Madras High Court
Ars Steels And Alloy International Pvt. … vs State Of Tamil Nadu on 9 June, 2025
Author: D.Bharatha Chakravarthy
Bench: D.Bharatha Chakravarthy
2025:MHC:1322
W.P.No.4871 of 2022 etc., (batch cases)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Orders reserved on : 20.02.2025
Orders pronounced on : 09.06.2025
CORAM :
THE HON'BLE MR.JUSTICE D.BHARATHA CHAKRAVARTHY
W.P.Nos.4871, 4876, 6917, 6922, 6927, 6980, 7913, 7204, 7201, 7286,
7293, 7299, 8157, 8163, 8161, 8556, 8565, 8562, 8561, 9059, 9475, 9482,
9478, 9487, 10226, 10238, 10244, 10247, 10232, 10596, 10615, 10610,
10601, 10619, 14670, 14673, 15869, 15878, 15875, 16676, 16680, 16678,
16679, 16690, 16689, 16688, 16685, 16683, 17200, 17206, 17203, 18069,
18077, 18075, 18080, 21898, 21904, 21902, 22504, 22520, 22515, 22509,
22731, 22736, 22744, 22739, 24524, 24527, 24532, 25953, 25960, 25958,
25956, 26094, 26105, 26100, 27426, 27440, 27436, 27433, 27453, 27455,
27458, 27457, 27845, 27851, 27848, 29175, 29182, 29179, 29178, 29744,
29754, 29752, 29783, 29787, 31989, 31997, 31994, 32437, 32447, 32456 &
32460 of 2022;
7440, 7445, 7694, 7697, 7698, 7849, 7861, 8630, 8636, 8640, 8651, 8653,
8655, 9696, 9703, 10446, 10451, 13268, 13317, 13297, 13327, 13341,
18832, 18841, 18840, 19073, 19077, 19075, 19079, 27903, 27906, 27914,
27917, 27924, 27966, 27959, 27921, 27970, 27946, 27951, 27955, 32632,
32638, 32636, 32671, 32681, 32679, 32676, 32674, 34395, 34407, 34403,
34412, 34409, 34622, 34644, 34633, 34629, 34637, 34783, 35055, 35070,
35063, 35085, 35076, 35081, 35863, 35870 & 35867 of 2023;
1565, 1578, 1573, 2057, 2062, 2061, 2059, 2058, 2366, 2663, 2661, 2658,
2655, 2371, 2370, 3308, 3310, 4030, 5390, 5397, 5401, 5404, 5392, 5396,
6224, 6230, 6236, 6797, 6803, 6800, 6798, 8136, 8148, 8152, 8146, 14888,
14893, 14897, 14896, 15793, 15796, 15794, 16337, 16350, 16353, 16348,
1/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
16349, 16344, 16345, 16346, 18638, 20895, 20908, 22090, 22094, 22099,
27572, 27577, 29689, 29702, 29696, 29706, 32192, 32197, 32195, 35704,
35710, 38058, 38067 & 38064 of 2024;
571, 578, 574, 674, 682, 679, 714, 719, 730, 722, 8172, 8181, 8177, 8495,
8502, 8499, 13051, 13067, 13061, 13058, 14829, 14835 and 14839 of 2025
and W.M.P.Nos.4989, 4988, 4987, 4996, 4995, 4994, 6955, 6958, 6959,
6964, 6965, 6966, 6967, 7010, 7011, 7012, 6969, 6970, 7223, 7219, 7216,
7230, 7229, 7228, 7225, 7217, 7226, 7333, 7322, 7321, 7332, 7331, 7337,
7318, 7340, 7338, 8165, 8164, 8163, 8161, 8156, 8153, 8150, 8159, 8160,
8478, 8474, 8472, 8471, 8469, 8462, 8468, 8466, 8461, 8460, 8480, 8479,
8863, 8860, 8864, 9223, 9221, 9220, 9219, 9217, 9216, 9236, 9225, 9224,
9235, 9234, 9215, 9948, 9957, 9965, 9934, 9942, 9943, 9949, 9958, 9959,
9964, 9941, 9950, 9963, 9937, 9939, 10258, 10259, 10273, 10270,
10269,10268, 10267, 10266, 10261, 10275, 10274, 10254, 10253, 10265,
10252, 13873, 13872, 13865, 13866, 15177, 15169, 15184, 15182, 15181,
15178, 15175, 15168, 15166, 15959, 15965, 15966, 15963, 15962, 15961,
15976, 15990, 15989, 15987, 15985, 15978, 15977, 15993, 15995, 15974,
15970, 15969, 16494, 16496, 16495, 16487, 16480, 16479, 16478, 16486,
16485, 17408, 17414, 17410, 17415, 17420, 17419, 17427, 17425, 20929,
20925, 20922, 20933, 20930, 20932, 21537, 21541, 21540, 21536, 21530,
21528, 21524, 21523, 21775, 21759, 21773, 21758, 21766, 21767, 21782,
21781, 23496, 23495, 23492, 23491, 23487, 23485, 25048, 25046, 25039,
25053, 25051, 25050, 25037, 25055, 25044, 25040, 25054, 25168, 25185,
25184, 25178, 25177, 25176, 25171, 25170, 25186, 26641, 26639, 26632,
26654, 26651, 26624, 26623, 26630, 26663, 26673, 26672, 26669, 26668,
26664, 26677, 26678, 27133, 27143, 27142, 27138, 27137, 27132, 28466,
28465, 28460, 28461, 28469, 28468, 28473, 28472, 29156, 29155, 29154,
29150, 29148, 29141, 29138, 29151, 29139, 29180, 29179, 29176, 29174,
29173, 31435, 31434, 31447, 31446, 31443, 31442, 31864, 31856, 31854,
31866, 31878, 31877, 31874 & 31872 of 2022;
7526, 7521, 7520, 7527, 7893, 7891, 7890, 7882, 78800, 7875, 7874, 7873,
7879, 8114, 8101, 8113, 8102, 8821, 8819, 8817, 8816, 8815, 8813, 8807,
2/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
8805, 8806, 8840, 8839, 8838, 8837, 8835, 8832, 8831, 8830, 8828, 9760,
9766, 9765, 9761, 10399, 10397, 10396, 10403, 10401, 10400, 13039,
13010, 13004, 13001, 13040, 13049, 13020, 13018, 13036, 13032, 13022,
12996, 12992, 13044, 13012, 18070, 18079, 18078, 18081, 18077, 18076,
18071, 18069, 18080, 18323, 18319, 18318, 18317, 18332, 18331, 18333,
18322, 18321, 18320, 18329, 18324, 27445, 27446, 27472, 27478, 27471,
27421, 27454, 27479, 27481, 27456, 27405, 27406, 27410, 27413, 27414,
27417, 27418, 27419, 27422, 27423, 27426, 27453, 27428, 27444, 27470,
27457, 27461, 27462, 27463, 27398, 27395, 27397, 27403, 27451, 27452,
27427, 32234, 32228, 32225, 32237, 32236, 32235, 32233, 32232, 32230,
32272, 32289, 32291, 32280, 32275, 32274, 32288, 32287, 32286, 32281,
32279, 32278, 32276, 32273, 32290, 34324, 34314, 34313, 34312, 34305,
34302, 34301, 34323, 34331, 34330, 34325, 34319, 34318, 34317, 34332,
34588, 34587, 34585, 34594, 34592, 34591, 34590, 34589, 34578, 34577,
34582, 34581, 34593, 34575, 34583, 34770, 34773, 35048, 35026, 35049,
35038, 35028, 35027, 35059, 35058, 35057, 35054, 35053, 35047, 35040,
35041, 35021, 35019, 35018, 35052, 35861, 35859, 35858, 35857, 35863,
35854, 35853 & 35852 of 2023;
1605, 1604, 1603, 1601, 1600, 1599, 1591, 1590, 1589, 2206, 2204, 2207,
2202, 2198, 2197, 2196, 2194, 2193, 2191, 2214, 2213, 2212, 2208, 2201,
2924, 2569, 2568, 2936, 2572, 2933, 2932, 2930, 2927, 2926, 2925, 2558,
2937, 2935, 2562, 2560, 2923, 2922, 2571, 2570, 2567, 3568, 3567, 3566,
3565, 3564, 3563, 4353, 4352, 4354, 6920, 5951, 5943, 5946, 5947, 5950,
5952, 6919, 5928, 5929, 5930, 5933, 5948, 5949, 5935, 5953, 6905, 6907,
6912, 5936, 5940, 5941, 5954, 6903, 6913, 6914, 6918, 7584, 7583, 7579,
7578, 7577, 7576, 7575, 7582, 7581, 7580, 7588, 7587, 9100, 9101, 9086,
9104, 41323, 9095, 9096, 9098, 9091, 9093, 9087, 9088, 9090, 16164,
16163, 16152, 16153, 16166, 16165, 16149, 16162, 16157, 16156, 16155,
16167, 17226, 17221, 17220, 17214, 17225, 17224, 17219, 17217, 17215,
17883, 17885, 17897, 17911, 17912, 17914, 17905, 17906, 17895, 17898,
17915, 17899, 17900, 17901, 17902, 17904, 17907, 17908, 17909, 17910,
17916, 17888, 17894, 17896, 20447, 20443, 20442, 22837, 22844, 22843,
3/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
22841, 22836, 22834, 24097, 24098, 24087, 24088, 24077, 24078, 24093,
24081, 24086, 30082, 30091, 30090, 30088, 30085, 30083, 32348, 32361,
32360, 32354, 32347, 32345, 32344, 32353, 34951, 34955, 34961, 34956,
34953, 34962, 38556, 38563, 38561, 38555, 41163, 41161, 41186, 41180,
41170 & 41169 of 2024; .
695, 694, 704, 703, 699, 698, 834, 833, 828, 838, 832, 825, 826, 841, 840,
896, 894, 888, 876, 878, 889, 872, 871, 9167, 9166, 9163, 9155, 9161, 9168,
9160, 9157, 9156, 9523, 12583, 9521, 9518, 9517, 9516, 9511, 9509, 9508,
9522, 16740, 16729, 16736, 16742, 16746, 16728, 16731, 16733 and 16734
of 2025
In W.P.No.4871 of 2022:-
ARS Steels and Alloy International Pvt. Ltd.,
Represented by its Authorised Signatory,
D-109, 2nd Floor, LBR Complex,
Anna Nagar East, Chennai - 600 102. .. Petitioner
Versus
1. State of Tamil Nadu,
Rep by the Principal Secretary to Government,
Energy Department,
Secretariat, Fort St. George,
Chennai - 600 009.
