Holding

The Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003 is constitutionally valid, falls within State legislative competence, is not repugnant to the Electricity (Supply) Act, 1948, and its repeal‑and‑savings clause preserves existing exemption rights while the tax is to be imposed on actual consumption, not on maximum demand.

Summary

The Supreme Court examined the constitutionality of the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003, holding that the State has legislative competence under Entry 53 of List II and that the Act does not conflict with the Electricity (Supply) Act, 1948. The Court clarified that the repeal‑and‑savings provisions in Section 20(1) of the 2003 Act, not Section 20(2), preserve existing exemption rights, and that electricity tax must be levied on actual consumption rather than on maximum demand charges. It rejected the applicability of Article 14 equality challenges, the doctrine of promissory estoppel, and the claim that the Act required presidential assent under Article 288. Consequently, the appeals were partly allowed, overturning the High Court’s dismissal of the writ petitions.

Issues considered

The State's legislative competence to enact the 2003 Act under Entry 53 of List II versus Entry 38 of List III
Whether the 2003 Act is repugnant to the Electricity (Supply) Act, 1948
Applicability of Article 288(2) – need for presidential assent
Constitutionality of Section 14 of the 2003 Act under Article 14 (equality)
Interpretation of Section 20(1) and Section 20(2) – repeal and savings
Whether the doctrine of promissory estoppel or legitimate expectation applies to the exemption notifications
Whether electricity tax can be levied on maximum demand charges or only on actual consumption

Legislation cited

Constitution of Indias. 14, s. 245, s. 246, s. 248, s. 254, s. 265, s. 288, s. 366
Electricity (Supply) Act, 1948
General Clauses Act, 1897s. 6

Subjects

legislative competencetaxationelectricity dutyArticle 14Article 288repeal and savingspromissory estoppellegitimate expectationmaximum demand chargetax exemptionconstitutional validity

Judgment

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, 2003-
Legislative 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, 1948-
Constitution of India, 1950-Articles 14, 248, 254, 288, 366-General Clauses
Act, 1897, Section 6.

Doctrines:

Doctrine of purposive construction-Doctrine of legitimate
D
expectation-Doctrine of promissory estoppel-meaning and applicability
of

Words & Phrases:

"Unless a different intention", "Corresponding': "not withstanding
E
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
F
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.
G
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 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 ,....r
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
Act can be read down for the purpose of upholding its constitutionality.
B
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 •
Constitution of India; and that the 'privilege' is superior to the right and in
E
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
""
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
application; that an exemption, by its very nature, does not create a right and B
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.
They are separately enumerated. Taxation is treated as a distinct matter for E
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
enactment under several entries, one of them being a tax entry. G
[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
Anr., [19771 4 SCC 98; Raja Jagannath Baksh Singh v. State of Uttar Pradesh,
E v.
AIR (1962) SC 1563 and MP. Vidyut Karamchari Sangh 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
(Deceased) By His Legal Representative v. The State ofPunjab, (196613 SCR
F 486; State of Punjab v. Harnek Singh, (2002) 3 SCC 481; State of A.P. v.
y
National Thermal Power Corpn. Ltd. and Ors., (2002] 5 SCC 203; BSES Ltd.
(
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 ofPunjab 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
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD. v. ELECTRICITY INSPECTOR 959
I
-J.
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 c
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
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
E
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
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
discretion and is allowed to pick and choose objects for taxation and exempt!on. '
E [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
exemption provision purports to give power to exempt tax on "electricity sold
G
for consumption" and makes no corresponding provision for exemption of tax
on electrical energy self-generated and consumed. [Para 76) [992-C-D)

State ofA.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 ofIndia, (1962) Supp 3 SCR 481,
SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. v. ELECTRICITY INSPECTOR 96 J
relied on. A
:.
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
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
"r
(Para 811 [993-FI
l
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 ofStatutory Interpretation', Tenth Edition, pages
t
315-316, referred to.
c
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,
operate in different situations. Whereas the proviso appended to Sub-section
D
(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
different fields, the marginal note of Section 20, viz., repeal and savings, would
F 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
appears". It may be that the provisions of the 2003 Act are demonstrably
c
-..;. 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
Section 14 of the 2003 Act at the outset. The word "corresponding" may mean E
"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 contra-
distinguished 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 Sub-
section (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
repeal clause. It seeks to protect the matter specified thereunder despite such
D
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 ..,,
I
issued by the appropriate authority, the same had to be given a purpose. A
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.
(Paras 105, 106 and 107) [1003-D-F)
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. ofA.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 ofBihar and Ors. v. Project Uchcha Vidya, Sikshak Sangh
and Ors., (2006) 2 SCC 545; Mahabir Vegetable Oils (P) Ltd. and Anr. v.
State ofHaryana and Ors., [2006] 3 SCC 620; State ofPunjab 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,
delivered, stored and possessed. [Paras 164, 165 and 166) (1023-E, F, G)
H
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
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 I935 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:
c
"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
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
E 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
F 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."
G 4. The 1935 Act did not contain any provision similar to Item No. 48-
B of the Seventh Schedule of the 1935 Act. After coming into force of the
Constitution of India, 'Electricity' was placed in List III of the Seventh
Schedule of the Constitution 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
any person to supply energy in any specified area, and also to lay c
down or place electric supply lines for the conveyance and
• transmission of energy,

(a) where the energy to be supplied is to be generated outside such
area, from a generating station situated outside such area to the
boundary of such area, or
D

(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 I0, 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
incorporated with, and to form part of, every licence granted under
r
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. Article 288 of tlie Constitution of India reads as under:

"( l) Save insofar as the President may by order otherwise provide, no
-f law of a State in force immediately before the commencement of this
Constitution shall impose, or authorise the imposition of, a tax in
respect of any water or electricity stored, generated, consumed, c
distributed or sold by any authority established by any existing law
or any law made by Parliament for regulating or developing any inter-
State river or river-valley.

Explanation - The expression "law of a State in force" in this clause
shall include a law of a State passed or made before the commencement D
of this Constitution and not previously repealed, notwithstanding that
it or parts of it may not be then in operation either at all or in particular
y
I areas.

(2) The Legislature of a State may by law impose, or authorise the
imposition of, any such tax as is mentioned in Clause (I), but no such E
law shall have any effect unless it has, after having been reserved for
the consideration of the President received his assent; and if any
such law provides for the fixation of the rates and other incidents of
such tax by means of rules or orders to be made under the law by any
authority, the law shall provide for the previous consent of the President
F
..,. being obtained to the making of any such rule or order."
'r
8. A bare perusal of Section 3 of the I 939 Act would show that taxes
were levied on sale of electrical energy by the licensee. There was, thus, no
provision under the 193 9 Act for levy of tax on consumption of electrical
energy. G
9. In exercise of its power conferred upon it under Entry 38 of List III
. of the Seventh Schedule of the Constitution of India, the Parliament enacted
the Electricity (Supply) Act, 1948 (for short "the 1948 Act"). In terms of
Section 5 thereof, each State was enjoined with a duty to constitute State
Electricity Board. Section 12 of the 1948 Act provides for incorporation of H
972 SUPREME COURT REPORTS (2007] 6 S.C.R.

A such Boards constituted thereunder.
IO. In the year 1962, the State of Tamil Nadu enacted Tamil Nadu
Electricity (Taxation on Consumption) Act, 1962 (Act No. IV of 1962) (for
short "the 1962 Act") to provide for the levy of tax on the consumption of
electrical energy in the State of Madras.
B
11. "Consumer" and "energy intensive industries" have been defined in
Sections 2(1) and 2(3) respectively of the 1962 Act in the following terms:

"(!) "consumer" with its grammatical variations and cognate
expressions includes any person who consumes energy whether
c generated by himself or supplied to him.

(3) "energy intensive industries" means industries in which the price
of energy used in the process of manufacturing or producing the
principal product of the industry concerned exceeds 15 per centum of
the total cost of the manufacture or production of that product and
D includes the industries manufacturing or producing the following
namely:-
(i) aluminium; '<
I
(it) bleaching powder ;
E (iii) calcium carbide ;

(iv) caustic soda ;
(v) synthetic gem ;"

12. Section 3 of the 1962 Act provides for levy of tax on consumption
F of energy, referred to therein as electricity tax computed as percentage of the
"price of energy consumed" by the consumer. Section 3-A provided for levy
of additional tax on consumption of energy calculated at the rate of four per
centum of the "price of energy consumed" by the consumer. The proviso
appended thereto, however, inter alia provides for exemption from levy of
G some additional tax on the energy consumed by any person (ot~er than a
licensee) who consumes energy generated by himself.

13. Section 12 of the 1962 also provided for exemption of tax in the
following terms:

"12. Exemption from tax. - (I) Where energy under High Tension
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD "· ELECTRICITY INSPECTOR [S.B SINHA, l. ] 973

Supply is consumed in the process of manufacturing or producing the A
principal product in any industrial undertaking licensed under the
Industries (Development and Regulation) Act, 1951 (Central Act LXV
of 1951 ), no electricity tax shall be payable on the energy so consumed
for a period of three years from the date of the commencement of the
manufacture or production of the principal product in such undertaking. B

(2) For the purposes of sub-section (I), if any question arises in
regard to the date of the commencement of the manufacture or
production of the principal product, the question shall be decided by
the prescribed officer in accordance with such procedure as may be
prescribed and his decision thereon shall be final."
c
14. Section 13 of the 1962 Act, however, enabled the Government to
make exemptions and impose restrictions by notification in the following
terms:

13. Power of Government to notify exemptions and reductions. - (!)
The Government may, by notification, make an exemption or reduction D
in rate, in respect of the electricity tax payable under this Act by any
specified class of persons, having regard to all or any of the following
r matters, namely:-
(a) the nature of the business or industry carried on by such class
of persons ; E
(b) the price of energy consumed in relation to the total cost of the
manufacture or production of the principal product in any industrial
undertaking owned or controlled by such class of persons ;
(c) such other matters as may be prescribed. · F
(2) Any exemption from electricity tax or reduction in the rate of
electricity tax notified under sub-section (I) may be subject to such
restrictions and conditions as may be specified in the notification.

(3) The Government may, by notification, cancel or vary any G
notification issued under sub-section (1).

15. Section 14 of the 1962 Act provided that the said Act was in
addition to and not in derogation of the 1939 Act. Section 18 of the 1962 Act
also contained a provision that the same shall be subject to Article 288 of the
Constitution of India.
974 SUPREME COURT REPORTS [2007] 6 S.C.R.

A 16. The 1939 Act and the 1962 Act were repealed by the 2003 Act. \___,.
Incidentally, the 2003 Act was not to consolidate and amend the levy of tax
on consumption or sale of electricity but to consolidate and rationalize the
same.

17. "Captive generating plant", "consumer'', "generating company" and
B "tariff' were defined in Section 2 of the 2003 Act as under:
"(2) "captive generating plant" means power plant set up by any
person or association of persons or any Co-operative society to
generate electricity primarily for his own use or for the use of members,
and includes the power plants that are permitted to sell the surplus
c power so generated;

(5) "consumer" with its grammatical variations and cognate expression
means any person who is supplied with electricity on payment of
charges, or free of cost or otherwise by a licensee or by the Government
or by any other person engaged in the business of supplying electricity
D to the public under the Indian Electricity Act, 1910 or any other law
for thr. time being in force and includes-

(i) a licensee who consumes electricity whether generated by
himself or supplied to him by any other licensee; and

E (ii) actual use of power or any other person who consumes electricity
generated by himself;

Explanation 1.- Where a licensee consumes electricity, whether
generated by himself or supplied to him, such licensee shall be deemed
to be a consumer only in respect of the electricity so consumed,
F
Explanation II - Where a licensee or other person consumes energy
for purposes connected with the construction, maintenance and )

operation of the generating, transmitting and distributing system,
such licensee or person shall not be deemed to be a consumer in
respect of the energy so consumed;
G
(9) "generating company" means any company or body corporate or
association or body of individuals, whether incorporated or not or
artificial juridical person, which owns or operates or maintains a
generating station;

H (14) "tariff' means a rate of tariff leviable upon the consumption of
SOCTHERN PETROCHEMICAL INDUSTRIES CO LTD ,. ELECTRICITY INSPECTOR [SB Sl~HA. I.) 975

electricity b the State supplied by the licensee and as fixed by the A
Tamil Nadu Electricity Regulatory Commission;"

18. Section 3 of the 2003 Act is the charging provision in terms whereof
every licensee and every person other than a licensee is required to pay every
month to the Government in the prescribed manner, a tax on the electricity
sold or consumed during the previous month at the rate specified thereunder. B
Section 4, however, contains a non-obstante clause stating that no electricity
tax shall be payable under Section 3 on the sale of electricity by a licensee
to the persons nominated thereunder. It contains almost an identical provision
of the 1939 Act. The 2003 Act provides for a complete machinery for
assessment of the electricity duty payable. It also provides for an appeal from C
an order of assessment of electricity tax.

19. Section 14 of the 2003 Act provides for general exemption which is
in the following terms:

"Exemption and reduction of tax.-The Government may, by D
notification, make an exemption or reduction in rate in respect of the
electricity tax payable under this Act on electricity sold for
consumption by or in respect of any-
r
\
(i) institution or class of person;

(ii) place of public worship, public burial or burning ground or other E
place for the disposal of the dead;

(iii) premises declared by the State Government to be used exclusively
for purposes of public charity;

(iv) vessel whether seagoing or inland." F
20. The repeal and saving clause is contained in Section 20 thereof.

21. Section 20 and 21 of the 2003 Act read as under:

"20(1) :-The Tamil Nadu Electricity Duty Act, 1939 and the Tamil Nadu G
Electricity (Taxation and Consumption) Act, 1962 is hereby repealed.

Provided that such repeal shall not affect:
(a) the previous operation of the said Acts or anything duly done
or suffered ther"(:under;
H
976 SUPREME COURT REPORTS [2007) 6 S.C.R.

