Ntpc Ltd vs South Delhi Municipal Corporation And Ors.
- Court
- Delhi High Court
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 06.10.2026
Judgment pronounced on: 27.10.2026
Judgment uploaded on: 27.10.2026
# CNR No. DLHC010101462022
+ W.P.(C) 4144/2022
NTPC LTD .....Petitioner
Through: Mr. Gopal Jain, Sr. Adv. with
Ms. Sakie Jakharia, Ms. Aseem
Aggarwal and Ms. Kriti
Sharma, Advs.
versus
SOUTH DELHI MUNICIPAL CORPORATION AND ORS.
.....Respondents
Through: Mr. Sanjay Poddar, Sr. Adv.
with Dr. Divya Swamy, SC for
MCD with Mr. Govind Kumar,
Mr. Yagyawalkya Singh, Mr.
R. R. Panda, Mr. Apurv Kumar,
Ms. Anshika Singh, Mr.
Sameer Pandey, Mr. Ankit
Kakkar, and Ms. Akriti Singh,
Advs. for SDMC/MCD for R-
1/SDMC.
Mr. Tushar Sannu, ASC for
NDMC.
Mr. Anupam Varma, Mr.
Aditya Gupta and Mr. Yash
Srivastava, Advs. for R-3 and
R-4.
Mr. Nitin Kala, Mr. Kunal
Singh, Mr. Tanmay Jain and
Ms. Kanishka Rawat, Advs. for
R-5.
CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE BHARAT PARASHAR
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J U D G M E N T
ANIL KSHETARPAL, J.:
1. The principal issue that has been raised by way of the present
Petition, is to declare the Bye-Law 3(3) of the Delhi Municipal
Corporation (Assessment and Collection of Tax on the Consumption,
1
Sale or Supply of Electricity) Bye Laws, 1962 ultra vires the Delhi
2
Municipal Corporation Act, 1957 , which enables the Respondent
No.1 to impose a municipal electricity tax upon the Petitioner for
consumption of self-generated electricity for the period 01.06.2006 to
15.10.2018 amounting to Rs. 197,15,84,639/- (Rupees One Hundred
Ninety-Seven Crores Fifteen Lakhs Eighty-Four Thousand Six
Hundred Thirty-Nine-only)
2. As a consequence to the aforestated, the Petitioner also seeks
issuance of writ in the nature of certiorari , seeking quashing of
impugned Demand cum Show Cause Notice dated 06.12.2021 and
communications dated 08.11.2021, 03.01.2022 and 24.01.2022 issued
to the Petitioner by the Respondent No.1, seeking payment of the
electricity tax demand raised thereof.
A. BRIEF BACKGROUND :
3. In order to appreciate the controversy in the present case, the
facts in brief are required to be noticed.
4. In the year 1973, the Badarpur Thermal Power Station (BTPS)
was established and constructed under the ownership of Central
1
hereinafter referred to as Bye-Laws
2
hereinafter referred to as the Act
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Electric Authority with an object of supplying electricity to various
states including Delhi. However, in the year 1978, its management
came to be transferred to the Petitioner, and since then Delhi became
the sole beneficiary of the electricity generated by the said plant.
5. Subsequently, vide notification dated 31.05.2006, the ownership
of the BTPS also came to be transferred to the Petitioner. In the
ordinary course of its operations, the plant continued to generate and
supply electricity to the licensees until its closure on 15.10.2018,
when it came to be shut down permanently.
6. Thereafter, the Respondent No.1, vide a communication dated
08.11.2021, raised a demand of Rs. 197,15,84,639/- towards alleged
electricity tax on the auxiliary consumption of electricity at BTPS for
the period from 01.06.2006 to 15.10.2018. Following which, the
impugned SCN dated 06.12.2021 along with subsequent
communications dated 03.01.2022 and 24.01.2022, came to be issued
by the Respondent No.1 seeking payment of the assessed electricity
tax by the Petitioner. Aggrieved thereby, the Petitioner has
approached this Court seeking our indulgence.
7. Before proceeding towards the examination of contentions
raised by the parties, we deem it appropriate to reproduce the relevant
provisions of the Bye-Law along with the Act, which forms the basis
of contentions raised thereby. The relevant provisions are as under-
The Act
113. Taxes to be imposed by the Corporation under this Act.— (1)
The Corporation shall, for the purposes of this Act, levy the following
taxes, namely: —
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(a) property taxes;
(b) a tax on vehicles and animals;
(c) a theatre-tax;
(d) a tax on advertisements other than advertisements published in the
newspapers;
(e) a duty on the transfer of property; and
(f) a tax on buildings payable along with the application for sanction
of the building plan.
