Andhra Pradesh High Court – Amravati
The State Of Andhra Pradesh vs Maddi Lakshmaiah And Co.Pvt.,Ltd., on 26 June, 2025
Author: R Raghunandan Rao
Bench: R Raghunandan Rao
1
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
IN THE HIGH COURT OF ANDHRA PRADESH
***
+ WRIT PETITION NO: 29672 of 2023 & Batch
W.P.No.29672/2023
Between:
# A.P. Textile Mills Association,
2nd Floor, Manoharam Skin Clinic,
4/2 Lakshmipuram, Guntur 522 007,
Rep. By its Vice-Chairman
Mr. Patchala Chalapathi Rao
... Petitioner / Petitioners
$ AND
$ 1. State of Andhra Pradesh, Energy Department, Secretariat,
Velagapudi, Amaravathi, Guntur District, rep. By its Principal
Secretary.
2. Southern Power Distribution Company of Andhra Pradesh Ltd.,
Tiruchanoor Road, Kesvyana Gunta, Tirupati - 517 501, rep. By its
Managing Director.
3. Central Power Distribution Company of Andhra Pradesh Ltd.,
Corporate Office, Beside Polytechnic College, ITI Road, Vijayawada,
rep. By its Managing Director.
4. Estern Power Distribution Company of Andhra Pradesh Ltd., P & T
Colony, Seethammadhara, Visakhapatnam 530 020, rep. By its
Managing Director.
.... Respondents
Date of Judgment pronounced on : 26.06.2025
HON'BLE THE CHIEF JUSTICE DHIRAJ SINGH THAKUR
HON'BLE SRI JUSTICE R RAGHUNANDAN RAO
1. Whether Reporters of Local newspapers : Yes/No
May be allowed to see the judgments?
2. Whether the copies of judgment may be marked : Yes/No
to Law Reporters/Journals:
3. Whether The Lordship wishes to see the fair copy : Yes/No
Of the Judgment?
2
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
*IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
*HON'BLE THE CHIEF JUSTICE DHIRAJ SINGH THAKUR
And
HON'BLE SRI JUSTICE R RAGHUNANDAN RAO
+ WRIT PETITION NO: 29672 of 2023 & Batch
% Dated: 26.06.2025
W.P.No.29672/2023
Between:
# A.P. Textile Mills Association,
2nd Floor, Manoharam Skin Clinic,
4/2 Lakshmipuram, Guntur 522 007,
Rep. By its Vice-Chairman
Mr. Patchala Chalapathi Rao
... Petitioner / Petitioners
$ AND
$ 1. State of Andhra Pradesh, Energy Department, Secretariat,
Velagapudi, Amaravathi, Guntur District, rep. By its Principal
Secretary.
2. Southern Power Distribution Company of Andhra Pradesh Ltd.,
Tiruchanoor Road, Kesvyana Gunta, Tirupati - 517 501, rep. By its
Managing Director.
3. Central Power Distribution Company of Andhra Pradesh Ltd.,
Corporate Office, Beside Polytechnic College, ITI Road, Vijayawada,
rep. By its Managing Director.
4. Estern Power Distribution Company of Andhra Pradesh Ltd., P & T
Colony, Seethammadhara, Visakhapatnam 530 020, rep. By its
Managing Director.
