# SOUIBERN PETROCHEMICAL INDUSTRIES CO. LTD v. ELECTRICITY INSPECTOR AND E.T.1.0. AND ORS

- **Citation:** [2007] 6 S.C.R. 955
- **Court:** Supreme Court of India
- **Decided:** 2007-05-15
- **Case number:** Civil Appeal No. 2551 of2007
- **Bench:** S.B. Sinha, Markandey Ka Tju
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/souibern-petrochemical-industries-co-ltd-v-electricity-inspector-and-e-t-1-0-23139
- **Pages:** 72

## Headnote

B
Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003Legislative competence and validity of-Held: State has not overstepped its
limits of power-Legislative competence of the State and validity of the Act C
upheld-Also not repugnant to the Electricity (Supply) Act, 1948Constitution of India, 1950-Articles 14, 248, 254, 288, 366-General Clauses
Act, 1897, Section 6.
Doctrines:
Doctrine of purposive construction-Doctrine of legitimate
expectation-Doctrine of promissory estoppel-meaning and applicability
of
Words & Phrases:
"Unless a different intention", "Corresponding': "not withstanding
such repeal"-Meaning of in the context of Tamil Nadu Tax on Consumption
or Sale of Electricity Act, 2003 and General Clauses Act, 1897.
"Permanence': "privilege': "goods"-Meaning of
The validity of the provisions of Tamil Nadu Tax on Consumption or Sale
of Electricity Act, 2003 and/or application thereof in respect of the generating
companies as also the consumers, were challenged before the Madras High
Court in a large number of writ petitions. The Division Bench of the Madras
High Court negatived the challenge. Hence the present appeals.
On behalf of the appellants it was contended that the consumers of
electrical energy form a homogenous class and, thus, could not have been
discriminated in the matter of grant of exemption; that the equality clause
contained in Article 14 of the Constitution oflndia being a basic structure of
955
D
E
F
G
H
956
SUPREME COURT REPORTS
[2007] 6 S.C.R.
A the Constitution must in a situation of this nature be enforced and in that
view of the matter, it was obligatory on the part of the State to treat all the
consumers on equal footing; that in view of the fact that Section 14 of the
2003 Act per se is arbitrary, the burden of proof was on the State to show
that the classification is a valid classification, and that the validity of the 2003
B
Act can be read down for the purpose of upholding its constitutionality.
It was also contended that the High Court committed a manifest error
in interpreting Sub-sections (1) and (2) of Section 20 of the 2003 Act together;
that they are independent of each other and operate in different fields; that
whereas the proviso appended to Section 20(1) of the 2003 Act provides for
c savings that follow from the repeal of the 1962 Act and the 1939 Act; that
Section 20(2) provides for a legal fiction for continuation of certain things as
if the Acts of 1962 and 1939 had not been repealed; that Sub"section (I) of
Section 20 does not contain any statement which occurs in Section 6 of the
General Clauses Act being "unless a different intention appears", and in that
view of the matter, all rights and privileges obtained by a consumer in terms
D of the provisions of the 1939 Act or the 1962 Act are safeguarded. Having
regard to the new economic policy, the statute encourages more private
participation in the private sector and thereby a literal or narrow
interpretation will defeat the same; that in any event, Section 14 should be
construed in such a manner so as to make it consistent with Article 14 of the
E Constitution of India; and that the 'privilege' is superior to the right and in
that view of the matter even if the appellants have not acquired any right, they
having enjoyed privilege, the same is saved under Clause (b) of Sub-section
(1) of Section 20 of the 2003 Act.
It was also submitted that the parties have set up their industries relying
F on the promises made by the State; that the sugar industries have spent about
Rs. 745.64 crores in that behalf and that taking account of this substantial
spin-off, doctrine of promissory estoppel should be attracted in this case and
in that view of the matter, the State is estopped from demanding the electricity
duty from the captive power plants including the appellants.
G
On behalf of the Respondent-State of Tamil Nadu, it was inter alia
contended that the exclusive right of the State Legislature to legislate matters
under entries

## Text

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SOUIBERN PETROCHEMICAL INDUSTRIES CO. LTD.
A
v.
ELECTRICITY INSPECTOR AND E.T.1.0. AND ORS.
MAY 15, 2007
[S.B. SINHA AND MARKANDEY KA TJU, JJ.]
B
Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003Legislative competence and validity of-Held: State has not overstepped its
limits of power-Legislative competence of the State and validity of the Act C
upheld-Also not repugnant to the Electricity (Supply) Act, 1948Constitution of India, 1950-Articles 14, 248, 254, 288, 366-General Clauses
Act, 1897, Section 6.