(2) In addition to the taxes specified in sub-section (1), the
Corporation may, for the purposes of this Act, levy any of the
following taxes, namely: —
(a) an education cess;
(b) a local rate on land revenues;
(c) a tax on professions, trades, callings and employments;
(d) a tax on the consumption, 2[sale or supply] of electricity;
109. Adoption of budget estimates.— 1[(1) The Corporation shall, on
or before the 31st day of March of every year, adopt for the ensuing
year the budget estimate which shall be an estimate of the income and
expenditure of the Corporation to be received and incurred on
account of the municipal government of Delhi.]
(2) On or before the 15th day of February of each year the
Corporation shall determine the rates at which various municipal
taxes, rates and cesses shall be levied in the next following year and
save as otherwise provided in this Act the rates so fixed shall not be
subsequently altered for the year for which they have been fixed.
(3) Budget estimates shall be prepared in such form as may be
approved by the Standing Committee and presented and adopted in
such manner and shall provide for all such matters as are prescribed
by regulations made in this behalf.
150. Imposition of other taxes.— (1) The Corporation may, at a
meeting, pass a resolution for the levy of any of the taxes specified in
sub-section (2) of section 113, defining the maximum rate of the tax to
be levied, the class or classes of persons or the description or
descriptions of articles and properties to be taxed, the system of
assessment to be adopted and the exemptions, if any, to be granted.
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(2) Any resolution passed under sub-section (1) shall be submitted to
the 1 Government for its sanction, and if sanctioned by that *
Government, shall come into force on and from such date as may be
specified in the order of sanction.
(3) After a resolution has come into force under sub-section (2), the
Corporation may, subject to the maximum rate, pass a second
resolution determining the actual rates at which the tax shall be
leviable; and the tax shall come into force on the first day of the
quarter of the year next following the date on which second resolution
is passed.
(4) After a tax has been levied in accordance with the foregoing
provisions of this section, the provisions of sub-section (2) of section
109, shall apply in relation to such tax as they apply in relation to any
tax imposed under sub-section (1) of section 113.
152. Time and manner of payment of taxes.— (1) Save as otherwise
provided in this Act, any tax levied under this Act shall be payable on
such dates, in such number of instalments and in such manner as may
be determined by bye-laws made in this behalf.
169. Appeal against assessment, etc.— (1) An appeal against the levy
or assessment of any tax under this Act shall lie to the court of the
District Judge of Delhi.
(2) If, before or on the hearing of an appeal under this section, any
question of law or usage having the force of law or construction of a
document arises, the court of the District Judge on its own motion
may, or on the application of any party to the appeal, shall, draw up a
statement of the facts of the case, and the question so arising, and
refer the statement with its opinion on the question for the decision of
the High Court.
(3) On a reference being made under sub-section (2), the subsequent
proceedings in the case shall be, as nearly as may be in conformity
with the rules relating to references to the High Court contained in
Order XLVI of the First Schedule to the Code of Civil Procedure,
1908 (5 of 1908).
(4) In every appeal, the costs shall be in the discretion of the court.
(5) Costs awarded under this section to the Corporation shall be
recoverable by the Corporation as an arrear of tax due from the
appellant.
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(6) If the Corporation fails to pay any costs awarded to an appellant
within ten days after the date of the order for payment thereof, the
court may order the Commissioner to pay the amount to the appellant.
The Bye-Law
3. Collection of Electricity Tax.- (1) Where within the limits of the
Corporation :
(a) electricity is supplied by the Delhi Electric Supply Undertaking, a
tax on the consumption, sale or supply of the electricity (hereinafter in
these bye-laws referred to as the electricity tax) payable under the
provisions of the Act, shall be collected by the General Manager
(Electricity); and
(b) electricity is supplied by any licensee other than the Delhi Electric
Supply Undertaking, the electricity tax shall be collected by that
licensee on behalf of the Corporation.
(2) The licensee who collects any tax under sub-clause (b) of Clause
(1) shall pay the tax so collected to the General Manager (Electricity)
within such time and in such manner as prescribed in these by-laws.
The tax so paid shall be a first charge on the amount recoverable by
the licensee for the electricity supplied by him an shall be a debt due
by him to the Corporation.
Provided that the license shall not be liable to pay the tax in respect
of any electricity supplied by him for which he has been proved to be
unable to recover his own charges.
(3) In the case of electricity generated by any person for his own
consumption, the person who generates such electricity shall pay the
electricity tax to the General Manager (Electricity) within such time
and in such manner as are prescribed in the bye-laws.
2. Definition. - In these bye-laws, unless the context otherwise
requires:
(2) "Consumer" means any person who is supplied with electricity by
a licensee, or whose premises are, for the time being, connected for
the purposes of receiving electricity, with the works of a licensee and
includes a consumer of electricity generated by himself within the
limits of the Corporation;
7. Time and manner.of collection and payment. –
(2)A person generating electricity shall pay to the General Manager
(Electricity the tax due on electricity generated by him in the
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proceeding calendar month by the 15" of the subsequent month.
