# ·H STATE OF MYSORE v. WEST COAST PAPERS MILLS LTD. & ANR

- **Citation:** [1975] 2 S.C.R. 127
- **Court:** Supreme Court of India
- **Decided:** 1974-09-24
- **Bench:** H. R. Khanna, M. H. Beg, V. R. Krishna Iyer
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/h-state-of-mysore-v-west-coast-papers-mills-ltd-anr-6278
- **Pages:** 11

## Headnote

127
Mysore Electricity (Taxatld11 011 Co11sumptio11) Act,. 1959 (Mysore
Act
No. 14 of 1959, Sections 2( I), ,3 and sub 0sectio11s (l) and (3) of Sectio11 4Electricity tax 011 electrical energy lost in tile course of transmission, wlletlrer
warranted-Respondent, if liable to pay electricity tax 011 e/ecrica/ e11ergv used
by it for ge11er,ati11g further electrical energy.
·
The respondent company is
manufacturing. paper
and other products.
Since the Mysore Electricity Board was not in a position to supply the entire
quantity required by the respondent company, the company started generating
electricity. In 1966, the appellants made a demand of Rs. 3,53,953.45 as
arrears of electricity tax under the Act from the respondent for the · period
from July 1959 to March 19'66. The respondent company filed a writ petition
in the High Court challenging the demand notice contending that, (1) it was
not liable to pay electricity tax on the quantity of electrical energy Jost in the
·course of transmission, i.e. as a result of transmission ·or transformer 'loss; and
(2) some electrical energy was used by it for generation .of further electrical
energy and therefore, no electricity tax was payable on the quantity of electrical
energy utilised by it for generation of further electrical energy, The High
Court decided on· both the points of controversy in favour of the respondent
company. This appeal by certificate under article 133( I )(a) has been filed
by the appellant.
Allowing the appeal with respect to the second contention,
HELD: (1). (Per H. R. Khanna and V. R. Krishna Iyer, JJ.)
The entire scheme of the Mysore Electricity (Taxation on Consumption)
Act 1959 is to tax the consumption of electrical energy. Where some energy
is riot co~sumed but ·lost before it reaches the point of consumption, the question of levy of tax on consumption of such energy would not in the very nature
of things arise. The place of consumption is normally at some distance from
the place where electrjcal energy is generated. Electrical energy has conse·
quently to be transmitted through metal conductors to the place where it is
consumed.
Such transmission admittedly entails loss of some electrical energy
and what is lost can plainly be not available for consumption and as such
would not be consumed. To realise tax on aU the electrical energy generated
would be tantamount to levying tax on generation or production of· electrical
energy and not on its consumption. Such a tax on the generation or production of electrical energy is plainly not permissible .under the Act.
The fact
that the consumer happens in the present case to be the same company which
generated the elctrical energy would make no .. material difference. [131 B-F]
Gokak Mills Ltd. v. Staf>e of Mysore (1969)2 Mysore Law Journal 99, aprroyed.
Per M .. H. Beg J. (dissellling).
No distinction is made anywhere in the Act between consumption for different purposes, such as generation, transmission, transformation or utilisation
of electricity for any other purpose.
One who generates electricity and then
transmits and transforms it before utilising it for another purpose may be said
to be generating it for several purposes. Spending up ot utilisation of energy for
each of the purposes, whether it be generation, or transmission, or. transfor·
mation, or, manufacture of some particular commodity, can be said to be a
use which must necessarily fall within the ordinary .grammatical or dictionary
mean!n~ of the wor~ consumption. The consumption begi'!s immediately after
electn~1ty can be s.a1d to be generated. So long a:s energy 1s spent or used up,
128
SUPREME COURT REPORTS
[1975] 2 s.c.R.
whatever be the process or purpose of such using up1 it will be cons~mption.
For n division of consumption into effective consumption and non-effective con·
sumptior., there is no warrant in the relevant provisions Of the Act. [134 F·H,
135 F.G, 136 A·D]
It may be tha' the electricity tax is imposed upon a pcrso~ only in the c

## Text

A
B
c
D
E
F
G
·H
STATE OF MYSORE
v.