A (b) any right, privilege, obligation or liability acquired, accrued or
incurred under the said Acts;
(c) any penalty, forfeiture or punishment incurred in respect of any
offence committed against the said Acts;
(d) any investigation, legal proceeding (including assessment
B proceeding) or remedy in respect of any such right, privilege,
obligation, liability, forfeiture or punishment as aforesaid and any
such investigation, legal proceeding or remedy may be instituted,
continued or enforced and any such penalty, fprfeiture or
punishment may be imposed as if this Act has not been passed;
c (2) Notwithstanding such repeal;

(a) anything done or any action taken or purported to have been
done or taken including any rule, notification, inspection order or
notice made or issued or any direction given under the repealed
laws, shall so far as it is not inconsistent with the provisions of
D this Act be deemed to have been done or taken under the
corresponding provisions of this Act.
(b) Any duty levied under the repealed Tamil Nadu Electricity Duty
Act, 1939 and the rules made thereunder during the period prior
to the commencement of this Act, but not collected, may be
E recovered in the manner provided under the repealed Act and
rules made thereunder.
(c) Any tax levied under the repealed Tamil Nadu Electricity (Taxation
on Consumption) Act, 1962 and the rules made thereunder during
the period prior to the commencement of this Act, but not
F collected, may be recovered in the manner provided under the
repealed Act and the rules made thereunder. )
i
21. This Act shall have effect subject to the provisions of Article 288
of the Constitution"

G WRIT PETITIONS

22. Validity of the provisions of the 2003 Act and/ or application thereof
in respect of the generating companies as also the consumers of electrical
energy being purchasers from the Tamil Nadu Electricity Board came to be
questioned before the Madras High Court in a large number of writ petitions.
H The matter was heard by a Division Bench of the said High Court. By reason
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. v. ELECTRICITY INSPECTOR (S.B. SINHA, l. ] 977
~· of a judgment and order dated 13.07.2006, the Division Bench dismissed the A
writ petition.

HIGH COURT JUDGMENT

23. The High Court noticed seven arguments raised before it. It decided
all the issues against the writ petitioners. Before us, only argument Nos. 1, B
3, 4, 5 and 7 have been pressed.

.. {
24. We may notice the same at the outset:

"(I) The Tamil Nadu Act 12 of2003 levying tax on consumption or
sale of electricity is invalid for want of assent of the President of c
_.
. India, in view of Article 288(2) of the Constitution of India.

(2) ***

(3) The impugned Act is repugnant to Section 29 of the Electricity
Regulatory Commissions Act, 1998. The Central Act, 1996 provided
D
for the fixation of tariff for electricity to vest with the Commission. The
tariff so fixed should be held to include the entire price payable for
the energy. Thus, the impugned State Act which imposes a tax on the
'/" sale or consumption of electricity is repugnant to the Central Law.
•
Since the State Act had not received the assent of the President, it
is not saved by Article 254(2) of the Constitution. Hence, it is invalid E
in law.

(4) Under the Tamil Nadu Electricity Taxation on Consumption Act,
1962, some of the appellants were exempted from payment of tax on
consumption of self-generated energy. Even though this Act 1962 has
been repealed by the present Act, in view of Section 20(2)(a) of the F
.y impugned Act, their rights are protected. Therefore, they are entitled
)- to continue the exemption from payment of tax.

(5) ...

(6) •••
G
(7) The tax on consumption should be actual consumption. It cannot
include the maximum/sanctioned demand charges. As such, the tax on
consumption cannot be levied on such electricity which is lost in
transmission. The tax on consumption of electricity should be based
on the electricity consumed and not on the electricity lost in H
978 SUPREME COURT REPORTS (2007] 6 S.C.R.

A transmission."

25. In regard to argument No. I, the High Court opined that Article 288
of the Constitution of India being applicable in respect of those which are the
authorities within the meaning of the provisions thereof, assent of the President
was necessary only in their case and not in case of consumers like the
B appellants.

-
26. It was furthermore held that in terms of Section 4 of the 2003 Act,
the State of Tamil Nadu covered all persons except the Government, Railways
and authorities dealing with the development of inter-state river and, thus, the
constitutional obligation laid down under Article 288 of the Constitution of
C India stands satisfied. It was held:

"22. Thus, it is clear that this Article imposes a total ban against a ...
State from imposing any tax on the purchase outside a State. This
prohibition is absolute. Whereas under Article 288 of the Constitution,
the State is not prevented from enacting a law, but it is made clear that
D the law shall not have any effect against the authority mentioned in
Article 288 of the Constitution of India unless it receives the assent
of the President. Thus, the purpose of the article is to give protection
only in respect of the authorities generated, consumed, etc. of the
electricity as referred to under Article 288. Therefore, as correctly held
E by the learned single Judge, the appellants, who are not such
authorities described in the article, cannot take umbrage under the
said article and consequently, they cannot resist the enforcement of
Act 12 of 2003. Hence, the first submission would fail."

27. As regards argument No. 3, the High Court opined that as the tax
F is levied on the tariff, the same being not a part of tariff, the provisions of
the Electricity Regulatory Commissions Act, 1998 (for short "the 1998 Act")
cannot be said to have any application whatsoever holding:

"30. Similarly, the contention of repugnancy is also baseless. The
question of repugnancy would arise only when both the laws are
G enacted on the same entry. The question of repugnancy between one
law and another would arise only if both the laws of the Parliament
and the State Legislature are referable to an Entry in List Ill. As , .
indicated above, the Central Law is referable to Entry 38 List III while
the State Law falls under Entry 53 List II. In these circumstances, no
H question of repugnancy would arise."
SOUTHERN PETROCHEMICAL INDUSTRJES CO LTD "· ELECTRICITY INSPECTOR [S B. SINHA. l ] 979
-..j 28. On argument No. 4, the High Court opined that as the exemption A
provision contained in Section 14 of the 2003 Act is inconsistent with the
provisions of Sections 12 and 13 of the 1962 Act, Section 20(2)(a) of the 2003
Act will have no application stating:

"37. However, in this case, as indicated above, there is an exemption
as provided in Section 14 only with reference to the tax on the sale B
of electricity and not on the tax on consumption of electricity. Thus,
it is clear that there is clear inconsistency between the Acts that have
been repealed and the repealing Act of 2003. In these circumstances,
-1 in view of Section 20(2)(a) of the impugned Act, the exemption orders
would cease to be valid on the coming into force of the new Act.
Hence, the appellants cannot take advantage of Section 20( I) of the
c
Act."

29. In relation to argument No. 7, the High Court held that there being
two types of consumers, viz., Low Tension consumers and High Tension
consumers, tax being payable only on High Tension consumers and as tariff D
is collected on the permitted demand, levy thereof on maximum demand is
permissible in law stating:
)·
\ "52. With regard to the High Tension connections, a twin tariff system
is adopted, one rate as per KV A for each unit consumed, the other rate
is on permitted demand as per KV A. It is pointed out that as per the E
definition of maximum demand, the same is determined on the energy
delivered ,at a point of supply. Even though the tariff is collected on
the permitted demand, the tax is levied only on the maximum demand,
that is, on the energy consumed."

30. A statement made by the learned Advocate General as to actually F
'f on what basis tax is collected was recorded in the following terms:
t
"53. Now, it is submitted by the learned Advocate General that the
maximum demand is what is really consumed by them as against the
permitted demand and therefore, the taxes are imposed only on the
demand charges and it is based on actual consumption." G
ADDITIONAL GROUND

3 I. One of the appellants before us in Civil Appeal arising out of SLP
(C) No. 21689 of 2006 filed an application for raising additional grounds.
Permission to raise additional grounds was granted by an order dated 12.02.2007. H
980 SUPREME COURT REPORTS (2007] 6 S.C.R.

A Pursuant thereto or in furtherance of such leave granted, the constitutionality ,..._,.
of Section 14 of the 2003 Act was questioned.

SUBMISSIONS ON BEHALF OF THE APPELLANTS

32. Mr. K.K. Venugopal, learned senior counsel appearing on behalf of
B the appellants, in support of the appellants pressing the aforementioned
additional grounds, would contend that the consumers of electrical energy
form a homogenous class and, thus, could not have been discriminated in the
matter of grant of exemption. The learned counsel would contend that the
equality clause contained in Article 14 of the Constitution of India being a t
basic structure of the Constitution must in a situation of this nature be
c 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. In view of the fact that
Section 14 of the 2003 Act per se is arbitrary, it was urged, the burden of proof
was on the State to show that the classification is a valid classification. It was
contended that in such an event, the validity of the 2003 Act can be read
D down for the purpose of upholding its constitutionality and according to the
learned counsel the following words should be declared to be ultra vires "on
electricity sold for consumption by".
-{
33. Relying on the decision of a Constitution Bench of this Court in D.S. I
Nakara and Ors v. Union of India, [1983] 1 SCC 305, the learned counsel
E would contend that for the aforementioned purpose, the court may take into
consideration the historical facts that the exemption which had all along been
granted could not have been taken away all of a sudden particularly when
the appellants altered their position relying on or on the basis of the
representations made by the State that in the event, such captive generating
plant or cogenerating units are set up, they would be granted perennial
F
exemption from payment of electricity tax.
'r
34. It was submitted that in view of the decision of this Court in j

Manekagandhi v. Union of India, [1978] l SCC 248, the Act can be struck
down not only on the ground of being discriminatory in nature but also on
G the ground of being arbitrary.

35. Mr. R.F. Nariman, learned counsel appearing on behalf of the
appellants in Civil Appeals arising out ofSLP (C) Nos. 2100, 2844, 2099, 2097,
3108, 3109, 3111 and 3112 of2007 would submit that the High Court committed
a manifest error in interpreting Sub-sections (I) and (2) of Section 20 of the
H 2003 Act together. They are independent of each other and operate in different
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD.•« ELECTRICITY INSPECTOR (S.B. SINHA, I.] 98}

-_/ fields. Whereas the proviso appended to Section 20(1) of the 2003 Act A
provides for savings that follow from the repeal of the 1962 Act and the 1939
Act; Section 20(2) thereof provides for a legal fiction for continuation of
certain things as if the Acts of 1962 and 1939 had not been repealed. It was
pointed out that Sub-section ( 1) of Section 20 does not contain any statement
which occurs in Section 6 of the General Clauses Act being "unless a different
intention appears". In that view of the matter, all rights and privileges obtained B
by a consumer in terms of the provisions of the 1939 Act or the 1962 Act are
safeguarded.
y

) 36. It was urged that whereas Sub-section (1) of Section 20 of the 2003
Act contains a similar provision as Section 6 of the General Clauses Act,
Clauses (a) and (b) of Sub-section (1) of Section 20 of the 2003 Act are clearly
c
attracted. Reliance in this behalf has been placed on Mis. Universal Imports
Agency and Anr. v. The Chief Controller of Imports and Exports and Ors.,
.(1961] I SCR 305, Shri Ran Prasad (Deceased) By His Legal Representative
v. The State ofPunjab, [ 1966] 3 SCR 486 and State ofPunjab v. Harnek Singh,
(200213 sec 481. D
3i. It was urged that the words "sold for consumption" would amount
,... to 'tautology' as electrical energy can never be stored. Reliance in this behalf
) has been placed on State of A.P. v. National Thermal Power Corpn. Ltd. and
Ors., (2002] 5 SCC 203 and BSES Ltd. v. Tata Power Co. Ltd. and Ors., (2004]
1 SCC 195. In that view of the matter, this is a fit case for applying purposive E
construction to provide meaningful context to the semantic interplay between
the words "by" and the phrase "sold for consumption". If the aforementioned
part of the provision, viz., "sold for consumption by" is to be treated as
superfluous, the same may as well be read down for the purpose of upholding
the exemption granted in favour of the appellants, pursuant to the notifications F
issued under the 1939 Act and the 1962 Act, particularly when such exemptions
-r were to be granted 'permanently'.
\
38. Such a construction is permissible having regard to the fact that the
2003 Act is not a consolidating and amending statute but one for consolidation
and rationalization. Having regard to the new economic policy, the statute G
encourages more private participation in the private sector and thereby a
literal or narrow interpretation will defeat the same. In any event, Section 14
should be construed in such a manner so as to make it consistent with Article
14 of the Constitution of India.

39. It was submitted that the 'privilege' is superior to the right and in H
982 SUPREME COURT REPORTS (2007] 6 S.C.R.

A 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 (I) of Section 20 of the 2003 Act.

40. The parties have set up their industries relying on the promises
made by the State. In particular sugar industries have spent about Rs. 745.64
B crores in that behalf. Taking accou11t 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. Reliance in this behalf has •
\-.
been placed on MRF Ltd., Kottayam v. Assistant Commissioner (Assessment) ...

c Sales Tax and Ors., [2006] 8 SCC 702 and State of Punjab v. Nestle India Ltd.
and Anr., [2004] 6 SCC 465.

41. Our attention in this behalf has also been drawn to the observations
of Beg, J. in his concurrent judgment in Madan Mohan Pathak and Anr. v.
Union ofIndia and Ors., [1978] 2 SCC 50 wherein the Life Insurance Corporation
D (Modification of Settlement) Act, 1976 was struck down inter alia on the
premise that the statute resiled from the earlier promise made by the
Government.
~
42. Mr. A.K. Ganguli, learned senior counsel appearing on behalf of the •
appellants, had supplemented the submissions of Mr. K.K. Venugopal and Mr.
E R.F. Nariman, urging that no previous sanction having been obtained from the
President oflndia as is required under Article 288 of the Constitution oflndia,
the 2003 Act is ultra vires particularly when Section 2 I of the 2003 Act as also
Section 18 of the 1962 Act specifically refer thereto.

