on  the consumption of energy The 667 taxing event  being the  consumption of  energy, the  source from  which   the  electricity   is  acquired  would  become altogether irrelevant. Sec. 3(1) as also Sec. 4(1) has to be read as  a whole  and has  to be interpreted in a harmonious and meaningful  manner. A  person having  his own  source of energy  who   also  purchases  energy  from  another  source indicated in  sec. 3(1  j (a) will be covered by 3(1) (a) to the extent  he purchases electricity from such a source, and will be  equally covered  by sec.  3(1) (c), in so far as he consumes energy  from his  own source of generation. He will be covered  by both the provisions read conjointly. The same reasoning applies  in the context of clauses (a) (b) and (c) of sec.  4(1). There  is no rational basis for exonerating a person from  payment of  duty merely  because he has his own source of  generation and he also purchases electricity from some other  source. In  fact it  will be irrational to do so and it  would give  rise to an anachronism. Why make him pay ’only’ if  he generates  his own  energy and  why exempt him altogether merely  because he  ’also ’  purchases from  some other source ? [670 D-H]      As acute  shortage of power was being experienced there was a  need to  encourage the consumers to acquire their own source of  energy with a view to reduce or lessen the burden on the existing sources of electricity generation. Obviously this purpose  can be achieved only by granting the exemption prospectively to  those  consumers  who  install  their  own source of  generation of  energy pursuant  to the concession being granted  under the  provision for exemption. Those who already had their own source of generation of energy need no such encouragement  in respect  of the source of generation, already installed.  If they  wanted to further augment their own source  or generation  of  energy  they  would  also  be entitled to  exemption in respect or the ’additional’ source of generation  installed ’after’  the date  specified in the notification. The  classification is,  therefore,  rational, purposeful, as  also meaningful,  and it  is  calculated  to effectively serve  the real  purpose of  granting exemption. Article 14  cannot be  invoked in  a situation  like this to successfully assail  that part  of the  notification whereby the date  of installation has been made the precondition for qualifying the exemption. [672 G-673 B]      State of  Uttar Pradesh  v. Jageshwar,  [1983] SCC  305 referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeals Nos. *1312 of 1976,  519, 1146,  537 and  2639 of 1979. 773 and 2032 of 1980.      Appeals by  *Certificate and  Special  leave  Petitions from the  Judgment and  order dated  the  8.10.74,  9.11.78, 22.12.78, and 5th March. 1980 of the Allahabad High Court in

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Civil Writ  Petitions Nos.  3039/74, 89/76,  760/75, 759/75, 442/76, 2630/77 and 547/75.      P. R.  Mridul, G.  L Sanghi, Dr. Praveen Kumar, Praveen Kumar, and H. K Puri for the appearing Appellants.      S. C.  Manchanda,  Sobha  Dikshit,  Pradeep  Misra  and Sudhir Kulshreshta for the appearing Respondents 668      The Judgment of the Court was delivered by      THAKKAR, J.  The main  controversy  in  this  group  of appeals centres around the question whether Electricity Duty on the  consumption of electrical energy in Uttar Pradesh is payable by a person who has his own source of generation and also purchases  electrical energy  from a  licensee, or  the Board, or  the State  Government, or the Central Government. The contention  has been  raised in  the context  of Section 3(1) and 4(1) of the U. P. Electricity (Duty) Act, 1852. The view is  canvassed on  behalf of the consumers of electrical energy that  while under  Section 3(1) (c) read with Section 4(1) (c) of the Act Electricity Duty is indubitably leviable and payable  on electrical  energy consumed by a person from his own  source of  generation, such  duty is not payable by him in  case he  consumes energy  from  his  own  source  of generation and  also purchases  energy from  a licensee, the Board, the State Government or the Central Government.      This question initially came up before a Division Bench of the Allahabad High Court in Sherwani Sugar Syndicate Pvt. Ltd. v.  State of  U.P. (C.  