WEST COAST PAPERS MILLS LTD. & ANR.
September 24, 1974
[H. R. KHANNA, M. H. BEG AND V. R. KRISHNA IYER, JJ.]
127
Mysore Electricity (Taxatld11 011 Co11sumptio11) Act,. 1959 (Mysore
Act
No. 14 of 1959, Sections 2( I), ,3 and sub 0sectio11s (l) and (3) of Sectio11 4Electricity tax 011 electrical energy lost in tile course of transmission, wlletlrer
warranted-Respondent, if liable to pay electricity tax 011 e/ecrica/ e11ergv used
by it for ge11er,ati11g further electrical energy.
·
The respondent company is
manufacturing. paper
and other products.
Since the Mysore Electricity Board was not in a position to supply the entire
quantity required by the respondent company, the company started generating
electricity. In 1966, the appellants made a demand of Rs. 3,53,953.45 as
arrears of electricity tax under the Act from the respondent for the · period
from July 1959 to March 19'66. The respondent company filed a writ petition
in the High Court challenging the demand notice contending that, (1) it was
not liable to pay electricity tax on the quantity of electrical energy Jost in the
·course of transmission, i.e. as a result of transmission ·or transformer 'loss; and
(2) some electrical energy was used by it for generation .of further electrical
energy and therefore, no electricity tax was payable on the quantity of electrical
energy utilised by it for generation of further electrical energy, The High
Court decided on· both the points of controversy in favour of the respondent
company. This appeal by certificate under article 133( I )(a) has been filed
by the appellant.
Allowing the appeal with respect to the second contention,
HELD: (1). (Per H. R. Khanna and V. R. Krishna Iyer, JJ.)
The entire scheme of the Mysore Electricity (Taxation on Consumption)
Act 1959 is to tax the consumption of electrical energy. Where some energy
is riot co~sumed but ·lost before it reaches the point of consumption, the question of levy of tax on consumption of such energy would not in the very nature
of things arise. The place of consumption is normally at some distance from
the place where electrjcal energy is generated. Electrical energy has conse·
quently to be transmitted through metal conductors to the place where it is
consumed.
Such transmission admittedly entails loss of some electrical energy
and what is lost can plainly be not available for consumption and as such
would not be consumed. To realise tax on aU the electrical energy generated
would be tantamount to levying tax on generation or production of· electrical
energy and not on its consumption. Such a tax on the generation or production of electrical energy is plainly not permissible .under the Act.
The fact
that the consumer happens in the present case to be the same company which
generated the elctrical energy would make no .. material difference. [131 B-F]
Gokak Mills Ltd. v. Staf>e of Mysore (1969)2 Mysore Law Journal 99, aprroyed.
Per M .. H. Beg J. (dissellling).
No distinction is made anywhere in the Act between consumption for different purposes, such as generation, transmission, transformation or utilisation
of electricity for any other purpose.
One who generates electricity and then
transmits and transforms it before utilising it for another purpose may be said
to be generating it for several purposes. Spending up ot utilisation of energy for
each of the purposes, whether it be generation, or transmission, or. transfor·
mation, or, manufacture of some particular commodity, can be said to be a
use which must necessarily fall within the ordinary .grammatical or dictionary
mean!n~ of the wor~ consumption. The consumption begi'!s immediately after
electn~1ty can be s.a1d to be generated. So long a:s energy 1s spent or used up,
128
SUPREME COURT REPORTS
[1975] 2 s.c.R.
whatever be the process or purpose of such using up1 it will be cons~mption.
For n division of consumption into effective consumption and non-effective con·
sumptior., there is no warrant in the relevant provisions Of the Act. [134 F·H,
135 F.G, 136 A·D]
It may be tha' the electricity tax is imposed upon a pcrso~ only in the character or capacity of a consumer. It ~oes not follow f~om this that the cha~acter
or cap~city of a consumer only begins when energy 1s used up fo~ a particular
purpose in whi(;h a consumer is c:onsumer. If he consumes it is ev1d.ent that the
charncter of a consumer attaches to him even if he is a generator or producer
of c'nergy. He has then a dual c:haracter when he consumes and also generates.