43. The High Court, Mr. Ganguli would contend, has mis-interpreted the
F provisions of Article 288 of the Constitution of India insofar as it failed to
take into consideration that it is in two parts. Reference to inter-State river I
i
authority has nothing to do with the first part of the said provision. Also, as
Tamil Nadu Electricity Board which was constituted by reason of the provisions
of the 1948 Act, does not pay any tax, it cannot realize any tax from the
G consumers to whom electricity is supplied.

44. It was further submitted that the maximum demand charges cannot
be made a basis for demanding electricity tax as maximum demand charges
have been levied for a different purpose whicli is penal in nature. Reliance
in this behalf has been placed on Orissa State Electricity Board and Anr. v.
H /Pl Steel Ltd. and Ors:, [1995] 4 SCC 320.
SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD '· ELECTRICITY INSPECTOR [SB. SINHA, l.] 983
- _(
_
45. The learned counsel would argue that as tax can be levied in terms A
of Article 265 of the Constitution of India, no taxable event occurred for levy
of electricity duty on the quantum of electrical energy which has not been
consumed or sold. Our attention in this behalf has been drawn to a decision
of this Court in State of Mysore v. West Coast Papers Mills Ltd. and Anr.,
[1975] 3 sec 448 for the proposition that no electricity duty was payable at
transmission loss. B

46. Mr. A.R.L. Sundrasan, learned senior counsel appearing on behalf
of the appellants in Civil Appeal arising out of SLP (C) No. 18220 of 2006
-{
would submit that having regard to the Entry 38, List III of the Seventh
Schedule of the Constitution of India, in terms whereof the Parliament had
enacted the 1998 Act, the State could not have made any law in terms of Entry
c
58, List II of the Seventh Schedule of the Constitution of India as the entire
filed of electricity is covered thereby and, thus, the impugned Act should he
held to be repugnant to the 1998 Act.

47. The learned counsel appearing on behalf of the appellants in Civil D
Appeal arising out of SLP (C) No. 3600 of 2007, would submit that in terms
of Article 288 of the Constitution of India, the focus is on the law which
,.
~
enables the State to impose tax and not the individual event of levy thereof
and, thus, even if such actual levy might not have been levied, the Act
authorizing imposition of such tax on river valley authorities, is bad in law.
E
48. The impugned Act suffers from callous exercise of power inasmuch
as the State, by imposing tax, intended to give the State Electricity Board such
amount which it could not get from the hands of the Electricity Regulatory
Commission. A provision of the Act cannot be exercised in such a way to
defeat the provisions of another Act. Burden of collection of tax from the
F
..,,.. consumer where it does not have any captive generation plant is on the
licensee and, thus, it should be held to be the part of the tariff and in that
\
view of the matter, the impugned legislation is ultra vires Article 246 of the
Constitution of India.

49. Mr. K. V. Viswanathan, learned counsel would submit that tariff is not G
only a price but also all which is taken for sale or consumption of electrical
energy.

50. In certain m~tters, including Civil Appeals arising out of SLP(C) Nos.
1746 to 1762 of2007, the validity of provisions of the 1962 Act, as amended
H
984 SUPREME COURT REPORTS [2007] 6 S.C.R.

A by Act 32 of 1991, have also been challenged on the ground that in view of ~- -
insertion of Section 3-A, the Government of Tamil Nadu issued a notification
bearing No. GOMs No. 787 dated 30.04.1979 so as to simplify the process of
tariff and all taxes, thus, having been merged, fresh levy of additional tax
would be prohibited.

B 51. In respect of certain factories involving products like cement,
involving inter alia Grasim Industries Ltd. [Civil Appeal arising out of SLP (C)
No. 2064 of2007], we may notice that the Government of Tamil Nadu issued
GOMs No. 2072 dated 19.11.1969 under Section 13(1) of the 1962 granting
exemption for consumption of energy under High Tension Supply for a period
C of two years in addition to the exemption specified in Sub-section {I) of
Section 12, i.e., five years. By GOMs. No. 1201dated18.06.1970, the Government
of Tamil Nadu again, in exercise of its power under Section 13( 1) of the 1962
Act, granted exemption to those 'who consume energy generated by
t.hemselves' for a period of two years in addition to the exemption. specified
in the notification issued through GOMs. No. 2404, i.e., for a period of five
D years. Some of the appellants established their cement plants and applied for
High Tension Energy connection in the year 1998 and set up captive power
plants in 2000 and started drawing energy from its captive power plant only
from the year 2000 and, thus, the exemption notifications would remain valid
despite enactment of the 2003 Act.
E SUBMISSIONS ON BEHALF OF THE STATE

52. Mr. T.R. Andhyarujina, learned senior counsel appearing on behalf
of the State of Tamil Nadu, on the other hand, would submit:

(i) The exclusive right of the State Legislature to legislate matters
F 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.
(ii) No material has been placed on record to show that the State
Legislature has transgressed its legislative power in covert or
G indirect manner or otherwise over-stepped its limits.
(iii) The functions of 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
H Seventh Schedule of the Constitution of India and,_ thus, in that
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD v. ELECTRICITY INSPECTOR [S.B SINHA. J. J 985
-_( view of the matter Article 254 of the Constitution of India cannot A
have any application.

(iv) Article 288 of the Constitution of India would be attracted only
when the following things are established:

(a) Existence of an authority established by any law made by
the Parliament;
B
(b) The Authority must be established for regulating or
developing any inter-state river or river valley and only in
-I such case no State would make a law imposing or authorizing
the imposition of tax in respect of any water or electricity
stored, generated, consumed, distributed or sold by such
c
authority;

and in that view of the matter, only when a State makes a law on
such an authority, the assent of the President would be required
in terms of Clause (2) of Article 288 of the Constitution oflndia
and not otherwise.
D
(v) Whereas the 1939 Act having contained no provmon for
)' exemption and the 1962 Act providing for exemption only from
;
consumption of electrical energy, the 2003 Act granted exemption
only for sale; the provisions of the latter being inconsistent with
the provisions of the earlier acts, the exemption notifications do E
not survive having regard to the fact that Section 20 of the 2003
Act repeals both the 1962 Act as well as the I 939 Act.

(vi) Sub-sections ( 1) and (2) of Section 20 of the 2003 Act must be
.read together and having regard to the fact that the notifications
are referred to under Sub-section (2) of Section 20 only, in view F
r of the inconsistencies between the 2003 Act, on the one hand,
\ and the 1939 Act and the 1962 Act, on the other, they do not
survive.

(vii) The words "corresponding provisions" contained in Section 20
of the 2003 Act need not mean exactly similar but "to be in G
harmony with or to be similar, analogous to or to be identical
with" and in that view of the matter, Section 14 of the 2003 Act
containing an exemption provision must be held to have covered
the subject.
(viii) As the notifications for exemption from payment of electricity H
986 SUPREME COURT REPORTS (2007] 6 S.C.R.

A duty under the 1962 Act are held to be saved under Sub-section \_-
( 1) of Section 20 of the 2003 Act, the same would lead to
anomalous situation.
(IX) (a) The words "unless a different intention appears" must
necessarily be read in the context of Sub-section (I) of Section
B 20 of the 2003 Act ,and the proviso appended thereto being
practically the incorporation of Section 6 of the General Clauses
Act, the words "unless a different intention appears" must be
read thereinto although not expressly contained therein.
(b) The words "anything duly done" contained in proviso (a) to
c Sub-section (I) of Section 20 of the 2003 Act cannot have the
meaning of keeping alive a notification for exemption of electricity
tax on consumption which is prohibited by Section 14 and
negatived by Section 20(2)(a) and, thus, it must receive a restricted
and contextual construction.

D (c) An exemption, by its very nature, does not create a right and
it is always defeasible and susceptible to be withdrawn.
(x) In absence of necessary pleadings, a challenge to the
constitutionality of the Act on the purported ground of "(
discrimination must fail. In matters of taxation including exemption, !

the State is given wide discretion and is allowed to pick and
E
choose objects for taxation and exemption and in that view of the
matter the notifications cannot be held to be ultra vires.
(xi) 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
F
Act on the basis thereof or otherwise, inasmuch as there cannot
be any estoppel against the exercise of legislative power to repeal 'r
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.
G (xii) Electricity tax is levied on a licensee under the 2003 Act in terms
of Clauses (a) and (b) of Sub-section (I) of Section 3 thereof. In
view of the definition of"net charge" contained in Section 2 (12)
read with Explanation II of Section 2(7), the tax must be held to Y"
be levied on actual consumption and not on demand charges.
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD. •·. ELECTRICITY INSPECTOR [S.B. SINHA, J.) 987

-_,( CONSTITUTIONAL SCHEME AND THE VIRES ISSUE A
53. Article 245 of the Constitution of India vests the Parliament with
power of legislation on all matters enumerated in List I and also the matters
enumerated in List III of the Seventh Schedule of the Constitution of India.
The State Legislature, however, has the exclusive right to legislate matters
specified in the Entries contained in List JI. B
54. Federal supremacy no doubt recognizes that the State's power to
legislate with regard to any matters in List III would be subject to any Act
i of the Parliament; however, Clause (3) of Article 246 of the Constitution of
India gives the legislature of the State an exclusive power with respect to any
matters in List II, subject to restriction imposed in the entry itself, as for c
example, Entries I, 2, 12, 13, 17, 22, 23, 24, 32 and 33. Entry 53 of List II does
not contain any such restriction and has not been made subject to any of the
entry made in List I or List III.

55. Various entries in the three Lists provide for the fields of legislation.
D
They are, therefore, required to be given a liberal construction inspired by a
broad and generalize 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. They are separately
enumerated. Taxation is treated as a distinct matter for purposes of legislative
competence vis-a-vis the general entries. Clauses (I) and (2) of Article 248 of E
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, entries I 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.
F
f We, however, do 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 enactment under several entries,
one of them being a tax entry.
G
56. A bare perusal of Entry 53 of List II and Entry 38 of List III, however,
clearly suggests that they are meant to operate in different fields.

57. In National Thermal Power Corpn. Ltd. (supra}, this Court has
clearly held that "the power of the State Legislature to enact law to levy tax
by reference to List II of the Seventh Schedule has two limitations: one, H

t
988 SUPREME COURT REPORTS [2007] 6 S.C.R.

A arising out of the entry itself, and the other, flowing from the restriction
embodied in the Constitution."

58. 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.
B
59. Legislative competence of the State of Tamil Nadu to legislate the
impugned Act is beyond any dispute. It cannot therefore, be said that the
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. [See K.C. Gajapati Narayan Deo and Ors. v. The State
C of Orissa, [1954] SCR I and R.S. Joshi, Sales Tax Officer, Gujarat and Ors.
v. Ajit Mills Limited and Anr., [1977) 4 SCC 98).

60. In the decision of this Court in Raja Jagannath Baksh Singh v.
State of Uttar Pradesh, AIR (1962) SC 1563, it has been held:

D "21... Though the validity of a taxing statute cannot be challenged
merely on the ground that it imposes an unreasonably high burden,
it does not follow that a taxing statute cannot be challenged on the
ground that it is a colourable piece of legistation and as such, is a
fraud on the legislative power conferred on the legislature in question.
E If, in fact, it is shown that the Act which purports to be a taxing Act
is a colourable exercise of the legislative power of the legislature, then
that would be an independent ground on which the Act can be struck
down. Colourable exercise of legislative power is not a legitimate
exercise of the said power and as such, it may be open to challenge.
But such a challenge can succeed not merely by showing that the tax
F levied is unreasonably high or excessive, but by proving other relevant
circumstances which justify the conclusion that the statute is
colourable and as such, amounts to a fraud."

61. Entry 53 of List II provides for a taxation entry; whereas Entry 38
G of List III provides for a non-taxation entry dealing with general aspects of
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. [BSES Ltd (supra) at page 208)
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO l TD '· ELECTRICITY INSPECTOR [S.B. SINHA. I. ) 989

62. Article 254 deals with methods ofresolving conflict between the law A
---{ made by the Parliament and law made by the State in respect of the matters
enumerated in the concurrent list.

63. In MP. Vidyut Karamchari Sangh v. MP. Electricity Board, [2004]
9 sec 755, it was held:
B
"28. Recourse to the said principles, however, would be resorted to
only when there exists direct conflict between two provisions and not
otherwise. Once it is held that the law made by Parliament and the
State Legislature occupy the same field, the subsequent legislation
-f made by the State which had received the assent of the President of
India indisputably would prevail over the parliamentary Act when c
there exists direct conflict between two enactments. Both the laws
would ordinarily be allowed to have their play in their own respective
fields. However, in the event there does not exist any conflict, the
parliamentary Act or the State Act shall prevail over the other depending
upon the fact as to whether the assent of the President has been D
obtained therefor or not. (See Bharat Hydro Power Corpn. ltd v.
State of Assam)".

64. The 2003 Act is, thus, not repugnant to the 1948 Act.
.r
ARTICLE 288 ISSUE
E
65. It is no doubt true that Section 18 of the 1962 Act as also Section
21 of the 2003 Act provided that they would be subject to the provisions of
Article 288 of the Constitution of India. It deals with exemption from taxation
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 F
if any such law provides for fixation of the rates and other incidents of tax,
y the assent of the President would be required.
~

66. A plain reading of Clause (2) of Article 288 of the Constitution of
India raises no doubt that the application thereof was meant to be only in
respect of the river valley authorities like Damodar Valley Corporation G
constituted in the year 1948 by the Damodar Valley Corporation Act, 1948.
The question came up for consideration before this Court in Damodar Valley
Corporation v. State of Bihar and Ors., [1976] 3 SCC 710 wherein it was
y
stated:
H
990 SUPREME COURT REPORTS [2007) 6 S.C.R.