Doctrines:
Doctrine of purposive construction-Doctrine of legitimate
expectation-Doctrine of promissory estoppel-meaning and applicability
of
Words & Phrases:
"Unless a different intention", "Corresponding': "not withstanding
such repeal"-Meaning of in the context of Tamil Nadu Tax on Consumption
or Sale of Electricity Act, 2003 and General Clauses Act, 1897.
"Permanence': "privilege': "goods"-Meaning of
The validity of the provisions of Tamil Nadu Tax on Consumption or Sale
of Electricity Act, 2003 and/or application thereof in respect of the generating
companies as also the consumers, were challenged before the Madras High
Court in a large number of writ petitions. The Division Bench of the Madras
High Court negatived the challenge. Hence the present appeals.
On behalf of the appellants it was contended that the consumers of
electrical energy form a homogenous class and, thus, could not have been
discriminated in the matter of grant of exemption; that the equality clause
contained in Article 14 of the Constitution oflndia being a basic structure of
955
D
E
F
G
H
956
SUPREME COURT REPORTS
[2007] 6 S.C.R.
A the Constitution must in a situation of this nature be enforced and in that
view of the matter, it was obligatory on the part of the State to treat all the
consumers on equal footing; that in view of the fact that Section 14 of the
2003 Act per se is arbitrary, the burden of proof was on the State to show
that the classification is a valid classification, and that the validity of the 2003
B
Act can be read down for the purpose of upholding its constitutionality.
It was also contended that the High Court committed a manifest error
in interpreting Sub-sections (1) and (2) of Section 20 of the 2003 Act together;
that they are independent of each other and operate in different fields; that
whereas the proviso appended to Section 20(1) of the 2003 Act provides for
c savings that follow from the repeal of the 1962 Act and the 1939 Act; that
Section 20(2) provides for a legal fiction for continuation of certain things as
if the Acts of 1962 and 1939 had not been repealed; that Sub"section (I) of
Section 20 does not contain any statement which occurs in Section 6 of the
General Clauses Act being "unless a different intention appears", and in that
view of the matter, all rights and privileges obtained by a consumer in terms
D of the provisions of the 1939 Act or the 1962 Act are safeguarded. Having
regard to the new economic policy, the statute encourages more private
participation in the private sector and thereby a literal or narrow
interpretation will defeat the same; that in any event, Section 14 should be
construed in such a manner so as to make it consistent with Article 14 of the
E Constitution of India; and that the 'privilege' is superior to the right and in
that view of the matter even if the appellants have not acquired any right, they
having enjoyed privilege, the same is saved under Clause (b) of Sub-section
(1) of Section 20 of the 2003 Act.
It was also submitted that the parties have set up their industries relying
F on the promises made by the State; that the sugar industries have spent about
Rs. 745.64 crores in that behalf and that taking account of this substantial
spin-off, doctrine of promissory estoppel should be attracted in this case and
in that view of the matter, the State is estopped from demanding the electricity
duty from the captive power plants including the appellants.
G
On behalf of the Respondent-State of Tamil Nadu, it was inter alia
contended that the exclusive right of the State Legislature to legislate matters
under entries enumerated in List II being exclusive, Entry 53 thereof would
not be subservient to Entry 38 of List III of the Seventh Schedule of the
Constitution of India; that no material has been placed on record to show that
H the State Legislature has transgressed its legislative power in covert or
"
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,,
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•
.,,
,.
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SOUTHERN PETROCHEMICAL INDUSTRIES CO. LID. '· ELECTRICITY INSPECTOR
957
.J
indirect manner or otherwise over-stepped its limits; that the functions of A
the State Electricity Regulatory Commission constituted under the 1998 Act
refer to a non-taxing entry dealing with general aspects of electricity
excluding taxation and, thus, the 1998 Act cannot prevail over Entry 53 of
List II of the Seventh Schedule of the Constitution of India and, thus, in that
view of the matter Article 254 of the Constitution of India cannot have any B
application; that an exemption, by its very nature, does not create a right and
it is always defeasible and susceptible to be withdrawn; that the doctrine of
promissory estoppel will have no application in the instant case as the State
cannot be prevented from extending the exemption of electricity tax on
consumption under the 2003 Act on the basis thereof or otherwise, inasmuch
as there cannot be any estoppel against the exercise of legislative power to c
repeal any Act and to re-enact it. The exemption granted under Section 13(1)
of the 1962 Act was otherwise subject to cancellation or variation under
Section 13(2) thereof.