What the Act docs is simply to tax the using up of energy by a person what·
ever be the capacity in which the use may have been made. It is really a
tax on using up and not on use in any particular character or manner. [136
F·HJ
Indian Al11miniur11 Co. Ltd. v. Ti'ie C.l.T. West Bengal, Calcutta, 849 T·R
735 referred to.
(2)
(By Full Court) : Electrical energy can be consumed for a variety of
purposes. The fact· that such energy has been used not for manufacturing some
other article but for generating furthh electricity would not go to show that such
c:nergy has not been consumed. Sub-section (3) of section 4 makes it clear
that electricity tax would be payable if a person consumes electrical energy
~eneralcd ~ :' the consumer himself. The definition of the word "consumer" also
shows that it would include a ~:rson who consumes energy generated by himself. [132 C·E, G·H]
CIVIL APPELLATE JuRISli>ICTION : Civil Appeal No: 124(N) of
1971.
Appeal from the judgment and order dated the August 5, 1970 of
the MY.sore High Court in W.P. No. 2058 of 1970.
S. V. Gupte and M. Veerappa, for the appellant.
V. Krishna Murthy, P. C.
.Bhartari, J. B. Dadachanji 0. c.
Mthur and Ravinder Narain, for the respondent.
·
V. s. Desai, G. S. Ullal and B. R. Agarwala, for the interveners.
KHANNA, J.-This appeal by certificate under article 133(l)(a)
of the Constitution has been filed by the State of Mysore and the
Electrical Inspector to the Government of Mysore against the judgment of Mysore (now Karnataka) High Court whereby that court
in a petition unider article 226 of the Constitution quashed the demand
made by the app<:!Jant State calling upon the West Coast Papers Mills
Ltd. respondent company to pay electricity tax under the Mysore
Electricity (Taxatibn on Consumption) Act, 1959 (Mysore Act No.
14 of 1959) (hereinafter referred to as the Act). The two questions
which arise for determination in this case are :
( 1 ) Whether electricity tax is chargeable on the quantity
of' electrical energy lost in the course of transmission;
and
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(2) Whet1.1~r the respondent co~pany is
li~ble to pay
electnc1ty tax on the quantity of electncal ehqgy
. used by it for generation of further electrical energy.
H
The High Court answered both the questio~ in favour of the res- .
pondent company and quashed the demand which included tax on
the above two counts. The State, it was held, was at liberty to make
MYSORE v. WEST COAST' PAPERS;M!Ll:s-.,(Khanna, J,).
1"-9
A · a fresh assessnient of the electricity iax· pay.able by the respondent
company "withou.t taking into . account. transmissio~ losses and . ~he
quantity of electncal energy used for generat:on ot further electnc.1l
energy".
The State was also .. directed. to, r~fund the ~xce~s amouat
realised by it from the respondent company or Jo adiust 1t towards
the electricity tax lawfully due from the .respondent companiy
for
B
subsequ1<nt years.
· .
.
The respondent company is manufacturing .paper and other products at Dandeli.
Since the Mysore State E:ectricity Board was not
in a position to supply the entire ql!antity of electricity required by
the respondent company, th~ company started generating electricity bf
installing turbine and other machinery.
On June 18, 1966 the ap:<
pellants made· a demand of Rs. 3,53,953.45 as arrears of eJectricity
· c
tax under the Act from ·the respondent company for the period from
July 1959 to March· 1966.
0.n August 29, 1966 the respondent
comparzy filed wtit petition challenging the demand notice . on the
ground that the demand was illegal and unjus•ified.
Before dealing with the respective contentions, it may be pertinent
to set ou_t 1 he releva,nt provisions.
A State :legislature is ~ompetent'
to impose tax on con~umption · or sale of· electricity under· entry 53
I>
of list II of Seven'h Schedu!e to the Constitution. The Mysore legis-
. lature has enacted the Act in exercise of the power conferred by the
above entry.
S~cti<ln 2' of the Act contains definitions. Clause (1)
of that section gives the defiajtion of consumer as under :
"(1) "consumer" includes a local ·authority, company
or other person to whom energy is· supplied by a licensee
E .
on payment of charges or· otherwise, and a licensee or other
person who consumes energy generated by himse'.f, but does
not . include a liceQ,See to whom energy is supplied by the
State Electricity Board for supply to others; and the word
"consume" with its grammatical variations shall be construed
according! y;
·
·
·
Explanation :-Where a licensee to whoin energy is sup.