M. W. P. No. 3039 of 1974). The Division Bench  by its judgment dated October 8, 1974 upheld the contention that in as much as the petitioner company had its  own  source  of  generation  of  energy  and  was  also purchasing energy from another source indicated in Section 3 (1) (a) and 3 (1) (b), the petitioner company was not liable for payment  of duty  on the  energy generated  from its own source of supply. The State of Uttar Pradesh has called into question the  legality and  validity of this decision by way of an  appeal by  certificate of fitness granted by the High Court (C.  A. No. 1312 of 1977). Meanwhile M/s. Deoria Sugar Mills Ltd.  also approached  the High  Court of Allahabad by way of  C.M.W.P. No.  9990 of 1975 on an identical plea. The matter came up before another Division of the Allahabad High Court. This  Division Bench  was of  the  opinion  that  the decision  in   Sherwani  Syndicate   case  (supra)  required reconsideration. The matter was therefore referred to a Full Bench. The Full Bench was of the opinion that the view taken earlier in Sherwani’s Case was not correct and dismissed the Writ Petition  filed by  M/s Deoria  Sugar Mills, taking the view  that   a  user   of  electricity  was  liable  to  pay electricity duty  on the  consumption of energy from his own source of  supply regardless  of  whether  or  not  he  also purchased electricity  from some  other source  indicated in Section 3  (1) (a)  and (b). In view of this decision of the Full Bench,  petitions instituted  by  six  other  companies raising the  identical question  were dismissed  by the High Court of Allahabad. These companies 669 have approached this Court by way of six separate appeals by special leave granted by this Court.      Sections 3 (1) and Section 4(1) of the Act in so far as material read thus;-           "3. Levy  of Electricity  Duty-(I) Subject  to tho      provisions  herein  after  contained,  there  shall  be      levied for  and paid  to the  State Government  on  the      energy:           (a)   Sold to a consumer by a licensee, the Board,                the   State   Government   or   the   Central

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              Government, or           (b)   Consumed by  a licensee  or the  Board in or                upon  premises   used   for   commercial   or                residential purposes, or in or upon any other                premises   except    in   the   construction,                maintenance or operation of his or its works;                or           (c)   Consumed by  any other  person from  his own                source of  generation; a  duty  (hereinafter)                referred to as ’electricity Duty’)           x           x            x           x           x           x           x            x           x           x           4.   Payment  of  electricity  duty  and  interest                thereupon:-           (1)   The electricity  duty shall be paid, in such                manner and  within  such  period  as  may  be                prescribed, to the State Government.                (a)  Where the energy is supplied or consumed                     by a licensee, by the licensee:                (b)  Where the  energy  is  supplied  by  the                     State   Government    or   the   Central                     Government or is supplied or consumed by                     the Board,  by the  appointed authority;                     and                (c)  Where the  energy  is  consumed  by  any                     other person  from  his  own  source  of                     generation by the person generating such                     energy." 670      The original writ Petitioners who canvass the view that electricity duty  is not  leviable or  payable by  a  person consuming energy  from his  own source  of generation  under section 3 (1) (c) read with Section 4 (l) (c) of the Act lay great stress  on the expression ’another person’ occuring in Section 3  (l) (c)  and Section  4 (1) (c) of the Act. It is contended that  in view  of the user of this expression only those  consumers  who  wholly  fall  outside  the  orbit  of Sections 3  (1) (a) or 3 (l) (b) are eligible to electricity duty under section 3(1) (c). In case a consumer fails ’both’ under Sections 3 (1) (a) and 3 (1) (c) or sections 3 (1) (b) and 3  (1) (c)  (it is  so argued such a person would not be exigible to  electricity duty.  The same  argument is  urged protanto in  the context  of clauses  (a), (b)  and  (c)  of Section 4(1).  In our  opinion this submission is altogether untenable and has been rightly repelled by the Pull Bench of the Allahabad High Court in its well considered judgment. On a plain reading of Section 3 (1) (c) it is evident that duty has been  levied on the energy consumed by a person from his own source  of generation without anything more. There is no rider or  qualification engrafted  in Section  3 (1)  (c) or Section 4  (1) (c?.  