2. The Chief Electrical Inspector to the Government,
Thiru-Vi-Ka Industrial Estate,
Guindy, Chennai - 600 032.
3. Tamil Nadu Generation and Distribution
Corporation Limited (TANGEDCO),
4/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Rep by its Chairman & Managing Director,
144, Anna Salai,
Chennai - 600 002. .. Respondents
Prayer in W.P.No.4871 of 2022 : Writ Petition filed under Article 226 of
the Constitution of India praying for a Writ of Certiorarifed Mandamus
calling for the records of the 1st respondent comprised in G.O.(Ms).No.55
Energy (D2) Department, dated 20.10.2021 and quash the same as arbitrary,
illegal and is violative of the provisions of the Tamil Nadu Tax on
Consumption or Sale of Electricity Tax, 2003 and consequently forbear the
respondents, their officers, employees, subordinates, agents, men or any
other persons claiming and/or acting under them from in any manner.
W.P.No.4871 of 2022:-
For Petitioner(s) : Mr.Rahul Balaji
For Respondent(s) : Mr.Haja Nazirudeen,
Additional Advocate General,
Asstd. by Mr.T.N.C.Kaushik,
Additional Government Pleader (Taxes)
and Mr.L.Jai Venkatesh,
Standing Counsel for TANGEDCO
5/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
W.P.Nos.4876, 6917, 6922, 6927, 6980, 7193, 7204, 7201, 7286, 7293,
7299, 8157, 8163, 8161, 8556, 8565, 8562, 8561, 9475, 9482, 9478, 9487,
10266, 10238, 10244, 10247, 10232, 10596, 10615, 10610, 10601, 10619,
14670, 14673, 15869, 15878, 15875, 16676, 16680, 16678, 16679, 16690,
16689, 16688, 16685, 16683, 17200, 17206, 17203, 18069, 18077, 18075,
18080, 21898, 21904, 21902, 22504, 22520, 22515, 22509, 22731, 22736,
22744, 22739, 24524, 24527, 24532, 25953, 25960, 25958, 25956, 26094,
26105, 26100, 27426, 27440, 27436, 27433, 27453, 27455, 27458, 27457,
27845, 27851, 27848, 29175, 29182, 29179, 29178, 29744, 29754, 29752,
29783, 29787, 31989, 31997, 31994 of 2022;
7440, 7445, 7694, 7697, 7698, 7849, 7861, 8630, 8636, 8640, 8651, 8653,
8655, 9696, 9703, 10446, 10451, 13268, 13317, 13297, 13327, 13341,
18832, 18841, 18840, 19073, 19077, 19075, 19079, 27903, 27906, 27914,
27917, 27924, 27966, 27959, 27921, 27970, 27946, 27951, 27955, 32632,
32638, 32636, 32671, 32681, 32679, 32676, 32674, 34395, 34407, 34403,
34412, 34409, 34622, 34644, 34633, 34629, 34637, 35055, 35070, 35063,
35085, 35076, 35081, 35863, 35870 & 35867 of 2023;
1565, 1578, 1573, 2057, 2062, 2061, 2059, 2058, 2366, 2663, 2661, 2658,
2655, 2371, 2370, 3308, 3310, 4030, 5390, 5397, 5401, 5404, 5392, 5396,
6224, 6230, 6236, 6797, 6803, 6800, 6798, 8136, 8148, 8152, 8146, 14888,
14893, 14897, 14896, 15793, 15796, 15794, 16337, 16350, 16353, 16348,
16349, 16344, 16345, 16436, 18638, 20895, 20908, 22090, 22094, 22099,
27572, 27577, 29689, 29702, 29696, 29706, 32192, 32197, 32195, 35704,
35710, 38058, 38067 & 38064 of 2024;
571, 578, 574, 674, 682, 679, 714, 719, 930, 722, 8172, 8181, 8177, 8495,
8502, 8499, 13051, 13067, 13061, 13058, 14829, 14835 and 14839 of 2025
:-
For Petitioner(s) : Mr.R.V.Easwar, Senior Counsel
Mr.Joseph Prabhakar,
for Mr.S.P.Parthasarathy
6/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
For Respondent(s) : Mr.Haja Nazirudeen,
Additional Advocate General,
Asstd. by Mr.T.N.C.Kaushik,
Additional Government Pleader (Taxes)
and Mr.L.Jai Venkatesh,
Standing Counsel for TANGEDCO
W.P.No.9059 of 2022:-
For Petitioner(s) : Mr.D.G.Hariprasath
For Respondent(s) : Mr.Haja Nazirudeen,
Additional Advocate General,
Asstd. by Mr.T.N.C.Kaushik,
Additional Government Pleader (Taxes)
and Mr.L.Jai Venkatesh,
Standing Counsel for TANGEDCO
W.P.Nos.32437 and 32447 of 2022:-
For Petitioner(s) : Mr.L.P.Maurya
For Respondent(s) : Mr.Haja Nazirudeen,
Additional Advocate General,
Asstd. by Mr.T.N.C.Kaushik,
Additional Government Pleader (Taxes)
W.P.Nos.32456 and 32460 of 2022:-
For Petitioner(s) : Mr.S.Lakshmipathy
7/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
For Respondent(s) : Mr.Haja Nazirudeen,
Additional Advocate General,
Asstd. by Mr.T.N.C.Kaushik,
Additional Government Pleader (Taxes)
and Mr.L.Jai Venkatesh,
Standing Counsel for TANGEDCO
W.P.No.34783 of 2023:-
For Petitioner(s) : Mr.M.Kamalanathan
For Respondent(s) : Mr.Haja Nazirudeen,
Additional Advocate General,
Asstd. by Mr.T.N.C.Kaushik,
Additional Government Pleader (Taxes)
and Mr.L.Jai Venkatesh,
Standing Counsel for TANGEDCO
COMMON ORDER
A. Prelude:
The State, The Power, The Duty – thinking of these by switching on
the concept of electricity is the subject matter. All these Writ Petitions seek
identical relief and are therefore considered and disposed of by this common
order.
8/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)B. The Petitions:
2. The petitioners in this batch of Writ Petitions are industrial
concerns that consume electricity from their own captive generating plants
and/or procure power through open access from Indian Energy Exchange
Limited (IEX) or Power Exchange India Limited (PXIL).
3. In these Writ Petitions, there are two sets of prayers. First, the
petitioners challenge G.O.Ms.No.55, Energy (D2) Department, dated
20.10.2021. They pray to quash the same and, consequently, to restrain the
respondents, namely the State of Tamil Nadu, through the Secretary, Energy
Department, the Chief Electrical Inspector to the Government, and the Tamil
Nadu Generation and Distribution Corporation Limited (TANGEDCO), or
their officers, employees, or subordinates, from collecting the tax under the
Tamil Nadu Tax on Consumption or Sale and Electricity Tax Act, 2003
(hereinafter referred to as the Act 12/2003).
9/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
4. By the said Government Order, it is stated that, vide
G.O.Ms.No.121, Energy (B1) Department, dated 23.12.2010, the tax on the
consumption of electricity is levied and collected through the monthly
current consumption charge bills, effective from 01.04.2011. By the letter
dated 13.08.2020, the Chief Electrical Inspector stated that tax must be
levied in accordance with Section 3(1)(c) of Act 12/2003 on electricity
consumption purchased through open access from IEX or PXIL as well.
However, the process of levying and collecting this tax on such transactions
by the department would be cumbersome, and he suggested that
TANGEDCO also levy and collect the tax since they already possess the
relevant data and revenue particulars. The Chief Electrical Inspector also
brought to the Government’s attention that TANGEDCO already collected
tax on the consumption of electricity from captive generating plants, yet it
has omitted to collect in some distribution circles, and he sought direction in
this regard. The Government examined the Chief Electrical Inspector’s
request and entrusted TANGEDCO with the collection of tax and
10/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
consumption of electricity purchased through open access from IEX or
PXIL, in addition to the collection tasks already assigned via the
Government Order dated 23.12.2010. The Chief Electrical Inspector is
instructed to monitor revenue realization and is authorized to remit the same
to the account mentioned therein. Additionally, the Chief Electrical
Inspector has been designated as the remitting, reconciling, and controlling
authority for revenue receipts under the specified head of account.
5. The second limb of the prayer challenges G.O.Ms.No.121, Energy
(B1) Department, dated 23.12.2010. The said Government Order was
notified in the Tamil Nadu Government Gazette No.III Part II-Section 2,
dated 26.11.2011. By the said Government Order, in exercise of power
under Section 12(1) of the Act 12/2023, the Government appointed the
officers mentioned therein for the collection of Electricity Tax. The
Assessors, Junior Engineers, Assistant Engineers, and Assistant Executive
Engineers are designated as the authorities for the collection of electricity
11/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
tax. The Executive Engineer of the respective division was appointed as the
Inspection Officer. The Superintending Engineer of the respective circle
was designated as the Chairman/appellate authority.
C. The Arguments:
6. Heard the learned Counsel on either side. Mr.Rahul Balaji,
Mr.S.P.Parthasarathy, Mr.D.G.Hariprasath, Mr.L.P.Maurya,
Mr.S.Lakshmipathy, Mr.M.Kamalanathan, learned Counsels argued in detail
for the petitioners. Mr.Haja Nazirudeen, the Additional Advocate General,
defended the state. The factual and legal submissions made by the learned
Counsel for the petitioners and the learned Counsel for the respondents were
detailed and overlapped with each other. Therefore, they are mentioned in
common and dealt with.
7. The learned Counsel for the petitioners would first guide this Court
12/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
through certain dates and events. On 10.06.2023, the Electricity Act, 2003
(Central Act 36/2003) came into force, replacing the Indian Electricity Act,
1910, the Electric Supply Act, 1948, and the Electricity Regulatory
Commissions Act, 1998. At the same time, without reference to the
aforementioned developments, the State of Tamil Nadu enacted The Tamil
Nadu Tax on Consumption or Sale of Electricity Act, 2003 (Tamil Nadu Act
12 of 2003), which came into force on 16.06.2003. The drafting and
passage of the bill took place prior to the enactment of the Electricity Act,
2003. It is pointed out that the State of Tamil Nadu had no opportunity to
consider the salient features of the Electricity Act, 2003, which not only
consolidates the laws relating to energy, generation, distribution,
procurement, and consumption but also aims to chart the future of various
fields and activities relating to electricity. The State of Tamil Nadu also
notified the rules under Tamil Nadu Act 12/2003, namely, the Tamil Nadu
Tax on Consumption or Sale of Electricity Rules, 2003, which also came
into effect on the same date, i.e., 16.06.2003.