F
plied by the State E1ectricity Board for supply to others,
·himself consumes a,ny part of the ef'lergy, he shall be deemed
to be a consumer in respect of energy so consumed."
Section 3 of the Act contains· the charging provision and material
part of it at the relevant time read as under :
'
. "Subject t? the provisions of the Act, there shall be
G
levied and paid to the State Government qn 1he units of ,
energy ;,consu:n:ed eve.~y month, a tax (hereina(ter referred
to as
electn~1ty tax ) . calculated at a rate not\ ~xceeding
three n~ye pa1se per umt of energy as may, by notification,
be specified by the State Government, and different rates
may be specified in respect of different classes of consumers"'
'
H
Section 4 deals with the payment of electricity tax. Sub-sections ( 1)
and ( 3) of that section read. as under :
" ( 1) Every licen~ee shall . collect and pay to the S•ate
Government at .the ume and m the manner pre&cribed the
1C-L251SupCI/75
'
130
SUPiU!ME COURT REPORTS
[1975] 2 s.c.lt.,
electricity tJX payable under fois Act on the units of e~rgy
supplied by him to consumers. The tax so payable shall be
a first charge on the amounts recoverable by the supplier
for the energy supplied by him and shall be a debt due by
him to the State· Oov.:rnment :
Provided that wh~:re the licensee has been unable to
recover the amou,nts du~ to him for the energy supplied by
hin1 he shall not b! liable to pay the tax in respect of the
energy so supplied.
(3) Every persorn, who consumes energy generated by
himself, or who supplies energy to any other person free of
charge, shall pay, or collect and pay, ~as the case may be,
to the State Government, at the time a.nd in the manner prescribed, the electricity tax payable under section 3 on the
units of energy consumed by himself or supplied to such
other person.
It would at this stage k appropriate to advert briefly to the process of genera•ion and distribution of electricity.
The
process of
generation of electricity normally .consists of converting mechanical
energy into electrical ·energy through what is known as the "generator".
Such mechanical energy is normally supplied by turbine or
piston engine.
The motive power· for such turbine or piston engine
is supplied by falling water, s'eam,
gas, mineral oil or nuclear
fuel.
Electrical energy so generated is
transmitted through
me•ru
conductors to places where it is to be .used. Some loss of electrical
energy takes place in the transmission.
Such loss is described as
transmission loss.
Electricity is transmitted over long· distances at
c0m):>aratively high voltage to minimise the ttansmission loss.
If
electricity is generated at low voltage before transmission,. it is stepped
up to relatively high voltage through what is known as "transformer".
When electrical energy reaches the place where it is be used, the
voltage of electric current is brought down through a transformer
before it is put to use. The reason for that is that it is more safe
and convenient to . have low voltage at the point of consumption.
Some energy is lost in the process of stepping up ~nd stepping down
of the voltage through transformers.
Such loss is described as the
transformer loss.
Ar.cording to the case s<~t up by the respondent company, it was
not liable to pay electricity tax on the quantity of electrical energy lost
in the course of transmission, i.e., as a result of transmission· or. trans·
former loss. It was further the case of the respondent company that
some electrical energy was used by it for generation of further electrical energy. The respondent claimed that no electricity tax was payable
on the quantity of electrical energy utilised by it for generation of further electrical energy. The High Court, as mentionedearlier, decided
on both the points of controversy in favour of the respondent company.
In appeal before us Mr. Gupte on behalf of the appellants · has
challenged the correctness of the view taken by the High Court on the
two points of. controversy.
As against that, Mr. Krishnamurthy on
A
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H
A.
B
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MYSORE v. WEST COAST PAPERS MILL'S (Khanna,/,)
131
behalf of the respondent company and Mr. Desai on behalf of the -
intervener have canvassed for the .correciness of the view· taken by the
High Court.