Partly allowing the appeals, the Court
D
HELD: 1.1. Various entries in the three Lists provide for the fields of
legislation. They are, therefore, required to be given a liberal construction
,.
inspired by a broad and generalized spirit and not in a pedantic manner. A
clear distinction is provided for in the scheme of the Lists of the Seventh
Schedule between the general subjects of legislation and heads of taxation. E
They are separately enumerated. Taxation is treated as a distinct matter for
purposes of legislative competence vis-A-vis the general entries. Clauses (1)
and (2) of Article 248 of the Constitution of India also manifests the
aforementioned nature of the entries of the List, and, thus, the matter relating
to taxation has been separately set out. The power to impose tax ordinarily
would not be deduced from a general entry as an ancillary power. In List II, F
T'
entries 1 to 44 form one group providing for the legislative competence of
~
the State on subjects specified therein, whereas entries 45 to 63 form another
group dealing with taxation. This Court does not mean to suggest that in
regard to the validity of a taxation statute, the same, by itself, would be a
determinative factor as in a case where the Parliament may legislate an
G
enactment under several entries, one of them being a tax entry.
[Para 55) [987-D-F]
-(
1.2. A bare perusal ofEntry 53 of List II and Entry 38 of List ill, ho~ever,
clearly suggests that they are meant to operate in different fields.
[Para 56) [987-G) H
958
SUPREME COURT REPORTS
[2007] 6 S.C.R.
A
1.3. Entry 53 does not contain any such restriction and, thus, Clause
. ,
(3) of Article 254 of the Constitution of India will have no application in the
instant case. [Para 58) 1988-B)
1.4. Legislative competence of the State of Tamil Nadu to legislate the
impugned Act is beyond any dispute. It cannot, therefore, be said that the
B State's action in enacting the Act suffers from colourable exercise of any
power. Thus, it can be safely concluded that the State has not over-stepped its
limits of power. !Para 591 (988-B-Cj
1.5. Entry 53 of List II provides for a taxation entry; whereas Entry 38
1
of List III provides for a non-taxation entry dealing with general aspects of
c electricity excluding taxation. The 1998 Act empowers the Commission only
to fix the electricity tariff or the charges for consumption of electricity. The
legislation made by the State is independent of actual tariff of electricity
charges. Tariff would mean a cartel of commerce and normally it is a book of
rates. [Para 61 I (988-G-HI
D
1.6. The 2003 Act is, thus, not repugnant to the 1948 Act.
(Para 641 (989-D)
K.C. Gajapati Narayan Deo and Ors. v. The State of Orissa, (19541 SCR
.,
1; R.S. Joshi, Sales Tax Officer, Gujarat and Ors., v. Ajil Mills Limited and
E
Anr., [19771 4 SCC 98; Raja Jagannath Baksh Singh v. State of Uttar Pradesh,
AIR (1962) SC 1563 and MP. Vidyut Karamchari Sangh v. MP. Electricity
Board, (200419 SCC 755, relied on.
Mis. Universal Imports Agency and Anr. v. The Chief Controller of
Imports and Exports aud Ors., (1961) 1 SCR 305; Shri Ram Prasad
F (Deceased) By His Legal Representative v. The State of Punjab, (196613 SCR
486; State of Punjab v. Harnek Singh, (2002) 3 SCC 481; State of A.P. v.
National Thermal Power Corpn. Ltd. and Ors., (2002] 5 SCC 203; BSES Ltd.
y
v. Tata Power Co. Ltd. and Ors., (2004) 1 SCC 195; MRF Ltd, Kottayam v.
(
Assistant Commissioner (Assessment) Sales Tax and Or;;., (20061 8 SCC 702;
State of Punjab v. Nestle India Ltd. and Anr., (20041 6 SCC 465; Madan Mohan
G Pathak and Anr. v. Union of India and Ors., (19781 2 SCC 50; Orissa State
Electricity Board and Anr. v. IP/ Steel Ltd. and Ors., (1995] 4 SCC 320 and
State of Mysore v. West Coast Papers Mills Ltd. and Anr., (197513 SCC 448,
referred to.
r
2.1. It is no doubt true that Section 18 of the 1962 Act as also Section
H 21 of the 2003 Act provided that they would be subject to the provisions of
-J.
I
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD. v. ELECTRICITY INSPECTOR
959
Article 288 of the Constitution of India. It deals with exemption from taxation A
by States in respect of water or electricity in certain cases. Clause (2) of the
said Article mandates that when a State makes a law for imposition of tax and
if any such law provides for fixation of the rates and other incidents of tax,
the assent of the President would be required. [Para 651 [989-E-FI
2.2. A plain reading of Clause (2) of Article 288 of the Constitution of B
India raises no doubt that the application thereof was meant to be only in
respect of the river valley authorities like Damodar Valley Corporation
constituted in the year 1948 by the Damodar Valley Corporation Act, 1948.