13/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
8. On 13.06.2003, vide G.O.Ms.No.51, Energy (B1) Department, the
Government of Tamil Nadu notified the tax rate at Rs.10 paise per unit for
electricity consumed for personal use, applicable to both licensees that are
captive generating plants and individuals who are not licensees. The learned
Counsel would submit that it is evident the tax rate encompasses electricity
sold by licensees who are not captive generating plants under Section
3(1)(a), electricity sold by captive generating plant licensees under Section
3(1)(b), and electricity consumed for personal use by captive generating
plants that are licensees, as well as individuals who are not licensees in
accordance with Section 3(1)(c) of the Act.
9. On the same date, by G.O.Ms.No.53 Energy (B1) Department, the
Chief Electrical Inspector of the Government is appointed as the Director of
Electricity Tax according to Section 2(3) of the Act. Furthermore, by
G.O.Ms.No.54 Energy (B1) Department, the categories of officials
14/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
mentioned therein were appointed as the Inspecting Officers of Electricity
Tax in exercise of powers under Section 12(1) of the Act 12/2003. By
G.O.Ms.No.55 Energy (B1) Department, the Officers designated as
Electrical Inspectors were also made registration officers under Section 5(1)
of the Act. By G.O.Ms.No.56 Energy (B1) Department, the Government
authorized the then Tamil Nadu Electricity Board to recover Electricity Tax
from any person to whom electricity is sold by it under Section 6(1) of the
Act.
10. Thereafter, on 14.08.2014, vide G.O.Ms.No.59 Energy (D2)
Department, the various designations mentioned therein were designated as
Electrical Inspectors, etc., in respect of the various functions under the said
Act and other regulations. Subsequently, in a letter dated 10.08.2021, the
Chief Financial Controller, Revenue of TANGEDCO, clarified that the
energy purchased from IEX shall not be treated as captive consumption;
therefore, the self-generation tax is not applicable for such transactions, and
15/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
the Superintending Engineer of Cuddalore EDC was requested to address
the audit objection accordingly. Against this backdrop, the first impugned
Government Order was issued on 23.01.2010, appointing the officers of the
erstwhile Tamil Nadu Electricity Board for the collection of Electricity Tax
directly through current consumption bills. The second impugned order in
G.O.Ms.No.55 was issued on 20.10.2021, vesting additional powers in the
officers for the collection of e-tax on power purchases through IEX and
other platforms directly by levying them in the current consumption bills.
11. In this context, the petitioners submit that following the
introduction of the Electricity Act, 2003, the subject of electricity was
liberalized, and the requirement to obtain a license for electricity generation
was removed. Captive generation of electricity for personal consumption is
permitted freely. Furthermore, a statutory framework for open access is
outlined, allowing consumers complete freedom to select open access to
electricity generated through captive sources, group captive arrangements,
16/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
third-party power purchases, or inter-State and intra-State power purchases
via IEX, among other options. Given the substantial gap between demand
and supply, private participation in the electricity sector is increasingly
encouraged. Consequently, several private entities have established captive
generating plants and commenced electricity consumption by utilizing the
infrastructure provided by the State/TANGEDCO, paying the necessary
wheeling and transmission charges, which are determined by the State
Electricity Commission periodically. Thus, the position of receiving
electricity solely through the State-owned Electricity Board has been
liberalized, and the open access system has further strengthened and
facilitated this liberalization.
12. The Indian Energy Exchange, among others, is facilitated by the
Central Regulatory Electricity Commission. Indian Energy Exchange
Limited (IEX) is India’s premier energy trading platform that provides an
automated platform for the physical delivery of electricity. The platform
17/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
enables efficient price discovery and allows participants to trade in a variety
of energy products. It is neither a generator of energy nor a trader of energy;
rather, it serves as a platform facilitating consumers needing energy to
purchase and generators willing to supply energy to engage in trade. It is
also not a licensee. Actual users of electricity submit bids for purchase
using the platform after paying the applicable charges, including cross-
subsidy charges and other open access fees. The energy consumed is always
treated as an inter-State purchase, and the necessary charges are paid
accordingly.
13. The learned Counsel would then submit that electricity is placed
in List-III of the Seventh Schedule of the Constitution of India. At the same
time, the imposition of taxes on the consumption or sale of electricity was
specifically designated as a State subject under Entry-53 of List-II of the
Seventh Schedule of the Constitution of India. Originally, under the
Government of India Act, 1935, the State of Madras had enacted the Tamil
18/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Nadu Electricity Duty Act, 1939, under Entry-48(b) of the Seventh Schedule
of the said Act, levying a duty on certain sales and consumption of electrical
energy by the licensees in the State of Tamil Nadu. In 1962, the
Government of Tamil Nadu enacted the Tamil Nadu Electricity (Tax on
Consumption) Act, 1962 (Act IV of 1962), which provided for the levy of
tax on the consumption of electrical energy in the State. At that time, the
State of Tamil Nadu formed a Commission on Tax Reforms and Revenue
Augmentation under the Chairmanship of Dr.Raja J. Chellayya, and the
Commission suggested that the Tamil Nadu Electricity Duty Act, 1939, and
the Tamil Nadu Electricity Tax on Consumption Act, 1962, could be
rationalized and a single legislation introduced for this purpose. The
Commission also recommended the rationalization of the tax rate payable by
the buyers and consumers of electricity. The Government of Tamil Nadu
accepted the recommendations of the Commission with certain
modifications. Accordingly, this was incorporated into the budget speech
for the year 2003-2024, and it was announced that a new bill would be
19/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
introduced in the Assembly to enact new legislation on the Electricity Tax,
which would provide for a minimum tax rate of 5% and a maximum tax rate
of 10% on the net charge for the energy sold by all licensees.
14. It would also state that the bill would provide for a tax levy of a
minimum of Rs.10 ps and a maximum of Rs.20 ps for each unit of energy
consumed for personal use, and no tax will be levied on the sale of
electricity for agricultural purposes or for hut service connections, as these
would be exempt. Accordingly, the Act was passed and came into effect on
16.06.2003. Section 15 of Act 12/2003 empowers the Government to create
rules to implement the purposes of the Act; thus, Act 12/2003 was also
framed and it took effect on the same day, i.e., 16.06.2003.
15. Turning their attention to G.O.Ms.No.121 Energy (B1)
Department, dated 23.12.2010, the learned Counsel for the petitioners
submits that the State Act was enacted with the objective of consolidating
20/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
and rationalizing the taxation on the sale and consumption of electricity in
the State. While Section 3 is the charging provision, Sections 5 to 9 provide
for the levy, assessment, and recovery of the tax. Rules 3 to 21 of the Rules,
2003 outline the registration, maintenance of books of accounts,
assessments, and the time and manner of tax collection/payment, etc. The
Act and Rules provide a comprehensive mechanism for assessing the
Electricity Tax. Rule 6 specifies the manner of payment of Electricity Tax
to the Government for the sale of electricity by the licensee, TANGEDCO,
as per Section 3(1)(a) and (b) of the Act 12/2003. TANGEDCO must credit
the tax at a rate of 5% of the net charge for the supply of electricity to the
consumer into the Government treasury under the designated head.
16. The learned Counsel would take this Court through the Rules.
Attention is drawn to Rules 8 and 9. It is stated that Section 6 of the Act
provides that the licensee may, with the previous sanction of the Act and
subject to such conditions as may be imposed, recover from any person or
21/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
class of persons to whom the electricity is sold, the Electricity Tax which
must be paid by the licensee in respect of the electricity so sold or any part
of it, as may be determined by the Government.
17. Rule 8 of the Rules, 2003 states the time and manner of
reimbursement of the Electricity Tax for the sale of electricity to consumers
by licensees. It specifies that the licensee must include the tax leviable
under Act 12/2003 as a separate item in the bill of charges for the sale of
electricity and recover it from the consumer along with the consumption
charges. Rule 9 states that the licensee, regarding the sale of electricity,
should take all reasonable steps to install and maintain the meter on the
consumer’s premises, registering the type of electricity sale attracting
taxation, ideally on the same date each month, but no less than 25 days and
no more than 35 days after the previous meter reading date.
18. The Government had issued G.O.Ms.No.56, Energy (B1) on
22/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
13.06.2003, granting sanction to TANGEDCO to recover the Electricity Tax
from any person or class of persons to whom the electricity is sold by the
licensee or TANGEDCO. Thus, it can be seen that the entire machinery is
provided for TANGEDCO to reimburse itself from consumers concerning
the 5% tax payable by it relating to electricity sales. Upon such collection, it
must remit the amount under the head mentioned therein. The learned
Counsel would also draw attention to the bills produced along with the typed
set of papers to demonstrate the above. Thus, it is their contention that
TANGEDCO is enabled under the Acts and Rules to do only the
aforementioned.
19. Regarding the other persons, the learned Counsel would draw the
attention of this Court to Section 5, which states that every person, other
than a licensee or the State Government, who has installed or proposes to
install a generating plant for the generation of electricity for his own
consumption, must register his name with such officer as the Government
23/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
may appoint for this purpose. It provides that the application for registration
of such captive generating plants shall be made in such manner and form,
and on payment of such fees as may be prescribed. The officer appointed
for this purpose may, upon receipt of the application and after conducting
such inquiry in that regard, grant a certificate of registration. Rule 5 of the
Rules also provides the application form for registration in Form A-1, and a
fee of Rs.200/- is prescribed. The certificate of registration shall be in Form
A-2 and will be valid for a period of three years. It requires the maintaining
of a register of all registered generating plants in Form A-3 by the
registering authority. Rule 10 stipulates that every captive generating plant
shall install meters to measure the quantity of electricity for its own
consumption as well as for the sale of surplus electricity to others. It also
provides that the said meter shall be installed to ascertain the amount of tax
payable under Section 3 of the Act.
