Case Law Details
Harekrishna Metallics Pvt. Ltd. Vs State of Karnataka (Karnataka High Court)
Section 4[3] of the Karnataka Electricity [Taxation on Consumption] [Amendment] Act, 2013 deals with the payment of tax. In terms of sub-section [3] of Section 4, the incidence of tax is on the consumption. The consumption of electricity relates to every person generating electricity by himself, and or who supplies electricity free of charge or otherwise to any other person through his own system.
The electricity tax is payable as per Section 3, the charging Section. Section 4[3] is the payment of tax to be made by different class of persons. In the case of Biocon1, the Division Bench of this Court while dealing with the levy of tax on consumption has categorically observed that such levy is permissible. The State has legislative competence to impose the consumption tax under Entry 53 of List II to the Seventh Schedule to the Constitution of India. The very question inasmuch as the levy of tax on consumption by the producers of electricity was considered, analyzed and decided in paragraph 22 of the judgment extracted supra. The consumers also the producers of electricity are not exonerated from the levy of tax since electricity cannot be stored. Production and consumption being simultaneous, the argument that tax levied is in fact on production only and not on consumption, was negated. In the said judgment, the Division Bench has considered the decision of M.P.Cement Manufacturers Association2. rendered by the Hon’ble Apex Court. Indeed in M.P. Cement Manufacturers Association2 case, the levy of tax was on the generation of electricity as could be seen from the language employed in Section 3[2] of the M.P.Upkar [Sanshodhan] Adhiniyam, 2003 and in order to bring it within the arena of consumption tax, subsequent explanation was added. The Hon’ble Apex Court considering the scope of explanation held that, explanation cannot override the main provision and accordingly, held that the State has no competence to levy tax on the generation which is the domain of the Parliament. Such being the legal position, the arguments of the learned Senior Counsel that the provisions challenged herein do not come within the State competence cannot be countenanced.
Thus, the challenge made to Sections 3[1] and [2] as well as Section 4[3] of the Act is no more res integra in view of the judgments of our Hon’ble High Court referred to above.
The Hon’ble Apex Court in the case of Govind Saran Ganga Saran V/s. Commissioner of Sales Tax and Others9, has held that the components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If these components are not clearly and definitely ascertainable it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity. Keeping this principles in mind, if the levy of electricity tax in terms of Sections 3[1] [2] and 4[3] of the Amendment Act, 2013 is examined, the taxable event attracting the levy is consumption, the person on whom the levy is imposed may be the generator also who is obliged to pay the tax. That itself would not be construed as the taxable event to find the levy fatal to its validity. These two are different aspects and cannot be integrated together in order to bring the incidence of tax on the generation, merely for the reason that the generator is paying the tax. Moreover, the heading of Section 4[3] denotes payment of tax i.e., the person who is liable to pay the tax, the same cannot invalidate the charging section since generator is made liable to pay the tax on its consumption. The law enunciated by this Court in the judgments referred to above squarely applies to Section 4[3] also. The notification impugned dated 24.11.2014 prescribes the rate of tax on captive consumption and auxiliary consumption of electricity generated by the captive generation plant/co-generation plant which is in conformity with the provisions of the Amendment Act, 2013.
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