The Jiyajeerao Cotton Mills Ltd. Vs.
State of Madhya Pradesh  INSC 311 (31 October 1961)
SINHA, BHUVNESHWAR P.(CJ) KAPUR, J.L.
CITATION: 1963 AIR 414 1962 SCR Supl. (1) 282
Electricity-Levy of duty-Producer, if liable
to pay duly on electricity consumed by himself- Such levy if ultra vires the
Constitution- Government of India Act, 1935 (26 Geo. 5 Ch. 2), List II Entry
48B-Constitution of India, List I Entry 84, List II, Entry 53-Central Provinces
and Berar Electricity Duty Act, 1949 (C. P. &. Berar 10 of 1959), as
amended by Madhya Pradesh Taxation laws Amendment Act, 1956 (311. P. 7 of
1956), 88. 2, 3
The appellant mill produced electricity over
100 volts exclusively for its own consumption. It challenged the levy of the
electricity duty by the Government of Madhya Pradesh (1) (1962) 2 S. C. R. 839.
283 under the C. P. and Berar Electricity Act as 1949, by the Madhya Pradesh
Act 7 of 1956, on the grounds, firstly that on proper construction of s. 3 of
the Act it was not liable to pay any duty at all as the Table of rates did not
prescribe any rate for electricity consumed by producers and, secondly, the
levy of duty on electricity consumed by producer himself being in substance an
excise duty could be levied only by the Parliament under Entry 84 List I. If it
was not an excise duty the levying of it was beyond the competence of the State
Legislature in the absence of any appropriate Entry in the List.
Held, that on a combined reading of the
definition of 'consumer' in s. 2(a) and 'producer' in s. 2(d-1) of the C. P.
& Berar Act, 10 of 1949, a producer, consuming the electrical energy
generated by him is also a consumer as he consumes electrical energy supplied
by himself, falls squarely within the Table under s. 3 of the Act prescribing
rates of duty payable by a consumer and is therefore liable to pay duty there
Held, further, that the present Act for levy
of duty upon consumption of electric energy was enacted under Entry 45B of the
List II of the Government of India Act, 1935, corresponding to Entry 53 of List
II of the Constitution where as the levy of duty of excise on manufacturer
production of goods by Parliament is under Entry 84 of List I. The taxable
event with respect to a duty of excise is 'manufacture' or 'production';
and not 'consumption'; the levy upon
consumption of electric energy cannot be regarded as duty of excise falling
within Entry 84 of List I.
Held, also, the language used in the
Legislative Entries in the Constitution must be interpreted in a broad way so
as to give the widest amplitude of power to the Legislature to legislate and
not in a narrow and pendantic sense.
CIVIL APPELLATE JURISDICTION: CIVIL Appeal
No. 582 of 1960.
Appeal from the judgment and order dated February 5, 1959, of the Madhya Pradesh High Court (Gwalior Bench) at Indore in Civil
Misc. Case No.
11 of 1959.
A. V. Viswanatha Sastri, Rameshwar
Nath," S. N. Andley and P. L. Vohra, for the appellant.
B. Sen, B. K. B.Naidu and I. N. Shroff, for
284 1961. October 31. The Judgment of the
Court was delivered by MUDHOLKAR, J.-This is an appeal on a certificate of
fitness granted by the High Court of Madhya Pradesh under Art. 133 (1) (a) of
The appellant is a textile mill at Gwalior in Madhya Pradesh. It generates electricity for the purpose of running its mills
and for other purpose connected therewith. It does not sell electrical energy
to any person.
Under the provisions of the Central Provinces
and Berar Electricity Duty Act, 1949 (No. 10 of 1949)as amended by the Madhya
Pradesh Taxation Laws Amendment Act, 1956 (Act No. 7 of 1956) the Government of
Madhya Pradesh levied upon the appellant electricity duty amounting to Rs. 2,78,417/-
for a certain period. The appellant paid it under compulsion and thereafter
preferred a writ petition to the High Court of Madhya Pradesh under Art. 226 of
the Constitution in which it challenged the validity of the levy on two
grounds. The first ground was that upon a proper construction of s. 3 of the C.
P. & Berar Electricity Duty Act, 1949 as amended by the Madhya Pradesh
Taxation Laws amendment Act, 1966 the appellant would not be liable to pay any
duty at all. The second ground was that if the Act permitted the levy of duty
on electricity consumed by the producer himself it was ultra vires the
Constitution because in substance it would be a duty of excise which can be
levied only by Parliament under Entry 84 of List I and that oven if it was not
excise duty it was beyond the competence of the Madhya Pradesh legislature to
levy it in the absence of any appropriate entry in List II. The petition was
summarily rejected by the High Court, but upon an application made by the
appellant it granted to it certificate of fitness, as already stated.