20. The learned Counsel would further submit that the registered
24/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
captive generating plants shall be required to pay the tax at the rate of Rs.10
ps per unit within 30 days under the head mentioned therein. Furthermore,
vide G.O.Ms.No.55, Energy (B1) Department, dated 13.06.2003, the
Government had appointed the Electricity Tax Inspecting Officers holding
the post of Electrical Inspectors as the Registration Officers. Section 8
provides for the procedure. It mandates that every licensee or a person other
than the licensee shall keep books of accounts in the prescribed form and
submit returns showing the units of electricity supplied and the amount of
electricity payable in spite thereof.
21. Rule 14(1) of the Rules enumerates how the books of accounts
shall be maintained by the licensee under Section 8 of the Act in Form B-1.
The sales must be shown separately to consumers under Sections 4 and 14,
along with any other electricity charges under Section 3. Rule 14(2) outlines
how the books of accounts should be kept by captive generating plants.
Section 8 also stipulates the requirements for the books of accounts
25/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
maintained by captive generating plants engaged in the sale of surplus
electricity after their own consumption, which shall be in Form B-3 as
annexed to the Rules. Furthermore, Rule 15 specifies the submission of
returns: Form C-1 for the sale of electricity, Form C-2 for own consumption,
and Form C-3 for the sale of surplus.
22. The best judgment procedure is prescribed under Section 9 of the
Act 12/2003 if no returns are filed under Section 8 of the Act 12/2003. The
best judgment assessment shall be made according to the procedure
prescribed under Rule 16. Rule 20 makes the procedure applicable to
captive generating plants and non-licensees. Rule 21 makes the rules
mutatis mutandis applicable concerning the sale of surplus energy by captive
generating plants. An appeal is also provided for under Section 10 of the
Act 12/2003. Section 12 enables the Government to appoint Inspecting
Officers to conduct inspections as per the books of accounts, etc. Section 7
states that if any Electricity Tax due under the Act 12/2003 remains unpaid,
26/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
it shall be deemed in arrears, and interest at the rate prescribed by the
Government from time to time shall be payable on such Electricity Tax.
This amount, together with the interest payable, shall be recoverable either
as arrears of land revenue or by deduction from any amount payable by the
Government to the licensee. Additionally, Rule 7 prescribes an interest rate
of 12% per annum. Thus, the contention of the learned Counsel is that, in
complete violation of the entire existing mechanism for levying, assessing,
and collecting tax, the impugned Government Order in G.O.Ms.No.121,
Energy (B1) Department, dated 23.12.2010, disregards this and issues a
directive to the distribution licensee, relying solely on Section 12 of the Act
12/2003.
23. Regarding the captive generating plants, it can be observed that
the distribution licensee does not supply energy in any way. Based on the
challenged Government Order, TANGEDCO is directly imposing e-tax on
the energy consumed by the petitioners from their wind and solar power
27/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
plants. The learned Counsel will direct the attention of this Court to some of
the actions taken by TANGEDCO by referencing the bills in that regard.
They will further argue that exemptions are periodically granted by the
Government under Section 14(2) for various categories. As a result, due to
the circumvention of procedure even for exempted units, TANGEDCO
continues to collect tax, compelling the concerned units to ultimately
approach this Court for a refund of the taxes levied. Despite the Court’s
orders, TANGEDCO fails to issue refunds. Thus, the learned Counsel
submits that on its face, G.O.Ms.No.121, dated 23.12.2010, directly
contradicts the provisions of the Acts and the Rules framed thereunder and
is therefore liable to be set aside.
24. Thereafter, turning their attention to the other impugned
G.O.Ms.No.55, Energy (D2) Department, dated 20.10.2021, it can be seen
that the subject matter of the imposition of tax can only relate to Section
3(1)(c) of Act 12/2003. The contention of the learned Counsel for the
28/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
petitioner is that the levy is wholly unlawful, as the purchases through IEX,
etc., are inter-State transactions. The State cannot artificially fix the situs of
the sale by considering consumption alone as within its territory to bring the
transaction within its taxing fold. The learned Counsel would rely upon the
judgment of the Hon’ble Supreme Court of India in State of A.P. Vs.
1
National Thermal Power Corpn. Ltd. in support of the said proposition.
25. Alternatively, the learned Counsel would submit that Section
3(1)(c) does not even contemplate the taxation of such transactions. When
the statute does not expressly prescribe taxing, such IEX transaction
G.O.Ms.No.55, dated 20.10.2021, would be a colourable exercise of power
to arrogate the source of taxing power itself. The imposition of tax should
be specific, and a statutory machinery, including assessment and filing of
returns, is not prescriber in the Act. Therefore, in the absence of a clearly
defined taxable event, identified taxable person, notified rate, and statutory
machinery, the levy cannot constitute a valid tax. In this regard, the learned
1 (2002) 5 SCC 203
29/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Counsel would rely upon the judgment of the Hon’ble Supreme Court of
India in Commissioner of Central Excise and Customs, Kerala Vs. Larsen
2
& Toubro Ltd. .
26. Referring to the framework of the IEX, it is stated that it is India’s
premier energy exchange, providing an automatic electronic trading
platform for the physical delivery of electricity. The petitioners are all
consumers of electricity who purchase it from IEX. IEX is neither a
generator nor a trader of energy. Electricity is made available through a
bidding process on the platform. Successful bidders are permitted to
consume the energy after all applicable charges are settled. The energy
consumed is always treated as an inter-State purchase, and the necessary
charges are paid accordingly. IEX has more than 6600 participants from 29
states and 5 union territories who can purchase electricity.
27. The learned Counsel would then take this Court through an
2 (2016) 1 SCC 170
30/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
overview of how transactions are typically conducted on the IEX platform.
They would submit that to participate in trading, Power Generators,
Distribution Companies, Traders, and consumers must first register with the
exchange. The trading mechanism operates through an electronic trading
platform. This mechanism includes the Day-ahead Market (DAM), Term-
ahead Market (TAM), and Renewable Energy Certificate (REC) trading.
DAM allows participants to buy or sell electricity for delivery the next day.
TAM enables buying or selling electricity over a term period such as a
week, month, or quarter. REC refers to a Tradable Certificate that
represents the environmental attributes of renewable energy generation.
Consumers willing to procure engage in procurement through the segments
DAM or TAM by placing bids based on their consumption requirements and
price preferences.
28. The next requirement is grid connectivity. To utilize the energy
procured, consumers use the grid facilities provided by the local distribution
31/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
company or through other means, such as open access arrangements.
Depending on the type and scale of energy consumed, various approvals and
regulatory compliances must also be secured to consume energy from the
IEX. Firstly, large consumers wishing to procure energy directly from the
generators through the grid, without going through their local DISCOM,
must obtain open access approval from the regulatory authorities.
Consumers may also need to install special meters to accurately measure
energy consumption in cases of open access arrangements. Regarding
tariffs, regulatory approvals are also required. Additionally, there is a
payment and settlement mechanism provided on the IEX platform that
ensures timely settlement between buyers and sellers.
29. The DAM involves a trading session that occurs a day before the
actual delivery of electricity. Once the bids are received, the IEX system
clears the market by matching the bids based on price and quantity. The
system determines the Marking Clearing Price (MCP) at which total demand
32/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
equals total supply. After determining the MCP, the system allocates the
clearing prices to all successful bids. Buyers pay the MCP while sellers
receive it, and the results of the trading session are declared. Based on these
results, the IEX generates bills and invoices for buyers and sellers.
Payments are settled through the same platform, with the necessary
transaction fees and other charges deducted. A dispute resolution
mechanism is also provided by the platform in case of any disputes.
Additionally, IEX provides detailed reports including statements of
transactions, statement details, and other relevant information.
30. The learned counsel would rely on paragraph Nos.23 to 32 of the
judgment of the Hon’ble Supreme Court of India in State of A.P. Vs.
National Thermal Power Corpn. Ltd. (cited supra) and submit that the
Hon’ble Supreme Court of India clarified how to read the List-II Entries 53
and 54, the meaning of an inter-State sale, and the effect of Entry 53 of List-
II, as well as Entry 53 and its consequences on the free flow of trade. They
33/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
submit that the State attempted to introduce a new item that was previously
not taxable under the guise of issuing an authorization, which is absolutely
unconstitutional and ultra vires.
31. The second contention of the learned Counsel for the petitioners is
based on Section 3(1)(c) of the Act. They would submit that a careful
reading of Section 3 in general and Section 3(1)(c) in particular indicates
that the consumers, such as the petitioners, who consume electricity from
these platforms, are not covered under Section 3. Section 3 deals with two
kinds of supply. In respect of licensed suppliers, it contains two categories
besides captive generating plants, and only Section 3(1)(c) pertains to non-
licensed suppliers, including captive generating plants. However, Section
3(1)(c) specifically uses the phrase ‘consumption for its own use’ and does
not mention the word ‘consumer’. In this regard, the definition of ‘consumer’
under Section 2(5) is referenced. It is submitted that while interpreting the
provision, the Court must consider that a term, despite being defined in the
34/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
statute, is not included in the charging provision. If the legislature intended
to cover the petitioners, it would have used the phrases ‘actual user of power’
or ‘any person who is supplied with the electricity on payment of charges or
free of cost or otherwise’. Since the phrase is not used, Section 3(1)(c) does
not encompass the petitioners.
32. The learned Counsel would also rely on the definition of the term
‘licensee’ under Section 2(10) and the clarification provided under Section
2(16), stating that the words and expressions used but not defined under the
Act shall have the same meaning as those under the Indian Electricity Act,
1910, the Electricity Supply Act, 1948, and the Electricity Regulatory
Commission Act, 1998, all of which were incidentally repealed even before
coming into force of the Act 12/2003. The learned Counsel would also rely
on the definition of the consumer under the Act, 1910. Furthermore, the
contention is that the phrase ‘for own use’ is used only in the context of
captive generating plants, with Section 2(2) being relied on in this regard.