The fact  that the  user of electricity from his own source of generation purchases electricity from some other  source as  well,  is  an  altogether  irrelevant factor from  the stand point of the liability imposed by the said provisions.  Be it  realized that duty is levied on the consumption of  energy. The  taxing event is the consumption of energy  The source from which the electricity is acquired is altogether  irrelevant. .  A person having his own source of energy  who also  purchases energy  from  another  source indicated in  Section 3 (1) (a) will be covered by 3 (1) (a) to the  extent he  purchases electricity from such a source, and will be equally covered by Section 3 (1) (c), insofar as he consumes  energy from  his own  source of  generation. He will be  covered by both the provisions read conjointly. The same reasoning applies in the context of clauses (a) (b) and

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(c) of  Section 4  (1).  There  is  no  rational  basis  for exonerating a  person from payment of duty merely because he has his  own source  of generation  and  he  also  purchases electricity from  some other  source. In  fact  it  will  be irrational  to   do  so   and  it  would  give  rise  to  an anachronism. Why  make him pay ’only if he generates his own energy and  why exempt  him  altogether  merely  because  he ’also’ purchases  from some other source ? Duty is levied as a measure  of taxation  in order to raise additional revenue as is  made abundantly  clear by the prefactory note and the extract from  the statement of objects and reasons published in U. P. Gazette Extraordinary dated September 1, 1952 which reads as under: 671           "The minimum  programme of  development which this      State must  carry out  within the  next three  or  four      years for  the attainment of the objective of a welfare      State is  set out in the Five Year Plan drawn up by the      Planning  Commission.   This  plan   provides  for   an      expenditure  of   13.58  crores   of  rupees  on  power      development projects. Such a huge expenditure cannot be      met  from   our  present   resources.  It  is,  however      essential for  the  welfare  of  the  people  that  the      expenditure should  be incurred  and that noting should      be allowed  to stand  in the way of the progress of the      plan. Additional  resources have therefore to be found,      the bulk  of which can be raised only by means of fresh      taxation.           A tax on the consumption of electrical energy will      impose a  negligible burden  on the  consumer and  is a      fruitful source  of additional  revenue. The  bill  has      been so prepared as to ensure that the tax payable by a      person will  be related  to the quantity of electricity      consumed by  him. The bill is being introduced with the      above object.  Vide Statement  of Objects  and  Reasons      published in  U. P.  Gazette. Extra.  dt. September  1,      1952."      How would this object be promoted or served by adopting such an  irrational course  ? The  taxing  event  being  the consumption of energy, the source from which the electricity is acquired  would become  altogether irrelevant.  Section 3 (1) as  also Section 4 (1) has to be read as a whole and has to be  interpreted in a harmonious and meaningful manner. To do otherwise would be to defeat the legislative intent which is abundantly  clear, whilst  at the  same time exposing the provision to  the charge  of being irrational and arbitrary, by placing  such an  unwarranted construction  thereon.  The Full Bench  of the  Allahabad High  Court,  was,  therefore, perfectly  justified  in  taking  the  view  that  duty  was chargeable in  respect of  energy consumed  by a person from his own  source of generation regardless of the fact that he ’also’  purchased   electricity  from   some  other   source indicated in  Section 3  (1) (a)  and Section 4 (1) (a). The appeal preferred by the State, being Appeal No. 1312/77 will therefore have  to be  allowed and  the appeals preferred by the consumers  of electricity challenging the correctness of the decision  rendered by  the Full  Bench must therefore be dismissed. 672      The next  question agitated  in five  out of  the seven appeals comprised  in the  group (it  does not arise in C.A. 1312/77 and  C.A. 1146/79)  arises thus:-  The State of U.P. issued a  notification  dated  March  17,  1973  whereby  in exercise of powers under sub-section (4) of Section 3 of the Act a  person  consuming  energy  from  his  own  source  of