.... Respondents
! Counsel for Petitioner : Sri K. Gopal Chowdary appearing vice
Sricharan Telaprolu;
Mr. B. Adinarayana Rao Sr. Counsel;
Mr. Alladi Ravinder, Sr. Counsel
^Counsel for Respondents : The Advocate General appearing vice
G.P. for Energy
3
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
<GIST :
>HEAD NOTE:
? Cases referred:
1. (2004) 2 SCC 249
2. (2022) 10 SCC 700
3. (2023) 3 SCC 1
4. (1990) 4 SCC 366
5. 1985 Supp SCC 432
6. AIR 1968 SC 1232
7. (1999) 8 SCC 667
8. 1985 Supp SCC 205 : 1985 SCC (Tax) 447 : AIR 1985 SC 1041
9. (2007) 5 SCC 447 [Paras 138 and 139]
10. (1975) 2 SCC 131
11. (1954) 2 SCC 82
12. AIR 1965 SC 1107 :: (1965) 2 SCR 477
13. AIR 1967 SC 1895
14. {1973 (2) SCC 1 [Paragraphs 5, 14 to 18]
15. 1975 (1) SCC 492 [Paragraphs 9 and 18],
16. 1989 (4) SCC 187 [Paragraphs 62, 99 and 100]
17. 1989 (4) SCC 683 [paragraphs 3 and 5 to end],
18. 1997 (5) SCC 516 [Paragraphs 6,7 21 to 26]
19. AIR 1984 AP 75:: 1983 SCC Online AP 61
20. AIR 1952 SC 369
21. AIR 1960 SC 1080
4
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
APHC010575252023
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3446]
(Special Original Jurisdiction)
THURSDAY, THE TWENTY SIXTH DAY OF JUNE
TWO THOUSAND AND TWENTY FIVE
PRESENT
HONOURABLE THE CHIEF JUSTICE DHIRAJ SINGH THAKUR
THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO
WRIT PETITION NO: 29672 of 2023
Along with W.P.Nos:29987, 30666, 30668, 30768, 31043, 31065, 31104, 31106,
31116, 31118, 31153, 31157, 31207, 31215, 32024, 32026, 32036, 32043, 32047,
32048, 32204, 32205, 32261, 32276, 32279, 32280, 32288, 32293, 32309, 32316,
32317, 32318, 32320, 32321, 32324, 32327, 32329, 32349, 32458, 32478, 32524,
32533, 32554, 32561, 32660, 32871, 32888, 32891, 32912, 32988, 32990, 32994,
32995, 32996, 33121, 33132, 33133, 33137, 33418, 33420, 33425, 33557, 33558,
33644, 33728, 33729, 33745, 33764 of 2023;
179, 180, 182, 183, 184, 185, 329, 391, 500, 586, 594, 680, 797, 798, 810, 811,
816, 818, 819, 824, 870, 877, 947, 988, 997, 1049, 1099, 1123, 1125, 1321, 1421,
1437,1448, 1490, 1491, 1505, 1524, 1532, 1612, 1623, 1625, 1680, 1682, 1776, 1781,
1782, 1783, 1784, 1786, 1791, 1793, 1800, 1813, 1818, 1819, 1865, 1873, 1874, 1908,
1910, 1919, 1921, 1981, 2002, 2006, 2071, 2087, 2158, 2165, 2183, 2200, 2204, 2205,
2207, 2209, 2210, 2211, 2213, 2214, 2215, 2216, 2225, 2264, 2272, 2281, 2326, 2361,
2365, 2366, 2368, 2369, 2379, 2382, 2383, 2388, 2400, 2401, 2433, 2440, 2476, 2479,
2481, 2530, 2551, 2552, 2553, 2554, 2556, 2557, 2559, 2560, 2562, 2563, 2565, 2568,
2569, 2571, 2572, 2573, 2626, 2644, 2674, 2676, 2677, 2682, 2686, 2697, 2699, 2700,
2702, 2720, 2721, 2724, 2727, 2729, 2731, 2733, 2736, 2741, 2748, 2749, 2752, 2755,
2757, 2763, 2764, 2812, 2820, 2837, 2852, 2896, 2943, 2959, 2993, 3022, 3024, 3026,
3027, 3034, 3035, 3045, 3093, 3096, 3101, 3102, 3104, 3106, 3125, 3135, 3144, 3155,
3163, 3170, 3172, 3178, 3191, 3223, 3334, 3348, 3385, 3388, 3435, 3486, 3525, 3591,
