BALIA, J. - (1.) THE members of the petitioner's Association are the persons who have set up captive power generation plants for the use and consumption of electricity in their respective industries and are not indulging in sale and supply of electricity.
(2.) THE Rajasthan State Legislature in exercise of its authority to legislate in the subject of `tax on consumption and sale of electricity' in terms of Entry 53 of the State List of 7th Schedule of the Constitution had enacted Rajasthan Electricity (Duty) Act of 1962 (for short the "act of 1962"). Section 3 of the Act of 1962 envisages the levy of Duty on `the energy consumed by a person other than a supplier, generating energy for his own use or consumption'. In terms of proviso (3) to Section 3, by Notification dated 12. 12. 1989, the State Government considering it expedient in the public interest remitted the Electricity Duty on consumption of electricity by persons generating energy for their own use and consumption. Said Notification had continuously remained in force until issue of impugned Notification dated 12. 7. 2004, by which the Notification dated 12. 12. 1989 had been rescinded. This had the effect of making such consumption of electricity, which has been generated by captive generation plants, subject to Duty at the rate prescribed in this respect from time to time. The State Legislature had also enacted the Rajasthan Power Sector Reforms Act, 1999 (hereinafter referred to as the `act of 1999') with the assent of the President of India. The Act of 1999 inter alia envisaged setting up of the Rajasthan Electricity Regulatory Commission under Section 3 of the Act, 1999 and enumerated functions, proceedings and powers of the Commission under Section 9 of the Act. Section 12 of the Act of 1999 further envisages that in the discharge of its functions, the Commission shall be guided by such directions in the matter of policy involving public interest as the State Government may give to it in writing and that the State Government shall consult the Commission in relation to any proposed legislation or rules concerning any policy direction issued about the functioning of the Commission and shall duly take into account the recommendation, if any, made by the Commission on such matters. After enactment of the Act of 1999, the Parliament enacted the Indian Electricity Act, 2003 (for short `the Act of 2003') in exercise of its legislative authority on the subject covered by Entry 38 of the concurrent list of 7th schedule. With the enactment of Act of 2003, the Indian Electricity Act, 1910 and the Electricity Supplies Act,1948 were repealed. This enactment envisages that in determining the tariff on electricity, the Central Government or the State Government, as the case may be, will provide non-discriminatory open access to its transmission system administered by any private or Govt. Company under it and as a transitory measure levy such surcharge on consumers as may be notified by the Central Commission or the State Commission, as the case may be, to be utilised for the purpose of meeting the cost of current level cross subsidy which shall be progressively reduced and eliminated but emphasising that such surcharge shall not be levied in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use. This reveals legislative policy that additional charges cannot be levied on the electricity generation for captive consumption for the purpose of cross subsidy. While making the budgetary proposals for the Financial Year 2004-05, it was given out by the Chief Minister of Rajasthan, who is also the Finance Minister in the State Legislative Assembly that all persons, industrial units who are getting supplies of energy from the electricity distribution companies are paying 40 paisa per unit Duty on the energy consumed by them, but the industries which are generating energy for captive consumption are not paying any Duty on the electricity generated for their captive consumption. This gives as extra edge to the captive power generating industries and the industries who have not established captive power plant are lagging behind. With this premise, it was proposed to levy 25 paisa per unit Electricity Duty on the consumption of electricity generated by own sources. It was further envisaged in the speech that this will result in additional revenue of 36 crores rupees, which shall be subvent to electricity distribution companies so that they can partly off- set the increased cost of coal and diesel. On that very date i. e. 12. 7. 2004, the impugned Notification (Annex. P/10) was issued rescinding the earlier Notification dated 12. 12. 1989, which reads as under:- "finance DEPARTMENT" TAX DIVISION' NOTIFICATION JAIPUR, JULY 12, 2004 S. O. 89.- In exercise of the powers conferred by sub-section (3) of Section 3 of the Rajasthan Electricity (Duty) Act, 1962 (Rajasthan Act No. 12 of 1962), the State Government being of the opinion that it is expedient in the public interest so to do, hereby rescinds this Department's Notification No. F. 4 (46)/fd/gr. IV/84 dated 12. 12. 1989. (F. 4 (67)/fd/tax/2004-49) By order of the Governor, (Ajitabh Sharma) Deputy Secretary to the Government. "
(3.) SIMULTANEOUSLY, another Notification dated 12. 7. 2004 (Annex. P/2) was also issued fixing the rate of Electricity Duty payable on consumption of self generated energy for any purpose, at 25 paisa per unit. This Notification was also used carrying a statement that it is expedient in the public interest so to do. However, subsequently, on considering the representation made by the petitioner's association and representation of other industries, another Notification was issued on 28. 7. 2004 modifying the rates of Electricity Duty payable on consumption of self generated energy for any purpose, by prescribing different rates of Electricity Duty, depending on the total consumption of the unit per year. THE PETITIONER CONTENDS The petitioner association has principally raised three grounds challenging the Notification dated 12. 7. 2004 (Ex. P/10), rescinding the earlier Notification dated 12. 12. 1989. Firstly, it was contended that imposition of Electricity Duty on captive consumption by the State Legislature is incompetent as it amounts to Duty on manufacture which amounts to a Duty of Excise which state legislature is not competent to legislate the subject falls in List I of Seventh Schedule and is exclusively for Parliament to legislate. It was also contended that the distinction has not been made between `consumption' of electricity and `use' of electricity for the purpose of levy of Duty. Entry 53 of List II permits levy of Duty only on consumption and sale of Electricity. Therefore, Section 3 of the Act, 1962, to the extent it authorises levy of Electricity Duty on use of captively generated electricity, is ultra vires. It was urged by the learned counsel that Entry 52 clearly makes a distinction between `use' and `consumption' of any goods. Entry 53 speaks of tax on `consumption' only and not of tax on `use' of electricity. On this premise, it was contended that there is difference between the consumption of electricity and use of electricity. It was pointed out that where the end product of manufacture can be used for transmission or distribution of electricity, the electricity cannot be said to have been consumed, it can only be said to have been used. It was urged that the decision of Supreme Court in Jiyajeerao Cotton Mills Ltd. , Birlanagar, Gwalior vs. State of M. P. (AIR 1963 SC 414) and State of Gujarat and others vs. Akhil Gujarat Pravasi V. S. Mahamandal and others (2004) 5 SCC 155) are distinguishable and cannot be applied without considering whether the electricity in a particular case has been `consumed' or `used'. To the extent the tax being levied on `use' of electricity as is appearing in expression `used' in Section 3 of the Act, 1962 is ultra vires. It was further urged that at any rate the question of scope and ambit of legislative competence qua imposition of Duty on electricity generated for captive consumption needs reconsideration by the Supreme Court and the issue is not being given up or waived by the petitioners. ;