Case Note & Summary
The petitioner, M/s. JSW Steel Limited, a company engaged in steel manufacturing, operates a captive power plant (CPP) at its factory in Raigad, Maharashtra. The electricity generated from the CPP is used entirely for its own manufacturing processes and is not sold to any third party. The Maharashtra State Electricity Distribution Company Limited (MSEDCL) and the Electricity Inspector demanded payment of electricity duty under the Bombay Electricity Duty Act, 1958, on the electricity consumed from the CPP, treating it as 'sold' to itself. The petitioner challenged this demand by filing two writ petitions: WP No. 12477 of 2015 against the Electricity Inspector's order and WP No. 13941 of 2016 against the MSEDCL's demand. The primary legal issue was whether captive consumption of self-generated electricity constitutes a 'sale' under Section 3 of the Bombay Electricity Duty Act, 1958, thereby attracting duty. The petitioner argued that the charging section only imposes duty on electricity 'sold' to a consumer, and since there is no sale when a generator consumes its own electricity, no duty is leviable. The respondents contended that the term 'sold' should be interpreted broadly to include deemed sales or that the legislative intent was to tax all consumption except exempted categories. The Court analyzed the language of Section 3, which states that duty is payable on 'the units of energy sold to a consumer'. It held that the word 'sold' clearly implies a transaction involving a seller and a buyer, and self-consumption does not amount to a sale. The Court also noted that the Electricity Act, 2003, defines 'captive generating plant' and recognizes the right of a captive generator to consume its own electricity. Applying the principle of strict interpretation of taxing statutes, the Court concluded that no duty is leviable on captive consumption. Consequently, the Court allowed both writ petitions, quashed the demand notices, and directed the respondents to refund any amounts already recovered, with interest at 6% per annum from the date of payment until refund.
Headnote
A) Electricity Duty - Captive Consumption - Interpretation of 'Sold' - Section 3 of Bombay Electricity Duty Act, 1958 - The issue was whether electricity generated from a captive power plant and consumed by the generator itself for its own industrial use attracts electricity duty under Section 3 of the Bombay Electricity Duty Act, 1958. The Court held that the expression 'sold' in Section 3 must be interpreted strictly, and since there is no sale when a generator consumes its own electricity, no duty is leviable. The Court relied on the principle that taxing statutes are to be construed strictly and that the charging section must be given its plain meaning. (Paras 10-25)
Issue of Consideration
Whether electricity generated from a captive power plant and consumed by the generator for its own use is exigible to electricity duty under the Bombay Electricity Duty Act, 1958, when no sale is involved.
Final Decision
Both writ petitions are allowed. The impugned orders and demand notices are quashed and set aside. The respondents are directed to refund any amounts recovered from the petitioner towards electricity duty on captive consumption, with interest at 6% per annum from the date of payment until refund.
Law Points
- Electricity duty
- Captive consumption
- Sale of electricity
- Bombay Electricity Duty Act
- 1958
- Section 3
- Interpretation of 'sold'
- Captive generating plant
- Electricity Act
- 2003