We have set out ·tiie relevan~ provisions of the Act, and it would
appear therefrom that electricity tax is payable on the units of· energy
consumed. The . one question with which we are concerned in this
appeal is whether electricity tax is payable in respect of the electrical
energy which is lost in transmission as a ~esult of transmission loss or
transformer loss. So far as this ques$ion .is concerned, we are of the
view that no tax is. payable on the electricity so lost. The entire scheme
of the Act is to tax the consumption of electrical energy. Where some
energy is not consumed but lost before it reac.hes the point of cons·uruption, the question of levy of tax on consumption of such energy would
not in the very nature of things arise. The place of consumption of
electrical energy is normally at some distance from the place where
electrical energy is generated. Electrical energy has consequentlv to
be transmitted through metal conductors to the place where. it is consumed.
Such transmission admittedly entails loss of some electrical
energy and what is lost can plainly be not available for consumption
and as such would not be consumed. If a person, for exarilple, generates
100 units of electrical energy and loses 10 units in the process of transmission from the point of generation to the point of coniumption, he
would in the very nature of things be able to supply only 90 units of
eiectrital energy to the consumers. The tax which would be payable on
the electrical energy consumed in such a case would be only for 90
units and not 100 units.
To hold othl'TWise and to realise tax on
100 units of electrical energy would be tantamount to levying tax
on the generation or production of electrical energy and not on its .
consumption. Such a tax on the generation or .production of electrical
energy is plainly not permissible under. the Act.
The fact that the
consumer happens in the present case to be the same company which
generated the electrical eneriy would, in our opinion, make no material difference.
A similar question arose before a Division Bench of the Mysore
High Court in Gokak Mills Ltd. v. State of Mysore( 1). The Division
Bench, while holding that no tax is payable in respect of the energy lost
between the point of generation and the point of consumption, observed as under :
"In the case before us, the company occupies both the
role of a supplier and a consumer .. It is a supplier when it
generates electricity and supplies it for its own purposes to
be consumed by it after it reaches the point of consumption.
The supply which it makes from the point of generation after
it is .generated, to the point of consumption where it is received by it for purposes of consumption, is transmitted by the
company not in the role of a consumer but in the· role of a
supplier, and, if during the process of transmission which is
made by the company in the role of a supplier some part of
the energy :is lost-and we are informed that such loss iS' in-
(1) (1969) 2 Mysore Law Journal 99.
132
SUPREME COURT REPORTS
[1975) 2 s.c,R.
evitable-it would not, in our opinion, be correcUo say that
that energy which is so lost is energy consumed by the company which generated it."
A
The above observations, in our opinion, represent the correct position
in law. It may be stated that the High Court declined to grant a certificate of fitness for appeal to the State of Mysore in the above case.
The State thereupon sought special leave of this Court to appeal against . B
the judgment of the High Court but its application was rejected.
It is not necessary to express opinion on the legal position in a case
where a person receives supply, in bulk, of energy from a licensee and
while transmitting or transforming or distributing the same within his
area, suffers losses as such a question does not arise in the present case.
We are. however, unable to agree with the High Court that no
electricity tax is payable ·by the respondent company in respect of
the electrical energy used by it for generating further electrical energy.
Electrical energy can be consumed for a variety of purposes. The fact
that such energy has been used not for manufacturing some other
article but for generating further electricity would not go to show that
such energy has n.ot been consumed. What we are actually concerned wit!t und~r the Act is the consumption of electrical energy. The
use ·of electr1cat energy vvould none the less be consumption of such
energy even though it has bi~en consumed in operating the apparatus·
for generating further ele:ctrical energy. . The purposes for
which
the energy has been consumed would not make any material difference
for the purposes of the levy of tax under the Act.
It is not disputed on behalf of the respondent company that if it
h.ad used electrical energy generated by the State Electricity· Board
for generating further electrical energy, the use of such energy generated by the Board would have attracted the provisions of the Act for
liability to pay electricity tax. It would, in our opinion, make no
difference that the electrical energy useli by the respondent co~pany
for generating further electric:al energy was that which had been generated by itself. Sub-section ( 3) of section 4 reproduced above makes
it clear that electricity tax would be payable if a person consumes elcc-·
trical energy generated by himself. The sub-section thus puts the
consumption ·.Of energy generated by the consumer himself at par with
the consumption of energy generated by sOJpeone else. The definition
of the word "consumer" also shows that 1t would include a person
c
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who consumr.s energy generated by Himself. The proposition that in . G
the ·matter of the levy of electricity tax the court should differentiate
between cases wherein the 1energy COD$umed .has been generated by
someone other than the consumer and those wherein such energy has
. been ~enerated by the consumer himself cannot, therefore, be countenanced.
