S.B.SINHA, J. - (1.) LEAVE granted.
(2.) VALIDITY and/ or application of Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003 (for short "the 2003 Act") is in question in these appeals which arise out of a common judgment dated 13.07.2006 passed by a Division Bench of the High Court of Madras. Legislative competence in Central and Provincial Legislature in India was for the first time provided for by reason of the Government of India Act, 1935 (for short "the 1935 Act"). Item 48-B of List II of the Seventh Schedule of the 1935 Act provided for taxes on consumption or sale of electricity subject, however, to the provisions of Section 154-A of the 1935 Act which reads as under: "154-A. Save in so far as any Federal may otherwise provide, no Provincial law or law of a Federated State shall impose, or authorize the imposition of, a tax on the consumption or sale of electricity (whether produced by a Government or other persons ) which is - (a) consumed by the Federal Government, or sold to the Federal Government for consumption by that Government ; or (b) consumed in the construction, maintenance or operation of a Federal Railway by the Federal Railway Authority or a railway company operating that railway, or sold to that authority or any such railway company for consumption in the construction, maintenance or operation of a Federal Railway ; and any such law imposing, or authorising the imposition of a tax on the sale of electricity shall secure that the price of electricity sold to the Federal Government for consumption by that Government, or to the Federal Railway Authority or any such railway company as aforesaid for consumption in the construction, maintenance or operation of a Federal Railway, shall be less by the amount of the tax than the price charged to other consumers of a substantial quantity of electricity." The 1935 Act did not contain any provision similar to Item No. 48-B of the Seventh Schedule of the 1935 Act. After coming into force of the Constitution of India, 'Electricity' was placed in List III of the Seventh Schedule of the Constitution of India. However, the matter relating to imposition of taxes on the consumption or sale of electricity was provided for under Entry 53 of List II of the Seventh Schedule of the Constitution of India.
(3.) THE then State of Madras in terms of Entry 48-B of the Seventh Schedule of the 1935 Act, enacted Tamil Nadu Electricity Duty Act, 1939 (for short "the 1939 Act") levying a duty on certain sales and consumption of electrical energy by the licensees in the State of Tamil Nadu. At the relevant time, licences used to be granted in terms of the Indian Electricity Act, 1910 (for short "the 1910 Act"). Section 3 of the 1910 Act reads as under: "3. Grant of licenses.(1) THE State Government may, on application made in the prescribed form and on payment of the prescribed fee (if any), grant after consulting the State Electricity Board, a licence to any person to supply energy in any specified area, and also to lay down or place electric supply lines for the conveyance and transmission of energy, (a) where the energy to be supplied is to be generated outside such area, from a generating station situated outside such area to the boundary of such area, or (b) where energy is to be conveyed or transmitted from any place in such area to any other place therein, across an intervening area not included therein, across such area. (2) In respect of every such licence and the grant thereof the following provisions shall have effect, namely (a) any person applying for a license under this Part shall publish a notice of his application in the prescribed manner and with the prescribed particulars, and the license shall not be granted - (i) until all objections received by the State Government with reference thereto have been considered by it: Provided that no objection shall be so considered unless it is received before the expiration of three months from the date of the first publication of such notice as aforesaid; and (ii) until, in the case of an application for a license for an area including the whole or any part of any cantonment aerodrome, fortress, arsenal, dockyard or camp or of any building or place in the occupation of the Government for defence purposes, the State Government has ascertained that there is no objection to the grant of the license on the part of the Central Government; (b) where an objection is received from any local authority concerned, the State Government shall, if in its opinion the objection is insufficient, record in writing and communicate to such local authority its reasons for such opinion; (c) no application for a license under this Part shall be made by any local authority except in pursuance of a resolution passed at a meeting of such authority held after one month's previous notice of the same and of the purpose thereof has been given in the manner in which notices of meetings of such local authority are usually given; (d) a license under this part - (i) may prescribe such terms as to the limits within which, and the conditions under which, the supply of energy is to be compulsory or permissive, and generally as to such matters as the State Government may think fit; and (ii) save in cases in which under section 10, clause (b), the provisions of sections 5 and 6, or either of them, have been declared not to apply, every such licensee shall declare whether any generating station to be used in connection with the undertaking shall or shall not form part of the undertaking for the purpose of purchase under section 5 or section 6; (e) the grant of a licence under this Part for any purpose shall not in any way hinder or restrict the grant of a licence to another person within the same area of supply for a like purpose; (f) the provisions contained in the Schedule shall be deemed to be incorporated with, and to form part of, every licence granted under this Part, save insofar as they are expressly added to, varied or excepted by the licence, and shall, subject to any such additions, variations or exceptions which the State Government is hereby empowered to make, apply to the undertaking authorised by the licence: Provided that where a licence is granted in accordance with the provisions of clause IX of the Schedule for the supply of energy to other licensees for distribution by them, then, insofar as such licence relates to such supply, the provisions of clauses IV, V, VI, VII, VIII and XII of the Schedule shall not be deemed to be incorporated with the licence." It did not contain any provision for exemption. However, after coming into force of the Constitution of India, the Act was to have effect, subject to the provisions of Article 288 of the Constitution of India.;