35/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
33. Similarly, the definition of ‘captive generating plant’ under
Section 2(8) is also relied upon. By guiding this Court through the
statement of objects and reasons made pursuant to the recommendation of
Dr.Raja J. Chellayya’s Commission and including the statement of objects
and reasons of the Amendment, 2008, the learned Counsel would submit
that purely and simply, the object of the State enactment was to levy a
minimum rate of tax of 5% and a maximum rate of tax of 10% on the net
charge of all the energy sold by the licensees, as well as to levy a minimum
of Rs.10 paise and a maximum of Rs.20 paise per unit of energy consumed
by the captive generating plant for their own use. For the proposition that
reference to the statement of objects and reasons can be made to understand
the background of the Act, the judgment of the Hon’ble Supreme Court of
India in Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip
3
Kumar and Company and Ors. is relied upon. The judgment of the Hon’ble
Supreme Court of India in Sri Ram Saha Vs. State of West Bengal and
3 (2018) 7 SCR 1191
36/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
4
Ors. is cited for the proposition that if two interpretations are possible, the
one that promotes or favors the object of the Act and the purposes it serves
must be preferred. It is further submitted that the objective was as above.
34. If one considers the chronology of events, namely the Act of
1910, the Act of 1948, and finally the Electricity Act, it can be seen that the
Act of 1910 created the basic framework for the electricity supply industry
in India. It envisaged the growth of the electricity industry through private
licensees. It provided for licensees who could supply electricity in a specific
area and established a legal framework for laying down wires and other
works related to the supply of electricity. Post-independence, the Act of
1948 mandated the creation of State Electricity Boards. However, over
time, recognizing the necessity to involve private players again, the general
policy shifted towards encouraging private sector participation in various
aspects. Accordingly, the Electricity Act of 2003 was introduced, and the
earlier Acts were repealed. Thus, in 2003, non-licensed captive power
4 (2004) 11 SCC 497
37/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
plants were recognized and permitted by the Central Government. The State
Act, enacted after the Electricity Act of 2003, levies a tax on electricity
consumed by such non-licensed captive generating plants. Therefore, the
taxable event came into existence on 10.06.2023, and immediately, the
present Act came into force on 16.06.2003. Thus, the plain intention should
be understood as solely to tax the captive generating plants and nothing else.
35. The next contention is that when the Act of 2003 was enacted, it
was founded solely on the Electricity Act of 1910. Therefore, the
framework of open access or the procurement exchanges was not
contemplated at all, and the imposition of tax is thus legally flawed. The
learned Counsel, considering the effective dates of both Acts, will further
guide this Court through Sections 2(10), 2(16), etc., of Act 12 of 2003,
pointing out that all the provisions refer only to the repealed Act of 1910.
The provisions of the repealed Act, including Section 2(h) and the term
‘consumer’ and Section 28, are relied upon. Accordingly, it was argued that
38/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
the entire legislative framework, at the time of the Act’s enactment in 2003,
was based on a licensing-centric model. Open access was a key feature of
the Central Act of 2003, which was entirely absent in the 1910 regime.
Thus, the State Act, conceived and enacted with the earlier regime in mind,
could never have envisioned open access consumers, power exchanges, or
non-licensee third party suppliers. The definitions of the terms ‘persons
other than licensee’ and ‘consumer’ demonstrate that these transactions were
never contemplated. In view of this, it follows that, by interpreting the
provisions, tax cannot be imposed on the power procured through these
exchanges.
36. The next submission is that there is no prescribed statutory
provision or a prescribed statutory procedure for the imposition, assessment,
and collection of the tax on energy procured through exchanges. If these
exchanges are absent, or even if there is any ambiguity regarding them, it
must be considered that there is no tax in law. The judgment of the Hon’ble
39/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Supreme Court of India in Commissioner of Central Excise and Customs,
Kerala (cited supra) is relied upon, with specific reference to Paragraph
Nos.20 and 21. By reading the said judgment, the learned Counsel would
first submit that Act 12/2003 does not identify such a taxable event. The
phrase ‘consumption of own use’ employed therein, as demonstrated in the
preceding Sections of the Act, is contextually confined only to captive
generating plants. Similarly, the definition of consumer also does not
include these kinds of users. The applicable rate of tax is also unclear, as the
levy of not less than Rs.10 ps and not more than Rs.20 ps is again not
expressly made applicable. Even assuming that the definition should be
interpreted to apply to new transactions, the rate of tax should have first
been notified specifically for these transactions. The judgment of the
Hon’ble Supreme Court of India in Commissioner of Customs (Import),
Mumbai (cited supra) is relied upon for the proposition that the
interpretation of the charging provision of a taxation statute, as opposed to
the interpretation of an exemption notification, should favor the assessee in
40/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
any case of ambiguity. Thus, in the absence of a clear provision under Act
12/2003, the entire attempt to collect tax through the impugned Government
Order is illegal.
37. The next ground of attack is that the impugned Government Order
in G.O.Ms.No.55 constitutes a colourable exercise of power. When the
State lacks the authority to tax inter-State transactions, and when the
charging section itself is inapplicable, the aim that cannot be accomplished
directly is sought to be achieved indirectly under the pretense of enabling
TANGEDCO to collect the tax. Thus, the Government Order is not an
innocuous exercise of power; rather, it is one issued to arrogate a power that
is non-existent. Finally, regarding Section 16 of the Act, the learned
Counsel submits that the removal of difficulties should first be consistent
with the objectives and cannot contradict the express provisions of the Act.
The judgment of the Hon’ble Supreme Court of India in Straw Products
5
Ltd. Vs. Income Tax Officer, Bhopal and Ors. is relied upon. The
5 (1968) 68 ITR 227
41/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
attention of this Court is drawn to Sections 7 and 9 of the Act, contending
that under the guise of exercising power per Section 16, Sections 7 and 9
cannot be nullified. The Division Bench judgment of this Court in Anglo-
French Textiles Ltd. Vs. Income-Tax Officer, Circle I[1}, Pondicherry
6
and Anr. is also relied upon. Additionally, the judgment of the Hon’ble
7
Supreme Court of India in Madeva Upendra Sinai Vs. Union of India is
cited. It is contended that the impugned Government Order cannot be
justified on the pretext of being issued to remove difficulties, and Section 16
cannot assist the respondents. Therefore, both impugned orders must be
quashed.
38. Per contra, the learned Additional Advocate General for the
respondents would submit that the Tamil Nadu Act 12/2003 falls under
Entry 53 of List – II of the Seventh Schedule of the Constitution of India. It
is enacted to consolidate and rationalize the laws relating to the levy of tax
6 (1976) 103 ITR 282
7 (1975) 98 ITR 209
42/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
on the ‘consumption’ or ‘sale’ of electricity in the State of Tamil Nadu. The
Electricity Act, 2003 (Central Act 36/2003) falls under Entry 38 of List – III
of the Seventh Schedule, which relates to consolidating the laws concerning
‘generation, transmission, distribution, trading, and use of electricity,’ and
generally aims to take measures conducive to the development of the
electricity industry, promote competition therein, protect the interests of
consumers, supply electricity to all areas, rationalize electricity tariffs,
ensure transparent policies regarding subsidies, and promote efficient and
environmentally sound policies, along with the constitution of a central
electricity authority, regulatory commissions, and the establishment of an
Appellate Tribunal for matters connected therewith or incidental thereto.
Thus, it can be seen that they operate in divergent fields.
39. The learned Additional Advocate General would first take this
Court through the relevant provisions of the Tamil Nadu Act 12/2003. He
would refer to Section 2(1) regarding the definition of ‘actual user of power’,
43/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Section 2(2) concerning ‘captive generating plant’, and Section 2(10)
defining ‘licensee’. He would submit that Section 3 is the charging provision
that provides for tax on the consumption and sale of electricity. He would
argue that the relevant provision applicable in the instant case is Section
3(1)(c). According to him, the writ petitioners are not effecting the sale of
electricity; instead, they are procuring electricity from the Indian Energy
Exchange for their own consumption. Therefore, when the tax is levied on
consumption, and when such consumption is confined within the territory of
the State, the jurisdiction under Entry 53 of List – II is very much available.
In fact, to source power through inter-State open access, the petitioners are
permitted to use the transmission lines or associated facilities on the inter-
State transmission system in accordance with the regulations. Imposing tax
on electricity is one of the major sources of revenue for the State
Government. The levy applies to consumption within the State that is
procured from IEX. Thus, there is no necessity even to amend the Act.
44/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
40. As a matter of fact, during the year 2019, assessment notices in
the Form E-1 were issued to all consumers who procured power from IEX.
Only some appeared for personal hearings, while others did not take
advantage of the opportunity. Therefore, to proceed further, the Inspector of
Electricity obtained procurement details from the State Load Dispatch
Centre of the Tamil Nadu Transmission Corporation Limited and issued
notices regarding tax on consumption to all consumers for the power
procured through IEX during the period from April 2015 to January 2020.
In response to this notice, very few have paid tax on consumption, and
others repudiated it by citing the judgment of the Hon’ble Supreme Court of
India in State of A.P. Vs. National Thermal Power Corpn. Ltd. (cited
supra). It is submitted that in terms of Section 3(1)(c), the Government is
vested with the power to levy electricity charges at Rs.10 ps per unit on
customers for their own use of power procured from the IEX. The Director
of Electricity Tax serves as the monitoring head for tax collection
throughout the State.
45/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
41. The process of levying and collecting tax at such a massive scale
by the Department would be cumbersome and delayed, as data must be
collected from the State Load Dispatch Centre of TANTRANSCO, and
subsequent demands must be raised on an individual consumer basis. To
avoid delays, and considering the enormity of the process and potential
revenue loss to the State Exchequer, the Government issued G.O.Ms.No.55,
dated 20.10.2021, which solely anticipates additional tasks assigned to
officials already responsible for certain duties under G.O.Ms.No.121, dated
23.12.2010. The aforementioned G.O.Ms.No.121 was issued by the
Government to assign the task of tax collection from captive generating
plants based on the recommendations of the tax reforms and revenue
augmentation commission. These recommendations aimed to enable the
Tamil Nadu Electricity Board to collect the Electricity Tax alongside the
consumption charges, with the Chief Electoral Inspector overseeing the
revenue realization. Subsequently, the rate was fixed, effective from
46/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
01.04.2011, referencing self-generation tax at Rs.10 ps per unit for High
Tension consumers in their monthly consumption bills. This will apply to
power consumed through DG sets and power consumed through open
access, such as wind power, solar power, and group captive power. The tax
collection duties assigned to TANGEDCO as per G.O.Ms.No.55 regarding
power consumption through IEX are merely an additional obligation to be
executed in accordance with G.O.Ms.No.121.