(3) The General Manager (Electricity) shall pay to the Commissioner:
(a) the tax collected by him under sub-clause (a) of Clause 3 of Bye-
law 3 within 70 days after the expiry of the month for which it is
levied.
(b) the amount received by him under Clauses (1) and (2) within 30
days of the receipt thereof.
15. Any person liable to pay tax under clause (3) of Bye-law 3 shall
keep separate accounts of the electricity consumed by him in the form
or forms prescribed under Bye-law 13, and shall submit to the
th
General Manager (Electricity) by the 15 of the month following that
to which the return relates, a monthly return in such form as may be
prescribed by the Commissioner by notification in the Official
Gazette. ”
B. CONTENTIONS OF THE PARTIES:
Submission on behalf of the Petitioner :
8. Learned senior counsel representing the Petitioner has raised
the following submissions:
8.1 The primary contention of the Petitioner is that the
consumption of electricity is to be understood as an incidence of
generation itself. To derive support to the aforestated, reference has
been made to Section 113(2)(d) of the Act to argue that the said
provision merely provides imposition of tax on consumption, as
such the Bye-Law 3(3) which enlarges the scope of usage of word
consumption to include imposition of tax on consumption of self-
generated electricity is ultra vires the parent statute. In support to
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the aforestated, reliance has been placed on St. Johns Teachers
Training Institute v. Regional Director, National Council for
3 4
Teacher Education & Anr. , NDMC & Ors. v . Association of
Concerned Citizens of New Delhi & Ors. and Kerala State
5
Electricity Board & Ors. v. Thomas Joseph & Ors. , to argue that a
rule cannot be made to supplant any provision of the parent statute.
8.2 Nothwithstanding, the aforestated it has also been argued
that any auxiliary consumption of electricity by the generating
company during the course of such generation, amounts to taxation
upon generation itself, making such generation an incidence of
tax/taxable event. Additionally, it has also been argued that the
electricity consumed by the Petitioner was used in generating
electricity for supply to distribution licensees and, ultimately, end
consumers, and not for its own end use. Such incidental
consumption cannot be equated with „own consumption‟ under
Bye-Law 3(3), nor can the impugned levy be sustained under
Section 113(2)(d) of the Act.
8.3 It is contended that the tariff determined during the
relevant period already factored in the expenses of generation,
excluding the tax now sought to be imposed. The subsequent
demand for the period from 2006 to 2018 is, therefore, arbitrary and
violative of Article 14 of the Constitution of India.
8.4 Such imposition of tax has further been challenged for
3
(2003) 3 SCC 321
4
(2019) 15 SCC 303
5
(2023) 11 SCC 700
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non-compliance with Sections 150 and 152 of the Act, particularly
in the absence of any assertion of compliance with Sections 150(1)
and 150(2) thereof. Further, the Bye-Laws in toto has also been
assailed for non-compliance with Section 481A of the Act, as there
is no material demonstrating that they were laid before and
approved by Parliament in the prescribed manner.
8.5 It is contended that the demand raised in November 2021
for the period from 01.06.2006 to 15.10.2018 is barred by delay and
laches, having never been assessed or demanded during the relevant
period. Reliance is placed upon Government of India v. Citadel
6
Fine Pharmaceuticals, Madras & Ors. , and Union of India v.
7
CITI Bank , in support of the proposition that statutory powers
must be exercised within a reasonable period.
8.6 Without prejudice, it is also contended that no interest is
recoverable on the alleged arrears, since the tax was never levied or
demanded during the relevant period. It is further submitted that the
levy under Section 113(2) of the Act is optional, and Respondent
No.1 cannot retrospectively impose an interest burden upon the
Petitioner.
8.7 It is contended that the responsibility for collection and
remittance of electricity tax rested with the electricity licensee, i.e.,
Delhi Electricity Supply Undertaking, under Bye-Law 7(3).
Following the unbundling of the Delhi Vidyut Board in 2002, the
distribution licensees assumed the function of collecting electricity
6
(1989) 3 SCC 483
7
2022 SCC OnLine SC 1073
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tax, stated to be at the rate of 5%, for remittance to the respective
Municipal Corporations. Therefore, the demand raised directly
against the Petitioner is contended to be misconceived and legally
untenable.
8.8 Lastly, it is contended that the cost of auxiliary
consumption is factored into the tariff determined by the CERC,
computed with reference to net generation after deducting auxiliary
consumption from gross generation. Since electricity tax on the
tariff-inclusive sale price has already been collected by the
distribution licensees and remitted to the Respondent No.1, the
separate levy on auxiliary consumption amounts to double taxation
of the same economic component.
