The main legal point established in the judgment is that the State of Jammu and Kashmir was not competent to levy duty on the generation of electricity, as the Electricity (Duty) Act was enacted to levy duty on the sale or consumption of electricity, not on the generation thereof.

The dispute in this writ petition relates to competence of the Government of Jammu and Kashmir to levy electricity duty on generation of electric energy in exercise of power under section 3(1) of the Jammu and Kashmir Electricity (Duty) Act, 1963, which is sought to be done by notification, SRO 141 dated 21st April, 1999. The petitioner seeks quashing of the said notification and demands made thereunder, and writ in the nature of prohibition restraining the State of Jammu and Kashmir from imposing any tax/levy/cess/duty on generation in the hydel power projects of the petitioner-company located in the State.

2. The petition was filed principally against the State of Jammu and Kashmir and its officials. The Union of India, the Government of NCT, Delhi and States of Haryana, Himachal Pradesh, Rajasthan, Uttar Pradesh, Punjab and Chandigarh Administration, being beneficiaries of the electricity produced in the hydel power projects of the petitioner-corporation in the State of Jammu and Kashmir, were impleaded as proforma respondents. By order dated 5th February, 2002 the State of Haryana was transposed as co-petitioner on application made by it alleging that its interest is likely to be adversely affected by the result of writ petition. Having regard to the nature of the controversy involved, we have reservations if the State of Haryana can be a co-petitioner. In any view, after such transposition, it did not file any Supplementary affidavit/petition to warrant separate consideration of its case.

3. Adverting to the writ petition, the case of the petitioner is that it is a government company incorporated under the Companies Act, 1956-fully owned and controlled by the Central Government functioning under the administrative control of Government of India, Ministry of Power. Its activities relate to planning, promoting and organizing an integrated and efficient development of hydroelectric power in all its aspects, including planning, investigation, research, design of power projects, construction, generation, operation and maintenance of hydroelectric power stations, transportation of power generated at such hydel stations in accordance with the policy laid down by the Government of India from time to time. In the State of Jammu and Kashmir the projects are Salal Hydroelectric Project in Jammu region and Uri Hydroelectric Project in Kashmir valley with an installed capacity of 690 MW and 490 MW respectively. The tariff with respect to these projects is notified by Government of India under section 43A(2) of the Indian Electricity Act. The power generated at the power stations is shared by different states of the northern region, including Jammu and Kashmir in the ratio decided by the Government of India. The details of the sharing are contained in annexures 2A to 2F. It is not necessary to refer to these details except to state that Jammu and Kashmir being the host state, it enjoys 12% free electricity and further unalloted 15% share is also presently supplied to the State in addition to its share. The petitioner has also given corresponding details of other hydroelectric stations owned and operated by the petitioner-corporation in other States pointing out that though these projects are situated outside Jammu and Kashmir, the electricity generated therein is also supphed to the State of Jammu and Kashmir as per allocation of power made by the Government of India.

4. The case of the petitioner is that the State of Jammu and Kashmir is the biggest beneficiary of central projects in the matter of sharing of electricity generated at different hydroelectric power stations, including 12% free electricity at the hydel power stations situated in the State. It has been stated that the entire capital outlay investment in these projects was by raising loans and assistance from different financial institutions including World Bank. However, though the biggest beneficiary, the state is in huge arrear of tariff and other dues f