3595, 3606, 3641, 3656, 3695, 3728, 3739, 3795, 3804, 3808, 3809, 3810, 3811, 3814,
3833, 3952, 3961, 3977, 3990, 4001, 4003, 4175, 4190, 4208, 4212, 4214, 4221, 4250,
4253, 4256, 4276, 4328, 4350, 4351, 4352, 4363, 4373, 4406, 4414, 4422, 4465, 4477,
5
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
4527, 4528, 4529, 4569, 4596, 4601, 4603, 4606, 4618, 4620, 4623, 4625, 4630, 4639,
4641, 4643, 4644, 4648, 4656, 4739, 4753, 4758, 4760, 4761, 4765, 4777, 4783, 4817,
4818, 4829, 4858, 4879, 4897, 4902, 4907, 4935, 4946, 4979, 4990, 4993, 5008, 5025,
5134, 5136, 5232, 5253, 5255, 5271, 5277, 5279, 5284, 5299, 5316, 5322, 5338, 5347,
5353, 5355, 5357, 5388, 5389, 5392, 5394, 5399, 5400, 5401, 5405, 5416, 5417, 5437,
5448, 5460, 5462, 5475, 5486, 5501, 5509, 5521, 5531, 5534, 5537, 5539, 5548, 5551,
5554, 5555, 5556, 5559, 5561, 5563, 5566, 5572, 5573, 5575, 5578, 5600, 5621, 5625,
5631, 5633, 5635, 5640, 5673, 5682, 5692, 5704, 5708, 5711, 5716, 5723, 5729, 5734,
5737, 5784, 5792, 5823, 5829, 5831, 5864, 5865, 5873, 5874, 5876, 5881, 5889, 5899,
5900, 5902, 5906, 5908, 5920, 5921, 5923, 5925, 5926, 5927, 5961, 5964, 5971, 5977,
5996, 6002, 6022, 6023, 6025, 6030, 6078, 6111, 6117, 6118, 6119, 6120, 6121, 6122,
6123, 6128, 6129, 6133, 6190, 6218, 6220, 6225, 6226, 6283, 6295, 6315, 6320, 6337,
6355, 6384, 6389, 6394, 6403, 6404, 6415, 6418, 6421, 6422, 6425, 6428, 6448, 6459,
6460, 6461, 6462, 6463, 6464, 6465, 6468, 6496, 6569, 6571, 6581, 6582, 6585, 6587,
6589, 6591, 6595, 6596, 6600, 6611, 6612, 6617, 6618, 6624, 6626, 6627, 6638, 6644,
6679, 6702, 6748, 6786, 6796, 6805, 6807, 6851, 6871, 6874, 6879, 6880, 6887, 6889,
6890, 6893, 6894, 6909, 6912, 6914, 6915, 6916, 6920, 6928, 6930, 6973, 6975, 7001,
7024, 7028, 7068, 7082, 7086, 7093, 7102, 7104, 7105, 7107, 7125, 7151, 7166, 7170,
7173, 7190, 7191, 7193, 7214, 7233, 7262, 7285, 7316, 7352, 7354, 7355, 7360, 7366,
7372, 7375, 7393, 7402, 7405, 7427, 7429, 7467, 7478, 7482, 7483, 7499, 7500, 7505,
7506, 7509, 7513, 7514, 7515, 7519, 7520, 7524, 7534, 7565, 7569, 7590, 7598, 7599,
7601, 7602, 7610, 7611, 7615, 7616, 7625, 7665, 7701, 7721, 7722, 7723, 7725, 7726,
7728, 7762, 7801, 7803, 7806, 7809, 7811, 7813, 7814, 7815, 7820, 7822, 7832, 7833,
7834, 7835, 7836, 7837, 7855, 7885, 7899, 7901, 7902, 7905, 7908, 7919, 7931, 7934,
7936, 7939, 7941, 7954, 7958, 7984, 8020, 8033, 8046, 8049, 8104, 8137, 8158, 8165,
8178, 8179, 8181, 8182, 8185, 8187, 8188, 8189, 8190, 8194, 8208, 8212, 8259, 8393,
8452, 8488, 8497, 8498, 8501, 8502, 8508, 8513, 8525, 8539, 8546, 8578, 8590, 8601,
8612, 8631, 8646, 8650, 8675, 8686, 8694, 8700, 8701, 8706, 8710, 8797, 8835, 8848,
8897, 8937, 8941, 8951, 8952, 9000, 9012, 9044, 9111, 9121, 9124, 9286, 9294, 9298,
9299, 9301, 9302, 9377, 9413, 9462, 9481, 9556, 9561, 9563, 9610, 9615, 9616, 9617,
9618, 9619, 9626, 9628, 9636, 9644, 9666, 9719, 9759, 9766, 9767, 9768, 9787, 9812,
