Sona Synthetics Vs State of Karnataka (Karnataka High Court)
Karnataka High Court held that levy of tax on electricity charges which includes the ‘minimum tariff’ are unconstitutional as the State has no legislative competence to levy tax on ‘minimum tariff’ for the electricity which is not consumed. Accordingly, section 3(1) of Karnataka Electricity (Taxation on Consumption) Act, 1959 declared unconstitutional.
Facts- The questions that arose in these two writ petitions are whether the supply of electricity to ensure minimum demand, without actual consumption of electricity, amounts to consumption or sale and enables the State to levy tax on the tariff for the supply of electricity and whether Section 3(1) of the Karnataka Electricity (Taxation on Consumption) Act, 1959 (For short ‘Act, 1959’) as amended by Amending Act 7 of 2003 and Amending Act 5 of 2004 imposing tax on electricity charges ultravires?
Conclusion- Held that section 3(1) of the Karnataka Electricity (Taxation on Consumption) Act, 1959, as amended by Act No.7 of 2003 and Act No.5 of 2004, imposing tax on electricity charges, declared as unconstitutional. Further, also held that supply of electricity to the consumer to ensure availability of electricity for consumption, does not amount to consumption or sale, unless the electricity consumed by the consumer, and the State has no legislative competence under Entry No.53, List II of Seventh Schedule to the Constitution of India to levy tax on minimum tariff. The State is competent to levy tax under Entry No.53, List II of Seventh Schedule only on actual consumption or sale of electricity.
