Madhya Pradesh High Court
M/S Ujaas Energy Ltd. Thru. Authorized … vs The Commissioner Of Commercial Tax on 12 August, 2025
Author: Vivek Rusia
Bench: Vivek Rusia
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VATA Nos.48 & 49 of 2021
IN THE HIGH COURT OF MADHYA PRADESH
AT I N D O R E
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI
VALUE ADDED TAX APPEAL No. 48 of 2021
M/S UJJAS ENERGY LTD. THRU. AUTHORIZED OFFICER SHRI
ANURAG MUNDRA
Versus
THE COMMISSIONER OF COMMERCIAL TAX AND OTHERS
WITH
VALUE ADDED TAX APPEAL No. 49 of 2021
M/S UJJAS ENERGY LTD. THRU. AUTHORIZED OFFICER
Versus
THE COMMISSIONER OF COMMERCIAL TAX AND OTHERS
Appearance:
Shri Rounak Choukse, learned counsel for the appellant.
Shri Sudeep Bhargava, learned Deputy Advocate General for the respondents /
State.
Reserved on : 22nd July, 2025
Delivered on : 12th August, 2025
ORDER
Per : Justice Vivek Rusia
Value Added Tax Appeal No.48 of 2021
The appellant has filed this appeal under Section 53 of the
Madhya Pradesh Value Added Tax Act, 2002 against the order dated
25.06.2020 passed by the Madhya Pradesh Commercial Tax Appellate
Board Bench at Indore, whereby the appeal has been dismissed and the
order dated 30.09.2016 passed by the Appellate Authority / Additional
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VATA Nos.48 & 49 of 2021
Commissioner, Commercial Tax, Indore Division has been affirmed
relating to Financial Year – 2013 – 14.
Value Added Tax Appeal No.49 of 2021
The appellant has filed this appeal under Section 53 of the
Madhya Pradesh Value Added Tax Act, 2002 against the order dated
28.01.2020 passed by the Madhya Pradesh Commercial Tax Appellate
Board Bench at Indore, whereby the appeal has been dismissed and the
order dated 13.04.2016 passed by the Appellate Authority / Additional
Commissioner, Commercial Tax, Indore Division has been affirmed
relating to Financial Year – 2012 – 13.
02. Since the issues involved in both the appeals are identical in
nature, with the consent of the parties, these appeals are heard finally
and are being decided analogously.
FACTS OF THE CASE
03. The appellant is a limited company duly incorporated under the
provisions of the Companies Act, 1956 (now 2013). The appellant is
also registered under the provisions of the Madhya Pradesh Value Added
Tax Act, 2002 (in short ‘the VAT Act‘), having TIN No.23351104700.
The appellant is engaged in the business of manufacturing transformers,
setting up solar plants, and the generation and sale of solar energy
produced in its own generation plants.
04. The appellant set up two solar plants at Rajgarh and Barod and
sells and transmits the energy across the grid by an open access system.
The appellant and other Renewable Energy Generators may sale the
energy to obligated entities (Captive Power Plants / Open Access
Consumers, DISCOMs), which are under Renewable Purchase
Obligation. Secondly, sale of Renewable Energy Certificates, i.e. REC
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VATA Nos.48 & 49 of 2021
mechanism to local DISCOMs at average power purchase cost or to
Open Access Consumer at mutually agreed rates or through Power
Exchange that is also under Renewable Purchase Obligation.
05. Sub-section (1)(e) of Section 86 of the Electricity Act, 2003
mandates the promotion of electricity from renewable source of energy
by providing suitable measures for connectivity with the grid. It is the
function of the State Regulatory Commission to fix the percentage of
total consumption of electricity in the area of a distribution lecensee for
the purchase of electricity generated from renewable sources. Section 86
of the Electricity Act is reproduced below:-
”86. Functions of State Commission: – (1) The State
Commission shall discharge the following functions, namely: –
(a) determine the tariff for generation, supply,
transmission and wheeling of electricity, wholesale, bulk or
retail, as the case may be, within the State:
Provided that where open access has been permitted to
a category of consumers under section 42, the State
Commission shall determine only the wheeling charges and
surcharge thereon, if any, for the said category of
consumers;
(b) regulate electricity purchase and procurement process
of distribution licensees including the price at which
electricity shall be procured from the generating companies
or licensees or from other sources through agreements for
purchase of power for distribution and supply within the
State;
(c) facilitate intra-State transmission and wheeling of
electricity;
(d) issue licences to persons seeking to act as transmission
licensees, distribution licensees and electricity traders with
respect to their operations within the State;
(e) promote co-generation and generation of electricity
from renewable sources of energy by providing suitable
measures for connectivity with the grid and sale of
electricity to any person, and also specify, for purchase of
electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution
licensee;
(f) adjudicate upon the disputes between the licensees,
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VATA Nos.48 & 49 of 2021
and generating companies and to refer any dispute for
arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid Code
specified under clause (h) of sub-section (1) of section 79;
(i) specify or enforce standards with respect to quality,
continuity and reliability of service by licensees;
(j) fix the trading margin in the intra-State trading of
electricity, if considered, necessary; and
(k) discharge such other functions as may be assigned to it
under this Act.