42. The learned Additional Advocate General would reiterate that the
effect of Entry 53 of List – II of the Seventh Schedule continues to remain in
force. Even the Constitution (One Hundred and First Amendment) Act did
not affect Entry 53 of List – II of the Seventh Schedule of the Constitution of
India in any manner. Regarding the sale of electricity, even if such a sale
occurs in the course of inter-State trade or commerce, the State can impose a
tax on such a sale following consumption. If consumption has occurred as a
taxable event within the territory of the State, there exists an adequate
47/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
territorial nexus to levy tax on consumption under Section 3(1)(c) of the
Tamil Nadu Act 12/2003 based on consumption inside the State. The state
legislature is fully competent to collect tax based on the available data, as
this is not illegal. When data regarding the consumption of electricity is
available, it can be utilized for the collection of tax. Although the inter-State
movement of electricity occurs pursuant to a contract of sale that qualifies as
inter-State sale, the consumption of electricity, being a distinct incidence of
the levy of tax under the provisions of Section 3(1)(c), is taxable. A
beneficial comparison can be made with Entry 38 of List – II, under which
the Electricity Act, 2003 came into force. Moreover, it can be observed that
even though electricity can be defined as goods, its taxability is not covered
under the Goods and Services Tax Act, 2017. Additionally, the Central
Sales Tax Act, 1956, which was subsumed under the G.S.T Act, 2017,
specifically exempted electricity under Section 6.
43. The learned Additional Advocate General would submit that
48/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017, which was
issued in exercise of powers conferred by sub-section 1 of Section 11 of the
Central Goods and Services Tax Act, 2017 (Act 12/2017), grants exemption
relating to the ‘inter-State supply of service’ alone in S.No.25 under the
heading 9699 in relation to the transmission or distribution of electricity by
an electricity transmission or distribution utility. Therefore, it can be
understood that the taxing power under Entry 53 of List – II remains intact
even after the completion of the Constitution (One Hundred and Eighth
Amendment) Act, 2016. The objective achieved by the Government Orders
is to facilitate the collection and ascertainment of taxes and cannot be
construed as an absolute delegation of power or transfer of authority to
TANGEDCO. The entire process does not represent an abdication or
abrogation of power; the authority remains with the Chief Inspector of
Electricity. The Department retains the right to proceed with the issuance of
assessment notices, etc., in accordance with Section 9 of the Act.
49/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
44. The learned Additional Advocate General would rely on the
judgment of the High Court of Gujarat in Nathalal Maganlal Chauhan Vs.
8
State of Gujarat specifically on paragraph No.31, to argue that the
Government has the power to delegate. The learned Additional Advocate
General would further reference the judgment of the Hon’ble Supreme Court
9
of India in Central Bank of India Vs. State of Kerala concerning the
interpretation of the non-obstante clause found in Section 174 of the
Electricity Act, 2003, to assert that this provision does not override the law
enacted under a different legislative field as specified in Entry 53 of List – II
of the Seventh Schedule regarding the consumption of electricity within the
State.
45. The learned Additional Advocate General would then rely upon
the judgment of the Hon’ble Supreme Court of India in State of
10
Maharashtra Vs. Bharat Shanti Lal Shah to contend that the Electricity
8 2020 SCC OnLine Guj 1811
9 (2009) 4 SCC 94
10 (2008) 13 SCC 5
50/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Act, 2003, which falls under Entry 38 of List – III, does not in any manner
take away the right of the State legislature falling under Entry 53 of List – II.
The learned Additional Advocate General would rely upon the judgment of
the Hon’ble Supreme Court of India, relied upon by the petitioners, in State
of A.P. Vs. National Thermal Power Corpn. Ltd. (cited supra) to point out
that the said judgment is not applicable to consumption by a person other
than a licensee, and in the said case, the parties are the Government and a
Central Government undertaking. He would submit that Article 287 of the
Constitution of India provides for exemption from taxes on electricity
consumed by the Government of India or sold by the Government of India.
The learned Additional Advocate General would then rely upon the
judgment of the High Court of Karnataka in ACC Limited, Mumbai Vs.
11
State of Karnataka and Ors. , wherein the High Court of Karnataka
considered the judgment of the Hon’ble Supreme Court of India in National
Thermal Power Corpn. Ltd. (cited supra) and held that the exemption
cannot be claimed as a matter of right, and the right of the State in respect of
11 2019 SCC OnLine Kar 3962
51/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
sale within the State was upheld. The learned Additional Advocate General
would then rely upon the judgment of the Hon’ble Supreme Court of India in
12
Swaroop Vegetables Products Industries Vs. State of U.P. , more
specifically, relying upon paragraphs 4, 5, and 7 to contend that the taxable
event is the consumption of energy and therefore is well within the powers
of the State of Tamil Nadu to impose such a tax. Therefore, he would submit
that the contentions on behalf of the learned Counsel for the petitioners are
liable to be rejected by this Court and that the Government Orders are to be
upheld.
D. The Questions:
46. I have reviewed the competing submissions from both sides and
examined the material records. Substantial and procedural questions arise
regarding the validity of the impugned Government Orders.
Substantial questions:-
(i) Will the State of Tamil Nadu have the power to collect tax on the
12 (1983) 4 SCC 24
52/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
electricity supplied and consumed through the inter-state open access
systems/purchases through exchanges?
(ii) When the Tamil Nadu Tax on Consumption or Sale and
Electricity Tax Act, 2003 was enacted without reference to the very concept
of open access purchase and purchasers through IEX, can the Government
of Tamil Nadu still levy and collect tax in the absence of any subsequent
amendment? Can the Government of Tamil Nadu now collect tax on intra-
State consumption of power procured through the open access system?
(iii) Is the tax leviable on captive generation and consumption?
Procedural:-
(iv) Whether the impugned Government Order in G.O.Ms.No.121,
dated 23.12.2010 is liable to be quashed?
(v) Is the collection of tax through the licensee illegal due to the
absence of a mechanism for assessing and collecting tax?
E.Question No.(i):-
53/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
47. The Tamil Nadu Tax on Consumption or Sale and Electricity Tax
Act, 2003 (Act 12 of 2003) was enacted with the power of the State of Tamil
Nadu traceable to Entry 53 of List – II of the Seventh Schedule. It is the
contention on behalf of the State of Tamil Nadu that as per the said Entry,
the State is entitled to levy tax both for the consumption or sale of the
electricity. The charging provision Section 3(1)(c) of the Act is extracted as
hereunder:-
“Sec.3.Tax on the consumption or sale of electricity.–
(1)
.
.
.(c). In the case of a person other than a licensee, the rate
shall be not less than 10 paise and not more than 20 paise
per unit of electricity on the consumption for own use as
may be notified by the Government.”
48. In this regard, it is contended that the consumption is within the
State of Tamil Nadu and consumption being the incidence of tax, the State
of Tamil Nadu will be well within its power. In this regard, the judgment of
the Hon’ble Supreme Court of India in Swaroop Vegetables Products
Industries (cited supra) is relied upon by the State. It is true that the
54/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Hon’ble Supreme Court of India was considering a similar provision with
reference to entities which partially generating energy from their own source
and partially purchased electricity. The relevant portion of paragraph No.4
reads as hereunder:-
“4….The fact that the user of electricity from his
own source of generation purchases electricity from some
other source as well, is an altogether irrelevant factor from
the stand point of the liability imposed by the said
provisions. Be it realized that duty is levied on the
consumption of energy. The taxing event is the
consumption of energy. The source from which the
electricity is acquired is altogether irrelevant.”
(Emphasis supplied)
49. Again, the relevant portion in the paragraph No.5 of the said
judgment also reads as follows:-
“5. How would this object be promoted or served by
adopting such an irrational course? The taxing event being
the consumption of energy, the source from which the
electricity is acquired would become altogether
irrelevant….”
55/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
50. However, subsequently, the Constitution Bench of the Hon’ble
Supreme Court of India in National Thermal Power Corpn. Ltd. (cited
supra) laid down the manner in which Entry 53 have to be read and it is
essential to quote paragraph Nos.20, 21 and 22 which read as follows:-
“Electricity, what it is
20. Before we deal with the constitutional aspects,
let us first state what electricity is, as understood in law,
and what are its relevant characteristics. It is settled with
the pronouncement of this Court in CST v. M.P.
Electricity Board, Jabalpur [(1969) 1 SCC 200 : (1969) 2
SCR 939] that electricity is goods. The definition of goods
as given in Article 366(12) of the Constitution was
considered by this Court and it was held that the definition
in terms is very wide according to which “goods” means
all kinds of movable property. The term “movable
property” when considered with reference to “goods” as
defined for the purpose of sales tax cannot be taken in a
narrow sense and merely because electrical energy is not
tangible or cannot be moved or touched like, for instance,
a piece of wood or a book, it cannot cease to be movable
property when it has all the attributes of such property. It
is capable of abstraction, consumption and use which if
done dishonestly, is punishable under Section 39 of the
Indian Electricity Act, 1910. If there can be sale and
purchase of electrical energy like any other movable
object, this Court held that there was no difficulty in
holding that electric energy was intended to be covered by
the definition of “goods”. However, A.N. Grover, J.
speaking for the three-Judge Bench of this Court went on
to observe (at SCC p. 205, para 9) that electric energy
“can be transmitted, transferred, delivered, stored,
possessed etc. in the same way as any other movable56/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)property”. In this observation we agree with Grover, J. on
all other characteristics of electric energy except that it can
be “stored” and to the extent that electric energy can be
“stored”, the observation must be held to be erroneous or
by oversight. Science and technology till this day have not
been able to evolve any methodology by which electric
energy can be preserved or stored. [Ed. : This is largely
true for the scale of operation under discussion in this
case. A very small amount of electrical energy, however,
can be stored in accumulators which can be retrieved and
used by inverters, as commonly called.]
21. Another significant characteristic of electric
energy is that its generation or production coincides
almost instantaneously with its consumption. To quote
from Aiyar’s Law Lexicon (2nd Edn., 2000)—
“Electricity in physics is ‘the name given to
the cause of a series of phenomena exhibited
by various substances, and also to the
phenomena themselves’. Its true nature is not
understood. Imperial Dictionary (quoted in
Spensley v. Lancashire Ins. Co. [54 Wis 433,
442, 11 NW 894] where the court, quoting
from the same authority, said, ‘we are totally
ignorant of the nature of this cause whether it
be a material agent or merely a property of
matter. But as some hypothesis is necessary
for explaining the phenomena observed, it has
been assumed to be a highly subtle,
imponderable fluid, identical with lightning,
which pervades the pores of all bodies, and is
capable of motion from one body to another’.”