A "9. What is required by clause (2) of Article 288 is that the law made
by the State Legislature for imposing, or authorising the imposition of \_-
tax mentioned in clause (I) shall have effect only if after having been
reserved for the consideration of the President it receives his assent.
Another requirement of that clause is that if such law provides for the
fixation of the rates and other incidents of such tax by means of Rules
B or orders to be made under the law by any authority, the law shall
provide for the previous consent of the President being obtained to
the making of any such Rule or order. It is, however, not the effect
of that clause that even if the abovementioned two requirements are
satisfied, the provisions which merely deal with the mode and manner
c of the payment of the aforesaid tax should also receive the assent of
the President and that in the absence of such assent, the provisions
dealing with the incidence of tax, which have received the assent of
the President, would remain unenforceable."

67. It may be true that in a case of this nature, it was not necessary to
D 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 the Act, the same, in our opinion, would not necessarily mean
that the same is required to be taken into consideration for the purpose of
E judging the constitutionality thereof. Submission of Mr. Ganguli and other
learned counsel appearing on behalf of the appellants, that the same was
meant to give effect to the 1948 Act under which the State Electricity Boards
are created, does not appeal to us. 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
F 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.

68. The State Electricity Board has been given the exemption under the
2003 Act which by itself would not mean that those who purchase electrical
G 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 the exemption provisions would be attracted only when requisite
conditions precedent therefor are satisfied, would apply in a case of
constitutional interpretation also. ..,..
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD v. ELECTRICITY INSPECTOR [S.B. SINHA. I ) 99 J

--1 69. The learned counsel for the appellants would, however, submit that A
Article 265 of the Constitution read with Article 288 thereof would mandate
compliance of the latter provision.

70. The expression "subject to" stated that the same would imply that
the provisions of Article 288 will have to be complied with. It is no doubt true
that ordinarily the expression "subject to" conveys the idea of a provision B
yielding place to another provision or other provisions subject to which it is
made as has been held in Surinder Singh v. Central Government and Ors.,
AIR (1986) SC 2166, para 6; South India Corporation (P) Ltd v. Secretary,
f Board of Revenue. Trivandrum and Anr., AIR (1964) SC 207, Ashok Leyland
Ltd v. State of Tamil Nadu & Anr., (2004] 3 SCC I and S.N. Chandrashekar
and Anr. v. State of Karnataka and Ors., (2006] 3 SCC 208. But, keeping in
c
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.

ARTICLE 14 ISSUE D
71. The issue that the 2003 Act in violation of the equality clause
contained in Article 14 of the Constitution of India was not raised before the
.r 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
been taken to urge the said question. A ground taken, however, must be E
based 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.
F
y 72. It is now trite that such factual foundation, unless is apparent from
• the statute, itself, cannot be pennitted to be raised and that too for the first
time before this Court.

73. In Orient Weaving Mills (P) Ltd. v. The Union ofIndia, [1962] Supp
G
3 SCR 481, this Court has stated:

" .. .It is one thing to attack the constitutionality of the provisions of
the Act authorising the levy of the excise duty on the petitioners; it
is quite a different thing to complain of the· exemption granted in
respect of the goods produced by the 5th respondent. As the vires H
992 SUPREME COURT REPORTS [2007] 6 S.C.R.

A of the Act itself has not been challenged, we need not say anything
more on that aspect of a possible controversy which has not been
actually raised in the petition."

74. Furthermore, in the matter of taxation, the State is given wide
discretion and is allowed to pick and choose objects for taxation and exemption.
B
75. We do not think that it is advisable for us to go into the said
question.

76. In absence of necessary pleadings and grounds taken before the
High Court, we are not in a position to agree with the learned counsel
C appearing on behalf of the appellants that only because Section 13 of the
repealed Act is inconsistent with Section 14 of the 2003 Act, the same would
be 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 exemption
D 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.

SHOULD WE READ IT DOWN

E 77. This leaves to the question as to whether the provisions of Section
14 of the 2003 Act should be read in such a manner so as to make it in
consonance with Article 14 of the Constitution of India. The learned counsel
would contend that Section 14 is loosely worded. We do not agree. The
premise on which the said submission was made is that electricity cannot be
stored. It has been held to be so in National Thermal Power Corpn. Ltd
F (supra) in the following words:

" .. .In this observation we agree with Grover, J. on all other
characteristics of electric energy except that it can be stored and to
the extent that electric energy can be stored, the observation must be
held to be erroneous or by oversight. Science and technology till this
G day have not been able to evolve any methodology by which electric
energy can be preserved or stored."

[See also BSES Ltd (supra), para 16 and 18]

78. However, the editorial note in National Thermal Power Corpn. Ltd
H (supra) itself suggests that now electricity, at least to some extent is possible
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD •·. ELECTRICITY INSPECTOR [S.B. SINHA, J ) 993

to be stored and that aspect of the matter had not been considered therein. A
Furthermore, the words "sold for consumption", only because the electricity
cannot be stored, cannot be held to be mere tautology as urged or at all.

79. The doctrine of purposive construction can be taken recourse to
provided there exists any ambiguity. If we have to agree with the submission
of the learned counsel and in particular, Mr. Nariman, we will have to not only B
ignore the words "for consumption" occurring immediately after the word
"sold" but also ignore the word "by" occurring immediately after the word
"consumption". We have to give a new meaning which would amount to
f judicial legislation. We do not see any 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
c
electricity but also consumption thereof.

80. We are not unmindful of the fact that the 2003 Act was enacted not
only to consolidate but also to rationalize the Act. Mr. Nariman takes us to
various authorities in regard to the construction of a consolidating statute D
including IRC v. Hinchy, (1960) I All ER 505, Beswick v. Beswick, (1967) 2
All ER 1197, Dir. Of Public Prosecutions v. Schild/camp, (1969) 3 All ER 1640,
Maunsell v. Olins, (1975) I All ER 16 and Farrell v. Alexander, (1976) 2 All
,r
ER 721, to suggest that a consolidating statute is not meant to alter law. But,
in these decisions, it has also been suggested that a consolidating statute
may also be an amending act. E

81. It is one thing to say that where the words or expressions in a
statute are plainly 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
F
another thing to say that it is necessary or proper to resort to or consider
..,--
the earlier legislations on the subject only because the consolidating Act re-
~
enacts in an orderly form the various statutes embodying the Jaw on the
subject. [See Williams v. Permanent Trustee Co. of New South Wales, (I 906)
AC 249, p. 252 and N.S. Bindra's Interpretation of Statutes, 10th edition, pages
!071-1072] G
82. The words "consolidate and amend" furthermore often occur in a
statute in repealing provision. Such a statute is not intended to alter the law.

83. In The Union of India v. The Mahindra Supply Co. AIR (1962) SC
256, this Court observed: 11
994 SUPREME COURT REPORTS [2007] 6 S.C.R.

A "7 ... The Arbitration Act of 1940 is a consolidating and amending
statute and is for all purposes a code relating to arbitration. In dealing
with the interpretation of the Indian Succession Act, 1865, the Privy
Council in Norendra Nath Sircar v. Kamlabasini Desai observed that
a code must be construed according to the natural meaning of the
language used and not on the presumption that it was intended to
B leave the existing law unaltered. The Judicial Committee approved of
the observations of Lord Herschell in Bank of England v. Vagliano
Brothers to the following effect:

I think ... the proper course is in the first instance to examine the
language of the statute and to ask what is its natural meaning,
c uninfluenced by any considerations derived from the previous state
of the law, and not to start with enquiring how the law previously
stood, and then, assuming that it was probably intended to leave it
unaltered, to see if the words of the enactment wm bear an interpretation
in conformity with this view. If a statute, intended to embody in a
D code a particular branch of the law, is to be treated in this fashion,
it appears to me that its utility will be almost entirely destroyed, and
the very object with which it was enacted will be frustrated. The
purpose of such a statute surely was that on any point specifically
dealt with by it, the law should be ascertained by interpreting the
language used instead of, as before, by roaming over a vast number
E of authorities in order to discover what the law was, extracting it by
a minute critical examination of the prior decisions ....

The court in interpreting a statute must therefore proceed without
seeking to add words which are not to be found in the statute, nor
is it permissible in interpreting a statute which codifies a branch of the
F law to start with the assumption that it was not intended to alter the
pre-existing law; nor to add words which are not to be found in the
statute, or for which authority is not found in the statute. But we do
not propose to dispose of the argument merely on these general
considerations. In our view, even the legislative history viewed in the
G light of the dictum of the Privy Council in Hurrish Chander case, does
not afford any adequate justification for departing from the plain and
apparent intendment of the statute."

84. Such construction is to be put only when it is a pure consolidating
statute but there cannot be any doubt whatsoever that the same has to yield
H to plain words to the contrary. [See Beswick (supra) and Grey v. !RC, (1959)
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. '· ELECTRICITY INSPECTOR (S.B. SINHA. J J 995
3 All ER 603). A
85. However, 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.
B
86. We may furthermore notice that the distinction between consolidating
statute and other statutes is no longer valid. It is only in certain exceptional
situations that the language used in the earlier Act can be resorted to.

87. In G.P. Singh's 'Principles of Statutory Interpretation', Tenth Edition,
pages 315-316, it is stated: C
"The distinction between consolidating statutes and other statutes
for purposes of interpretation is being obliterated. Recent decisions
have emphasised. that a consolidation Act should be interpreted
according to normal canons of construction and recourse to repealed
enactments can be taken only to solve any ambiguity, for the process D
of consolidation would lose much of its point if, whenever a question
as to construction of a consolidating Act arose, reference had to be
made to the statutes which it has consolidated and repealed. The
primary rule of construction of a consolidation Act is to examine the
language used in the Act itself without any reference to the repealed E
statutes. It is only when the consolidation Act gives no guidance as
to its proper interpretation that it is permissible to refer to the repealed
enactments for guidance and it is never legitimate to have recourse
to repealed enactments to make obscure or ambiguous that which is
clear in the consolidation Act. It is only when there is a real or
substantial difficulty or ambiguity that the court is to attempt to F
resolve the difficulty or ambiguity by reference to the legislation
which has been repealed and re-enacted in the consolidation Act.
This rule applies to all types of consolidation Acts which are now
three: (I) Pure consolidation. i.e. re-enactment, (2) Consolidation with
correction and minor improvement, and (3) Consolidation with Law G
Commission amendments. But when "the provisions of the Act itself
invited reference to the earlier law and in some cases were unintelligible
without them" recourse to the earlier law for construing the Act
becomes inevitable."

H
996 SUPREME COURT REPORTS [2007) 6 S.C.R.

A REPEAL ISSUE

88. Section 20 of the 2003 Act repeals the 1962 Act as well as the 1939
Act. The effect of 'repeal' is well known wherewith there does not appear to
be any general controversy. Thus, before proceeding to advert to the rival
contention of the parties, as noticed hereinbcfore, we may notice certain
B precedents of this Court operating in this behalf.

89. In State of Punjab v. Mohar Singh. (1955] 1 SCR 893], this Court
has stated:

" ... Whenever there is a repeal of an enactment, the consequences laid
C down in Section 6 of the General Clauses Act will follow unless, as
the section itself says, a different intention appears. In the case of a
simple repeal there is scarcely any room for expression of a contrary
opinion. But when the repeal is followed by fresh legislation on the
same subject we would undoubtedly have to look to the provisions
of the new Act, but only for the purpose of determining whether they
D
indicate a different intention. The line of enquiry would be, not whether
the new Act expressly keeps alive old rights and liabilities but whether
it manifests an intention to destroy them. We cannot therefore
subscribe to the broad proposition that Section 6 of the General
Clauses Act is ruled out when there is repeal of an enactment followed
E - by a fresh legislati0n. Section 6 would be applicable in such cases
also unless the new legislation manifests an intention incompatible
with or contrary to the provisions of the section. Such incompatibility
would have to be ascertained from a consideration of all the relevant
provisions of the new law and the mere absence of a saving clause
is by itself not material. It is in the light of these principles that we
F now proceed to examine the facts of the present case." '(
t
90. In Jayantila/ Amrath/a/ v. Union of India, [1972] 4 SCC 174, this
Court held:

"8. The above contention is untenable. There are no provisions in the
G Gold (Control) Act, 1968 which are inconsistent with Rule 126(I)(IO)
of the Rules. That being so, action taken under that rule must be
deemed to be continuing in view of Section 6 of the General Clauses
Act, 1897. It is true that Gold (Control) Act, 1968 does not purport to
incorporate into that Act the provisions of Section 6 of the General
H Clauses Act. But the provisions therein are not inconsistent with the
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD.'· ELECTRICITY INSPECTOR [SB SINHA, J. J 997

provisions in Section 6 of the General Clauses Act. Hence the A
provisions of Section 6 of the General Clauses Act are attracted in
view of the repeal of the Gold (Control) Ordinance, 1968. As the Gold
(Control) Act does not exhibit a different or contrary intention,
proceedings initiated under the repealed law must be held to continue.
We must also remember that by Gold (Control) Ordinance, the Rules B
were deemed as an act of Parliament. Hence on the repeal of the Rules
and the Gold (Control) Ordinance, 1968 the consequences mentioned
in Section 6 of the General Clauses Act, follow. For ascertaining
whether there is a contrary intention, one has to look to the provisions
of the Gold (Control) Act, 1968. In order to see whether the rights and
liabilities under the repealed law have been put an end to by the new C
enactment, the proper approach is not to enquire ifthe new enactment
has by its new provisions kept alive the rights and liabilities under the
repealed law but whether it has taken away those rights and liabilities.
The absence of a saving clause in a new enactment preserving the
rights and liabilities under the repealed law is neither material nor
decisive of the question see State of Punjab v. Mohar Singh and T.S. D
Baliah v. Income Tax Officer, Central Circle VI, Madras."
T
91. In India Tobacco Co. Ltd. v. The Commercial Tax Officer,
Bhavanipore and Ors., [1975] 3 SCC 512, this Court held:

"15. The general rule of construction is that the repeal of a repealing E
Act does not revive anything repealed thereby. But the operation of
this rule is not absolute. It is subject to the appearance of a different
intention in the repealing statute. Again such intention may be explicit
or implicit. The questions, therefore, that arise for determination are:
Whether in relation to cigarettes, the 1941 Act was repealed by the p
1954 Act and the latter by the 1958 Act? Whether the 1954 Act and
1958 Act were repealing enactments? Whether there is anything in the
1954 Act and the 1958 Act indicating a revival of the 1941 Act in
relation to cigarettes?

