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1996(4) Supreme 640
SUPREME COURT OF INDIA
K. Ramaswamy and G.B. Pattanaik, JJ.
Indian Aluminium Co. etc. etc. -Appellants
versus
State of Kerala & Ors. -Respondents
Civil Appeal No. 2770 of 1996
with
Civil Appeal Nos. 2771-2822 of 1996
(Arising out SLP (C) Nos. 10334/95, 10335/95, 10697-98/95, 11267/95, 11268-70/95, 11318/95, 11319/95, 11321/95, 11322/95, 11340/95, 11655/95, 17898/95, 18047-64/95, 18471/95, 3512/96 (CC 3235/95), 3514/96 (CC 4093/95), 8077/95, 8297/95, 8305/95, 8446-48/95, 8488/95, 8490/95, 8826/95, 8846/95, 8878/95, 9055/95, 9077/95, 9079/95, 9083/95 & 9205/95)
Decided on 2-2-1996
Counsel for the Parties :
For the first Appellant : K.K. Venugopal, Sr. Adv.
For other Appellants : R.F. Nariman, K.V. Vishwanathan.
For the State : T.L. Vishwanatha Iyer Sr. Adv.
For the KSE Board : G. Vishwanatha Iyer.
Held : Levy of duty goes into the public revenue. It is an impost, a compulsory exaction for the benefit to the coffers of the public exchequer and, therefore, it is a tax. The Act in pith and substance is a tax on sale or consumption of electrical energy. Therefore, the Act falls in Entry 53 and does not fall in Entry 27 of the State List of the Seventh Schedule to the Constitution. The State legislature, therefore, validly enacted the Act under Article 246 [3] of the Constitution. (Para 30)
(ii) The Kerala Electricity Surcharge (Levy and Collection) Act 22 of 1989-Section 11-Validation-Whether this section is constitutional ? (Yes)-Whether Section 11 is an anti-judicial power interfering with or encroaching into judicial review entrusted to the Courts ? (No)-It answers all the tests laid down in Para 56. (Para 57)
Held : Section 11 is not an incursion on judicial power of the Court and is a valid piece of legislation as part of the Act. (Para 57)
As already seen, the specific case of the State and the Board is that the State has been expending its public money for the effective functioning for the KSEB and the duty under the Act is flowing into the public exchequer and, therefore, it is not a duty for the benefit of KSEB coming under Essential Articles Act. Equally, it is not either a threat to the power of judicial review or form of restraint to exercise the power of judicial review over legislative action. It is true that under the Electricity Act which admittedly has been enacted under Entry 53 of the State List, the rate of duty, as amended, is 10 per cent. As stated above, under the Act duty is an additional impost in the nature of compulsory exaction for the benefit of public exchequer. When we look into the provisions of the Act it is clear that levy and collection of additional duty is not discontinued as contended by Shri Venugopal. As held above, the Act is a complete code in itself and operates retrospectively. Therefore, both the Acts operate harmoniously and do not collide in their operation since 1984 Act is the principal Act and the Act is in addition to, but not in substitution of the principal Act. (Para 58)
Held finally : Under these circumstances, we hold that the Act is valid. The direction with regard to the refund of duty for the period which the Act did not seek to cover, has already been given by the High Court and no appeal has rightly been filed by the State. Therefore, to that extent that order has become final. We need not dwell upon it. (Para 59)
Key Points: - The Kerala Electricity Surcharge Act 1989 is held valid under Article 246(3) as a tax on sale or consumption of electrical energy (Entry 53) (!) (!) - Section 11 is constitutional and not an encroachment on judicial power; it validates retrospective levy/collection and resolves past disputes (Chakolas Chakolas reference) (!) (!) - The Act operates harmoniously with the earlier Electricity Duty Act, with no eclipse of the prior statute; both can collect taxes in their respective fields (!) (!) - The pith and substance approach is used to determine legislative competence; words like "sale" or "consumption" receive wide interpretation to sustain vires (Entry 53) (!) (!) - The Court endorses liberal interpretation of taxing statutes to avoid avoidance of revenue, including surcharge as an additional tax (!) (!) - The decision discusses the balance of legislative, executive, and judicial powers and the safeguards against direct overrule of judicial decisions via retrospective validation (!) (!) (!) - The High Court’s refund direction for periods covered by the Act was not disturbed beyond finality; retrospective validation preserves past collections (!) (!) - The matter references Chakolas and subsequent cases to illustrate criteria for validating statutes: competence, removal of defect, and constitutional compatibility (!) (!) - The judgment clarifies that "surcharge" can be treated as a tax/impost for public revenue, not merely an ancillary levy (!) (!)