9815, 9820, 9840, 9861, 9910, 9911, 9913, 9918, 9928, 10044, 10071, 10088, 10089,
10104, 10108, 10112, 10123, 10165, 10197, 10244, 10256, 10269, 10306, 10314,
10317, 10319, 10324, 10325, 10328, 10330, 10331, 10333, 10342, 10397, 10416,
6
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
10421, 10437, 10481, 10482, 10497, 10508, 10513, 10515, 10516, 10517, 10520,
10540, 10541, 10584, 10616, 10623, 10630, 10667, 10672, 10691, 10706, 10708,
10716, 10744, 10769, 10786, 10787, 10788, 10789, 10822, 10834, 10844, 10846,
10847, 10852, 10853, 10858, 10859, 10877, 10893, 10897, 10908, 10922, 10946,
10947, 10967, 10971, 10979, 10996, 11006, 11012, 11025, 11045, 11047, 11065,
11076, 11111, 11117, 11183, 11188, 11236, 11287, 11300, 11321, 11327, 11329,
11330, 11331, 11342, 11367, 11369, 11395, 11421, 11432, 11445, 11447, 11460,
11546, 11608, 11648, 11658, 11665, 11672, 11683, 11695, 11697, 11704, 11804,
11816, 11820, 11841, 11847, 11922, 11939, 11961, 12061, 12108, 12137, 12306,
12309, 12367, 12368, 12374, 12375, 12420, 12422, 12423, 12425, 12444, 12451,
12454, 12472, 12497, 12504, 12536, 12544, 12553, 12582, 12583, 12590, 12604,
12611, 12689, 12711, 12712, 12713, 12714, 12718, 12728, 12730, 12741, 12780,
12804, 12825, 12831, 12845, 12851, 12966, 12971, 12975, 12979, 12981, 13104,
13139, 13159, 13170, 13206, 13209, 13210, 13224, 13259, 13283, 13285, 13305,
13309, 13310, 13350, 13384, 13391, 13465, 13497, 13504, 13517, 13519, 13522,
13525, 13529, 13545, 13573, 13589, 13592, 13639, 13690, 13695, 13696, 13706,
13708, 13711, 13713, 13733, 13784, 13822, 13831, 13870, 13971, 14150, 14175,
14198, 14199, 14220, 14228, 14229, 14230, 14234, 14287, 14414, 14418, 14420,
14498, 14505, 14530, 14586, 14588, 14646, 14690, 14696, 14697, 14715, 14718,
14720, 14721, 14788, 14858, 14861, 14897, 14901, 14910, 14924, 14942, 14946,
14958, 14960, 14970, 14976, 15096, 15166, 15176, 15198, 15209, 15219, 15222,
15234, 15253, 15288, 15292, 15294, 15300, 15302, 15304, 15306, 15324, 15330,
15332, 15334, 15338, 15357, 15431, 15447, 15452, 15467, 15470, 15487, 15505,
15535, 15561, 15615, 15698, 15715, 15718, 15745, 15762, 15820, 15828, 15873,
15874, 15900, 15962, 15972, 15996, 16024, 16032, 16050, 16070, 16071, 16085,
16160, 16164, 16169, 16171, 16192, 16201, 16207, 16216, 16236, 16292, 16337,
16383, 16458, 16462, 16474, 16501, 16526, 16562, 16573, 16586, 16604, 16614,
16649, 16650, 16652, 16667, 16670, 16680, 16720, 16723, 16754, 16786, 16789,
16829, 16861, 17003, 17005, 17037, 17076, 17079, 17135, 17158, 17159, 17160,
17241, 17267, 17307, 17332, 17342, 17352, 17388, 17414, 17438, 17444, 17451,
17482, 17492, 17516, 17543, 17574, 17651, 17695, 17701, 17702, 17710, 17730,
17732, 17808, 17810, 17813, 17816, 17822, 17825, 17934, 17981, 18002, 18003,
18005, 18047, 18066, 18176, 18177, 18265, 18268, 18273, 18289, 18321, 18367,
18386, 18436, 18441, 18451, 18547, 18556, 18585, 18603, 18612, 18663, 18720,
7
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