Reply on behalf of the Respondent No.1 :
9. Per contra , learned senior counsel representing the Respondent
No.1 has made the following submissions:
9.1 The principal contention of the Respondent No.1 is that
consumption of electricity is the incidence of tax, irrespective of its
source, purpose or the identity of the consumer, accordingly, an
auxiliary consumption by the generator is also liable to electricity
tax.
9.2 In support to the aforestated, reference has been made to
Entry 53 of List II of the Seventh Schedule of the Constitution and
Section 113(2)(d) of the Act to argue that neither the constitutional
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entry nor the statutory provision restricts the meaning of
consumption by reference to the source of electricity, the purpose of
its use or the identity of the consumer.
9.3 Reliance has been placed on the judgments in Jiyajeerao
8
Cotton Mills Ltd. v. State of M.P. , State of Mysore v. West Coast
9
Papers Mills Ltd. , Swaroop Vegetable Products Industries v.
10
State of U.P. and State of A.P. v. National Thermal Power
11
Corporation Ltd. , to contend that it is a settled legal position that
the taxable event is consumption and not generation. The source of
electricity, the purpose for which it is consumed, and the identity of
the consumer are immaterial. Additionally, electricity consumed by
a generator for further generation constitutes consumption, and the
term is not confined to use by the end consumer.
9.4 Controverting the argument pertaining to Bye-Law 3(3)
being ultra vires , it has been contended that Section 113(2)(d) of
the Act authorises the levy of electricity tax on consumption, while
Sections 113(3), 150(1) and 152 empower the Respondent No.1 to
frame bye-laws governing its levy, assessment, collection and the
class of persons to be taxed. In view thereof, the Bye-Law 3(3) does
not create a new tax but identifies the person liable to pay tax on
self-generated electricity consumed by him.
9.5 The aforestated scheme is further argued to be reinforced
by Bye-Law 2(2), which includes a person consuming electricity
8
AIR 1963 SC 414
9
(1975) 3 SCC 448
10
(1983) 4 SCC 24
11
(2002) 5 SCC 203
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generated by himself within the definition of “consumer”; Bye-Law
15, which requires accounts of electricity consumed by such
person; and Bye-Law 7(2), which prescribes the time for payment.
Reliance has been placed on Delhi International Airport (P) Ltd. v.
12
South Delhi Municipal Corporation , to contend that the
impugned Bye-Law cannot be said to exceed the scope of the parent
Act, as the levy falls within the charging provision itself.
9.6 It has been contended that the impugned Bye-Law has
been in force since 1963, and the Petitioner‟s challenge, instituted
in 2022 upon receipt of a demand, is grossly belated and ought not
to be entertained under Article 226 of the Constitution. It is further
submitted that Section 169 of the Act provides an efficacious
alternative remedy by way of appeal before the Municipal Taxation
Tribunal against the levy or assessment of tax. Hence, in view of
13
Titaghur Paper Mills Co. Ltd. v. State of Orissa , and State of
Madhya Pradesh v. Commercial Engineers & Body Building
14
Co. , the Petitioner ought to be relegated to the statutory remedy,
particularly in respect of disputes concerning quantum.
9.7 Replying to the non-compliance of Section 150 of the
Act it has been contended that the requirements under the said
provision have been duly complied with. It has been asserted that
the Respondent No.1, by Resolution dated 17.03.1992, defined the
classes of persons liable to tax, including consumers of self-
generated electricity. Thereafter, the levy was sanctioned by the
12
2020:DHC:33102-DB
13
(1983) 2 SCC 433
14
2022 SCC OnLine SC 1425
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Lieutenant Governor on 30.06.1992 under Section 150(2). Further,
the actual rates were determined by Resolution dated 30.06.1992,
with the tax coming into force on 01.07.1992; and the rates have
since been determined in accordance with Section 109(2) of the
Act.
9.8 Replying to the contention pertaining to double taxation
it has been argued that such plea is misconceived, inasmuch as
auxiliary consumption is taxed on electricity consumed within the
generating station, whereas the tax collected by licensees pertains to
electricity consumed by their respective consumers. The two levies
concern distinct units of electricity consumed by different persons.
In this regard, it has also been argued that the Petitioner already
pays duty on auxiliary consumption in other States, notwithstanding
the levy on end consumers. Without prejudice to the aforestated,
15
reference has been made to Jain Bros. v. Union of India , to argue
that there is no constitutional bar against double taxation.
9.9 Lastly, the Respondent No.1 has sought to distinguish the
judgments relied upon by the Petitioners. St. Johns (Supra) , is
argued to have laid down the general principle that subordinate
legislation must conform to the parent Act, which Bye-Law 3(3)
does. Association of Concerned Citizens of New Delhi (Supra) is
stated to have been dealt with the impugned Bye-Law altering the
method of valuation prescribed by the statute, whereas the present
Bye-Law neither alters the taxable event nor the measure of tax.
