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High Court Of Calcutta
SABYASACHI MUKHERJI
DAMODAR VALLEY CORPORATION - Appellant
Versus
THE SUPERINTENDENT OF COMMERCIAL TAXES, GIRIDIH - Respondent
C. R. 3097 (W) Of 1970
Decided On : 11/17/1975
ELECTRICITY - SALE - INTER-STATE SALE - DAMODAR VALLEY CORPORATION - GRID SYSTEM - MOVEMENT OF ELECTRICITY - LIABILITY TO SALES TAX - CENTRAL SALES TAX ACT, 1956, SECTION 3 - BIHAR SALES TAX ACT, 1959.
Fact of the Case:
Damodar Valley Corporation (DVC), a statutory corporation established to generate and distribute electric power, challenged the levy of sales tax on its inter-state sale of electricity. DVC operated a grid system that transmitted electricity from its generating stations in Bihar and West Bengal to consumers in both states and other states like Uttar Pradesh. The petitioner contended that the sales were local sales since the agreements with consumers did not specify the generating station from which the supply would be provided and that the grid system was merely a storehouse for electricity.
Finding of the Court:
The court held that the sale of electricity by DVC was not a sale in the course of inter-state trade or commerce and, therefore, not liable to sales tax under the Central Sales Tax Act, 1956. The court found that the movement of electricity from one state to another was not occasioned by the sale but was a result of the grid system, which acted as a storehouse for electricity.
Issues: 1. Whether the sale of electricity by DVC was a sale in the course of inter-state trade or commerce? 2. Whether the movement of electricity from one state to another was occasioned by the sale?
Ratio Decidendi: The court relied on the principles laid down in various Supreme Court judgments to determine whether a sale is in the course of inter-state trade or commerce. The court held that for a sale to be considered inter-state, there must be a sale, a movement of goods from one state to another, and the movement must be caused or due to the sale. In this case, the court found that the movement of electricity was not caused by the sale but was a result of the grid system, which acted as a storehouse for electricity.
Final Decision: The court set aside the impugned order and directed the respondent to consider the question afresh after the petitioner complied with the notice by furnishing a return and adducing evidence.
( 1 ) THE petitioner in this case is the Damodar Valley Corporation, a statutory Corporation established by the Damodar Valley Corporation Act, 1948. The Corporation was established, inter alia, for the purpose of generating electric power for distribution, control of flood in Damodar and to provide water for irrigation. The Corporation supplies power in the statutory area of the Valley and certain areas outside the Valley with the permission of the State Government. In order to fulfil the statutory obligation, the Corporation has set up a power generation and transmission system in the area. Part of the area falls in the State of Bihar and the other part falls within the State of West Bengal. Power system consists of a 132 KV Grid or a ring of 132 KV transmission lines astride the boundary of the two States. The Corporation operates generating stations, two of which are in West Bengal and four of which in the State of Bihar. feeding power and energy into the said 132 KV Grid. There are a number of sub-stations in both the States connecting to the main 132 KV lines for supplying power to the consumers either at 33 KV or 132 KV. It is the case of the petitioner that the agreements are executed by the Corporation with individual consumers for supply at the sub-stations which are located either in Bihar or in West Bengal. The petitioner states that the said agreements provide for supply of certain amount of power upto a stipulated maximum demand expressed in KW at a specified voltage, frequency, and number of phases. The petitioner emphasises that the agreements do not stipulate from which generating station the supply would be available. A copy of the standard agreement form usually entered into with the consumers has been annexed to the present petition. According to the petitioner the demand of power and energy of a consumer on any individual sub-station would actually vary continuously and certain amount of power and energy would flow into the point of supply from the generating station located in West Bengal and Bihar depending on the electrical conditions of the whole system. The petitioner states that there is no stipulation that supply to a sub-station, say for instance, Kharagpur would have to come from a power station in West Bengal or Bihar at a particular point of time.
( 2 ) THE petitioner further states that in order to develop a wider regional power service, the Corporation has taken on rent a double circuit 132 KV transmission line from the Corporation's Sonenagar sub-station to Pipri Sub-Station of Rihand system in Uttar Pradesh. The transmission line from Sonenagar to Pipri is owned by the Bihar State Electricity Board, but the Corporation has been using it exclusively on payment of hire charges. This rented line also forms part of the DVC KV Grid system, which makes it possible for the Uttar Pradesh system to operate in parallel with the system of the Corporation. In this case also power and energy flows from Rihand Hydro Electric Station to the Corporation Power Grid or from the Corporation Power Grid to the Rihand Power System of Uttar Pradesh depending on the electrical conditions and total load on the respective systems. According to the petitioner, in this case also there is no stipulation from which generating station the supply would flow into the Uttar Pradesh system. The petitioner states that neither is there any stipulation at which points the power and energy received from Uttar Pradesh would be supplied. The supply to Uttar Pradesh, according to the petitioner, could very well be from the generating station in West Bengal. Similarly, power received from Uttar Pradesh could either be supplied in Bihar or West Bengal depending on the power demand at different locations at a particular moment,
( 3 ) IT is the case of the petitioner that electricity unlike other goods cannot be stored in a yard, tank, godown, warehouse, depot or dump. Hence, it is pumped into a grid which spre
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