JUDGMENT
Ramaswamy, J.-Leave granted in all the special leave petitions.
2. This batch of appeals by special leave arises from common judgment dated November 22, 1994 of the Kerala High Court made in O.P. No. 5957 of 1987 and batch.
3. By Section 36 of Finance Act, 1978, the Central Excise and Salt Act, 1944 (for short, the "Excise Act) was amended to impose central excise duty on electricity under Item II-E in the Ist Schedule to the Excise Act and fixed 2 paise per kilo watt of electricity unit. Consequently, the Kerala State Electricity Board (KSEB) was liable to pay excise duty on electricity generated and produced by it. To recoup that loss, the Government of Kerala, exercising its power under Section 3 of the Kerala Essential Articles Control (Temporary Powers) Act, 1961, issued an order. By clause (4) of the said order, surcharge at the rate of 2.5 paise per unit of electrical energy was levied on all supplies of electrical energy made by the KSEB either directly or through licensees of Extra High Tension (EHT) and High Tension (HT) consumers. Thereunder, the licensees were allowed to retain 1 of the amount collected as collection charges. On October 1, 1984, the Government of India had withdrawn the levy of excise duty on electricity. The Government of Kerala in supersession of its Order dated April 6, 1979 had notified the State Electricity Supply (Kerala State Electricity Board and Licensees Area) Surcharge Order, 1984 effective from October 1, 1984. Under clause (4) of the said Order all supplies of electrical energy made by KSEB either directly or through licensees, were liable to surcharge at the rate fixed at 2.5 paise per unit. In the explanatory note it was stated that though excise duty was discontinued, the State Government desired to continue the levy of surcharge. The EHT and HT consumers had filed writ petitions challenging the validity of the 1984 Order. Pending writ petitions, on August 1, 1988, the State Government discontinued the levy of surcharge with effect from that date by issuing an Ordinance called the Kerala Electricity Duty (Amendment) Ordinance, 1988 which later on became an enactment. The rate of electricity duty was 30 of the price of energy. Later, it was revised to 10 paise per unit for HT consumers and 6.5 paise per unit for EHT consumers. After a representation was made through the Association of the HT and EHT consumers, the Government of Kerala decided to discontinue the surcharge on the electricity duty of 10 paise per unit. On September 27, 1988, a Division Bench of the High Court in Chakolas Spinning & Weaving Mills Ltd. v. K.S.E. Board1, held that the levy of surcharge is in substance a compulsory exaction intended to enrich the coffers of the State and in effect partakes the character of a tax on electricity. The Government, acting as a delegate under the Kerala Essential Articles Control Act, 1986 (Act 16 of 1986), is not competent to impose any tax. A writ of mandamus was issued directing refund of excise duty collected from those writ petitioners before the High Court. The Kerala State Electricity Supply (Kerala State Electricity Board and Licensees Area) Surcharge Order, 1984 was declared ultra vires the power of the State Government. The said judgment was confirmed by this Court dismissing the Special Leave Petitions in limine.
4. At this stage, it may be necessary to mention that the Essential Articles [Control] Act, 1963 was amended and Act 13 of 1988 was enacted. It is also relevant to note that exercising the power under Entry 53 of List II of the Seventh Schedule, the Kerala State legislature had enacted Kerala Electricity Duty Act, 1963 and Rules were made to levy electricity duty at varying rates. Orders were passed by this Court on April 13,1989 dismissing the SLP [C] Nos. 4256-66 of 1989. The Governor of Kerala, exercising power under Article 213 of the Constitution issued Ordinance called the Kerala Electricity Surcharge [Levy and Collection] Ordinance, 1989 which la
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