Similarly, with respect to Kerala State Electricity Board (Supra), it
15
1969 (3) SCC 311
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is argued to be concerned with a regulation directly contrary to the
parent enactment, which is not the case here.
9.10. Further, it is contended that the decisions in Citadel Fine
Pharmaceuticals (Supra) and Citi Bank N.A. (Supra) , merely hold
that the reasonableness of the period for initiating action depends
on the facts of each case. However, in the present case, the liability
accrued monthly under Bye-Law 7(2), and the Petitioner neither
filed returns nor paid the tax. It is argued that the question of
limitation, being a mixed question of fact and law, is to be
appropriately examined by the Municipal Taxation Tribunal in
statutory appeal.
Reply on behalf of the Respondent Nos.3 and 4 :
10. Learned counsel representing the Respondent Nos.3 and 4,
although a performa party, have also made the following submissions:
10.1 The principal and only contention of the aforestated
Respondents is that the levy by the Respondent No.1 results in
double taxation of the same economic component, since the cost of
auxiliary consumption is already factored into the tariff charged for
electricity supplied to the Discoms, on which electricity tax is
subsequently collected from end consumers.
10.2 To elaborate the aforestated, it has been contended, by
way of an illustration, that if the BTPS generated 100 units of
electricity at a total cost of Rs. 1,000 and consumed 20 units
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towards auxiliary consumption, the remaining 80 units were
supplied to the Discoms at a tariff of Rs. 12.50 per unit to recover
the entire cost of generation. Consequently, the tariff payable for
the 80 units aggregated to Rs. 1,000, on which electricity tax at the
rate of 5% amounts to Rs. 50, already collected from the end
consumers and remitted to the Respondent No.1.
10.3 Since the cost attributable to auxiliary consumption is
already factored into the tariff, a separate levy of electricity tax on
the 20 units consumed by BTPS would result in an additional tax of
Rs. 12.50, thereby increasing the total tax to Rs. 62.50. It is,
therefore, contended that the impugned levy results in double
taxation of the same economic component.
Reply on behalf of the Respondent No.5 :
11. Similarly, learned counsel representing the Respondent No.5,
who again is a performa party, has made the following submissions:
11.1 It has been contended that a demand raised on
06.12.2021 for the period from 01.06.2006 to 15.10.2018, is grossly
belated and unreasonable, particularly as the BTPS ceased
operations in October 2018. It is the case of the Respondent No.5
that retrospective recovery of the levy through future tariffs would
unfairly burden existing consumers with past costs and is contrary
to the Tariff Policy and the principles laid down in U.P. Power
16
Corporation Ltd. v. NTPC Ltd. .
16
(2009) 6 SCC 235
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11.2 It is argued that in absence of a prescribed limitation
period under the Act, the demand must nevertheless be raised
within a reasonable time, as held in State of Punjab v. Bhatinda
17
District Co-operative Milk Producers Union Ltd. , and Mr. Ved
18
Marwah v. NDMC and Ors. .
Rejoinder on behalf of the Petitioner :
12. Learned senior counsel representing the Petitioner has made the
following rebuttals to the arguments raised by the Respondent No.1:
12.1 It is contended that auxiliary consumption is incidental to
the process of generation and constitutes an incidence of generation
rather than taxable consumption. Further, it is submitted that Bye-
Law 3(3), insofar as it includes self-consumption within the ambit
of Section 113(2)(d) of the Act, enlarges the scope of the parent Act
and is ultra vires .
12.2 With respect to the reference made to Bye-Law 2(2) it
has been contended that, the definition of consumer therein only
includes a person consuming electricity generated by himself, and
as such does not cover the Petitioner, whose station is neither
supplied by a licensee nor connected to a licensee‟s works.
12.3 Accordingly, it is the case of the Petitioner that the
electricity generated at the BTPS was intended for supply to third
parties and not for its own consumption, as such an auxiliary
consumption cannot be construed as generation for self-
17
(2007) 11 SCC 363
18
2018:DHC:2055-DB
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consumption within the meaning of the impugned Bye-Law,
thereby enlarging the scope of the parent Act to impose tax on
auxiliary consumption.
12.4 The Petitioner has also sought to distinguish the
judgments relied upon by the Respondent No.1, including,
Jiyajeerao Cotton Mills (Supra) , Swaroop Vegetable Products
Industries (Supra) and West Coast Papers Mills Ltd. (Supra) ,
inasmuch as they were concerned with captive consumption and not
auxiliary consumption incidental to generation for onward sale. It is
submitted that the said decisions proceeded on express statutory
provisions covering self-generated electricity consumed by the
producer, which are absent from Section 113(2)(d) of the Act.
12.5 Insofar as the Respondent No.1‟s contention of payment
of similar taxes by Petitioner in other states is concerned, it has
been argued that the principal statute in such states, namely,
Chhattisgarh, Orissa and Karnataka, already provide for duty on
auxiliary consumption or for own use.
