NTPC had thermal power stations in the State of Andhra Pradesh(AP) and was generating and distributing electricity to the State of Goa and electricity Boards of Karnataka, Kerala and Tamilnadu. The State of AP sought to levy duty under the\u00a0 AP Electricity Duty Act, 1939. The charging section of the Act showed that NTPC was \u201clicensee\u2019 as per the definition thereof and duty was leviable on all sales of energy subject to some exclusions and certain conditions as regards rate charged\u00a0\u00a0 to consumers. The said levy was contested in AP High Court on the ground as to whether entry 53 under List II of Seventh Schedule to the Constitution of India authorizes the State of AP to levy such duty.<\/p>\n
Similarly, State of Madhya Pradesh(MP) also sought to levy duty under MP Electricity Duty Act, 1949 on NTPC. The charging section therein provided for \u00a0levy on electrical energy sold or supplied to consumers or consumed by oneself. Further, there was MP Upkar Adhinium, 1981 under which energy development cess was levied on the units of energy sold or supplied to consumers or consumed \u00a0by itself. In MP too, the NOTPC was supplying electricity to Electricity Boards in nearby States.<\/p>\n
Both the states argued\u00a0 that sale of electricity to Boards of other states is complete\u00a0 in the generating states i. e. AP and MP itself. The bulk power supply agreements with them showed that metering was done within the state. The delivery was complete at that point. The wheeling loss, wheeling charges, transmission loss and transmission charges while delivering the electricity to home state of buyers\u00a0\u00a0\u00a0 is on their account. NTPC loses control over the electricity supplied to the buyer once delivery is made. Payment made by beneficiaries is based on the delivery at the metering point. All these clauses show that the sale is complete within the<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
state and it is not an inter-State sale as averred by NTPC. The state has power to levy duty on such sales.<\/p>\n
The High Court of AP held that the State is incompetent to levy such duty. The State of AP filed an appeal before Supreme Court against this order. Similar issue had arisen in the State of MP and NTPC made an application under Article 139A\u00a0\u00a0 to move the matter from M P High Court to Supreme Court along with above matter. Both cases heard by the Supreme Court having similar facts.<\/p>\n
\u00a0<\/p>\n
The Court examined the amendments brought in by the Sixth Amendment to Constitution on 11-09-1956 in Articles 269, 286, Entry 54, insertion of entry 92A\u00a0\u00a0 in List I etc. The Central Sales Tax Act, 1956 was enacted to formulate principles\u00a0 for determining as to when a sale can be said to have taken place in the course\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of inter-State trade (section 3) and levy, collection and distribution of such taxes. The Court referred to Bengal Immunity Co. Ltd. v. State of Bihar. <\/em><\/strong>The Larger Bench ruled by majority that an\u00a0 inter-State sale\u00a0or\u00a0 purchase continues to\u00a0 be\u00a0 so irrespective of the State where the sale can be held to be located under the general law or by the fiction created by the Explanation below clause (1) of the Article 286. The situs of the sale is wholly immaterial so far as its inter-State character is concerned. It further ruled that until Parliament by law made in accordance with clause (2) below Article 286 provides otherwise, no State can impose or authorize the imposition of any tax on sale or purchase of goods taking place in the course of inter-State sale or commerce. In short, it was held that Explanation below clause (1) of Article 286 as it existed before Sixth Amendment\u00a0 to Constitution could not be applied for the purpose of interpreting Article 286(2).<\/p>\n The Court also noted that amendment in section 6 (charging section) of the CST\u00a0 Act w. e. f. 01-04-1973 which exempted specifically inter-State sale of electricity. The Statement of Objects and Reasons (SOR) thereof mentioned that exemption\u00a0\u00a0\u00a0 of inter-state sales of electricity was dependent upon rate of tax within the state. Therefore, Parliament specifically exempted it by amending section 6. This asserts the point that inter-State sales of electricity were liable to central sales tax prior\u00a0\u00a0\u00a0\u00a0 to this amendment.<\/p>\n The Court also noted that electricity was \u201cgoods\u201d in terms of its definition under Article 366(12) of the Constitution as held in CST v. MP Electricity Board, Jabalpur<\/em><\/strong>. It can be abstracted, transmitted, sold and has all attributes of \u201cgoods\u201d though it cannot be stored or preserved. Its special phenomenon is it is instantly sold and consumed after it is produced\/generated. It also referred to the ratio of\u00a0\u00a0 the judgment in Indian Alluminium Co. v. State of Kerala <\/em><\/strong>where it is observed that all the three steps namely, sale, supply and consumption of electricity take place simultaneously without any hiatus. This is a distinguishing property of electricity. In Burmah Shell Oil Storage & Distributing Co. v. Belgaum Borough Municipalities<\/em><\/strong>, it was held in the context of entry 52 that actof sale is merely<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n the means for putting the goods in the way of use of\u00a0 consumption. Entry 52 dealt with \u201cTaxes on the entry of goods for consumption, use or sale therein. The ultimate destination of goods is use or consumption.