18774, 18776, 18852, 18854, 18888, 18890, 18930, 18943, 18950, 18955, 18956,
18990, 19013, 19014, 19031, 19035, 19038, 19080, 19117, 19161, 19175, 19252,
19298, 19345, 19354, 19384, 19388, 19404, 19410, 19421, 19428, 19493, 19508,
19514, 19592, 19667, 19765, 19768, 19813, 19890, 19906, 19909, 19931, 20006,
20117, 20169, 20206, 20229, 20256, 20260, 20354, 20361, 20379, 20413, 20432,
20475, 20482, 20491, 20610, 20630, 20689, 20718, 20720, 20723, 20748, 20791,
20831, 20835, 20953, 21035, 21127, 21262, 21267, 21294, 21318, 21334, 21337,
21339, 21341, 21350, 21402, 21417, 21459, 21482, 21498, 21519, 21526, 21542,
21550, 21551, 21557, 21565, 21566, 21575, 21577, 21580, 21593, 21636, 21653,
21657, 21708, 21761, 21801, 21820, 21878, 21900, 21998, 22007, 22205, 22224,
22272, 22299, 22330, 22379, 22408, 22416, 22478, 22480, 22500, 22519, 22534,
22583, 22774, 22793, 22817, 22823, 22844, 22855, 22867, 22912, 22993, 23006,
23036, 23037, 23053, 23065, 23134, 23212, 23243, 23281, 23315, 23369, 23373,
23391, 23393, 23440, 23445, 23447, 23452, 23464, 23502, 23558, 23560, 23587,
23593, 23600, 23613, 23668, 23701, 23793, 23827, 23852, 23906, 23938, 23946,
24051, 24080, 24091, 24104, 24152, 24154, 24265, 24266, 24279, 24303, 24353,
24414, 24423, 24450, 24488, 24572, 24586, 24678, 24718, 24721, 24722, 24726,
24727, 24731, 24732, 24740, 24742, 24744, 24748, 24752, 24756, 24772, 24782,
24821, 24828, 24840, 24889, 24952, 25039, 25129, 25143, 25144, 25246, 25309,
25400, 25424, 25426, 25452, 25493, 25498, 25538, 25553, 25579, 25710, 25782,
25792, 25818, 25823, 25854, 25900, 25923, 25999, 26081, 26084, 26097, 26156,
26157, 26222, 26223, 26259, 26447, 26460, 26504, 26505, 26508, 26517, 26584,
26615, 26711, 26729, 26793, 26817, 26830, 26859, 26869, 26887, 26906, 26978,
27019, 27094, 27100, 27102, 27107, 27124, 27136, 27182, 27196, 27234, 27325,
27372, 27376, 27377, 27378, 27382, 27385, 27503, 27583, 27640, 27701, 27704,
27707, 27739, 27740, 27836, 27848, 27866, 28005, 28055, 28088, 28105, 28149,
28207, 28255, 28277, 28382, 28525, 28530, 28533, 28576, 28736, 28835, 28836,
28876, 28953, 28983, 28984, 28988, 29044, 29052, 29053, 29070, 29103, 29184,
29264, 29294, 29296, 29372, 29488, 29552, 29558, 29592, 29641, 29674, 29685,
29711, 30010, 30015, 30041, 30052, 30064, 30133, 30206, 30255, 30267, 30330,
30342, 30363, 30369, 30395, 30396, 30436, 30487, 30505, 30580, 30608, 30698,
30699, 30929, 30965, 30970, 30996, 31036, 31069, 31139, 31157, 31168, 31226,
31243, 31403, 31413, 31429, 31430, 31511 of 2024;
8
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
145, 221, 253, 358, 469, 512, 524, 596, 665, 690, 697, 708, 868, 931, 936, 989, 1053,
1089, 1105, 1122, 1124, 1184, 1186, 1204, 1233, 1380, 1399, 1449, 1472, 1488, 1601,
1665, 1852, 1863, 2090, 2264, 2483, 2501, 2511, 2636, 2816, 2927, 3017, 3060, 3180,
3197, 3238, 3321, 3486, 3488, 3646, 3667, 3679, 3680, 3907, 4019, 4021, 4041, 4490,