C. ANALYSIS AND FINDINGS:
13. Having heard the rival submissions advanced by the learned
counsel for the parties and upon perusal of the record, this Court is of
the view that the entire challenge rests on a single proposition,
namely, that consumption of electricity in the course of generation is
an incident of generation itself. If that proposition fails, the attack on
the vires of Bye-Law 3(3) loses its premise, and the pleas of double
taxation and arbitrariness loose their foundation. Therefore, this Court
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has, identified the following four issues, which are to be examined in
that order:
I. Whether consumption, and not generation, is the taxable event
under Section 113(2)(d) of the Act, and whether auxiliary
consumption by a generating station falls within it?
II. Whether the Bye-Law 3(3) travels beyond the parent Act, or
merely gives effect to it?
III. Whether the levy on auxiliary consumption results in double
taxation of a cost already recovered through tariff?
IV. Whether the demand raised in November 2021 for the period
01.06.2006 to 15.10.2018 is vitiated by delay?
In re: Issue I :
14. At the outset, this Court deems it appropriate to observe that the
character of a levy must be determined by reference to its taxable
event, namely, the event upon which the charge is imposed, and not
merely by the nomenclature assigned to it. However, the Petitioner
seeks to conflate generation with consumption by contending that
electricity consumed in the process of generation constitutes an
incident of generation itself and a levy thereon is, in substance, a tax
on production, a subject falling within the legislative domain of
Parliament.
15. A tax on the consumption of electricity is attracted by its use
and falls within the legislative field contemplated under Entry 53 of
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List II of the Seventh Schedule, whereas a duty of excise is attracted
by its production. The question, therefore, is whether the levy on
auxiliary consumption at BTPS is attracted by the consumption of
electrical energy or as contended by the Petitioner, constitutes a tax on
generation itself.
16. Notably, law in regard to the aforestated is no longer res integra
and has been settled by the Supreme Court by way of its precedents
discussed hereinafter. In Jiyajeerao Cotton Mills Ltd. (Supra) , the
Court held that a levy on consumption, including consumption by the
very person who generated the electricity, is distinct from an excise
duty on generation. The Court also observed that the expression
consumption means the use or expenditure of electrical energy, so that
the levy attaches when energy is used up and not when it is brought
into being.
17. The above stated principle was further reiterated by the
Supreme Court in National Thermal Power Corporation Ltd.
(Supra) , wherein the Court recognised that the relevant taxable event
may be sale or consumption, and a levy on it does not become an
excise duty merely because the electricity is generated before it is
consumed. Similarly, in Rajasthan Textile Mills Assn. v. State of
19
Rajasthan , the Rajasthan High Court held that a producer
consuming electricity generated by it is a consumer for the purposes
of Entry 53 of List II and the State Legislature is competent to impose
duty on such consumption. In view of these decisions, the Petitioner's
contention that auxiliary consumption in the course of generation is
19
2005 SCC OnLine Raj 563
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merely an incident of generation cannot be sustained.
18. This Court is also unable to accept the contention of the
Petitioner that auxiliary consumption stands on a different footing
merely because the electricity generated is intended for supply to third
parties. In West Coast Paper Mills Ltd. (Supra) , the Supreme Court
held that electricity utilised to operate equipment for generating
further electricity constitutes consumption and may attract tax. The
said decision also highlighted that the distinction lies between
electricity consumed and electricity lost in transmission before
reaching the point of use. It was observed that auxiliary electricity is
not lost in transmission but is utilised to operate the generating
station‟s equipment and, therefore, constitutes consumption for the
purposes of the levy.
19. Similarly, neither the source of the electricity nor the purpose
for which it is consumed alters the said position. In Swaroop
Vegetable Products Industries (Supra), a person consuming
electricity from its own source of generation was held liable to the
levy even though it also purchased electricity from a licensee.
Therefore, this Court is in agreement with the Respondent No.1 that
the source of the electricity, the purpose for which it is consumed, and
the identity of the consumer are immaterial to a levy on consumption.
Consequently, the fact that the Petitioner supplies the remaining
electricity to third parties does not alter the character of the electricity
consumed within the generating station.
20. The Petitioner‟s attempt to confine the decisions in Jiyajeerao
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Cotton Mills Ltd. (Supra), West Coast Paper Mills Ltd. (Supra) and
Swaroop Vegetable Products Industries (Supra) to cases of captive
consumption is equally misplaced. Captive electricity is a narrow
statutory category, being electricity generated by a qualifying captive
generating plant and consumed by the captive users in accordance
with the ownership and consumption conditions of the Electricity
Rules, 2005. Whereas, self-generated electricity is the wider genus,
namely, electricity produced by a person for its own use, and it may
be self-generated without being captive.