16. It is now well-settled that repeal connotes abrogation or obliteration G
of one statute by another, from the statute book as completely as if
it had never been passed; when an Act is repealed, it must be considered
(except as to transactions past and closed) as if:it had never existed.
(Per Tindal, C.J .. in Kay v. Goodwin and Lord Tenterdon in Surtees
v. Ellison cited with approval in State of Orissa v. MA. Tulloch &
Co.). H
998 SUPREME COURT REPORTS [2007] 6 S. C.R.
A 17. Repeal is not a matter of mere form but one of substance, depending
upon the intention of the legislature. If the intention indicated expressly
or by necessary implication in the subsequent statute was to abrogate
or wipe off the former enactment, wholly or in part, then it would be
a case of total or pro tanto repeal. If the intention was merely to
modify the former enactment by engrafting an exception or granting
B an exemption, or by super-adding conditions, or by restricting,
intercepting or suspending its operation, such modification would not
amount to a repeal (see Craies on Statute Law, 7th Edn. pp. 349, 353,
373, 374 and 375; Maxwells Interpretation of Statutes, I Ith Edn. pp.
164, 390 based on Mount v. Taylor; Southerlands Statutory Construction
c 3rd Edn. Vol. I, para2014 and 2022, pp. 468 and 490). Broadly speaking,
the principal object of a repealing and amending Act is to excise dead
matter, prune off superfluities and reje.:t clearly inconsistent enactments
see Mohinder Singh v. Harbhajan Kaur."

92. In T.S. Baliah v. T.S. Rangachari, Income Tax Officer, Central Circle
D VJ, Madras, [1969] 3 SCR 65, this Court held:
" ... The principle of this section is that unless a different intention
appears in the repealing Act, any legal proceeding can be instituted
and continued in respect of any matter pending under the repealed
Act as if that Act was in force at the time of repeal. In other words,
E whenever there is a repeal of an enactment the consequences laid
down in Section 6 of the General clauses Act will follow unless, as
the section itself says, a different intention appears in the repealing
statute. In the case of a simple repeal there is scarcely any room for
expression of a contrary opinion. But when the repeal is followed by
fresh legislation on the same subject the Court would undoubtedly
F
have to look to the provisions of the new Act, but only for the
purpose of determining whether they indicate a different intention.
The question is not whether the new Act expressly keeps alive old
rights and liabilities but whether it manifests an intention to destroy
them. Section 6 of the General Clauses Act therefore will be applicable
G unless the new legislation manifests an intention incompatible with or
contrary to the provisions of the section. Such incompatibility would
have to he ascertained from a consideration of all the relevant
provisions of the new statute and the mere absence of a saving clause
is by itself not material. In other words, the provisions of Section 6
of the General Clauses Act will apply to a case of repeal even ifthere
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. v. ELECTRICITY INSPECTOR [S.B SINHA. l.] 999

-~ is a simultaneous re-enactment unless a contrary intention can be A
gathered from the new statute ... "

93. In Gajraj Singh and Ors. v. State Transport Appellate Tribunal and
Ors., [1997]1 SCC 650, this Court held:

"24. When there is a repeal and simultaneous re-enactment, Section B
6 of the GC Act would apply to such a case unless contrary intention
can be gathered from the repealing Act. Section 6 would be applicable
in such cases unless the new legislation manifests intention
f inconsistent with or contrary to the application of the section. Such
incompatibility would have to be ascertained from all relevant
provisions of the new Act. Therefore, when the repeal is followed by c
a fresh legislation on the same subject, the Court would undoubtedly
have to look to the provisions of the new Act only for the purpose
of determining whether the 1ew Act indicates different intention. The
object of repeal and re-enal:lment is to obliterate the Repealed Act
and to get rid of certain obsolete matters." D
94. We may at this juncture also notice that whereas Section 6 of the

,. General Clauses Act provides for effect of repeal, Section 24 thereof provides
for continuation of orders issued under the enactments repealed and re-
enacted. They read as under:
E
"6 Effect ofrepeal.-Where this Act, or any Central Act or Regulation
made after the commencement of this Act,

repeals any enactment hitherto made or hereafter to be made, then,
unless a different intention appears, the repeal shall not-

(a) revive anything not in force or existing at the time at which the F
....,., repeal takes effect; or
• (b) affect the previous operation of any enactment so repealed or
anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued G
or incurred under any enactment so repealed; or

.....,. (d) affect any penalty, forfeiture or punishment incurred in respect of
any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of
H
1000 SUPREME COURT REPORTS [2007] 6 S.C.R.

A any such right, privilege, obligation, liability, penalty, forfeiture or
punishment as aforesaid;

and any such investigation, legal proceeding or remedy may be
instituted, continued or enforced, and any such penalty, forfeiture or
punishment may be imposed as ifthe repealing Act or Regulation had
B not been passed.

24 Continuation of orders, etc., issued under enactments repealed and
re-enacted.-Where any Central Act or Regulation, is, after the
commencement of this Act, repealed and re-enacted with or without
modification, then, unless it is otherwise expressly provided any
C appointment, notification, order, scheme, rule, form or bye-law, made
or issued under the repealed Act or Regulation, shall, so far as it is
not inconsistent with the provisions re-enacted, continue in force,
and be deemed to have been made or issued under the provisions so
re-enacted, unless and until it is superseded by any appointment,
notification, order, scheme, rule, form or bye-law, made or issued
D
under the provisions so re-enacted and when any Central Act or
Regulation, which, by notification under section 5 or 5A of the
Scheduled Districts Act, 1874, (14of1874) or any like law, has been
extended to any local area, has, by a subsequent notification, been
withdrawn from and re-extended to such area or any part thereof, the
E provisions of such Act or Regulation shall be deemed to have been
repealed and re-enacted in such area or part within the meaning of this
section."

95. What, however, is the matter of moment would be that the expression
"unless a different intention appears" occurring in Section 6 of the General
F Clauses Act, 1897 has not been inserted in Sub-section (I) of Section 20 of
the 2003 Act. Sub-sections (I) and (2) of Section 20 of the 2003 Act, thus,
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
G fiction for continuation of certain things/ proceeding on the premise as if the
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 appended
to Sub-section ( 1) of Section 20 of the 2003 Act, however, carves out an
exception in regard to the consequences flowing therefrom.

H 96. If Sub-sections (1) and (2) of Section 20 of the 2003 Act operate in .
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD.'- ELECTRICITY INSPECTOR [S.B SINHA, J. l 00 J

different fields, as we have held, the marginal note of Section 20, viz., repeal A
and savings, in our opinion, 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 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 B
be read together.

97. Submission of Mr. Andhyarujina that this Court must read the words
"unless a different intention appears" in Sub-section ( 1) of Section 20 of the·
2003 Act, in our opinion, is impermissible in law. We have rejected a similar
contention of Mr. Nariman urging us to read down and apply the purported C
rule of purposive construction while construing Section 14 of the 2003 Act.
We do not intend to apply different tests in the matter of construction of
Section 20 of the 2003 Act. Omission of words in a particular statute may play
an important role. The 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 D
recourse to purposive construction. It is also a well settled principles of law
that casus omissus cannot be supplied. [See J. Srinivasa Rao v. Govt. ofA.P.
and Anr., [2006] 13 SCALE 27]

98. Proviso appended to Sub-section (I) of Section 20 of the 2003 Act
although for all intent and purport incorporates Section 6 of the General E
Clauses Act but a significant departure therefrom must be borne in mind. If
the legislature has used different words, or has omitted certain words, in our
opinion, the same cannot be read as containing the words "unless a different
intention appears". It may be that the provisions of the 2003 Act are
demonstrably different from the 1962 Act but we must assume that the F
legislature did so deliberately. The intention of the legislature by making a
r distinction between Sub-section (1) and Sub-section (2) of Section 20 of the
• 2003 Act, in our opinion, is obvious. The fact that the significant words
"unless a different intention appears" or the Act does not contain a provision
inconsistent therewith were known to the legislature. Whereas in Sub-section
(I) of Section 20 of the 2003 Act they did not introduce any such thing, they G
did so while enacting Sub-section (2) thereof.

99. While construing the said words, we may require to construe 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" H
1002 SUPREME COURT REPORTS [2007] 6 S.C.R.

A as has been held in H. V. Mathai v. Subordinate Judge, Kottayam and Ors., )--
(1969] 2 sec 194.

I00. The word "correspond" as contained in Stroud's Judicial Dictionary,
2nd Edition, Ve:lume I, page 355, is to mean "to harmonize with" or "to be
identical with".
B
10 I. But, we may notice that 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 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
C of energy as contra-distinguished 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. Can the 1939 Act and the
1962 Act, on the one hand, and the 2003 Act, on the other, be said to be
containing similar or identical provisions? The answer thereto must be rendered
D in the negative. Once Section 14 of the 2003 Act is held to be 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, in our opinion,
will have no application. If Sub-section (2) of Section 20 of the 2003 Act
would have no application, Sub-section ( 1) of Section 20 would apply. Once
Sub-section (I) of Section 20 of the 2003 Act is found to have application,
E the absence of the words "unless a different intention appears" will assume
great significance.

102. If that be so, then there is no conflict between the proviso appended
to Sub-section (I) of Section 20 and Sub-section (2) thereof. In that view of
F the matter, Sub-section (2) of Section 20 of the 2003 Act would prevail.

103. The High Court, therefore, in our opinion, committed a manifest '1"
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
G be notwithstanding anything contained in Sub-section (l) of Section 20 thereof.

104. 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. Proviso, as is well known, has four functions, as has
been noticed by this Court in S. Sundaram Pillai v. V.R. Pattabiraman, (1985]
H 1 sec 591 in the following terms:
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD '· ELECTRICITY INSPECTOR [S.B. SINHA, J. j 003

"43. (I) qualifying or excepting certain provisions from the main A
- ..( enactment;

(2) it may entirely change the very concept of the intendment of the
enactment by insisting on certain mandatory conditions to be fulfilled
in order to make the enactment workable;
B
(3) it may be so embedded in the Act itself as to become an integral
pan of the enactment and thus acquire the tenor and colour of the
substantive enactment itself; and

(4) it may be used merely to act as an optional addenda to the
enactment with the sole object of explaining the real intendment of the C
statutory provision."

(See also Swedish Match AB v. Securities & Exchange Board, India,
(2004] 11 SCC641]

I 05. 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
r· inconsistent with the repealed Acts.

106. The 1962 Act provided for grant of exemption from payment of E
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
notification issued thereunder could be an act which would come within the
purview of the words "anything duly done".

I 07. In our opinion, it would not be correct to contend that only F
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 {I) thereof will have no application.

108. We are also unable to agree with Mr. Andhyarujina that exemption
from tax is a mere concession defeasible by Government and does not confer G
any accrued right to the recipient. Right of exemption with a valid notification
issued gives rise to an accrued right. It is a vested right. Such right had been
granted to them permanently. 'Permanence' would mean unless altered by
statute.
H
1004 SUPREME COURT REPORTS [2007) 6 S.C.R.

A. 109. Thus, when a right is accrued or vested, the same can be taken
away only by reason of a statute and not otherwise. "Thus, a notification }--
which was duly issued would continue to govern unless the same is repealed.

110. Mr. Andhyarujina, however, would submit that reference to the
words "anything duly done" should be given a restrictive meaning. He referred
B to ~Statutory Interpretation~ A Code" by F.A.R. Bennion, Third Edition, page
229, wherein it was stated:

"Paragraph (ii) This derives from Interpretation Act 1978 s 16( I )(b ).
The reference to 'anything duly done' avoids the need for procedural
matters, such ~ the giving of notices, to be done over again. t:
c
·Example 89.3 The Interpretation Act 1978 s 16 preserved the effect of
· a noise nuisance notice served under the Control of Pollution Act
1974 s 58(1) before its repeal and replacement by the Environmental
·.Protection Act 1990 ss 162 and 164(2) and Sch 16 Pt 111."

D 111. The treatment of the law, in our opinion, is not exhaustive as
different consequences are required to be taken into consideration and applied
· ·having regard to the nature of the statutory provision.
. . I
112. Mr. Andhyarujina also relied upon Maxwell on the Interpretation -"\__
of Statutes, 12th edition, page 18, wherein it was stated:
E
"When an Act is repealed, any delegated legislation made under the
Act falls to the ground with the statute unless it is expressly preserved.
Where the subordinate legislation is continued in force, however, the
general rule is that its scope and construction are determined according
to the repealed Act under which it was made."
F
.. i !"3. The statement of law therein does not militate against our findings
. aforementioned. Construction would vary from statute to statute. .... '[

114. It is profitable to notice at this stage a decision of this Court in
G J.Us. Universal Imports Agency (supra). In that case under the Indo-French
Agreement entered into by and between the two nations on !st November,
1954, the entire Administration of French Settlement vested in the Government
of India. The territory of Pondicherry, thus, became a free port without any
restriction in case of most imports. However, by reason of a notification dated
30th October, 1954, the importers in Pondicherry were required to obtain
H validation of licences held by them to import goods as petitioners thereof did
•
005
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD '· ELECTRICITY INSPECTOR (S.B. SINHA, J ] J

--1 not have any merchandise imported by them stood confiscated. A
115. Clause 6 of the Agreement reads, thus:

"Unless otherwise specifically provided in the Schedule, all laws in
force in the French Establishments immediately before the
commencement of the Order, which correspond to enactments specified B
in the Schedule, shall cease to have effect, save as respect things
done or omitted to be done before such commencement."