<\/p>\n The Court sought to allot the same meaning to word \u201csale\u201d in entry 53 of List II\u00a0\u00a0\u00a0\u00a0\u00a0 of 7th Schedule, which deals with \u201cTaxes\u00a0 on sale or consumption of electricity\u201d.\u00a0\u00a0\u00a0 It held that entry 53 should be read in the light of above decisions as \u201cTaxes on consumption or sale for consumption of electricity\u201d. By reading entry 53 this way, the conflict between entry 53 and 54 ceases to exist and two can be harmonized and read together. Electricity as goods is also covered by entry 54 which is subject\u00a0\u00a0 \u00a0to entry 92A of List I. Thus, sale of electricity for consumption within the state alone is taxable as per entry 53. The interstate sales of electricity would be governed by entry 92A and consequently by CST Act. The observations in C. P. Motor Spirits Act were important in this respect which stated that two entries in the list may overlap and sometimes may appear to be in direct conflict with each other. The Court should strive to search for reasonable and practical construction\u00a0 to seek reconciliation and try to give effect to all of them. Thus, two entries 53\u00a0\u00a0\u00a0 and 54 were interpreted as above to reconcile the overlapping or conflict between them.<\/p>\n The contention of the\u00a0 Revenue to the\u00a0 effect that there is\u00a0 no\u00a0 specific mention\u00a0 of entry 92A of List I\u00a0 in\u00a0 entry 53\u00a0 of\u00a0 List II\u00a0 and\u00a0 therefore, even interstate sales\u00a0 of electricity can be taxed thereunder, was negated by the Court since the bans imposed under Articles 269 and 286 would apply irrespective of the language used in the entries in the Seventh Schedule. The said entries are heads or fields\u00a0\u00a0\u00a0\u00a0 of legislative empowerment but the competence to legislate has to be traced from the Constitution. Refer, Calcutta Gas Co. v. State of WB. <\/em><\/strong>The prohibition on taxing of inter-State sales of electricity would squarely apply to entry 53 of List\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 II as well.<\/p>\n The inter State movement of the electricity is in pursuance of sale\u00a0 contracts with bulk buyers like Electricity Boards and hence, interstate sales. The Court also observed that situs of\u00a0 sale can be\u00a0 determined by\u00a0 competent legislation\u00a0 or by Judgement law but none of them or a contractual obligation can fix\u00a0 the\u00a0 situs as opposed to section 3 of the CST Act\u00a0 read with restrictions in\u00a0 Articles\u00a0 269 and 286. Under the MP Electricity Duty Act, 1949, \u201cConsumer\u201d is given an extended meaning to include a person who receives electricity without having regard to its consumption and a person who receives electricity in bulk and forwards it onwards for distribution without having regard to the fact whether it\u00a0\u00a0\u00a0 is transmitted outside state or consumed within state. Such definition will have\u00a0\u00a0\u00a0\u00a0 to be read down to mean only persons who receive electricity for consumption within the state. Otherwise, it will result in multiple taxation of electricity both\u00a0\u00a0\u00a0\u00a0 in the generating state and consuming state considering territorial nexus which is certainly not the legislative intention.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Thus, it is held that electricity is goods and interstate sale thereof is taxable under the CST Act.\u00a0 The\u00a0 State cannot levy\u00a0 electricityduty\u00a0 on\u00a0 interstate sales of electricity under Entry 53. (CA No. 3112 of 1990)\/(TC (C) 3 of 1998)<\/p>\n Editorial<\/em><\/strong>: Under GST law, rate of tax on Electricity is nil. But nevertheless, electricity is goods. Supply includes sale and supplyis subjected to tax under Article 246A. The same conflict can arise in case entry 53 and GST law since IGST Act covers interstate supplies. But it is now clear that no electricity duty\u00a0\u00a0\u00a0 can be levied on inter-State supplies which is the domain of IGST Act.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u201cMan\u2019s happiness really lies in contentment. He who is discontented, however much he possesses, becomes a slave to his desires.\u201d<\/em><\/p>\n – Mahatma Gandhi\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":" Andhra Pradesh General Sales Tax Act , 1957\n
\nS. 3: Levy of a duty in certain sales of electrical energy – Levy of duty under AP\/MP Electricity Duty Act-purported to be enacted under entry 53 in List II to the Seventh Schedule to Constitution- State not authorized to levy electricity duty on interState sales of electricity-Sixth Amendment to Constitution
\n– scope of entries 53 and 54 – Whether electricity is goods – whether interstate sales thereof taxable under CST Act, 1956 [S. 2, 6, Constitution of India Art, 132, 139A, 145, 245, 246,
\n269, 286, 287, 366, Central Sales Tax Act, 1956, S 3, Indian
\nElectricity Act, 1910, S. 39]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-12964","post","type-post","status-publish","format-standard","hentry","category-gst-law"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3n6","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/12964","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=12964"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/12964\/revisions"}],"predecessor-version":[{"id":12965,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/12964\/revisions\/12965"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=12964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=12964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=12964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}