21. The aforesaid decisions, which pre-date the 2005 Rules
interpreted the scope of the term „consumption‟ and did not turn upon
the captive status of the generating plant. As such, the absence of an
express reference to self-generated electricity in Section 113(2)(d) of
the Act does not, by itself, exclude such consumption from the ambit
of the provision.
22. In view of the aforestated, this Court holds that the taxable
event under Section 113(2)(d) of the Act is consumption of electricity,
hence, the auxiliary consumption at BTPS is consumption, and a levy
thereon does not, merely by reason of its use in the process of
generation, constitute a duty of excise on generation.
In re: Issue II :
23. It is trite law that delegated legislation cannot supplant the
parent statute or travel beyond the authority conferred thereunder. The
principles laid down in St. Johns Teachers Training Institute
(Supra), Association of Concerned Citizens of New Delhi (Supra)
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and Kerala State Electricity Board (Supra) , relied upon by the
Petitioner, admit of no dispute. However, the question is whether Bye-
Law 3(3) creates a liability beyond that contemplated under the Act or
merely prescribes the manner of imposing the tax already authorised
by the parent statute.
24. The test is whether the impugned Bye-Law creates a new levy,
alters the taxable event or the measure of tax, or merely gives effect to
the charge authorised by the parent Act. Section 113(2)(d) of the Act
authorises the levy of tax on consumption, which, as held
hereinabove, includes consumption of self-generated electricity. Bye-
Law 3(3) does not create a new taxable event but identifies the person
liable to pay tax on such consumption, which is precisely what
Sections 113(3), 150(1) and 152 of the Act empower the Respondent
No.1 to do. Therefore, this Court is in agreement with the Respondent
No.1 that the Bye-Law does not create a new tax.
25. The aforesaid interpretation is also consistent with the scheme
of the Bye-Laws, as Bye-Law 2(2) includes within the definition of
consumer, a person consuming electricity generated by himself, Bye-
Law 15 requires accounts of such consumption to be maintained, and
Bye-Law 7(2) prescribes the time for payment of the tax.
26. In this regard, the decisions relied upon by the Petitioner are
distinguishable on facts, as rightly submitted by Respondent No. 1. St.
Johns Teachers Training Institute (Supra) reiterates the settled
principle that subordinate legislation must conform to the parent Act,
a requirement which Bye-Law 3(3) satisfies. In Association of
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Concerned Citizens (Supra) , the impugned Bye-Law altered the
method of valuation prescribed by the statute, whereas in Thomas
Joseph (Supra) , the regulation was directly contrary to the parent
enactment.
27. In the present case, Bye-Law 3(3) neither alters the taxable
event nor the measure of tax and is not inconsistent with Section
113(2)(d) of the Act. Indeed, had Bye-Law 3(3) never been framed,
the consumption of the Petitioner would still have fallen within the
scope of the charging provision. However, if the Bye-Law 3(3) is
taken into consideration for the purpose of imposition of tax, the same
at its highest is declaratory in nature, clarifying the operation of the
statutory charge. Therefore, a provision which declares what the Act
already provides cannot be said to supplant or exceed the parent Act.
28. With respect to the present issue, two ancillary issues raised by
the Petitioner also warrant consideration. Firstly , the contention that
Bye-Law 2(2) does not apply to the Petitioner in the absence of a
connection with the works of a licensee is misconceived. Bye-Law
2(2) expressly includes within the definition of a consumer a person
who consumes electricity generated by himself, irrespective of
whether his premises are connected to the works of a licensee.
Reference in this regard is to be made to Swaroop Vegetable Products
Industries (Supra) , wherein the Supreme Court held that the source of
electricity is immaterial to the levy on consumption.
29. Secondly , this Court finds no infirmity in compliance with
Section 150 of the Act. The Respondent No.1 has pointed to the
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Resolution dated 17.03.1992 defining the classes of persons liable, the
sanction of the Lieutenant Governor dated 30.06.1992 under Section
150(2), and the rates fixed with effect from 01.07.1992, however, no
material has been placed on record by the Petitioner to displace the
said submissions.
30. In view of the aforesaid discussion, this Court is of the view
that Bye-Law 3(3) gives effect to the Act and does not supplant it,
therefore, cannot be held to be ultra vires the Act.
In re: Issue III :
31. The plea of double taxation, urged by the Petitioner and the
Respondent Nos.3 and 4, proceeds on the premise that the cost of
auxiliary consumption, having been factored into the tariff, cannot be
subjected to a separate levy of electricity tax. The contention falls for
consideration on two aspects, namely, the distinction between tariff
and taxation, and the illustration relied upon to demonstrate the
alleged duplication of tax.
32. It is pertinent to note that tariff determination and taxation
operate in distinct fields. While tariff represents the schedule of prices
and charges payable for the supply of electricity, tax constitutes a
statutory levy payable to the State over and above the tariff. As
recognised by the Supreme Court in National Thermal Power
Corporation Ltd. (Supra) , the power of a regulatory commission to
determine tariff does not extend to imposing or regulating a statutory
levy of electricity tax.