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generation installed  ’after’ January  2, 1973  was exempted from payment  of electricity  duty. The  appellants  in  the appeals before  us are  persons who have their own source of generation of  electricity.  The  generating  machinery  was however installed  and commissioned by them ’before’ January 2, 1973.  It is  their contention  that exemption  could not have been  lawfully granted  to a  person installing his own source  of   generation  ’after’   January  2,  1973  unless exemption  was   also  granted   to  the  persons  consuming electricity from  their own  source of  generation installed ’prior’ to  January 2,  1973. In other words the argument is that exemption  must be  granted to all persons having their own source  of electricity  regardless of  the date on which the source  of generation  is installed, in order to be able to successfully  face the  challenge from  the  platform  of Article 14  of the  Constitution of India. Exemption, (it is argued in  effect), must  be  granted  to  all  or  to  none irrespective of  the date  of installation  of the equipment for generation of electricity to save the provision from the peril of  being held  as unconstitutional  by reason  of its being discriminatory  and violative  of Article  14  of  the Constitution. This  argument has  been rightly  negatived by the  High   Court  for   the  very   good  reason  that  the Notification  ex-facie   made  it   abundantly  clear   that exemption was  being granted  "having regard  to the need to promote  industrial   production  generally   and   to   the prevailing acute power shortage in the State." It is evident that in  view of the felt-need for augmenting the sources of supply of  electrical  energy  an  incentive  needed  to  be provided by way of granting exemption to those who installed their own  source of generation of energy. As acute shortage of power was being experienced there was a need to encourage the consumers  to acquire  their own source of energy with a view to  reduce or lessen the burden on the existing sources of electricity  generation. Obviously  this purpose  can  be achieved only  by granting  the exemption  prospectively  to those consumers  who install  their own source of generation of energy pursuant to the concession being granted under the provision for  exemption. Those  who already  had their  own source of generation of energy need no such encouragement in respect of  the source  of generation  already installed. If they  wanted   to  further   augment  their  own  source  of generation of energy they would also be entitled to 673 exemption  in   respect  of   the  ’additional’   source  of generation installed  ’after’  the  date  specified  in  the notification. The  classification is,  therefore,  rational, purposeful, as  also meaningful,  and it  is  calculated  to effectively serve  the real  purpose of  granting exemption. Article 14  cannot be  invoked in  a situation  like this to successfully assail  that part  of the notification where by the date  of installation has been made the precondition for qualifying for exemption.      State  of   Uttar  Pradesh  v.  Jageshwar(1)  on  which reliance is placed cannot buttress the view canvassed by the writ petitioners  having regard  to the  fact that exemption was  granted   with  a  view  to  encouraging  consumers  of electricity to  become self-sufficient  hence-forth and with the end  in view to lessen the burden on the other source of generation prospectively.  As against  this  those  who  had already acquired their own source for generating electricity were in  need of  no retroactive  encouragement  by  way  of concession or  exemption for  doing what  they  had  already done. There  would have been no augmentation of the existing resources by  extending the  exemption to  them.  Under  the

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circumstances we  are of the opinion that the High Court was fully justified  in repelling  the plea  urged by  the  writ petitioners in this behalf.      In the  result the  appeal preferred  by the  State  of Uttar Pradesh  (C.A. 1312 of 1977) is allowed, the judgement and order  of the  High Court  are set  aside, and  the writ petition giving  rise to  the said  appeal is dismissed with costs throughout.      The rest of the appeals are dismissed with costs.      All interim orders will stand vacated. H.S.K                       Civil Appeal No. 1312/72 allowed                             and all other Appeals dismissed. 674