[Para 661 [989-G-HI
2.3. It may be true that in a case of this nature, it was not necessary to
lay down a clear provision of applicability of Article 288 of the Constitution
of India, but then it must have been done ex maori cautela (by way of abundant
caution). Only because a provision of the Constitution has been mentioned in
c
the Act, the same, would not necessarily mean that the same is required to be
taken into consideration for the purpose of judging the constitutionality D
thereof. The provisions, it is trite, are to be read in their entirety. The same
have to be read so as to give effect to the provisions contained in Article 287
of the Constitution of India. It is meant to be acted upon in the context of the
heading of Part XII of the Constitution of India and not for dealing with a
situation of the nature prevalent in the instant case. [Para 671 [990-D-FI
2.4. The State Electricity Board has been given the exemption under
the 2003 Act which by itself would not mean that those who purchase electrical
energy from them would also be so exempted. Had that been so, the same could
have been explicitly provided for. The principle of construction of statute, that
E
the exemption provisions would be attracted only when requisite conditions F
precedent therefor are satisfied, would apply in a case of constitutional
interpretation also. [Para 681 (990-G-HJ
2.5. The expression "subject to" stated that the same would imply that
the provisions of Article 288 ~ill have to be complied with. It is no doubt true
that ordinarily the expression "subject to" conveys the idea of a provision G
yielding place to another provision or other provisions subject to which it is
made. But,. keeping in view the nature of exemption granted, the subject matter
and nature of the recipient of such exemption, in our opinion, Article 288
has no application in the instant case. [Para 70) [991-B-C)
Damodar Valley Corporation v. State of Bihar and Ors., [1976) 3 SCC H
960
SUPREME COURT REPORTS
[2007) 6 S.C.R.
A 710; Surinder Singh v. Central Government and Ors., AIR (1986) SC 2166;
~ . ..--
South India Corporation (P) Ltd. v. Secretary, Board of Revenue, Trivandrum
and Anr., AIR (1964) SC 207; Ashok Leyland Ltd v. State of Tamil Nadu &
Anr., [2004] 3 SCC 1 and S.N. Chandrashekar and Anr. v. State of Karnataka
and Ors., [2006] 3 SCC 208, relied on.
B
3.1. The issue that the 2003 Act was in violation of the equality clause
contained in Article 14 of the Constitution oflndia was not raised before the
High Court. Only in one of the civil appeals, prayer was made for urging
additional ground and the same having been directed, additional ground has
t'·
been taken to urge the said question. A ground taken, however, must be based
c on a factual foundation. For attracting Article 14, necessary facts were
required to be pleaded. The foundational facts as to how Section 14 of the
2003 Act would be discriminatory in nature have not been stated at all. The
Government of Tamil Nadu has also not been given any opportunity to meet
the said contention. [Para 71) (991-D-EJ
D
3.2. It is now trite that such factual foundation, unless is apparent from
the statute itself, cannot be permitted to be raised and that too for the first
time before this Court. [Para 72) [91Jl-F)
~
3.3. Furthermore, in the matter of taxation, the State is given wide
'
E
discretion and is allowed to pick and choose objects for taxation and exempt!on.
[Para 74) (992-B)
3.4. This Court does not think that it is advisable to go into the said
question. [Para 75) [992-B)
3.5. In absence of necessary pleadings and grounds taken before the
F High Court, it cannot be said that only because Section 13 of the repealed
Act is inconsistent with Section 14 of the 2003 Act, the same would be
r
arbitrary by reason of being discriminatory in nature and ultra vires Article
14 of the Constitution of India on the premise that charging section provides
for levy of tax on sale and consumption of electrical energy, while the
G exemption provision purports to give power to exempt tax on "electricity sold
for consumption" and makes no corresponding provision for exemption of tax
on electrical energy self-generated and consumed. [Para 76) [992-C-D)
State of A.P. v. National Thermal Power Corpn. Ltd. and Ors., (2002) 5
>-
SCC 203; BSES Ltd. v. Tata Power Co. Ltd. and Ors., (2004) l SCC 195 and
H Orient Weaving Mills (P) Ltd. v. The Union of India, (1962) Supp 3 SCR 481,
:.
"r
l
SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. v. ELECTRICITY INSPECTOR
96 J
relied on.
4.1. The doctrine of purposive construction can be taken recourse to
provided there exists any ambiguity. If this Court has to agree with the
submission in this regard it has to not only ignore the words "for
consumption" occurring immediately after the word "sold" but also ignore
A
the word "by" occurring immediately after the word "consumption". This B
Court has to give a new meaning which would amount to judicial legislation.
There is no need therefor as thereby the taxation provision would be given a
new dimension, by reason whereof not only exemption provisions will have to
be understood in the context of sale of electricity but also consumption thereof.