This characteristic quality of electric energy was judicially
noticed in Indian Aluminium Co. v. State of Kerala
[(1996) 7 SCC 637] . Vide para 25 this Court has noted :
(SCC p. 650)
“Continuity of supply and consumption starts
from the moment the electrical energy passes57/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)through the meters and sale simultaneously
takes place as soon as meter reading is
recorded. All the three steps or phases (i.e.
sale, supply and consumption) take place
without any hiatus. It is true that from the
place of generating electricity, the electricity is
supplied to the substation installed at the units
of the consumers through electrical high-
tension transformers and from there electricity
is supplied to the meter. But the moment
electricity is supplied through the meter,
consumption and sale simultaneously take
place … as soon as the electrical energy is
supplied to the consumers and is transmitted
through the meter, consumption takes place
simultaneously with the supply. There is no
hiatus in its operation. Simultaneously sale
also takes place.”
These properties of electricity as goods are of immense
relevance as we would state hereafter.
22. We now come to the question on the
interpretation of Entry 53 in List II of the Seventh
Schedule. It provides for taxes on the consumption or sale
of electricity. The word “sale” as occurring in Entry 52
came up for the consideration of this Court in Burmah
Shell Oil Storage & Distributing Co. of India Ltd. v.
Belgaum Borough Municipality [AIR 1963 SC 906 :
1963 Supp (2) SCR 216] . It was held that the act of sale is
merely the means for putting the goods in the way of use
or consumption. It is an earlier stage, the ultimate
destination of the goods being “use or consumption”. We
feel that the same meaning should be assigned to the word
“sale” in Entry 53. This is for a fortiori reason in the
context of electricity as there can be no sale of electricity
excepting by its consumption, for it can neither be
preserved nor stored. It is this property of electricity which
persuaded this Court in Indian Aluminium Co. case58/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)[(1996) 7 SCC 637] to hold that in the context of
electricity, the word “supply” should be interpreted to
include sale or consumption of electricity. Entry 53 should
therefore be read as “taxes on the consumption or sale for
consumption of electricity”.”
(Emphasis supplied)
51. Thus, it can be seen that the Constitution Bench agreed on the
earlier judgment based on the principle that electrical energy can neither be
preserved nor stored, and that generation, sale, supply, and consumption
occur simultaneously without any hiatus. Therefore, the consumption and
sale of electrical energy cannot be separated, meaning that in the case of an
inter-State sale, the State Government cannot impose tax by separating the
incidence of consumption from sale. It should be a straightforward case of
either consumption alone or a sale with consumption within the State.
However, there have been subsequent developments following the
aforementioned judgments of the Hon’ble Supreme Court of India. Notably,
the Constitution Bench did not consider the consumption of power through
an open access system. Additionally, the Indian Electricity Act, 2003 came
59/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
into force, which, effective from 02.06.2003, introduced the open access
system for the first time.
52. Section 2(47) of the Indian Electricity Act, 2003 defines open
access and the same is extracted hereunder for ready reference:-
“Section 2. (Definitions):-
.
.
.
(47). “open access” means the non-discriminatory
provision for the use of transmission lines or distribution
system or associated facilities with such lines or system by
any licensee or consumer or a person engaged in
generation in accordance with the regulations specified by
the Appropriate Commission;”
53. Open access is a regulatory framework that empowers eligible
consumers to purchase open access electricity directly from the open market.
This system breaks away from the traditional model where consumers are
tied exclusively to local distribution companies like TANGEDCO. The
objective is to make the market more competitive and to acquire energy at a
lower cost with greater efficiency. The system is supervised by the Central
60/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Electricity Regulatory Commission (CERC) and the State Electricity
Regulatory Commissions with reference to the grid, supply through the grid,
and its stability. Open access power can be obtained through short-term,
medium-term, and long-term contracts with suppliers.
54. The platform, Indian Energy Exchange Limited, is one of the
premier energy exchange platforms for trading electricity. Under the short-
term or medium-term plans, the energy to be provided is traded, and
depending on the market—referencing demand—the prices are fixed and the
trades are closed. Invoices are raised, and the bills are settled through the
exchange. Both the purchaser and the seller must have open access
approval, meet necessary arrangements, and obtain tariff approvals. By
purchasing, consumers acquire the volume of electricity for a specified
duration, with a fixed price. Additionally, when authorities permit access
through local distribution companies via the Central or State grid,
transmission and wheeling charges apply. Furthermore, a gross subsidy
61/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
surcharge is levied to offset the revenue loss of the local distribution
company. Scheduling and system operation charges also apply to cover
administrative costs related to scheduling, dispatching, and overall system
management to maintain grid stability. Therefore, in an open-access
transmission or purchase through these exchanges, it is important to consider
whether the same dictum of the Constitution Bench—where sale, supply,
and consumption occur simultaneously—holds true. In reality, trading—the
sale and purchase—takes place on platforms like IEX, where bidding
occurs, invoices are raised, and payment is made. The supply is facilitated
through the grid, and consumption occurs where the purchaser has grid
connectivity. Central and state authorities manage grid stability, ensuring
supplies to purchasers upon payment of wheeling and other charges.
Consequently, this course of transactions complicates the notion that
electrical energy, being a constant flow of electrons within a conductor, is
generated, sold, supplied, and consumed instantaneously, though
conceptually, the dictum of the Hon’ble Constitution Bench that there
62/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
cannot be any storage of electricity (except for minimal quantities etc.,) and
therefore, the supply and consumption can never be separated.
55. Be that as it may, there is one more supervening factor. The
Constitution (One Hundred and First Amendment) Act, 2016, by which,
Section 269A is added to the Constitution of India. The same is extracted
hereunder for ready reference:-
“269A. Levy and collection of goods and services tax in
course of inter-State trade or commerce.— (1) Goods
and services tax on supplies in the course of inter-State
trade or commerce shall be levied and collected by the
Government of India and such tax shall be apportioned
between the Union and the States in the manner as may be
provided by Parliament by law on the recommendations of
the Goods and Services Tax Council.
Explanation.—For the purposes of this clause,
supply of goods, or of services, or both in the course of
import into the territory of India shall be deemed to be
supply of goods, or of services, or both in the course of
inter- State trade or commerce.
(2) The amount apportioned to a State under clause
(1) shall not form part of the Consolidated Fund of India.
(3) Where an amount collected as tax levied under
clause (1) has been used for payment of the tax levied by a
State under article 246A, such amount shall not form part
of the Consolidated Fund of India.
(4) Where an amount collected as tax levied by a
State under article 246A has been used for payment of the63/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)tax levied under clause (1), such amount shall not form
part of the Consolidated Fund of the State.
(5) Parliament may, by law, formulate the
principles for determining the place of supply, and when a
supply of goods, or of services, or both takes place in the
course of inter-State trade or commerce.]”
56. As opposed to the words ‘sale’ or ‘purchase’, as contained in other
articles, the phrase that is used in Article 269A is ‘Goods and Services Tax
on supplies in the course of inter-State trade or commerce’. Electricity is
consistently held to be goods. There can be no iota of doubt that if
person/concern buys power through these exchanges/open access system
from another state, then whether purchase, supply or consumption, all
happen in the ‘course of inter-state trade or commerce’. Thus, when the
power of the State of Tamil Nadu to impose tax is circumscribed by the
Article 269A, then, Section 3(1)(c) of the Act cannot be interpreted to
empower the power of the State to impose tax on the ground that the
consumption happens within the State of Tamil Nadu.
64/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
57. Further, the Article 286 of the Constitution of India underwent
change with the One Hundred and First Amendment Act and it reads as
follows:-
“286. Restrictions as to imposition of tax on the sale or
purchase of goods.—
(1) No law of a State shall impose, or authorise the
imposition of, a tax on the supply of goods or of services
or both, where such supply takes place—
(a) outside the State; or
(b) in the course of the import of the goods or services or
both into, or export of the goods or services or both out of,
the territory of India.
3[* * * *]
(2) Parliament may by law formulate principles for
determining when a supply of goods or of services or both
in any of the ways mentioned in clause (1).
[(3) * * * *]”
58. Even if one were to interpret the open access system through the
grids of the Central and State authorities acting as a buffer and considering
that the sale and supply ends at the grid connectivity of the suppliers’ place
and after payment of the wheeling charges, the purchasers consume inside
the State, even then, by virtue of the Article 286 of the Constitution of India,
if the supply is outside the State, no law of the State shall authorise
65/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
imposition of such a tax. As a matter of fact, a perusal of the provisions of
the Central Goods and Services Tax, 2024 enacted by the Government of
India in exercise of its power under Article 269A, covers electricity also and
in exercise of powers under Section 11, the Central Government has issued a
notification in Notification No.2/2017 exempting electrical energy under
S.No.104, Chapter/Heading/Sub-heading/Tariff Item No.27160000 under
the said Act. It is true that the Karnataka High Court in Vijaya Steels Ltd
13
Vs. Bangalore Electricity Supply Company upheld the action of the state.
But the effect of the above Articles of the Constitution of India was not
considered in the said Judgment and therefore, I am unable to subscribe to
the view taken. In view thereof, I answer the question that with reference to
consumption of electricity through open access system if it is through inter-
State open access system which is in the course of inter-State trade or
commerce, there is no power vested with the State of Tamil Nadu to impose
tax and Section 3(1)(c) of the Act cannot be read to include those
transactions and though ‘consumption’ can be an incidence if it happens in
13 2016 SCC OnLine Kar 8965
66/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
the course of an intra-state transaction.