4494, 4652, 4818, 4879, 4991, 5027, 5127, 5129, 5224, 5496, 5530, 5531, 5545, 5615,
5633, 5706, 5762, 5811, 5940, 5985, 5995, 6048, 6098, 6108, 6247, 6262, 6274, 6297,
6319, 6334, 6447, 6546, 6601, 6663, 7196, 7309, 7344, 7348, 7568, 7596, 7884, 7971,
7979, 8034, 8081, 8100, 8101, 8215, 8243, 8248, 8426, 8885, 9000, 9001, 9029, 9124,
9472, 9768, 9897, 9922, 9974, 10030, 10042, 10233 of 2025;
W.A. Nos. 1043, 1062, 1069, 1071, 1077, 1084, 1085, 1086, 1087, 1088, 1089, 1090,
1091, 1092, 1093, 1094, 1095, 1096, 1097, 1098, 1099, 1100, 1101, 1102, 1103, 1104,
1105, 1106, 1107, 1108, 1109, 1110, 1111, 1112, 1113, 1114, 1115, 1116, 1117, 1118,
1119, 1120, 1121, 1122, 1123, 1124, 1125, 1126, 1135, 1136, 1145, 1146, 1147, 1154,
1156, 1235, 1236, 1237, 1238, 1239, 1242, 1243, 1244, 1245, 1246, 1247, 1248, 1275
of 2023;
16, 20, 23, 104, 202, 225, 227, 228, 244, 251, 255, 262, 267, 281, 282, 286, 297, 301,
306, 308, 322, 323, 325, 326, 327, 328, 331, 332, 333, 355, 356, 359, 361, 365, 378,
384, 389, 390, 393, 395, 397, 398, 399, 400, 401, 402, 405, 406, 412, 423, 426, 427,
428, 429, 430, 431, 434, 435, 444, 445, 447, 450, 453, 460, 461, 462, 463, 470 of 2024;
W.P.No.29672/2023
Between:
A.p. Textile Mills Association, ...PETITIONER
AND
State Of Andhra Pradesh and Others ...RESPONDENT(S)
Counsel for the Petitioner:
1. SRICHARAN TELAPROLU
Counsel for the Respondent(S):
1. VENKATA RAMA RAO KOTA SC FOR APSPDCL
2. GP FOR ENERGY
3. V V SATISH (SC for APEPDCL)
4. METTA CHENDRA SEKHAR RAO
9
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
Court made the following Common Judgment:
(per Hon'ble Sri Justice R.Raghunandan Rao)
All these matters are being disposed of by way of this common order as
common issues are raised.
2. Heard Sri B. Adinarayana Rao, learned Senior Counsel, Sri A.
Ravinder, learned Senior Counsel, Sri K. Gopal Chowdary, Sri Sricharan
Tellaprolu, Sri P. Narasimha Rao, Sri Challa Gunaranjan, learned counsel
appearing for the petitioners, and learned Advocate General appearing for the
respondents.
3. The A.P. Electricity Duty Act, 1939 (hereinafter referred to as ―the
Duty Act‖) was enacted for levying duty on the sale of electrical energy by
―licensees‖. The term Licensee was originally defined to mean any person
licensed under the Indian Electricity Act, 1910 to supply energy or any person
who was authorized under section 28 of the same Act to supply energy. This
definition was amended to mean a person who has been granted a licence
under section 14 of the Electricity Act, 2003. Prior to the impugned
amendments, Duty, at the rate of 6 paise per unit, was levied on the
Licensees, under Section 3 of the Duty Act. Under section 7, the Government,
by way of previous sanction, could permit the licensees to pass on the Duty, to
the consumers. Section 3A, empowered the Government to exempt payment
of Duty. Section 3, prior to the amendments, which are under challenge, in the
present batch of cases, reads as follows:
10
HCJ & RRR,J
W.P.No.29672 of 2023 & batch
3. Levy of a duty in certain sales of electrical energy.
(1) Save as otherwise provided in sub-section (2), every
licensee in the State of Andhra Pradesh shall pay every
month to the State Government in the prescribed manner, a
duty calculated at the rate of six paise per unit of energy, on
and in respect of all sales of energy except sales to the
Government of India for consumption by that Government or
sales to the Government of India or a railway company
operating any railway for consumption in the construction,
maintenance or operation of the railway effected by the
licensee during the previous month at a price of more than
Twelve paise per unit and on and in respect to all energy
which was consumed by the licensee during the previous
months for purposes other than those connected with the
construction, maintenance and operation of his electrical
undertaking and which, if sold to a private consumer under
like conditions, would have fetched a price of more than
Twelve paise per unit.
Provided that no duty under this sub-section shall be payable
on and in respect of sale of energy effected -
(a) by the Andhra Pradesh State Electricity Board to any
other licensee;
(b) by the National Thermal Power Corporation to the Andhra
Pradesh State Electricity Board.
(2) A licensee shall be exempt from duty under sub-section
(1) in any month if in the previous month the total sales of
energy effected by him at whatever price together with the
energy consumed by him for purposes other than those
connected with the construction, maintenance and operation
of his electrical undertaking, did not exceed 16,666 units:
Provided that if at the end of any financial year, it is found
that in such year the total sales of energy effected by the
licensee at whatever price together with the energy
consumed by him for purposes other than those connected
with the construction, maintenance and operation of his
electrical undertaking, were not less than 2,00,000 units, the
licensee shall pay the duty in respect of any month or
months comprised in such year in which the total of the sales
and of the consumption as aforesaid did not exceed 16,666
units.
(3) Where a licensee holds more than one licence duty shall
be calculated and levied under this section separately in
respect of each licence.
(4) Where a licensee who is liable to pay duty under this
section sells energy to the Government of India for
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W.P.No.29672 of 2023 & batch
consumption by that Government or to a railway company
operating any railway for consumption, in the construction,
maintenance or operation of that railway, the price charged
on such sales shall be less by the amount of the duty than
the price charged to other consumers of a substantial
quantity of energy, provided the price last mentioned is more
than twelve paisa per unit.
In this sub-section, the expression 'price charged to other
consumers' shall include the duty, if any, recoverable from
the consumer under sub-section (1) of Section 7.
Explanation. - The expression 'railway' in this section and
in Section 9 shall have the meaning assigned to it in clause
(20) of Article 366 of the Constitution.‖
4. Sections 2 and 3 of the Duty Act were amended by Act 10/2021.
These amendments were as follows:
1. xxxx
2. In the Andhra Pradesh Electricity Duty Act, 1939 (hereinafter
referred to as the Principal Act), in Section 2, for sub-clause (i)
of clause (b), the following shall be substituted, namely,
(Amendment of Section 2. Act No.5 of 1939, Central Act No.36
of 2003).
―(i) a person who has been granted a license under Section
14 of the Electricity Act, 2003‖
3. (Amendment of Section 3)
―3. In Section 3 of the Principal Act, in sub-section (1), for
the words ―a duty calculated at the rate of six paise per unit
of energy‖, the words ―a duty calculated at the rate notified
by the State Government from time to time for different
consumer categories‖, shall be substituted.‖
5. After this amendment, the Government of A.P. issued
G.O.Ms.No.7, dated 08.04.2022, which reads as follows:
GOVERNMENT OF ANDHRA PRADESH
ABSTRACT
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W.P.No.29672 of 2023 & batch
Andhra Pradesh Electricity Duty Act, 1939 - Levy of duty
on certain sales of energy under Section 3(1) of the A.P.
Electricity Duty Act, 1939 - Notification - Issued.