·,Y
116. Analyzing the said provision, this Court held:

" ... The words things done in para 6 must be reasonably interpreted
and, if so interpreted, they can mean not only things done but also
c
the legal consequences flowing therefrom. If the interpretation
suggested by the learned counsel for the respondents be accepted,
the saving clause would become unnecessary. If what it saves is only
the executed contracts i.e. the contracts whereunder the goods have
been imported and received by the buyer before the merger, no further D
protection is necessary as ordinarily no question of enforcement of
the contracts under the pre-existing law would arise. The phraseology
.,.... used is not an innovation but is copied from other statutory clauses .
Section 6 of the General Clauses Act (I 0 of 1897) says that unless a
different intention appears, the repeal of an Act shall not affect
E
anything duly done or suffered thereunder ..."

I 17. Thus, a liberal and extensive construction was given by this Court.

118. To the same effect is also a decision of this Court in Shri Ram
Prasad (supra) wherein power to make rule was held to be a thing done within
F
the meaning of Article 357(2) of the Constitution of India.
y

• 119. In Harnek Singh (supra), this Court held:

"16. The words anything duly done or suffered thereunder used in
clause (b) of Section 6 are often used by the legislature in saving
clause which is intended to provide that unless a different intention
G
appears, the repeal of an Act would not affect anything duly done or
suffered thereunder. This Court in Hasan Nurani Malak v. S.M Ismail,
--r Asstt. Charity Commr., Nagpur has held that the object of such a
saving clause is to save what has been previously done under the
statute repealed. The result of such a saving clause is that the pre- H
1006 SUPREME COURT REPORTS [2007] 6 S.C.R.

A existing !aw continues to govern the things done before a particular
date from which the repeal of such a pre-existing law takes effect. In
}--
Universal Imports Agency v. Chief Controller of Imports and Exports,
this Court while construing the words things done held that a proper
interpretation of the expression things done was comprehensive enough
to take in not only the things done but also the effect of the legal
B consequence flowing therefrom."

120. Furthermore, exemption from payment of tax in favour of the
appellants herein would also constitute a right or privilege. The expression
"privilege" has a wider meaning than right. A right may be a vested right or
C an accured right or an acquired right. Nature of such a right would depend
upon and also vary from statute to statute. It has been so held by this Court,
while construing Section 6 of the General Clauses Act, in Mis. Gurcharan
Singh Baldev Singh v. Yashwant Singh and Ors., [1992] 1 SCC 428 in the
following terms:

D " ... The objective of the provision is to ensure protection of any right
or privilege acquired under the repealed Act. The only exception to
it is legislative intention to the contrary. That is, the repealing Act
may expressly provide or it may impliedly provide against continuance
of such right, obligation or liability ..."

E 121. We are, however, in a case of this nature, not really concerned
with the question as to whether even an inchoate right can be subject matter
of a saving clause. Such a question, in our opinion, does not arise for
consideration herein.

122. We have noticed the legislative history of the Act. Whereas the
F 1939 Act did not contain any provision for grant of exemption from payment
of electricity tax on sale of electrical energy, the 1962 Act contained two
provisions in relation thereto. One, contained in Section 12 relating to High
Tension Supply in the matter of principal production and another contained
in Section 13 being a general power of exemption.
G 123. After the 1962 Act came into force, as noticed hereinbefore, the
Government issued the notification bearing GOMs No. 787 dated 30.04.1979
merging the electricity tax with the basic tariff. ln 1991, the 1962 Act was
amended whereby additional tax was levied at 5%. y

124. On or about 22.10.1991, the Union Ministry of Power, Government
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD ''· ELECTRICITY INSPECTOR [S.B SINHA, J J J007

--( of India published a policy for private participation in the power sector as a A
result whereof provisions were made in the 1948 Act allowing setting up of
generating companies and captive power plants. Indisputably, the Government
of Tamil Nadu constituted a committee to go into the issue of cogeneration
of electricity in the sugar mills and other industries and to make
recommendations therefor; the terms of reference being "to evolve a
methodology for pricing of electricity purchased by Tamil Nadu Electricity B
Board from sugar Mills Cogenerating electricity", etc. as stated therein. It is
not in dispute that a cogenerating sugar mill is not similar to other captive
..,,, power plant insofar as a typical cogenerating sugar mill would consume only
30% of the power generated and balance 70% thereof is to be sold.

125. The Committee furnished a report recommending exemption from
c
generation tax both from power consumption and as also the power supplied
to the grid/ third parties. It was also recommended that the Tamil Nadu
Electricity Board may pay a price equal to HT-I tariff charged for industrial
consumers less 2% for transmission cost.
D
126. The State, however, did not accept the recommendations made by
the said Committee in their entirety. By reason ofa notification dated 16.06.1993,
the State while accepting a part of the said report, directed that the Tamil
~
Nadu Electricity Board shall pay a price equal to HT-I tariff charged for
industrial consumers less 2% for transmission cost. However, an exemption
provision was made from payment of Electricity General Tax therein stating: E

"Cogenerating sugar mills shall be exempted from the Electricity
Generation Tax both for power consumed captively as well as power
supplied to the Tamil Nadu Electricity Board and other third parties."

127. By reason of Act No. 43of1994, with a view to rationalize the rate F
..,, of tax on consumption, rate ()f additional tax was increased from 4 % to 5%

• without repealing GOMs. No. 230 dated 16.06.1993 .

128. On 9.10.1995, the Ministry of Power, Union of India wrote to all
State Electricity Boards and State Governments urging them to take steps to
tap the potential in captive/ cogeneration power plants as energy shortage
G
was visualized at 15% and peaking shortage at 30%. The State Governments,
therefore, were urged to create an institutional mechanism to meet the said
shortage.

129. On or about 23rd September, 1996, the Government of Tamil Nadu
H
1008 SUPREME COURT REPORTS [2007] 6 S.C.R.

A issued the following exemption notification bearing GOMs. No. 126:
"In exercise of the powers conferred by sub-section (I) of Section 13
of the Tamil Nadu Electricity (Taxation on Consumption) Act I 962
(Tamil Nadu Act 4of1962), the Governor of Tamil Nadu hereby direct
that the consumption of self-generated electrical energy for captive
B generators by the Paper, Textile, Chemical and Sugar Industries
irrespective of the fuel they use be exempted permanently from the
electricity tax payable under the said Act. The Governor also direct
that the consumption of energy generated through Non-Conventional
Energy Sources like Sun, Wind etc., be exempted from th~ Electricity
c Tax payable under the above Act."

I 30. Appellants contend that relying on or on the basis thereof, a huge
sum was invested by them for installing power generation plants. Sugar
industries, by way of example, alone are said to have invested about
Rs. 745.64 crores in that behalf; the details whereof are as under:
D
SI No Name of the Sugar Mill Project Cost
Rs. in crores
I EID Parry (India) Limited 265.00
2 Thiru Arooran Sugars Ltd/
Terra Energy Limited 104.00
E
3 Shree Ambika Sugars Limited Hi0.00

4 Rajshree Sugars & Chemicals Ltd 86.64

5 Sakthi Sugars Limited 96.00
F 6 Kothari Sugars & Chemicals Ltd. 33.00

Total : 745.64
Grasim Industries alone is said to have invested about Rs. 37
crores.
G
131. Appellants contend that a lower rate of tariff was purposively fixed
as the State intended to grant exemption from payment of electricity tax
permanently which, according to them, would be evident from the following
SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. '·ELECTRICITY INSPECTOR [S.B. SINHA, I.] } OQ9

--{ chart: A
"Date TNEB Rate HT-I Assumed
Tariff Tax Net Rate
Season Off-season on
consumption
(Rs. P) (Rs. P) (Rs. P) (Rs. P) (Rs. P) B
01.04.1995 225 2.40 0.05 235
01.04.1996 236 2.80 0.05 2.75
01.04.1997 2.48 2.80 0.05 2.75
01.04.1998 2.60 2.80 0.06 2.74
20.07.1998 2.60 3.20 0.06 3.14 c
01.04.1999 2.73 3.20 0.07 3.13
01.042000 2.73 2.48 3.40 0.07 333
01.042001 2.87 2.60 3.40 0.07 333
01.042002 2.88 2.73 3.20 0.07 3.13
16.032003 3.01 2.73 3.50 0.08 3.42
D
Notes: I. After 16.3.2003, the same rate continued as the TNEB rate
is restricted to 90% of the HT-I Tariff as per TNEB Board
r proceedings dated 11.1.2000.
2. In co-generation, out of the total power generated, 30% is used·
for captive consumption and 70% is exported to TNEB. Tax of 5% E
on consumption therefore approximates to 2.14% on the power
exported to TNEB. The tax as above is calculated on that basis."

PROMISSORY £STOPPEL ISSUE

132. It is in the aforementioned context, the doctrine of promissory F
y
estoppel is sought to be invoked. We will notice hereinafter that even a right
can be preserved by reason of invocation of doctrine of promissory estoppel.
•
133. Submission of Mr. Andhyarujina, however, is that there cannot be
an estoppel against a statute and, in any event, an exemption granted under
Sub-section (I) of Section 13 of the 1962 Act was subject to cancellation or G
variation under Sub-section (2) of Section 13 thereof.

134. In regard to the evolution of the said doctrine, it may not be
necessary for us to notice all the decisions cited at the bar as most of them
have recently been taken into consideration by this Court in Mis. A.P. Steel
H
1010 SUPREME COURT REPORTS (2007] 6 S.C.R.

A Re-Rolling Mill Ltd. v. State of Kera/a & Ors., (2006) 14 SCALE 162. )--

135. The doctrine of promissory estoppel would undoubtedly be
applicable 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
B 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
instructions. Appellants had undoubtedly been enjoying the benefit of payment
of tax in respect of sale/ consumption of electrical energy in relation to the
cogenerating power plants.
c 136. Unlike an ordinary estoppel, promissory estoppel gives rise to a
cause of action. It indisputably creates a right. It also acts on equity. However,
its application against constitutional or statutory provisions is impermissible
in law. This aspect of the matter has been considered in State of Bihar and
Ors. v. Project Uchcha Vidya, Sikshak Sangh and Ors., [2006] 2 SCC 545
D stating:

"77. We do not find any merit in the contention raised by the learned
counsel appearing on behalf of the respondents that the principle of ...,
equitable estoppel would apply against the State of Bihar. It is now
well known, the rule of estoppel has no application where contention
E as regards a constitutional provision or a statute is raised. The right
of the State to raise a question as regards its actions being invalid
under the constitutional scheme of India is now well recognised. If by
reason of a constitutional provision, its action cannot be supported
or the State intends to withdraw or modify a policy decision, no
exception thereto can be taken. It is, however, one thing to say that
F such an action is required to be judged having regard to the
fundamental rights of a citizen but it is another thing to say that by
y
,
applying the rule of estoppel, the State would not be permitted to •
raise the said question at all. So far as the impugned circular dated
18-2-1989 is concerned, the State has, in our opinion, a right to
G support the validity thereof in terms of the constitutional framework."

137. Yet again in Mahabir Vegetable Oils (P) Ltd. and Anr. v. State of
Haryana and Ors., [2006] 3 SCC 620, it was stated: y-
"38. The promises/representations made by way of a statute, therefore,
H continued to operate in the field. It may be true that the appellants
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD. '· ELECTRICITY INSPECTOR [S.B. SINHA. J. ] 1Q11

altered their position only from August 1996 but it has neither been A
denied nor disputed that during the relevant period, namely, August
1996 to 16-12-1996 not only have they invested huge amounts but
also the authorities of the State sanctioned benefits, granted
permissions. Parties had also taken other steps which could be taken
only for the purpose of setting up of a new industrial unit. An B
entrepreneur who sets up an industry in a backward area unless
otherwise prohibited, is entitled to alter his position pursuant to or in
furtherance of the promises or representations made by the State. The
State accepted that equity operated in favour of the entrepreneurs by
;r
issuing Note 2 to the notification dated 16-12-1996 whereby and
whereunder solvent extraction plant was for the first time inserted in C
Schedule III i.e. in the negative list."

138. We may, however, notice that a survey of the earlier decisions has
also been made by this Court in State of Punjab v. Nestle India Ltd. and Anr.,
[2004] 6 sec 465 wherein the Jaw has been stated in the following terms:
D
"25. In other words, promissory estoppel long recognised as a legitimate
defence in equity was held to found a cause of action against the
Government, even when, and this needs to be emphasised, the
representation sought to be enforced was legally invalid in the sense
that it was made in a manner which was not in conformity with the
procedure prescribed by statute." E
139. Referring to Motilal Padampat Sugar Mills Co. Ltd. v. State of UP.
[ 1979] 2 SCC 409, this Court observed:

"29. As for its strengths it was said: that the doctrine was not limited
only to cases where there was some contractual relationship or other F
pre-existing legal relationship between the parties. The principle would
be applied even when the promise is intended to create legal relations
or affect a legal relationship which would arise in future. The
Government was held to be equally susceptible to the operation of the
doctrine in whatever area or field the promise is made contractual, G
administrative or statutory. To put it in the words of the Court:

The Jaw may, therefore, now be taken to be settled as a result of this
decision, that where the Government makes a promise knowing or
intending that it would be acted on by the promisee and, in fact, the
promisee, acting in reliance on it, alters his position, the Government H

...
1012 SUPREME COURT REPORTS [2007] 6 S.C.R.

