Himachal Pradesh High Court caps electricity duty hikes on stone crushers, calls revision power vague and unguided

The petitioners were industrial units engaged in stone-crushing and mining-related activities in Himachal Pradesh.

They challenged notifications dated 1 September 2023 and 18 January 2024 issued under Section 11(2) of the Himachal Pradesh Electricity Duty Act, 2009, by which electricity duty applicable to stone crushers and mines was increased from 11% to 25% and thereafter to 37.50%.

The petitions were heard and decided together because they involved common questions of law and fact.

1. Whether the State Government was competent under Sections 3 and 11(2) of the Himachal Pradesh Electricity Duty Act, 2009, to classify or sub-classify consumers and to place stone crushers in a separate category for levy of electricity duty?

2. Whether the State Government could successively revise electricity duty from 11% to 25% and then to 37.50% under Section 11(2), notwithstanding the statutory limitation that revision could not exceed 50% of the rate specified under Section 3 at any one time?

3. Whether Section 11(2) of the 2009 Act was vague, unguided and arbitrary because it prescribed no minimum interval or guiding principles for successive enhancement of electricity duty?

4. Whether the classification of electricity consumers by the Himachal Pradesh Electricity Regulatory Commission for tariff purposes prevented the State from making a separate classification for electricity-duty purposes?

The Court applied Sections 3 and 11(2) of the Himachal Pradesh Electricity Duty Act, 2009: Section 3 authorises levy of electricity duty on consumption or supply of electricity, while Section 11(2) permits revision of rates, subject to the ceiling of 50% of the rate specified under Section 3 at any one time.

The Court distinguished electricity tariff classification under Section 50 of the Electricity Act, 2003 and Clauses 2.3 and 1.2.46 of the Himachal Pradesh Electricity Supply Code, 2009 from classification for taxation purposes, holding that tariff and electricity duty operate in distinct fields.

It relied on State of Madhya Pradesh v. Ajay Singh, (1993) 1 SCC 302, Bimal Chandra Banerjee v. State of Madhya Pradesh, (1970) 2 SCC 467, Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla, AIR 1992 SC 2038, Kunj Behari Lal Butail v. State of H.P., (2000) 3 SCC 40, and M/s Devi Das Gopal Krishan v. State of Punjab, AIR 1967 SC 1895, for the principles that delegated fiscal powers must remain within the statutory framework and require adequate legislative guidance.

The Court also applied the doctrine of reading down, relying on Authorized Officer, Central Bank of India v. S. Shanmugavelu, (2024) 6 SCC 641, and held that a provision should be preserved where it can be made workable and constitutionally valid without judicial legislation.

The Court held that the Electricity Regulatory Commission’s power to classify consumers concerns the determination of tariff or charges for supply of electricity, whereas the State’s power under the 2009 Act concerns taxation of electricity consumption; consequently, the State was competent to classify, reclassify or sub-classify consumers for electricity-duty purposes.

The separate treatment of stone crushers was therefore not invalid merely because they were otherwise included among large industrial consumers for tariff purposes.

However, the Court found Section 11(2) defective to the extent that it authorised repeated enhancements of up to 50% without prescribing any minimum interval, guiding principles or safeguards.

The impugned notifications demonstrated the resulting excess: the rate was increased from 11% to 25% in September 2023—an increase exceeding 50%—and then from 25% to 37.50% within about five months.

Rather than strike down Section 11(2), the Court read it down and prescribed interim limits for enhancement, permitting progressively higher revisions only with the passage of specified periods, while recognising that reductions could be made without the same limitation because they adversely affected State revenue rather than consumers.

Applying the statutory 50% ceiling to the existing rate, the Court held that the permissible rate was 16.5% from 1 September 2023 and 24.75% from 18 January 2024.

However, it held that the enhancements from 11% to 25% and from 25% to 37.50% exceeded the permissible statutory limits.

Section 11(2) was not struck down; instead, it was read down and supplemented through interim directions requiring specified intervals and graduated limits for future enhancements until suitable legislative or regulatory guidance was introduced.

Electricity duty payable by the petitioners was consequently directed to be calculated at 16.5% from 1 September 2023 and 24.75% from 18 January 2024, with future revisions governed by the prescribed directions until the State amended the law or framed appropriate rules.

Any excess payment was directed to be adjusted against future electricity-duty liability, preferably within one year, and any shortfall was similarly recoverable.

The connected writ petitions and pending applications were disposed of accordingly.