M/S USHA MARTIN BLACK LTD. AND ANR. Vs. UNION OF INDIA AND ORS.

JUDGEMENT

(1.) The petitioners have impugned the surcharge on electricity under the Notification in Annexure -2 and the revised rate as mentioned in Annexure -4 levied on account of imposition of Central Excise Duty on electricity generation. The question whether generation of electricity can be subjected to payment of excise duty was raised in M/s Tata Yodogawa Ltd. v/s. Union of India 1985 P. L. J. R., 673, and was answered by me in the affirmative and since this decision is challenged as incorrect, the present writ application is being heard by Division Bench. The petitioner Company runs a factory and is receiving electric energy from the State Electricity Board, respondent No. 2 as per the agreement dated the 20th December, 1966, Annexure -l. By Sec. 36 of the Finance Act, 1978 a new entry being Item No. 11E was inserted in the First Schedule to the Central Excise and Salt Act, 1944 (hereinafter referred to as 'the Excise Act'), whereby excise duty at the rate of 2 paise per Unit on electricity Per kilowatt hour was imposed. As a result thereof the Electricity Board levied the impugned surcharge by the Notification dated 13.5.1978 at the rate of 3 paise paise per Unit on electricity consumption by all categories of services excepting agricultural services. The petitioner's bills were consequently prepared at the higher rate By another Notification, Annexure -4, issued in 1979 the rate of electricity was revised and the new rate was fixed by taking into account the excise duty. The petitioners have challenged both these Notifications.

(2.) Mr. N. K. Prasad, the Learned Counsel of the Petitioners, has contended that the Parliament is not empowered to levy excise duty on generation of electricity and the insertion of the Item No. 11E in the Schedule to the Excise Duty is ultra vires and the consequent enhancement of the electric charges by the Electricity Board must be struck down as illegal and void in the eye of law. Alternatively, it has also been urged that the Electricity Board was not entitled to impose additional burden at the rate of 3 paise per Unit when it had to pay excise duty at the rate of 2 paise only.

(3.) Excise duty is levied under Sec. 3 of Excise Act on "excisable goods" which "are produced or manufactured in India." The relevant entry in List I of the Seventh Schedule of the Constitution of India, Namely, Entry No. 84 has also used the expression "goods manufactured or produced in India." The main argument of the petitioner is that since electricity is neither goods nor it is manufactured or produced, it cannot be treated as excisable goods so as to attract the provisions of the Excise Act, Mr. Prasad contended that although the expression "excisable goods" has been defined in Sec. 2(d) of the Excise Act. as goods specified in the First Schedule, any attempt on the part of the legislature to impose duty on something which cannot be called "goods" and with reference to which the expressions "manufactured" and "produced" are inapplicable has to be repelled as ultra vires. The appropriate word which can be used in relation to electricity is "generation" and, according to the Learned Counsel, it cannot be treated as a synonym either for manufacture or production. Reliance was placed on the observation in Deputy Commissioner v/s. P. Plantations Ltd.: A. I. R. 1969 Supreme Court, 930, that the word "produced" means "to bring forth, bring into being or existence to bring (a thing) into existence from its raw materials or elements". The argument is that the expression "production" necessarily involves a process whereby certain raw materials are converted into some thing else qualitatively different. Since such a process is not involved in the generation of electricity, it cannot be described to have been manufactured or produced. It is claimed that electric energy is imponderable and invisible and its presence or influence is only known by its effect. It is not tangible. It is not an article or matter which could be possessed, moved, delivered of Stored. Energy, as such, is never created nor destroyed but merely transformed from one form to another. In the generation of electricity there is no transformation of any raw material into electrical energy.