A would be held bound by the promise and the promise would be ~~
enforceable against the Government at the instance of the promisee,
notwithstanding that there is no consideration for the promise and the
promise is not recorded in the form of a formal contract as required
by Article 299 of the Constitution. (SCC p. 442, para 24)

B •••
[E]quity will, in a gtven case where justice and fairness demand,
prevent a person from insisting on strict legal rights, even where they
arise, not under any contract, but on his own title deeds or under
statute. (SCC p. 425, para 8)
-,..,
"
c •••
Whatever be the nature of the function which the Government is
discharging, the Government is subject to the ru~ of promissory
estoppel and if the essential ingredients of this rule are satisfied, the
D Government can be compelled to carry out the promise made by it.
(SCC p. 453, para 33)"

J40. This Court distinguished its earlier decision in Kasinka Trading v.
Union ofIndia, [1995] I SCC 274, whereupon Mr. Andbyarujina placed strong "(

reliance, in the following terms:
.E
"40. The case of Kasinka Trading v. Union of India cited by the
appellant is an authority for the proposition that the mere issuance of
an exemption notification under a provision in a fiscal statute such as
Section 25 of the Customs Act, 1962, could not create any promissory
estoppel because such an exemption by its very nature is susceptible
F to being revoked ,pr modified or subjected to other conditions. In
other words, there is no unequivocal representation. The seeds of
equivocation are inherent in the power to grant exemption. Therefore,
an exemption notification can be revoked without falling foul of the
.
~

principle of promissory estoppel. It would not, in the circumstances,
be necessary for the Government to establish an overriding equity in
G its favour to defeat the petitioners plea of promissory estoppel. The
Court also held that the Government of India had justified the withdrawal
of exemption notification on relevant reasons in the public interest.
Incidentally, the Court also noticed the lack of established prejudice
,_
to the promises when it said: (SCC p. 289, para 22)
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. '· ELECTRICITY INSPECTOR [S.B. SINHA. J. J I0I3

The burden of customs duty etc. is passed on to the consumer and A
-~
therefore the question of the appellants being put to a huge loss is
not understandable.

(See also Shrijee Sales Corpn. v. Union of India and STO v. Shree
Durga Oil Mills.) We do not see the relevance of this decision to the
facts of this case. Here the representations are clear and unequivocal." B
141. In MRF Ltd., Kottayam v. Asst. Commissioner (Assessment) Sales
Tax and Ors.. [2006] 8 SCC 702, wherein one of us (Katju, J.) was a member,
Kasinka Trading (supra) has also been held to be inapplicable where a right
has already accrued; for instance, in a case where the right to exemption of
tax for a fixed period accrues and the conditions for that exemption have also c
been fulfilled, the withdrawal of that exemption cannot affect the already
accrued right.

142. In MRF Ltd (supra), it was held that the doctrine of promissory
estoppel will also apply to statutol) notifications.
D
143. We may also notice an interesting observation made by Beg, J. in
Madan Mohan Pathak and Anr. v. Union of India and Ors., [ 1978] 2 SCC 50
.,. wherein the learned Judge in his concurrent judgment while striking down the
Life Insurance Corporation (Modification of Settlement) Act, 1976, opined:

"Furthermore, I think that the principle laid down by this Court in E
Union of India v. Indo-Afghan Agencies Ltd. can also be taken into
account in judging the reasonableness of the provision in this case.
It was held there (at p. 385):

Under our jurisprudence the Government is not exempt from liability
to carry out the representation made by it as to its future conduct and F
...,, it cannot on some undefined and undisclosed ground of necessity or
expediency fail to carry out the promise solemnly made by it, nor claim
"' to be the judge of its own obligation to the citizen on an ex parte
appraisement of the circumstances in which the obligation has arisen.

In that case, equitable principles were invoked against the Government.
G
It is true that, in the instant case, it is a provision of the Act of
. Parliament and not merely a governmental order whose validity is
challenged before us. Nevertheless, we cannot forget that the Act is
the result of a proposal made by the Government of the day which,
instead of proceeding under Section 11 (2) of the Life Insurance H
1014 SUPREME COURT REPORTS [2007) 6 S.C.R.

A Corporation Act, chose to make an Act of Parliament protected by
emergency provisions. I think that the prospects held out, the
representations made, the conduct of the Government, and equities
arising therefrom, may all be taken into consideration for judging
whether a particular piece of legislation, initiated by the Government
and enacted by Parliament, is reasonable."
B
144. We, therefore, are of the opinion that doctrine of promissory
estoppel also pmerves a right. A right would be preserved when it is not
expressly taken away but in fact has expressly been preserved.

145. In view of the application of doctrine of promissory estoppel in the
C 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 to be
D existing in the appellants.

LEGITIMATE EXPECTATION

146. We may also notice the emerging doctrine in this behalf, viz.,
Legitimate Expectation of Substantive Benefit. Ordinarily, the said principle
E would not have any application where the legislature has enacted a statute.
As, according to us, the legislature in this case allowed the parties to take
benefit of their existing rights having regard to· the repeal and saving clause
contained in Section 20(1) of the 2003 Act, the same would apply. If, thus,
principle of promissory estoppel would apply, there may not be any reason
as to why the doctrine of legitimate expectation would not.
F
147. 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
G applicable. The legislature, indisputably, has the power to legislate but where
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.

148. We may notice the applicability of the said doctrine in respect of
H a substantive legislation, which is of some academic interest.
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD v. ELECTRICITY INSPECTOR [S.B. SINHA, J. ) JQJ5
149. In R v. North and East Devon Health Authority, ex parte Coughlan, A
(2001) I QB 213, Lord Woolf identified three categories of legitimate
expectations:

(i) "The court may decide that the public authority is only required
to bear fri mind its previous policy or other representation, giving
it the weight it thinks right, but no more, before deciding whether B
to change course. Here the court is confined to reviewing the
decision on Wednesbury grounds. This has been held to be the
effect of changes of policy."

(ii) "On the other hand the court may decide that the promise or
practice induces a legitimate expectation of, for example, being C
consulted before a particular decision is taken. Here it is
uncontentious that the court itself will require the opportunity
for consultation to be given unless there is an overriding reason
to resile from it in whir.h case the court will itself judge the
adequacy of the reason auvanced for the change of policy, taking D
into account what fairness requires."

{ill) "Where the court considers that a lawful promise or practice has
induced a legitimate expectation of a benefit which is substantive,
J not simply procedural, authority now establishes that here too
the court will in a proper case decide whether to frustrate the
expectation is so unfair that to take a new and different course E
will amount to an abuse of power. Here, once the legitimacy of
the expectation is established, the court will have the task of
weighing the requirements of fairness against any overriding
1'1nterest relied upon for the change of policy."

(See also para 57-59) F

150. In R v. Home Secretary, ex parte Hindley, (2001) 1 AC 410 it is
interesting to note the leading speech of Lord Steyn which is more reserved.
Court, of Appeal also considered the aforementioned concept in R (on the
application of Bibij v. London Borough of Newham, (2001) EWCA Civ 607. G
In Bibi's case (supra), the court accepted that it had jurisdiction to protect a
substantive legitimate expectation but adopted a somewhat different approach
from the approach taken in Coughlan (supra). In a joint judgment the court
said:

"In all legitimate expectation cases, whether substantive or H
1016 SUPREME COURT REPORTS (2007] 6 S.C.R.

A procedural, three practical questions arise. The first question is to
what has the public authority, whether by practice or by promise,
committed itself; the second is whether the authority has acted or
proposes to act unlawfully in relation to its commitment; the third is
what the court should do."

B 151. In detennining whether an authority has acted "unlawfully", the
court expressed its discontent with the standard laid down in Coughlan. It will
be in the fitness of the continuing theme, to refer to Coughlan on this point:

The traditional view has been that the Wednesbury categories were
~
exhaustive of what was an abuse of power. However in Coughlan the
c court preferred "to regard the Wednesbury categories as the major
instances (not necessarily the sole ones), of how public power may
be misused" (para.81 ).

In Coughlan the court followed R v. Inland R<(Venue Commissioners
ex parle Unilever, (1996) S.T.C.681, in asking itself whether the reneging
D by an authority on its promise was "so unfair as to amount to an
abuse of power" (para. 78). It concluded that it was. However, without
refinement, the question whether the reneging on a promise would be
so unfair as to amount to an abuse of power is an uncertain guide. ....

After having established such an abuse the court may ask the decision taker
E to "take the legitimate expectation properly into account in the decision
making process." It does not necessarily follow that a legitimate expectation
of a substantive benefit will be satisfied. (See also Barratt v. Howard (2000)
FCA 190].

F 152. We may, however, do not mean to lay down a law that the said
principle is to be applied even on the face of the exercise of legislative power
by the State in tenns of the entries made in List II of the Seventh Schedule
,..
of the Constitution oflndia. Our observations must necessarily be understood
in the context of the aforementioned decisions.

G DEMAND CHARGE

153. We have noticed hereinbefore that the legislative field carved out
by reason of Entry 53 of List II and Entry 38 of List III of the Seventh
Schedule of the Constitution oflndia operate in different fields. The 1948 Act
was enacted to provide for the rationalization of the production and supply
H of electricity, and generally for taking measures conducive to electrical
~

17
SOUTHERN PETROCHEMICAL INDUSTRIES CO. l TD v. ELECTRICITY INSPECTOR [S.B. SINHA, I ] } Q

-~ development. A
154. Tariff is framed by the State Electricity Boards under Sections 46
and 49 of the 1948 Act. They may have different considerations for imposition
of tariffs. We have noticed hereinbefore, the definition of 'tariff' in BSES Ltd.
(supra), whereupon Mr. Andhyarujina himself relied upon. A tax on tariff and
a tax on consumption or sale of electrical energy, thus, operate in different B
fields. If it is to be held that the power of the Electricity Regulatory Commissiori
to fix tariff does not include a power to impose tax, axiomatically, the same
principle would apply also when a tax is sought to be levied on consumption
or sale of electrical energy and not on tariff. Power of taxation, as noticed
hereinbefore, operates differently from power to impose tariff. A tariff validly
framed by the licensee, in exercise of its statutory power, may lay down a
c
higher rate on the sale of power to various types of consumers having regard
to the necessity to maintain infrastructure. A maximum demand charge, when
levied, does not contemplate a sale or consumption of electrical energy.
Maximum tariff is provided for various reasons. It has been noticed by this
Court in /Pl Steel Ltd. (supra) in the following terms: D
"From this circumstance, however, one cannot jump to the conclusion
~
that it is an arbitrary way of levying consumption charges. Normally
speaking, a factory utilises energy at a broadly constant level. May
be, on certain occasions, whether on account of breakdowns, strikes
or shutdowns or for other reasons, the factory may not utilise energy E
at the requisite level over certain periods, but these are exceptions.
Every factory expects to work normally. So does the Electricity Board
expect and accordingly produces energy required by the factory and
keeps it in readiness for that factory keeping it ready on tap, so to
speak. As already emphasised, electricity once generated cannot be F
..,., stored for future use. This is the reason and the justification for the
demand charges and the manner of charging for it. There is yet
another justification for this type of levy and it is this: demand
charges and consumption charges are intended to defray different
items. Broadly speaking, while demand charges are meant to defray
the capital costs, consumption charges are supposed to meet the G
running charges. Every Electricity Board requires machinery, plant,
equipment, sub-stations, transmission lines and so on, all of which
require a huge capital outlay. The Board like any other corporation
has to raise funds for the purpose which means it has to obtain loans.
The loans have to be repaid, and with interest. Provision has to be
H
•.
1018 SUPREME COURT REPORTS [2007] 6 S.C.R.

A made for depreciation of machinery, equipment and buildings. Plants, y~~
machines, stations and transmission lines have to be maintained, all
of which require a huge staff. It is to meet the capital outlay that
demand charges are levied and collected whereas the consumption
charges are levied and collected to meet the running charges.

B 11. Pausing here for a moment, we may explain the importance and
significance of maximum demand. The maximum demand of a given
plant/factory determines the type of lines to be laid and the power of
transformers and other equipment to be installed for the purpose. A
factory having a maximum demand of say 1000 KVA and a factory
having a maximum demand of 10,000 KVA require different type of
c lines and other equipment for providing supply to them. In the case
of latter, lines have to be of a more load-bearing variety. Transformers
have to be installed and of more capacity. Sometimes in the case of
bulk consumers even a sub-station may have to be established
exclusively for such factory/plant. Very often these industries are
D situated away from power stations and main transmission lines which
means laying special power lines over considerable distances to give
the supply connection. As a matter of fact, the significance of the
maximum demand would be evident from the fact that the agreement <(
between the Board and consumer (like the respondent) specifies only
the maximum demand and not the total units allowed to be consumed.
E The agreement concerned herein prescribes the maximum demand at
7778 KVA but does not prescribe the total number of units of energy
allowed to be consumed. This is for the reason, explains Shri Hegde,
that the total number of units of energy consumed is determined by
the load/level at which power is drawn. The formula, taking the case
F of the respondent is stated to be I00% unrestricted energy requirement
of the respondent = contract demand in KV A x power factor x load
.,..
factor x total number of hours in a year. In concrete terms, it means
7778 KVA x 0.90 x 0.611x8760 = 37,467,590 KWH (Units)= 37.467.59
MU (Million Units). This formula, as it stat~s expressly, is premised
on unrestricted supply. Problems arise only when restrictions are
G placed on consumption on account of fall in production of electricity
by the Board, as would be explained hereinafter."

155. Thus, what is permissible for the purpose of framing a tariff need
not necessarily be permissible for levy of tax. Tariff for supply of High
H Tension energy is in two parts, viz., (a) units consumed and (b) maximum
SOUTHERN PETROCHEMICAL INDUSTRIES CO LTD "· ELECTRICITY INSPECTOR (S.B. SINHA, J. ) JQJ9

-~-{ demand. The High Court proceeded on a wrong premise to hold that the tax A
is levied only on the maximum demand, i.e., on the energy consumed. It is now
accepted that the maximum demand indicator installed in a factory premises
of a consumer of High Tension electrical energy shows the maximum amount
of energy drawn during any consecutive thirty minutes in a total month of
consumption of electrical energy. Maximum demand charge is fixed on that B
basis although the connected demand may be much more.