(2) The State Commission shall advise the State Government
on all or any of the following matters, namely :-.
(i) promotion of competition, efficiency and economy in
activities of the electricity industry;
(ii) promotion of investment in electricity industry;
(iii) reorganization and restructuring of electricity industry
in the State;
(iv) matters concerning generation, transmission,
distribution and trading of electricity or any other matter
referred to the State Commission by that Government.
(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.
(4) In discharge of its functions, the State Commission shall be
guided by the National Electricity Policy, National Electricity
Plan and tariff policy published under section 3.”
06. The Central Electricity Regulatory Commission, New Delhi,
vide Notification dated 14.01.2010, published in the Gazette of India
dated 18.01.2010, made a regulation called Central Electricity
Regulatory Commission (Terms and Conditions for Recognition and
Issuance of Renewable Energy Certificate for Renewable Energy
Generation) Regulation, 2010 (in short ‘the Central Regulation’).
Regulation 3 provides the designation of Central Agency and for
discharging functions of registration of eligible entities, issuance of
certificates, maintaining and settling accounts, etc. Rule 4 provides for
two categories of certificates, namely solar certificates issued to eligible
entities for the generation of electricity based on solar and non-solar
certificates issued to eligible entities for the generation of electricity
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based on renewable energy sources other than solar. The solar
certificates are liable to be sold to the obligated entities to enable them
to meet their renewable purchase obligation for solar and non-solar. As
per Regulation 5(1), a generating company engaged in the generation of
electricity from renewable energy sources shall be eligible for
registration for issuance of certificates, subject to the fulfilment of the
condition. Rule 6 provides for Revocation of Registration. Regulation
7 deals with Denomination and issuance of Certificates and as per
Regulation 7(7), the Commission shall determine through a separate
order, the quantum of Certificate to be issued to the eligible entities
being the solar generating companies registered under REC for one
Megawatt hour of electricity generated and injected into the grid based
on the formula provided therein. Rule 9 deals with the Pricing of
certificates.
07. Likewise, the Madhya Pradesh Electricity Regulatory
Commission also notified Madhya Pradesh Electricity Regulatory
Commission (Cogeneration and Generation of Electricity from
Renewable Sources of Energy) (Revision – I) Regulations, 2010 (in
short ‘the State Regulation’) on 09.11.2010, published in Gazette
Notification dated 19.11.2010. Regulation 13 provides for ”Renewable
Purchase Obligation (RPO)”. Under the aforesaid provision, the
appellant was registered as an eligible entity as defined in Regulation
2(1)(e) of the Central Regulation. The appellant obtained RECs and sold
them to various obligated entities as defined under Regulation 2(1)(i) of
the Central Regulation to fulfil the renewable purchase obligation as
mandated under Section 86(1)(e) of the Electricity Act.
08. The appellant applied to the Power System Operation
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VATA Nos.48 & 49 of 2021
Corporation Limited, which is a Central Agency, NDLC, for the
issuance of RECs. The Central Agency, after confirming the claims with
regard to the eligible units with the energy injection report of the State
Load Dispatch Centre (SLDC), issued RECs to the appellant. The RECs
are issued in electronic form in the dematerialisation account (Demat
Account) of the generator maintained with the Central Agency, and
certificates are liable to be traded only in the Indian Energy Exchange
maintained by the Central Agency. According to the appellant, the
trading of RECs is literally the sale of solar energy and purchase of the
same by way of obligated entities in order to fulfil their requirement
under sub-section (1)(e) of Section 86 of the Electricity Act.
09. The appellant / Company was assessed for period from
01.04.2012 to 31.03.2013 by the Assessing Officer (Deputy
Commissioner, Commercial Tax, Division – 2, Indore) and the sale of
RECs was treated under Entry 3, Part – II, Schedule – II of the VAT Act
instead of Entry 13 Schedule – I of the VAT Act and the order dated
27.02.2015 was passed.
10. The appellant challenged the aforesaid order before the
Appellate Authority / Additional Commissioner, Commercial Tax,
Indore and the same was dismissed. Thereafter, the appellant
approached the Madhya Pradesh Commercial Tax Appellate Board by
way of second appeal, which was dismissed vide impugned order dated
28.01.2020. Hence, the present VATA is before this Court.
11. The appellant has proposed the following substantial questions
of law:-
(1) Whether the impugned order passed by the appellate Board is
perverse being without application of mind as well as without
considering the case law referred by the appellant at the time ofSignature Not Verified
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hearing ?
(2) Whether the Appellate Board has wrongly classified the RECs
in the category provided in Entry 3 Part – II Schedule II of the
M.P. VAT Act where they do not belong and has not considered
correct nature of RECs and its classification under the M.P. VAT
Act ?
(3) Whether the Appellate Board has failed to consider the
correct position of law that RECs is to be deemed as purchase of
renewable energy for the purpose of RPO compliance and
therefore should have been classified in Entry 13 Schedule 1 of the
M.P. VAT Act i.e. ”Electrical Energy” and thus is exempted form
tax ?
