Delhi HC Rejects NTPC’s Challenge To ₹197-Crore Tax On Electricity Used By Badarpur Plant

Badarpur Thermal Power Station (BTPS), managed by NTPC from 1978 and transferred to its ownership in 2006, generated electricity until its closure on 15 October 2018.

On 8 November 2021, the South Delhi Municipal Corporation (SDMC) demanded ₹197,15,84,639 as electricity tax on BTPS’s auxiliary consumption for 1 June 2006 to 15 October 2018, followed by a show-cause notice and further communications.

NTPC challenged the demand and the vires of Bye-Law 3(3) of the Delhi Municipal Corporation (Assessment and Collection of Tax on the Consumption, Sale or Supply of Electricity) Bye-Laws, 1962, which requires a person generating electricity for its own consumption to pay electricity tax.

Section 113(2)(d) of the Delhi Municipal Corporation Act authorises a tax on the consumption, sale or supply of electricity; Entry 53 of List II of the Seventh Schedule concerns taxes on the consumption or sale of electricity.

Sections 150 and 152 govern the imposition and payment of municipal taxes, while Bye-Laws 3(3), 7(2) and 15 address tax on self-generated electricity, payment, and accounting for consumption.

A tax on consumption attaches to the use of electricity, including use by the person who generated it, and is distinct from an excise duty on generation (Jiyajeerao Cotton Mills Ltd. v. State of M.P.; State of A.P. v. NTPC Ltd.).

Electricity used to operate generating equipment is consumption, not transmission loss (State of Mysore v. West Coast Papers Mills Ltd.); the source of electricity does not alter the taxability of its consumption (Swaroop Vegetable Products Industries v. State of U.P.).

Delegated legislation must conform to, and cannot supplant or exceed, the parent statute.

Tariff and statutory taxation operate in distinct fields, and inclusion of a cost in tariff does not itself exempt that cost from tax.

Where no limitation period is prescribed, statutory power must be exercised within a reasonable time, assessed in the circumstances of the case; delay alone does not extinguish a liability accrued by law.

The Court held that electricity used within BTPS to operate its equipment was consumed, notwithstanding that the electricity generated was principally intended for supply to third parties.

Its use in generation did not convert the levy into a tax on generation.

Because Section 113(2)(d) already covered consumption of self-generated electricity, Bye-Law 3(3) identified the person liable and did not create a new taxable event or exceed the Act; the Court also found the requirements of Section 150 had been met on the material before it.

The tax collected on electricity supplied to end consumers related to distinct units consumed by those consumers; the tariff’s inclusion of auxiliary-consumption costs did not establish that tax had already been paid on the electricity consumed at BTPS.

Finally, the liability accrued monthly under the Bye-Laws, and NTPC had been required to maintain consumption accounts. In the circumstances, the Court found the demand was recovery of an existing liability, not a new levy, and that delay did not invalidate it.

It dismissed the petition and closed any pending applications, while clarifying that disputes limited to computation could be raised before the appropriate forum under Section 169 of the Act.