156. Mr. Andhyarujina himself has produced before us the terms and
conditions of supply of Tamil Nadu Electricity Board wherein 'demand' has
.:< been defined in the following terms:

"(vii) "Demand" -
c
(a) "Average Demand" for the month means the ratio of the total
kilowatt-hours consumed in the month to the total hours in the month.

(b) "Maximum Demand" in a month means the highest value of the
average Kilowatt- amperes delivered at the point of supply of the D
consumer during any consecutive thirty minutes in the month.

(c) "Permitted Demand" means the demand permitted by the competent
_7 authority of the Board taking into account the constraints in the
Board's transmission and distribution network. (This definition does
not apply to the demand quota permitted under the "Restriction and E
Control" orders).

(d) "Sanctioned Demand or Contracted Demand" means the demand
sanctioned by the competent authority of the Board and specified in
the agreement"."
F
'Load' has been defined in clause 2(ix)(a) in the following terms:
y
-- . "(ix) "Load" -

(a) "Connected Load" means the aggregate of the manufacturer's
rating of all the equipment connected in the consumer's installation G
and of all the portable equipments;

This is expressed in KW or HP. If the rating is in KVA, it is converted
to KW by multiplying it by a power factor of 0.9. If the rating is in
HP, it is converted to KW by multiplying it by 0-.746.
H
1020 SUPREME COURT REPORTS (2007] 6 S.C.R.

A (b) "Contracted Load" means the load which is specified in the
agreement;"

157. Similar definition has been provided in Tamil Nadu Electricity
Distribution Code.

B 158. From the definitions of aforementioned types of demand, it would
appear that 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 does not exist any distinction between actual consumption and
maximum demand. The High Court itself has noticed a distinction between
c Low Tension consumption and High Tension consumption. There indeed
exists such a definition. Therefore, in our opinion, such a construction would
not be correct.

159. A taxing statute, as is well known, must receive strict interpretation.
D [See Manish Maheshwari v. Asstt. Commissioner of Income Tax and Anr.,
[2007] 3 SCALE 627].

160. A taxing statute, therefore, must be made in consonance with
Article 265 of the Constitution of India. Mr. Andhyarujina draws our attention
to Sub-cl~use (d) of Clause 29A of Article 366 of the Constitution of India
E to submit that the Constitution itself has envisaged an expanded meaning of
the tenn. Clause 29A is subject to the other provisions. It has been included
for the purpose of defining the tax on the sale or purchase of goods as
envisaged under Entry 54 of List II of the Seventh Schedule of the Constitution
of India and not for the purpose of Entry 53.

F 161. The reason for insertion of such an explanation is to get over the
decision of this Court in State of Madras v. Gannon Dunkerley & Co.
(Madras) Ltd. [1959] SCR 379 wherein it has been held that tax cannot be
imposed on sale of materials transferred in execution of a works contract
. -
stating:

G "In our opinion, that is not the inference to be drawn from the
absence of words linking up the meaning of the word "sale" with what.
it might bear in the Sale of Goods Act. We think that the true legislative
intent is that the expression "sale of goods" in Entry 48 should bear
the precise and definite meaning it has in law, and that that meaning
should not be left to fluctuate with the definition of "sale" in laws
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. v. ELECTRICITY INSPECTOR [S.B. SINHA, J.] ] Q2J

relating to sale of goods which might be in force for the time being. A
It was then said that in some of the Entries, for example, Entries 31
and 49, List II, the word "sale" was used in a wider sense than in the
Sale of Goods Act, 1930. Entry 31 is intoxicating liquors and narcotic
drugs, that is to say, the production, manufacture, possession,
transport, purchase and sale of intoxicating liquors, opium and other B
narcotic drugs ... ". The argument is that "sale" in the Entry must be
interpreted as including barter, as the policy of the law cannot be to
prohibit transfers of liquor only when there is money consideration
-I
/
therefor. But this argument proceeds on a misapprehension of the
principles on which the Entries·are drafted. The scheme of the drafting
is that there is in the beginning of the Entry words of general import, C
and they are followed by words having reference to particular aspects
thereof. The operation of the general words, however, is not cut down
by reason of the fact that there are sub-heads dealing with specific
aspects ... "

162. Gannon Dunkerley & Co. (Madras) Ltd (supra) has been noticed D
by a 3-Judge Bench of this Court in Bharat Sanchar Nigam Ltd and Anr. v.
Union of India and Ors., [2006) 3 SCC I in the following terms:

"43. Gannon Dunkerley survived the Forty-sixth Constitutional
Amendment in two respects. First with regard to the definition of sale
for the purposes of the Constitution in general and for the purposes E
of Entry 54 of List II in particular except to the extent that the clauses
in Article 366(29-A) operate. By introducing separate categories of
deemed sales, the meaning of the word goods was not altered. Thus
the definitions of the composite elements of a sale such as intention
of the parties, goods, delivery, etc. would continue to be defined F
according to known legal connotations. This does not mean that the
content of the concepts remain static. The courts must move with the
times. But the Forty-sixth Amendment does not give a licence, for
example, to assume that a transaction is a sal~ and then to look
around for what could be the goods. The word goods has not been
altered by the Forty-sixth Amendment. That ingredient of a sale G
continues to have the same definition. The second respect in which
Gannon Dunkerley has survived is with reference to the dominant
nature test to be applied to a composite transaction not covered by
Article 366(29-A). Transactions which are mutant sales are limited to
the clauses of Article 366(29-A). All other transactions would have to H
1022 SUPREME COURT REPORTS [2007) 6 S.C.R.

A qualify as sales within the meaning of the Sales of Goods Act, 1930 '>-,...._
for the purpose of levy of sales tax."

While noticing the said case, it has been held:

"I 05. The amendment introduced fiction by which six instances of
B transactions were treated as deemed sale of goods and that the said
definition as to deemed sales will have to be read in every provision
of the Constitution wherever the phrase tax on sale or purchase of
goods occurs. This definition changed the law declared in the ruling
in Gannon Dunkerley & Co. only with regard to those transactions of ;,~

deemed sales. In other respects, law declared by this Court is not
c neutralised. Each one of the sub-clauses of Article 366(29-A) introduced
by the Forty-sixth Amendment was a result of ruling of this Court
which was sought to be neutralised or modified. Sub-clause (a) is the
outcome of New India Sugar Mills Ltd. v. CST and Vishnu Agencies
(P) Ltd. v. CTO. Sub-clause (b) is the result of Gannon Dunkerley &
D Co. Sub-clause (c) is the result of K.L. Johar and Co. v. CTO. Sub-
clause (d) is consequent to A. V. Meiyappan v. CCT. Sub-clause (e) is
the result of CTO v. Young Mens Indian Assn. (Regd.). Sub-clause (f)
is the result of Northern India Caterers (India) Ltd. v. Lt. Governor '(
of Delhi, and State of Punjab v. Associated Hotels of India Ltd.

E I06. In the background of the above, the history prevailing at the time
of the Forty-sixth Amendment and pre-enacting history as seen in the
Statement of Objects and Reasons, Article 366(29-A) has to be
interpreted. Each fiction by which those six transactions which are not
otherwise sales are deemed to be sales independently operates only
in that sub-clause. ,._
F
107. While the true scope of the amendment may be appreciated by
1'
overall reading of the entirety of Article 366(29-A), deemed sale under
each particular sub-clause has to be -determined only within the
parameters of the provisions in that sub-clause. One sub-clause cannot
be projected into another sub-clause and fiction upon fiction is not
G permissible. As to the interpretation of fiction, particularly in the sales
tax legislation, the principle has been authoritatively laid down in
Bengal Immunity Co. Ltd. v. State of Bihar, SCR at p. 647:
y
The operative provisions of the several parts of Article 286, namely,
clause (l)(a), clause (l)(b), clause (2) and clause (3) are manifestly
H
SOUTHERN PETROCHEMICAL INDUSTRIES CO. LTD. " ELECTRICITY INSPECTOR [S.B. SINHA, I. J JQ2J
.. .r-i intended to deal with different topics and, therefore, one cannot be A
projected or read into another. (S.R. Das, Actg. CJ.)

We can also see pp. 720 and 721 (N.P. Bhagwati, J.)."

It was categorically held therein:

"75. In our opinion, the essence of the right under Article 366(29- B
A)(d) is that it relates to user of goods. It may be that the actual
delivery of the goods is not necessary for effecting the transfer of the
right to use the goods but the goods must be available at the time
,,:r
of transfer, must be deliverable and delivered at some stage. It is
assumed, at the time of execution of any agreement to transfer the c
right to use, that the goods are available and deliverable. If the goods,
or what is claimed to be goods by the respondents, are not deliverable
at all by the service providers to the subscribers, the question of the
right to use those goods, would not arise."

It was furthermore held that only because the Board keeps itself ready D
for supply of electrical energy, the same by itself would not mean that there
had been deliverable goods and the goods have been delivered.
_J 163. We are not concerned with the user of the goods and, therefore,
deliverability of the goods is not in question.
E
164. 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 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, in our opinion, the same would have nothing to do
with the construction of Entry 53 of List II of the Seventh Schedule of the
F
r Constitution of India.

165. Supply does not mean sale. A' fortiori it does not also mean
consumption.

166. A 'goods' may be a tangible property or an intangible one. It would
G
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, delivered, stored and possessed.

167. Strong reliance has been placed by Mr. Andhyarujina on a decision H
1024 SUPREME COURT REPORTS [2007] 6 S.C.R.

A of this Court in Mis. Northern India Iron & Steel Co. v. State of Haryana
and Anr., [1976] 2 SCC 877 wherein it has been held:

"l 0. Coming to the question of duty, we have no hesitation in an
outright rejection of the extreme contention put forward on behalf of
the appellants that no duty is liviable at all on the demand charge. But
B it is clear, and this was fairly conceded to by the Solicitor Generai
appearing for the State of Haryana, that the amount of duty payable
will be on the actual amount of demand charge realisable from the
consumer after the proportionate reduction under clause 4(f) of the
tariff.
c 11. Section 3 of the Duty Act says that there shall be levied and paid
to the State Government on the energy supplied by the Board to a
consumer a duty to be called the electricity duty, computed at the
rates indicated in the various clauses of sub-section (I) of Section 3.
The expression used in the various clauses is where the energy is
supplied to a particular type of consumer, then the rate of duty will
D
be as specified therein. On the basis of the said expression the
argument put forward on behalf of the appellant was that the duty
could be levied only on the energy charges for the actual amount of
energy supplied. Such an argument is too obviously wrong to be
accepted. Reading the clauses as a whole it would be seen that the
E duty is chargeable on the price of energy supplied in a month. The
price of energy in a two-part tariff system would mean and include the
energy charge as also the demand charge. This is made further clear
by the manner of calculation provided in Rule 3 of the Punjab Electricity
(Duty) Rules, 1958. Sub-rule(!) says:

F The duty under clauses (iii) and (iv) of sub-section(!) of Section 3
of the Act shall be calculated on the price of the energy recoverable
at the net rate of the Board which will include the demand charge
when the supply is governed by a two-part tariff."

In that case, no term like "net energy" existed.
G
168. We may notice that this Court in West Coast Papers Mills Ltd,
(supra), held that no tax can be invoked on transmission loss stating:

"7. We have set out the relevant provisions of the Act, and it would
appear therefrom that electricity tax is payable on the units of energy
H
025
SOUTHERN PETROCHEMICAL INDUSTRIES CO.LTD. •·. ELECTRICITY INSPECTOR [S.B SISHA. J ] J

>---<; consumed. The one question with which we are concerned in this A
appeal is whether electricity tax is payable in respect of the electrical
energy which is lost in transmission as a result of transmission loss
or transformer loss. So far as this question 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 reaches the B
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 of electrical energy is normally at some distance from
.)
the place where electrical energy is generated. Electrical energy has
consequently to be transmitted through metal conductors to the place c
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
example, generates I00 units of electrical energy and loses I0 units in
the process of transmission from the point of generation to the point
of consumption, he would in the very nature of things be able to D
supply only 90 units of electrical energy to the consumers. The tax
which would be payable on the electrical energy consumed in such
'r a case would be only for 90 units and not I00 units. To hold otherwise
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 E
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 energy would, in our opinion, make no
material difference."
F
T' 169. Our attention has been drawn to a simple bill, from a perusal
whereof it appears that although permitted MD was 350 KVA, the recorded
demand being 144 KVA, electricity tax was charged only on the basis of 144
KV A and not on the basis of 350 KV A. Keeping in view the fact that the
maximum demand postulates something other than actual delivery of electricity,
the question of imposition of any tax thereupon does not arise. The decision G
of this Court in Mis. Northern India Iron & Steel Co. (supra) did not assign
any reason. The said decision did not take into consideration the provisions
of Article 366 ( 12) of the Constitution of India or the effect of Entry 53 of List
II of the Seventh Schedule of the Constitution of India. It has also not been
taken into consideration that the State cannot impose tax only because the H
1026 SUPREME COURT REPORTS [2007] 6 S.C.R.

A State Electricity Board would be entitled to levy tax on certain services. It
would bear repetition to state that the concept of tariff and tax is different.
Whereas tariff would include a list of charges, the tax must be on actual basis.
It is also not the case nor can it be that imposition of tax on actual sale or
consumption of electrical energy was impossible keeping in view of the
B particular fact situation. As noticed hereinbefore, two different meters are
installed; one, for the purpose of actual consumption of electrical energy and
another being a trivector, the same merely records the maximum demand.

170. A decision, as is well known, is an authority for what it decides
and not what can logically be deduced therefrom. A decision is not an
C authority on a point which has not been considered.
171. For the reasons aforementioned, we are of the opinion that the
impugned judgment cannot be sustained which is set aside accordingly. The
appeals are allowed to the extent mentioned hereinbefore. No costs.

GN. Appeal partly allowed.