We. therefore, partially accept the apl)eal an~ hold that electricity
tax under the Act is payable in respect of electri~ energy· consumed
for izenerating further electricity. No such tax !8• howey:er, payable
in respect of electrical energy lost as a result ·of transmission loss and
A
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MYSORE V. WEST COAST PAPERS MILLS (Beg, /.)
133
transformer loss.
The judgment of the High Court is modified accordingiy.
The parties in the circumstances
are left to bear their own
costs throughout.
BEG, J.-1 have had the advantage of going through the opinion
of my learned Brother Khanna with which my learned Brother Iyer
concurs.
I entirely agree with my learned Brother's observations :
'',What we are.. actually concerned with under the Act is the consumption of electricity.
The .purposes for which electricity has been consumed would not make any materi•.tl difference for the purpose
of
levy of tax under the Act".
I also agree that sub. s. (3) ·of Section 4
of the Act makes it clear that tax would be payable even if a person
consumes electrical energy generated by himself.
The sub-section
equates the consumption of energy generated by the consumer him- .
self with the consumption of energy generated by someone else.
The
definition of the word 'consumer' also shows that it would .include all
persons who consume energy generated ·by themselves. It seems to
me, with great r.:spect, that all this reasoning adopted by my learned
Brother applies with equal force to electricity which may be con8umed
in the process of transmission or transformatio~ of electricity generated so that it may be consumed at points at which or in a form in
which it may be possible to use it for one who wants to utilise elec~
tricity for a particular manufacturing process.
With great respect, I _f!).il to see· the distinction, in principle, between consumption of electricity for generation and what has been
•called "loss" of electricity in the course of its transmission and transformation.
The Electricity
Act, with which
we are concerned,
makes no distim;tion between a use for generation, a use for transmission or supply, and a use for transformation.
Transmission seems to
me a process district from generation. It may be covered. by the
heading of "supply" or "distribution". Transformation is akin
to
generation in as much as it results in the conversion of electrical power
of a certain voltage into one of a higher or lower voltage.· It is
a
part of the process which makes e~ectricity more suitable for use for
one of the several purposes or even the main purpose of a generator
of electricity.· The generation is also for the same purpose as
are
tnimmission· ani transformatlon of electrical energy into power
of
nMr:inriate voltage,
Therefore. if electricitv used uo in generation
is taxable as consumption, it sl1ould.
Jo¢cally speaking. follow that
electric.ity used up for transmission and transformation is also consumption even though it may be described as a "Joss" which seems !O
me t<i be a rather misleading term invented by those engaged m
supplying electricity.
Tiie problem before us is one of statutory construction
which
appears to me to be capable of solution by applying certain well-kno~n
rules of interpretation. The relevant provisions have been set out 1Il
134
'.:';JPREME COURT REPORTS
[1975] 2 s,c.R.
A ,
the judgment of my learned Brother Khanna so that I need not repeat .
them.
I will only refer to them in explaining them.
Section 2, cl. (I) seems to have three objects in view. Firstly, it
makes. it clear that the word "consumer" does not exclude but "h1cludes" authorities and persons, both natural and artificial, to whom
energy may be supplied, either gratis or on payment of a charge, as
also one w'ho generates energy as well as consumes it. Secondly, it
excludes "a licensee to whom energy is supplied by the State Electricity
Board for the purposes of supply to other". Every supplier of electricity is not excludetl.
It only excludes
an intermediate
supplier
"licencetl by the Electricity Board for purposes of supply to others".
Such an intermediate supplier is thus placed :1a an exempted cat.:gory
because his. use of electricity is apparently on behalf of the State Electricity Board. Other suppliers of Electricity would not be excluded
from the definition of "consumer" if they undertake the service or
supply without being lice:nced to do so by the State Electricity Board.