(Para 791 (993-B-CJ C
4.2. It is one thing to say that where the words or expressions in a statute
are ph1inly taken from an earlier statute in pari materia, which have received
judicial interpretation, it must be presumed that the Parliament was aware
thereof and intended to be followed in latter enactment But, it is another thing
to say that it is necessary or proper to resort to or consider the earlier D
legislations on the subject only because the consolidating Act re-enacts in
an orderly form the various statutes embodying the law on the subject
(Para 811 [993-FI
4.3. The words "consolidate and amend" furthermore often occur in a
statute in repealing provision. Such a statute is not intended to alter the law. E
(Para 821 (993-GI
4.4. There is no constitutional or statutory embargo that a consolidating
Act must also be an amending Act. When different terms are used in the new
Act, it would not be proper for the Court to refer to the provisions of a repealed
statute. [Para 85] (995-AI
F
4.5. The distinction between consolidating statute and other statutes is
no longer valiw It is only in certain exceptional situations that the language
used in the earlier Act can be resorted to. [Para 861 (995-B)
The Union of India v. The Mahindra Supply Co., AIR (1962) SC 256, G
relied on.
-<
!RC v. Hinchy, (1960) 1 All ER 505, Beswick v. Beswick, (1967) 2 All
ER 1197, Dir. Of Public Prosecutions v. Schildkamp, (1969) 3 All ER 1640,
Maunsell v. Olins, (1975) l All ER 16; Farrell v. Alexander, (1976) 2 All ER H
962
SUPREME COURT REPORTS
(2007] 6 S.C.R.
A 721; Williams v. Permanent Trustee Co. of New South Wales, (1906) AC 249,
' '
'
...._,. .,
p. 252 and Grey v. IRC, (195913 All ER 603, referred to.
Jayantilal Amrathlal v. Union of India, (1972) 4 SCC 174; India
Tobacco Co. ltd v. The Commercial Tax Officer, Bhavanipore and Ors., (1975]
3 SCC 512; T.S. Baliah v. T.S. Rangachari, Income Tax Officer, Central Circle
B VI, Madras, (1969] 3 SCR 65 and Gajraj Singh and Ors. v. State Transport
Appellate Tribunal and Ors., (1997) 1 SCC 650, referred to.
NS. Bindra's Interpretation of Statutes, 10th edition, pages 1071-1072
and G.P. Singh's 'Principles of Statutory Interpretation', Tenth Edition, pages
t
c
315-316, referred to.
5.1. What, however, is the matter of moment would be that the expression
"unless a different intention appears" occurring in Section 6 of the General
. -
Clauses Act, 1897 has not been inserted in Sub-section (1) of Section 20 of
the 2003 Act. Sub-sections (1) and (2) of Section 20 of the 2003 Act, thus,
D operate in different situations. Whereas the proviso appended to Sub-section
(1) of Section 20 of the 2003 Act provides for the consequences flowing from
the repeal of the 1939 Act and the 1962 Act; Section 20(2) provides for a
legal fiction for continuation of certain things/ proceeding on the premise as
ifthe said Acts had not been repealed. Repeal of the 1939 Act and the 1962
.,,,
Act would lead to repeal of notifications issued thereunder also. Proviso
E appended to Sub-section (1) of Section 20 of the 2003 Act, however, carves
out an exception in regard to the consequences flowing therefrom.
(Para 951 (1000-F-G)
5.2. If Sub-sections (1) and (2) of Section 20 of the 2003 Act operate in
F
different fields, the marginal note of Section 20, viz., repeal and savings, would
not be material. If both the Sub-sections of Section 20 of the 2003 Act are not
dependant on each other and in particular having regard to the phraseology
l'
used therein, they need not be read together. One cannot proceed on the basis
while reading the provisions of the statute that anomaly would be created and
then urge that they should be read together. [Para 96) (1000-H; 1001-A-B)
G
5.3. The submission that this Court must read the words "unless a
different intention appears" in Sub-section (1) of Section 20 of the 2003 Act,
is impermissible in law. Similar contention to read down and apply the
purported rule of purposive construction while construing Section 14 of the
2003 Act has already been rejected. This Court does not intend to apply
H different tests in the matter of construction of Section 20 of the 2003 Act.
SOUTHERN PETROCHEMICAL INDCSTRIES CO.LTD "· ELECTRICITY INSPECTOR
963
.... -.._J_J
Omission of words in a particular statute may play an important role. The A
intention of the legislature must be, as is well known, gathered from the words
used in the statute at the first instance and only when such a rule would give
rise to anomalous situation, the court may take recourse to purposive
construction. It is also a well settled principles of law that causes omissus
cannot be supplied. (Para 97( (1001-C-D(
B
5.4. Proviso appended to Sub-section (1) of Section 20 of the 2003 Act
although for all intent and purport incorporates Section 6 of the General
-~
Clauses Act but a significant departure therefrom must be borne in mind. If
{
the legislature has used different words, or has omitted certain words, the
same cannot be read as containing the words "unless a different intention c
appears". It may be that the provisions of the 2003 Act are demonstrably
-..;.