285 Mr. Viswanatha Sastri has reiterated
before us the same grounds which were urged in the High Court.
For the purpose of appreciating the first
ground it would be useful to reproduce the terms of B. 3 of the Act. The
section runs thus:
"Levy of duty on sale or consumption of
electrical energy-Subject to the exceptions specified in Section 3-A every
distributor of electrical energy and every producer shall pay every month to
the State Government at the prescribed time and in the prescribed manner a duty
calculated at the rates specified in the Table below on the units of electrical
energy sold or supplied to a consumer or consumed by himself or his employees
during the preceding month.
Table Rates of Duty (i) Electrical energy
supplied for consumption for lights, fans of any other appliances normally
connected to a lighting circuit.
6 nP. per unit of energy.
(ii) Electrical energy supplied for purposes
other than those specified in item (i) above.
1 nP. per unit of energy.
This is the charging section. It is not
disputed by Mr. Sastri that under this provision a producer of electrical
energy is made liable to pay duty for the units of electrical energy consumed
by himself. He, however, contends that rates of duty have been prescribed in
the Table below s. 3 only with respect to electrical energy "supplied for
consumption" to others and that no rates have been prescribed with 286
respect to electrical energy consumed by the producer himself. Section 2(a) of
the Act defines "consumer". The definition, so far as relevant, runs
" `Consumer' means any person who
consumes electrical energy sold or supplied by a distributor of electrical
energy or a producer.............." `Producer' as defined s. 2(d-1) of the
Act means "a person who generates electrical energy at a voltage exceeding
hundred volts for his own consumption or for supplying to others". If we
read the two definitions together, omitting the non-essentials, 'consumer'
would include "'any person who consumes electrical energy supplied by a
person who generates electrical energy for his own consumption". under s.
3 a person who generates electrical energy over hundred volts for his own
consumption is liable to pay duty on the units of electrical energy consumed by
himself. A producer consuming the electrical energy generated by him is also a
consumer, that is to say, he is a person who consumes electrical energy
supplied by himself. The Table prescribes rates of duty payable with respect to
electrical energy supplied for consumption and, therefore, the levy on the
appellant falls squarely within the Table under s. 3 of the Act and M/s.
Viswanatha Sastri's argument is devoid of substance.
It is difficult to see how the levy of duty
upon consumption of electrical energy can be regarded as duty of excise falling
within Entry 84 of List I. Under that Entry what is permitted to Parliament is
levy of duty of excise on manufacture or production of goods (other than those
excepted expressly by that entry). The taxable event with respect to a duty of
excise is "manufacture" or "production". Here the taxable
event is not production or generation of electrical energy but 287 its
consumption. If producer generates electrical energy and stores it up, he would
not be required to pay any duty under the Act. It is only when he sells, it or
consumes it that he would be rendered liable to pay any duty prescribed by the
Act. The Central Provinces and Berar Electricity Act was enacted under Entry
48B of List II of the Government of India act, 1935. The relevant portion of
that Entry read thus:
"Taxes on the consumption or sale of
electricity.......... " Entry 53 of List II of the Constitution is to the
same effect. The argument of Mr. Sastri is that the word "consumption"
should be accorded the meaning which it had under the various Act, including
the Indian Electricity Act, 1980. Under that Act and under the various
Provincial and Act, consumption of electricity mean, according to him,
consumption by persons other than producers and that both in the Government of
India Act any under the Constitution the word 'consumption' must be deemed to
have been used in the Fame sense. The Acts in question deal only with a certain
aspect of the topic "'electricity", and not with all of them.
Therefore, in those Acts the word
"consumption" they have a limited meaning, as pointed out by learned
counsel. But the word "consumption" has a wider meaning. It means
also "use up" "spend" etc.
The mere fact that a series of laws were
concerned only with a certain kind of use of electricity, that is consumption
of electricity by persons other than the producer cannot justify the conclusion
that the British Parliament in using the word "consumption" in Entry
48B and the Constituent Assembly in Entry 53 of List he wanted to limit the
meaning of "consumption" in the same way. The language used in the
legislative entries in the Constitution must be interpreted in a broad way so
as to give the widest amplitude of power to the legislature to legislate and
not in a narrow and pedantic sense. we 288 cannot, therefore, accept either of
the two grounds urged by or. Viswanatha Sastri challenging the vires of the
The appeal fails and is dismissed with costs.