Furthermore, the explanation makes it clear that any consumption cf
energy, even by a licenced supplier, would be covered by consumption
for purposes of taxation. Thhldly, the definition itself contains the
explanation that the wo1rd "consumed" shall, for all purposes not
specially mentionecl, be interpreted "with its grammatical variation".
This means that we are referred to the ordinary dictionary meanings
of the word "consumers" for its variants all of which are covered.
The Shorter Oxford English Dic:ionary (Third Edition-Vol. I)
contains the following meanings of "Consume" : (I) "To make away
.with, destroy, as .by fire, evaporation, 'decompositio!l, disease, or the
like; (2) to waste, squander; (3) to use up, esp. to eat up, drink up;
( 4) · to take up, spend, wa!ite",
Some additional connotations of it
will he found in Webster's Third International Dictionary. But, the
meanings given above ar•e primary and uniform. They are necessarily included in the variations expressly covered ·by the statutory definition of it in Sec. 2(1).
It seems clear to me that no distinction is made anywhere in the
Act between consumption for different purposes, such as generation,
transmission; transformation or utilisation of electricity for any other
purpose. One who genera~ electricity and then transmits and transforms it before utilising it for another purpose may .be said to be
generating it for several purposes. Spending up or utilisation of energy
for each of the purposes,, whether •it be generation, or, .transmission,
or, transformation, or, manufacture of some particular · com111odity,
can be said to be a use which must necessarily fall within the orilinary
uammatical or dictionary m1mnine; of the word consumption. So lone
as energy is spent or used up, whatever be the process or purpose of
such using up, it will be consumption.
Speaking for myself, I fu1d it imoossible to reject the ar1?Ument of
Mr. Gupte, tillat, hnmediately after the ooint of generation, begins the
process of QOnsumotion whether the elecllicity, or, to use tbe term
employed in the definition, "cmergy" is used up or IO'lt in transmission
B
c
D
E
F
G
H
A
B
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MYSORE v. WE'ST COAST PAPERS MILLS (Beg, /.)
135
or · trans~ormation or manufacture. The use of energy or electricity is
necessanly a process of using up or destroying it in the course of such
use. The mere fact that it is called "transmission loss" or "transformation loss", would, in my opinion, make no difference whatsoever to
!he result. ln each c~se, the result is consumption. The process is,
rn each case, one which entails consumption whatever be its object.
lt seems to me that the definition discussed above does not certain any exemption for any use of electricity for any particular purpose
except possibly where a licensee is said to be transmitting it on behalf
or the State Electricity Board. Such a licensee can charge or collect,
under Section 4(1) and (3) of the Act, the tax on what he supplies.
This necessarily implies a deduction, so far as those to whom energy
is supplied are concerned, of the quantity of energy lost or used up in
the process of supplying from the total quantity consumtti after it is
generated. It may be possible to contend that such a licensee supplier
comes within the class excluded from the definition of "consumer"
given in Section 2. cl. ( 1) of the Act, although perhaps the J;:xplanation to the provision would bring in even an intermediate licensee
consumer withfn the net of taxation when his consumption or use of
energy is for the purposes of transmission. The deduction of . the
quantity ccinsumed in providing the service of supplying, it could be
argued, is meant only to .exclude the collection of tax upon it from
the ultimate consumers.
However, as . no case of such a licensee is
before us, it is quite unnecessary
fo1 us to consider his hypothetical
case.
I mention it only for the purpose of showing that the character
in which the _activity of consumption is carri,1J on is only relevant for
the purposes of exclusion from the definition of "consumer" when we
have "a licensee to whom energy is supplied by the Electricity Board!
for supplv to others". In every other case, the character of a supplier
or generator is not rejevant at all in d'ciding whether he is also a
consumer.
In all other cases, the only question to be determined is :
Does he consume energy : The only character or. capa<;ity which is
relevant for purposes or taxation, if character is relevant at all, is that
of a consumer. In my opin:on, the consumption begins immediately
after electricity can be said to be generated.