different from the 1962 Act but it should be assumed that the legislature did
so deliberately. The intention of the legislature by making a distinction
between Sub-section (1) and Sub-section (2) of Section 20 of the 2003 Act, is
obvious. The fact that the significant words "unless a different intention
appears" or the Act does not contain a provision inconsistent therewith were D
known to the legislature. Whereas in Sub-section (1) of Section 20 of the
2003 Act they did not introduce any such thing, they did so while enacting
r
Sub-section (2) thereof. (Para 98) [1001-E-G)
5.5. While construing the said words, one may require to construe E
Section 14 of the 2003 Act at the outset. The word "corresponding" may mean
"to be in harmony with or to be similar or analogous to or to be identical
with". [Para 99] [1001-H]
5.6. Whereas the 1939 Act did not contain any provision for exemption
from payment of tax in respect of sale of electrical energy, Section 13 of the F
1962 Act dealing with taxation on consumption of electrical energy expressly
.,,
provided therefor. Section 14 of the 2003 Act, on the other hand, makes a
.,
provision for grant of exemption in respect of sale of energy as contradistinguished from the provisions of the 1939 Act. It takes away the power of
exemption on consumption of electrical energy which had been expressly
provided under the 1962 Act. Once Section 14 of the 2003 Act is held to be G
not containing any provision corresponding to the relevant provisions of the
1939 Act and the 1962 Act, Sub-section (2) of Section 20 of the 2003 Act,
will have no application. If Sub-section (2) of Section 20 of the 2003 Act would
have no application, Sub-section (I) of Section 20 would apply. Once Subsection (1) of Section 20 of the 2003 Act is found to have application, the H
964
SUPREME COURT REPORTS
[2007] 6 S.C.R.
A absence of the words "unless a different intention appears" will assume great
'L- ~
significance. If that be so, then there is no conflict between the proviso
appended to Sub-section (1) of Section 20 and Sub-section (2) thereof. In that
view of the matter, Sub-section (2) of Section 20 of the 2003 Act would prevail
(Para 101 and 102) (1002-B-F)
B
5.7. The High Court committed a manifest error in opining that both
the provisions relate to the same scenario. Furthermore, Sub-section (2) of
Section 20 of the 2003 Act uses the expression "notwithstanding such repeal"
and, thus, the same cannot be construed to be notwithstanding anything
1"'
contained in Sub-section (l) of Section 20 thereof. (Para 103) (1002-GI
[
c ,._.. 5.8. Once the aforementioned conclusion is arrived at, it would not be
necessary to construe the proviso appended to Sub-section (1) of Section 20
in its own language. (Para 104) (1002-H)
.;..
5.9. In a case of this nature, the proviso restricts the operation of the
D repeal clause. It seeks to protect the matter specified thereunder despite such
repeal. Section 6 of the General Clauses Act seeks to achieve the same purpose,
subject of course, to the repealing Act having no provision inconsistent with
the repealed Acts. The 1962 Act provided for grant of exemption from payment
of electricity tax levied on consumption of electricity. When a notification was
..,,
issued by the appropriate authority, the same had to be given a purpose. A
I
E notification issued thereunder could be an act which would come within the
purview of the words "anything duly done". It would not be correct to contend
that only because Sub-section (2) of Section 20 of the 2003 Act refers to
notification, the same would not mean that wherever the word notification has
been issued, Sub-section (1) thereof will have no application.
F
(Paras 105, 106 and 107) [1003-D-F)
5.10. Right of exemption with a valid notification issued gives rise to an
l
accrued right. It is a vested right. Such right had been granted to them
permanently. 'Permanence' would mean unless altered by statute. When a
right is accrued or vested, the same can be taken away only by reason of a
G statute and not otherwise. Thus, a notification which was duly issued would
continue to govern unless the same is repealed.
(Paras 108 and 109) (1003-G; 1004-A)
5.11. Exemption from payment of tax in favour of the appellants herein
would also constitute a right or privilege. The expression "privilege" has a
H wider meaning than right. A right may be a vested right or an accrued right
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. >'. ELECTRICITY INSPECTOR
965
-_{
or an acquired right Nature of such a right would depend upon and also vary A
from statute to statute. [Para 120[ [1006-B, C[
J. Srinivasa Rao v. Govt. of A.P. and Anr., (2006) 13 SCALE 27; H. V.
Mathai v. Subordinate Judge, Kottayam and Ors., [1969f 2 SCC 194; S.
Sundaram Pillai v. V.R. Pattabiraman, [ 1985[ 1 SCC 591 and Swedish Match
AB v. Securities & Exchange Board, India, [2004[ 11 SCC 641, relied on.
B
Stroud's Judicial Dictionary, 2nd Edition, Volume I, page 355; "Statutory
Interpretation - A Code" by F.A.R. Bennion, Third Edition, page 229 and
·{
Maxwell on the Interpretation a/Statutes, 12th edition, page 18, referred to.