F. Question No.(ii):-
59. Section 3(1)(c) was extracted supra. It may be true that both the
State of Tamil Nadu and the Union of India engaged in the exercise of
enacting the relevant Acts, namely, the Electricity Act, 2003, and the Tamil
Nadu Tax on Consumption or Sale and Electricity Tax Act, 2003, almost
simultaneously. While it is true that there was no occasion for this State to
consider the open access regime and the free regime introduced by the
Indian Electricity Act, when referencing a taxing statute, a plain literal
reading may cover a particular transaction or item within its ambit. Merely
because such a transaction or type of goods was not contemplated on the day
it was enacted, does not mean that new transactions arising subsequent to the
legislation, or new types of goods that emerged afterward, should be
excluded from the taxing statute. A straightforward and clear reading of the
provision relating to the incidence of tax encompasses new kinds of
67/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)transactions, such as open access purchases or trades, which may occur
subsequently. When the literal or general words of a tax statute include a
new form of transaction or technology, tax may be imposed even if such a
transaction did not exist when the law was enacted. This follows the
doctrine of the strict/literal rule of tax interpretation, qualified by
technological neutrality. Courts will not read in or stretch words; however,
if the words fit, the law applies. A useful reference in this regard can be
14
made to (i) Commissioner of Customs v. Dilip Kumar & Co. ; (ii) State of15
W.B. Vs. Kesoram Industries . Tax law is ordinarily technology-neutraland would encompass new or novel forms of transactions or technologies
developed after its enactment, provided they fall within the literal meaning,
do not contradict the purposes of the act, and there is no ambiguity.
60. As already held in question No.(i), the legislative power resides
firmly with the State of Tamil Nadu if the procurement occurs through an
14 (2018) 9 SCC 1 paragraph Nos.21-25
15 (2004) 10 SCC 201 paragraph No.106
68/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
intra-State open access system, as it does not constitute inter-State trade, nor
is the supply outside the State. However, as of now, the charging Section 3
of the Act does not encompass this. In fact, Section 3(1) serves as the
enabling provision for the State of Tamil Nadu to impose tax. Section
3(1)(a) addresses the situation of licensees other than captive generating
plants, namely those individuals, such as the petitioners, who procure power
through the open access system. Section 3(1)(b) pertains to licensees who
are captive generating plants, which will also not apply to the
aforementioned transactions. The State asserts authority under Section
3(1)(c), which is extracted supra. It is evident that Section 3(1)(c) does not
employ the term ‘consumers’ in relation to the incidence of tax. Although
individuals procuring power through the open access system fall within the
definition of consumer, the incidence of tax pertains to the electricity
consumed during the previous month ‘for own use’. It is not the electricity
consumed, but the phrase ‘for own use’ is specifically reiterated in Section
3(1)(c). If the interpretation suggested by the learned Additional Advocate
69/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
General is accepted, then the phrase ‘for own use’ would become redundant.
61. The Act specifically uses terminologies such as ‘actual user of
power,’ which is defined under Section 2(1) to mean a user who is not a
consumer but uses power from a captive generating plant. Therefore, when
these individuals purchase power through the open access system, they fall
within the definition of consumer. However, when Section 3(1)(c) abandons
the word ‘consumer,’ it contradicts itself by designating the incidence of tax
as consumption ‘for own use,’ which only applies to captive generating
plants and not to those who purchase power through the intra-State open
access system. In light of this, G.O.(Ms).No.55 Energy (D2) Department,
dated 20.10.2021, which aims to assign the collection of tax to the licensee,
namely TANGEDCO, concerning the consumption of electricity purchased
through open access from Indian Energy Exchange Limited or Power
Exchange India Limited, cannot be upheld as leviable under Section 3(1)(c)
of the Act and is therefore quashed. However, it remains open for the State
70/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
of Tamil Nadu to introduce a suitable amendment to the charging provision
if it chooses to levy tax on intra-state Open Access Purchase transactions.
G. Question No.(iii):-
62. Section 2(2) of the Act defines captive generating plant as
follows:-
“Section 2. Definitions.–
(1)…
(2) “captive generating plant” means a power plant set up
by any person or association of persons or any co-
operative society to generate electricity primarily for his
own use or for the use of members and includes the power
plants that are permitted to sell the surplus power so
generated.”
63. The definition of ‘consumer’ that is contained under Section 2(5)
of the Act reads as follows:-
“Section 2.Definitions.–
(1)..
.
.
.
(5) – “consumer”, with its grammatical variations and
cognate expression means any person who is supplied with
electricity on payment of charges, or free of cost or
71/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
otherwise by a licensee or by the Government or by any
other person engaged in the business of supplying
electricity to the public under the Indian Electricity Act,
1910 (Central Act X of 1910) or any other law for the time
being in force and includes—
(i) a licensee who consumes electricity whether
generated by himself or supplied to him by any other
licensee; and
(ii) actual user of power or any other person who
consumes electricity generated by himself.
Explanation I.– Where a licensee consumes
electricity, whether generated by himself or supplied to
him, such licensee shall be deemed to be a consumer only
in respect of the electricity so consumed.
Explanation II.– Where a licensee or other person
consumes energy for purposes connected with the
construction, maintenance and operation of the generating,
transmitting and distributing system, such licensee or
person shall not be deemed to be a consumer in respect of
the energy so consumed;
64. Therefore, it can be seen that, by virtue of Section 3(1)(c), the
captive generating plants are those that consume power for their own use
and are thus covered under Section 3(1)(c). Accordingly, the Government of
Tamil Nadu is entitled to collect tax at the rate of Rs. 10 ps per unit, and not
more than Rs. 20 ps per unit as may be notified. I answer the question
accordingly.
72/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
H. Question Nos.(iv) and (v):-
65. Regarding G.O.Ms.No.121, it has already been established that
the State of Tamil Nadu has the authority to impose a tax on captive
generating plants. It has also been clarified that, by virtue of Section 3(1)(c),
the tax is already levied. G.O.Ms.No.121 merely designates the officers
mentioned therein to collect the tax imposed under the Act. The only
argument presented is that this action contradicts the provisions of the Act
and the rules framed thereunder. Since the complete data, in terms of
metering, is readily available with TANGEDCO, the distribution company,
TANGEDCO and its officers, who collect the monthly consumption bills,
are ideally positioned to collect the tax. Section 5 of the Act requires the
registration of captive generating plants. Section 7 states that the Electricity
Tax due is recoverable as arrears of land revenue. Section 8 mandates that
licensees maintain books of accounts and submit returns. Section 9 outlines
the procedure for assessment in the absence of filed returns. Section 10
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
provides for an appeal. Section 12 empowers the Government to appoint
Electricity Tax Inspecting Officers to inspect the prescribed books.
66. Section 13 outlines the powers of Electricity Tax Inspecting
Officers, and the following is extracted hereunder:
“13. Powers of Electricity Tax Inspecting Officers.–(1)
Subject to the provisions of any rules made by the State
Government in this behalf, an Inspector may,–
(i) require production for inspection of such books
and records as may be necessary for ascertaining or
verifying the amount of electricity tax leviable under the
Act;
(ii) enter and search any premises where electricity
is, or is believed to be supplied, for the purpose of–
(a) verifying the statements made in the books of
account kept, and returns submitted, under section 5,
(b) testing the reading of meters,
(c) verifying the particulars required in connection
with the levy of electricity tax;
(iii) exercise such powers and perform such other
functions as may be necessary for carrying out the
purposes of this Act or the rules made thereunder.
(2) All searches made under sub-section (1) shall
be made in accordance with the provisions of the Code of
Criminal Procedure, 1973 (Central Act 2 of 1974).”
67. Therefore, when the government has the power to appoint
74/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Electricity Tax Inspecting Officers to inspect the petitioners regarding their
returns that show the units of electricity supplied and the amount of
electricity tax payable to the Director in the prescribed form and manner,
and when the Managing Director of TANGEDCO is appointed as the
Director, and when, under Section 13, the Electricity Tax Inspecting Officer
exercises necessary powers to carry out the purpose of the Act and the
Rules, it cannot be said that the impugned government order is in any way
contrary to the provisions of the Act. The mechanism for filing returns,
including claiming any exemptions, is available in the Act. Since electricity
is supplied through a metering mechanism and only TANGEDCO officials
visit every location to levy and collect electricity charges and inspect all
other facilities, the government order does not violate the provisions of the
Act.
68. As far as the Rules are concerned, under Rule 6, every licensee or
every person, other than a licensee, is supposed to credit such tax to the
75/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
Government’s treasury under the accounts mentioned therein. Rule 8 also
enables the licensee to include the tax leviable under the Act as a separate
item in the bill for the charges for the sale of electricity by him and shall
recover the same from the consumer along with his charges for the sale of
such electricity. In this regard, the definition of ‘consumer’ under the Act,
which was extracted supra, includes the actual user of power or any other
person who consumes the electricity generated by him. Therefore, the
provision also exists for including the Electricity Tax in the bill. In view
thereof, I do not find the G.O.Ms.No.121 to be violative of the Rules.
69. Furthermore, for the same reasons, it cannot be said that the Act
does not provide a proper mechanism. A proper reading of the Act and the
Rules will make it clear that, concerning consumers, the licensee, namely
TANGEDCO, can include the tax in the bill and collect it as well. In fact,
the licensees can also file returns; therefore, any refunds can be claimed as
per the Act. A provision for appeal is also established. Therefore, I reject the
76/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
procedural arguments concerning G.O.Ms.No.121 that it violates certain
provisions of the Act and the Rules, or the further argument that the
collection of tax is flawed for not providing a valid mechanism for the
collection and realisation of the tax amount. Accordingly, questions Nos.
(iv) and (v) are answered.
I. The Result:
70. In the result, these Writ Petitions are ordered on the following
terms:
(i) The impugned Government Orders in G.O.(Ms).No.55 Energy (D2)
Department, dated 20.10.2021 shall stand quashed;
(ii) The G.O.Ms.No.121 Energy (B1) Department, dated 23.12.2010
shall stand upheld;
(iii) There shall be no order as to costs. Consequently, connected
miscellaneous petitions are closed.
77/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
09.06.2025
Neutral Citation: yes
grs
To
1. The Principal Secretary to Government,
Energy Department, Secretariat, Fort St. George,
Chennai – 600 009.
2. The Chief Electrical Inspector to the Government,
Thiru-Vi-Ka Industrial Estate, Guindy, Chennai – 600 032.
3. The Chairman & Managing Director,
Tamil Nadu Generation and Distribution
Corporation Limited (TANGEDCO),
144, Anna Salai,
Chennai – 600 002.
D.BHARATHA CHAKRAVARTHY, J.
grs
78/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )
W.P.No.4871 of 2022 etc., (batch cases)
W.P.No.4871 of 2022 etc., (batch cases)
09.06.2025
79/79
https://www.mhc.tn.gov.in/judis ( Uploaded on: 12/06/2025 03:59:14 pm )