We understand that it
is on such an interpretation of the Act that the meter is installed at
the point of supply by the Company to itself of the electricity genera~
ea by it. It seems to me be quite immaterial whether the energy IS
consumed in transmission or transformation or a particular manufac•
G ·. turing process. It is, nevertheless, energy consumed. It is, so far as
the- definition goes, on par with electricity consumed for purposes of
II
· generation.
In order to meet what appears to me to have been correctly put
forword by Mr. Guote as the ordinary meaning of "consumer", subject to the qualification in the definiiion given in Sec. 2, cl. (1) of ~e
Act, learned counsel for the Respondents tried to rely upon the view
adopted by the Madras High Court that transmission and transformation must be construed as substantial parts of the process of generation.
Even if we were to accept . such an argument for which no
136
SUPREME COURT REPORTS
[l 975] 2 s.c.R •.
ground, justifiable from :a technical point of view, has been put forward
before us, l thmk that, upon the view adopted by my learned Brother
Khanna with regard to taxation of ·energy consumed on generation,
what is consumed for transmission and transformation of the energy
would also be taxable because that would then be energy used up in
A
the process of generation.
But, as I have said above, ) do not ~ml . ·
any acceptable basis for such a concept of fie process of generation
B
which wa> used by the Karnataka High Court in the judgment under
appeal before .us.
Another contention
advanced by the learned Counsel
for the
Respondents before us was that "effective" consumption must be
deemed to begin only after a transmission and transfonnation
o1
energy so that it is put in a consumable form.
This contention rests
C
upon a division of commmption into effective consumption and noneffective consumption. I do not find any warrant in the relevant provisions of the Act for such a distinction fer two kinds of consumption.
To introduce it would imply introlduction of words which are not there
in the stat\ltory prov:ision.
Such a method of construction or int~
pretation. is not pennissibl~ except under the compelling necessity to
avoid an absurdity which does not seem to be present here at all.
D
Lastly, learned Counsel for the respondents had tried to
argue
that the Act imposed a. tax u;xm a person in his "character'" as a
consumer and not in bis character as a generator. As already indicatdJ above, such a distinction is base,d on the supposedly different
characters of consumption seems to me to be quite misleading. The
confusion and difficulties to which such a distinction can give. rise an:i
E
the time it took to clear them up in another field of taxation, where .
the question was whether expenditure in a particular character is a
permissible deduction, under Section 10(XV) of the Indian Incometax Act may be gathered from what this Court said in Indian Aluminium Co. Ltd. v. the CJ.T. West Bengal Calcutta.(1)
It may be that the electricity tax is imposed upon a person 01,1ly in
the character or capa-city of a consumer. It does not follow from this
that the character or capacity of a consumer only begins when energy
is used up for a particular purpose in which a consumer is a consumer. ·
If he consumes it is evident that· the character of a .consumer attaches
to him. even if he is a generator _or .producer of energy, He has then
a dun! characrer wh<:n he consumes and also ~nerates. What the Act
does is si~ply to t~x the usinj.! up of enerl!v by a person whatever be
the capa~1ty !n which the use .may have ~een made,, It is· really a
tax on usmg up and not on use 1n any particular character or manner.
This seems to me to be the clear imoort of words to be construed.
These have, ordinarily to be given their full effect.
.
· ·Although the arguments of the respondents
mentionel.i
above
seem to ~ave found complete acceptance in the High Court, I find
!DYself, with due respect, u~able to accede; to them. Logically speakmg,_ I find· no way of escapmg the conclus1on lhat a tax im?osed on
{I) 84 J;f.R:. 73S
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MYSORE V. WEST COAST PAPERS MILLS (Beg, /,)
137
consumption cannot be avoided eveit when the consumer uses up
energy· either in generating or producing it or transmitting it or transforming it before utilising it for some manufacturing process. It is
consumption that is taxed. I, therefore, regret my inability to accept
the conclilsions of my learned Brother Khanna . on taxation of energy
used up in its transmission . or transformation before its use for a
manufacturing purpose.
In my opii;iion, the appeal befote us must be allowed wholly with
costs.
ORDER
In view of the decision of the majority, the appeal is allowed in
part and the judgment of the High Court modified. The parties are
left to. bear their own costs throughOIJ.~.
V.M.K.
\