SUBMISSIONS OF APPELLANT
12. Shri Raunak Choukse, learned counsel appearing for the
appellant submits that the learned Assessing Authority while assessing
the appellant has wrongly classified the RECs under Entry – 3, Part – II,
Schedule – II of the VAT Act and wrongly levied the tax @ 5% treating
it to be a sale of intangible goods like copyright, patent, REC License.
The REC, which represents one megawatt hour of renewable energy,
cannot be classified as intangible goods like copyright, patent, or
license. The sale of RECs is nothing but electrical energy, which is
exempted in Entry – 13, Schedule – I of the VAT Act.
13. It is further submitted by Shri Choukse, learned counsel that
RECs are traded through the Indian Energy Exchange and once it is sold
or purchased by obligated unit to mete out the obligation for purchase of
renewable energy, the certificate gets exhausted and cannot be treated
further unlike the patent, copyright, license can be sold many times. One
REC represents one megawatt-hour of electricity generated from
renewable sources. Hence, the impugned orders are liable to be set
aside, and the appellant be exempted from payment of taxes by treating
RECs under Entry 13, Schedule I of the VAT Act.
CONTENTS OF THE REPLY
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14. The respondents / State has filed a reply objecting the aforesaid
submissions by submitting that the sale of RECs is not a sale of
electrical energy of itself, it is a certificate covered under the category of
goods and eligible for sale.
15. It is further submitted the learned Assessing Authority while
assessing the case at the assessment level, first appeal as well as in the
second appeal has classified the REC under Entry 3 Part – II Schedule –
II of the VAT Act because the RECs are similarly traded as shares on a
particular energy exchange and are intangible goods similar to that of
the shares which are traded on the particular exchange. Hence, VATA is
liable to be dismissed.
APPRICIATION & CONCLUSION
16. Sub-section (1)(e) of Section 86 of the Electricity Act mandates
State Commission to promote cogeneration and generation of electricity
from renewable sources of energy and its connectivity with the grid for
sale to any person and prescribes the percentage of purchase of
electricity from such sources. Therefore, in order to implement the
aforesaid statutory provision, the Central as well as the State Electricity
Regulatory Commission had issued the Regulations, 2010. Under these
Regulations, the provisions have been made either to sell renewable
energy or sale Renewable Energy Certificates (REC). The Certificate is
defined under Regulation 2(1)(c) of the Central Regulations, which
means a Renewable Energy Certificate issued by the Central Agency
after following the procedure prescribed in the Regulations. Eligible
entities mean eligible to receive the certificate under this Regulation to
fulfil the obligation under Regulation 2(1)(e) of the Central Regulation
to obligated entities.
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17. Two categories of certificates are provided under Regulation 4
and Regulations 7 & 8 provide the denomination and issuance of
certificates and dealing in the certificates for sale by eligible entities to
obligated entities. Regulation 9 provides a procedure for determining the
floor price and forbearance price of the certificate. Regulation 9 is
reproduced below: –
9. Pricing of Certificate :
(1) The price of Certificate shall be as discovered in the Power
Exchange:
Provided that the Commission may, in consultation with the
Central Agency and Forum of Regulators from time to time
provide for the floor price and forbearance price separately for
solar and non-solar Certificates.
(2) The Commission while determining the floor price and
forbearance price, shall be guided inter alia by the following
principles:
(a) Variation in cost of generation of different renewable
energy technologies falling under solar and non-solar
category, across States in the country:
(b) Variation in the Pooled Cost of Purchase across States
in the country;
(c) Expected electricity generation from renewable energy
sources including:-
(i) expected renewable energy capacity under
preferential tariff
(ii) expected renewable energy capacity under
mechanism of certificates;
(d) Renewable purchase obligation targets set by various
State Commissions.
18. Regulation 10 provides for Validity and extinction of
Certificates. For registration and issuance of certificate, the
Commission is eligible to charge fees from eligible entities. Therefore, it
is purely a trade of Renewable Energy Certificates to promote the
generation of renewable energy. The generator or eligible entities either
may sale renewable energy through the grid under Open Access System
or get a certificates from the Central Agency for sale to an obligated
entity which is under an obligation to fulfill the purchase of renewable
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energy under sub-section (1)(e) of Section 86 of the Electricity Act.
Therefore, the learned Appellate Tribunal has wrongly come to the
conclusion that it is a tangible good like copyright, patent, license.
19. Shri Raunak Choukse, learned counsel for the appellant, has
rightly submitted that the tangible goods can be sold several times, but
the RECs are saleable for one time to the eligible entities at the price
fixed by the Agency or by way of mutual agreement.
20. In view of the above, the impugned orders dated 28.01.2020 &
25.06.2020 are hereby set aside. The questions of law are hereby
answered in favour of the appellant.
21. With the aforesaid, both the Value Added Tax Appeals stand
allowed.
Let a copy of this order be kept in the connected appeal also.
(VIVEK RUSIA) (BINOD KUMAR DWIVEDI)
JUDGE JUDGE
Ravi
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