6.1. The doctrine of promissory estoppel would undoubtedly be applicable c
where an entrepreneur alters his position pursuant to or in furtherance of
-
the promise made by a State to grant inter alia exemption from payment of
taxes or charges on the basis of the current tariff. Such a policy decision on
.. the part of the State shall not only be expressed by reason of notifications
issued under the statutory provisions but also under the executive D
instructions. Appellants had undoubtedly been enjoying the benefit of payment
of tax in respect of sale/consumption of electrical energy in relation to the
co-generating power plants. [Para .35) [ 1010-A, BJ
'f
I
6.2. Unlike an ordinary estoppel, promissory estoppel gives rise to a
cause of action. It indisputably creates a right It also acts on equity. However, E
its application against constitutional or statutory provisions is impermissible
in law. [Para 136) [1010-C[
6.3. Doctrine of promissory estoppel also preserves a right. A right
would be preserved when it is not expressly taken away but in fact has
expressly been preserved. In view of the application of doctrine of promissory F
..,
estoppel in the case of the appellants, their right is not destroyed and in that
view of the matter although the Scheme under the impugned Act is different
)
from the 1939 Act and the 1962 Act and furthermore in view of the phraseology
used in Section 20(1) of the 2003 Act, right of the appellants cannot be said
to have been destroyed. The legislature in fact has acknowledged that right G
to be existing in the appellants. [Paras 144 and 145) [1014-B, C[
Mis. A.P. Steel Re-Rolling Mill Ltd. v. State of Kera/a & Ors., (2006) 14
SCALE 162; State of Bihar and Ors. v. Project Uchcha Vidya, Sikshak Sangh
and Ors., (2006) 2 SCC 545; Mahabir Vegetable Oils (P) Ltd. and Anr. v.
State of Haryana and Ors., [2006] 3 SCC 620; State of Punjab v. Nestle India
~
966
SUPREME COURT REPORTS
[2007) 6 S.C.R.
A ltd. and Anr., (20041 6 SCC 465; Motilal Padampat Sugar Mills Co. Ltd. v.
'\. ..... -
State of U.P., 1197912 SCC 409; Kasinka Trading v. Union of India, (199511
SCC 274; MRF Ltd., Kottayam v. Asst. Commissioner (Assessment) Sales Tax
and Ors., [20061 8 SCC 702 and Madan Mohan Pathak and Anr. v. Union of
India and Ors., (197812 SCC 50, referred to.
B
7. Legitimate expectation is now considered to be a part of principles of
natural justice. If by reason of the existing state of affairs, a party is given to
understand that the other party shall not take away the benefit without
complying with the principles of natural justice, the said doctrine would be
applicable. The legislature, indisputably, has the power to legislate but where
:
c the law itself recognizes existing right and did not take away the same
expressly or by necessary implication, the principles of legitimate expectation
of a substantive benefit may be held to be applicable. !Para 1471 [1014-F, GI
..
R v North and East Devon Health Authority, ex parte Coughlan, (2001)
1 QB 213, Lord Woolf; R v. Home Secretary, ex parte Hindley, (2001) 1 AC
D 410; R (on the application of Bibi) v. London Borough of Newham, (2001)
EWCA Civ 607 and Barratt v. Howard, (2000) FCA 190, referred to.
8. The maximum demand in a month means the highest value of the
energy delivered at the point of supply of the consumer during any consecutive
"<
thirty minutes in a month. It is, therefore, incorrect to contend that there
E does not exist any distinction between actual consumption and maximum
demand. The High Court itself has noticed a distinction between L-Ow Tension
consumption and High Tension consumption. There indeed exists such a
definition. Therefore, such a construction would not be correct.
[Para 1581 [1020-B, q
F
9.1. It may be that electricity has been considered to be 'goods' but the
same has to be considered having regard to the definition of "goods" contained
y
in Clause (12) of Article 366 of the Constitution of India. When this Court
held electricity to be 'goods' for the purpose of application of sales tax laws
and other tax laws, the same would have nothing to do with the construction
G of Entry 53 of List II of the Seventh Schedule of the Constitution of India.
Supply does not mean sale. A' fortiori it does not also mean consumption.
A 'goods' may be a tangible property or an intangible one. It would become
goods provided it has the attributes thereof having regard to (a) its utility; (b)
capable of being bought and sold; and (c) capable of transmitted, transferred,
H
delivered, stored and possessed. [Paras 164, 165 and 166) (1023-E, F, G)
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD "· ELECTRICITY INSPECTOR [S.B SINHA, J.] 967
._/
9.2. Keeping in view the fact that the maximum demand postulates A
something other than actual delivery of electricity, the question of imposition
of any tax thereupon does not arise. [Para 169] [1025-F, G]
Mar.ish Maheswari. Asstt. Commissioner of Income Tax and Anr., (2007)
3 SCALE 627, relied on.
B
State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1959] SCR
379; Bharat Sanchar Nigam Ltd. and Anr. v. Union of India and Ors., [2006]
3 SCC I and Mis. Northern India Iron & Steel Co. v. State of Haryana and
{
Anr., [1976] 2 SCC 877, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2551 of2007. c
From the Judgment and Order dated 13.07.2006 of the High Court of
Judicature at Madras in W.A. 384 of 2004.