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33. This Court accepts the submission of Respondent Nos.3 and 4
that the cost of auxiliary consumption is factored into the tariff to
enable the Petitioner to recover its generation costs. However, the
inclusion of such costs in the tariff does not, by itself, confer
immunity from a tax otherwise lawfully leviable on the electricity
consumed. Any grievance arising from the treatment of such tax in the
tariff determination must be agitated before the appropriate regulatory
forum and cannot, in the absence of any statutory exemption, furnish a
ground to invalidate the impugned levy.
34. Similarly, the illustration relied upon by the Respondent Nos.3
and 4 does not establish double taxation. On the contrary, it
demonstrates that the electricity tax of Rs. 50, calculated at 5% of the
tariff of Rs. 1,000 recovered from the supply of 80 units, is
attributable to the consumption of those units by the end consumers.
No tax is thereby imposed on the 20 units consumed by BTPS towards
auxiliary consumption. The additional levy of Rs. 12.50 represents tax
on the value attributable to those 20 units and constitutes the first levy
thereon. The aggregate figure of Rs. 62.50 is arrived at only by
treating the cost of auxiliary consumption embedded in the tariff as
equivalent to tax already paid on that consumption, which is not borne
out by the illustration.
35. Since the illustration demonstrates that no tax has been imposed
on auxiliary consumption, it does not amount to double taxation,
which requires the same subject to be taxed twice. It is for the reason
that the 80 units supplied to the end consumers and the 20 units
consumed by BTPS constitute distinct quantities of electricity
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consumed by different persons, and the tax is levied separately on
each. The inclusion of the cost of auxiliary consumption in the tariff
does not render the tax paid on the electricity supplied to end
consumers a tax on the electricity consumed by BTPS.
In re: Issue IV :
36. The proposition drawn by the Petitioner is that where a statute
prescribes no period of limitation, a power must be exercised within a
reasonable time, and this Court has no hesitation in accepting the
same. However, what constitutes a reasonable period depends on the
facts and circumstances of each case, and delay in raising a demand
does not, by itself, extinguish a tax liability lawfully incurred.
37. In the present case, the demand raised in November 2021
cannot be held to be invalid on three premises. Firstly , the liability did
not arise from the demand, rather it accrued month to month under
Bye-Law 7(2) by operation of law, under a levy in force since 1992
and Bye-Laws in force since 1963. Secondly , under Bye-Law 15, the
Petitioner was required to maintain accounts of electricity consumed.
In this regard, it has been argued by the Respondent No.1 that no
returns were filed and no tax was paid, a position not controverted by
the Petitioner in its rejoinder. In these circumstances, the Petitioner
cannot rely upon the delay in raising the demand while having failed
to discharge its obligation to account for the consumption. Lastly , the
demand raised by the Respondent No.1 seeks recovery of an existing
statutory liability and does not impose a new levy.
38. The apprehension expressed by the Respondent No.5 that
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recovery of the demand may burden existing consumers through a
future tariff revision does not affect the Petitioner‟s statutory liability.
As observed hereinabove, the recovery of such costs through tariff is a
matter for the appropriate regulatory framework. Likewise, the closure
of BTPS in October 2018 is immaterial, since the liability arose when
the electricity was consumed.
39. The Petitioner‟s reliance placed on Citadel Fine
Pharmaceuticals (Supra) and CITI Bank (Supra) , also does not come
to its rescue, inasmuch as the said decisions merely lay down a
general observation of law, a position that is not alien. However, what
they do not establish is the prejudice caused by a delay with respect to
the imposition of municipal tax by the Respondent No.1 on
consumption of electricity by the Petitioner.
D. CONCLUSION:
40. For all the foregoing reasons, this Court is of the view that the
taxable event under Section 113(2)(d) of the Act is consumption, and
the auxiliary consumption at BTPS is consumption and not
generation. Further, Bye-Law 3(3) does not enlarge the Act, as it only
identifies the person liable on consumption of self-generated
electricity, which the Act already taxes. Furthermore, tariff and tax
operate in separate fields, and the levy on auxiliary consumption does
not result in double taxation. Lastly, the Respondent No.1 was not
barred by delay from recovering a tax which accrued by operation of
law and was never paid.
41. In view of the aforestated, the present Petition is dismissed.
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Pending applications, if any, also stands closed.
42. It is clarified that the foregoing discussion is confined to the lis
raised in the present Petition. Any dispute confined to the computation
of the amount may be raised by the Petitioner before the appropriate
forum under Section 169 of the Act, in accordance with law.
ANIL KSHETARPAL, J.
BHARAT PARASHAR, J.
OCTOBER 27, 2026 /sp/hr
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