Tax cannot be imposed on electricity supplied but not consumed as it does not equate to sale, violating legislative competence under Entry No. 53, List II of the Seventh Schedule.

ORDER :

1. The questions that arose in these two writ petitions are:

(i) Whether the supply of electricity to ensure minimum demand, without actual consumption of electricity, amounts to consumption or sale and enables the State to levy tax on the tariff for the supply of electricity?

(ii) Whether Section 3 (1) of the Karnataka Electricity (Taxation on Consumption) Act, 1959 (For short ‘Act, 1959’) as amended by Amending Act 7 of 2003 and Amending Act 5 of 2004 imposing tax on electricity charges ultravires?

2. During the pendency of the writ petitions, in terms of Act No.24 of 2018, Section 3 (1) of the Act, 1959, is amended, and by reason of amendment, the tax is levied only on ‘sale and consumption of electricity’. The tax on ‘electricity charges’ imposed under the impugned provisions on supply of electricity, was done away in 2018 amendment vide Act No.24 of 2018.

3. Since the petitioners had questioned the tax on electricity charges, and because of the amendment during pendency of writ petitions, tax on electricity charges on supply is done away, the State contends that the petitioners’ challenge that the provisions are ultravires becomes academic, and writ petitions have become infructuous. Thus, the Court, in addition to two questions referred to above, has to answer the following question as well.

"Whether the petition challenging the constitutional validity of a provision of law becomes infructuous, if the impugned provision is amended, or omitted during the pendency of the proceeding?"

4. If the answer to the above question is in the affirmative, then the Court need not examine the question on the vires of the provision. If the answer is in the negative, then the Court needs to examine the question on the vires of the provisions.

5. The answer to the above question does not appear to be simple “Yes” or “No”. The answer depends on the consequence of the provisions of law under challenge, on the petitioners.

6. If the provisions are held to be ultra vires, and if the petitioners are entitled to restitution or some other consequential relief, then the petitions do not become infructuous.

7. If the provisions are held to be ultra vires, and the petitioners are not entitled to any further relief by way of restitution or otherwise, then the Court petitions do become infructuous.

8. If the petitioners have suffered a consequence which can be quantified in terms of money, then the petition does not become infructuous merely because the provisions under challenge are omitted or amended.

9. Admittedly, in terms of the impugned provisions, the petitioners have paid Tax on the electricity charges, which included tax on ‘minimum tariff’. The contention is that the provisions imposing tax on supply of electricity are ultra vires. If the said contention is accepted and the provisions are held to be ultra vires, then the imposition and collection of such tax on minimum charges for the supply of electricity would be illegal. As a consequence, the State has to refund the tax collected, as collection of such tax amounts to ‘unjust enrichment’ by the State at the cost of the rate payer, subject, of c