WITH
D
C.A. Nos. 2552-2651 of2007.
R.F. Nariman, A.R.L. Sundrasan, A.K. Ganguli, Vijay Narayan, Vijay
r
Narayanan, K.K. Venugopal, Sr. Adv. P.H. Parekh, E.R. Kumar, Sanand
•
Rarnakrishnan, Nitin Thukral, Rukrnini Bobde (for P.H. Parekh & Co.) Krishna
Srinivasan, Sameer Parekh, Nitin Thukral, K.K. Mani, V.M. Shivkumar, Mayur E
R. Shah, Binu Tarnta, Rohini Musa, V. Balaji, P.N. Rarnalingarn, Vijay K. Jain,
K.K. Senthilvalan, Rakesh K. Sharma, K.V. Vishwanathan, B. Raghunath, V.
Mohana, R. Nedumaran, Vijay Kumar, N.L. Rajah, Dayan Krishnan, Nikhil
Nayyar, Gautam Narayan, P.B. Suresh, Vipin Nair, Amit Dhingra (for Temple
Law Firm) Srikala Gurukrishna Kumar, Gauri Ghuman and Senthil Jagadeesan F
for the Appellant.
..,
)
T.R Andharujina, V. Krishnamurthy, Sr. Adv. T. Harish Kumar and Prasanth
P. Advs. for the Respondents.
The Judgment of the Court was delivered by
G
S.B. SINHA, J. 1. Leave granted.
y
INTRODUCTION
2. Validity and/or application of Tamil Nadu Tax on Consumption or Sale H
968
SUPREME COURT REPORTS
[2007) 6 S.C.R.
A 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 BACKGROUND
B
3. Legislative competence in Central and Provincial Legislature in India
c
was for the first time provided for by reason of the Government of India Act,
1935 (for short "the 1935 Act"). Item 48-8 of List II of the Seventh Schedule
of the I 935 Act provided for taxes on consumption or sale of electricity
subject, however, to the provisions of Section I 54-A of the 1935 Act which
reads as under:
"I 54-A. Save in so far as any Federal may otherwise provide, no
Provincial Jaw 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 -
D
(a) consumed by the Federal Government, or sold to the Federal
E
F
G
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 ofa Federal Railway, shall be less by the amount of the tax
than the price charged to other consumers of a substantial quantity
of electricity."
4. The 1935 Act did not contain any provision similar to Item No. 48B 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 oflndia. However, the matter relating to imposition
of taxes on the consumption or sale of electricity was provided for under
H Entry 53 of List II of the Seventh Schedule of the Constitution of India.
..
SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD.,., ELECTRICITY INSPECTOR (S.B. SINHA, J J 969
·-'
STATUTORY PROVISIONS
A
5. The then State of Madras in tenns 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 tenns of the Indian Electricity Act, 1910 B
(for short "the 1910 Act"). Section 3 of the 1910 Act reads as under:
"3. Grant of licenses.( I) The State Government may, on application
.(
made in the prescribed fonn and on payment of the prescribed fee (if
'
any), grant after consulting the State Electricity Board, a licence to c
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 D
boundary of such area, or
(b) where energy is to be conveyed or transmitted from any place in
r
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 E
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 -
F
y
(i) until all objections received by the State Government with reference
'r
thereto have been considered by it:
Provided that no objection shall be so considered unless it is received
·1
before the expiration of three months from the date of the first
publication of such notice as aforesaid; and
G
(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 th~ license on H
-
970
SUPREME COURT REPORTS
[2007] 6 S.C.R.
A
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;
B
(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 che manner in which
<
notices of meetings of such local authority are usually given;
c
(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
D
may think fit; and
(ii) save in cases in which under section I 0, 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
I
be used in connection with the undertaking shall or shall not form part
E
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
(f) the provisions contained in the Schedule shall be deemed to be
r
incorporated with, and to form part of, every licence granted under
f
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
G
empowered to make, apply to the undertaking authorised by the
licence:
Provided that where a licence is granted in accordance with the
y
provisions of clause IX of the Schedule for the supply of energy to
other licensees for distribution by them, then, insofar as such licence
H
relates to such supply, the provisions of clauses IV, V, VI, VII, VIII and
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD" ELECTRICITY INSPECTOR [S.B. SINHA. J.) 97)
~__(
XII of the Schedule shall not be deemed to be incorporated with the A
licence."
6. 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.
B
7.