______________________________________________
ENERGY (POWER-iii) DEPARTMENT
G.O.MS.No.7 Date:08.04.2022
1. Andhra Pradesh Electricity Duty (Amendment) Act,
2003 (A.P. Act No.14 of 2003)
2. The Electricity Act, 2003
3. Act 10 of 2021, Andhra Pradesh Electricity Duty
Amendment) Act, 2020.
****
ORDER:
Whereas State Government levied electricity duty @6
paise per unit on all the sales of electrical energy from the
year 1994, except to the exempted categories; and
whereas, sub section (1) of Section 3 of Electricity Duty
Act 1939 as amended by Act 10 of 2021, empowered the
State Government to notify the rate of electricity duty from
time to time to be paid by different consumer categories
Consumers on energy sales.
2. Whereas, in other States like Maharashtra,
Madhya Pradesh, Karnataka, Odisha, Tamil Nadu, West
Bengal, Gujarat and Kerala the electricity duty is as a
percentage of consumption charges. Precisely, in the
States of Gujarat, Karnataka, Madhya Pradesh,
Maharashtra, Himachal Pradesh, Kerala Manipur, Punjab,
West Bengal and Jammu & Kashmir the rate of duty is
from 14 paise to 180 paise per unit sale of energy,
whereas in the State of Andhra Pradesh, electricity duty is
being levied @6 paise per unit only on all the sales of
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W.P.No.29672 of 2023 & batch
electrical energy from the year 1994 except the exempted
categories.
3. Whereas, post bifurcation of the erstwhile State
of Andhra Pradesh, the successor State remained a
predominantly agrarian one, with the agriculture sector
contributing to 35.47% as per the advance estimates of
GVA for the financial year 2021-22. Owning to the
requirement of providing the necessary support to the
agriculture sector, the State exchequer is having to endure
a huge burden, in the form of agriculture subsidy to the
State Distribution Utilities.
4. Whereas, the gap between the ARR (Average
Revenue Realization) and COS (Average Cost of Supply)
has widened significantly over the years increasing the
subsidy requirement from Rs.2,607 crores in financial year
2014-15 to Rs.11,123 crores in financial year 2022-23.
The Average Cost of Supplying power approved by the
Andhra Pradesh Electricity Regulatory Commission, has
increased by 29.26% over the last seven years. A key
reason that has primarily contributed to this increase in
cost of service is the substantial increase in debt of the
State public sector undertakings in power sector, over the
period 2014-19. Inadequate release of subsidy during the
period 2024-19 has also resulted in the Distribution utilities
and AP GENCO availing huge working capital liabilities to
sustain operations. Cost associated with servicing of this
debt was partly allowed by APERC while determining the
tariff and this has contributed to an increase in the subsidy
component. If the disallowed portion is also taken into
consideration, the subsidy requirement from the
Government is higher.
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W.P.No.29672 of 2023 & batch
5. Whereas, the economic recovery from the Covid
– 19 pandemic led disruptions has resulted in a steep rise
in the demand for power and the coal production in the
Country is not adequate to meet the higher requirements
of the thermal power plants, leading to increase in cost of
power available in power exchanges. Added to this, the
geopolitical tensions have resulted in an unprecedented
surge in the costs of import coal and also the crude oil
prices, indirectly impacting the mining costs of coal. Owing
to these reasons, the subsidy burden on the Government
is likely to be higher than what is anticipated. In view of the
above, there is imperative need for the State Government
to augment revenue by tapping all available sources.
6. Whereas, due to the above compelling reasons,
State Government have felt the inevitable need to
enhance the electricity duty.
7. Now, therefore, the Government have decided to
revise electricity duty on energy sales for different
categories of Consumers in exercise of the powers
conferred by Sub-Section (1) of Section 3 of the Andhra
Pradesh Electricity Duty Act, 1939.
8. Accordingly, the following notification will be
published in the extraordinary issue of Andhra Pradesh
Gazette:
NOTIFICATION
In exercise of the powers conferred by sub-section (1)
Section 3 of the Andhra Pradesh Electricity Duty Act,
1939, the Government of Andhra Pradesh hereby levy an
electricity duty of 1 (one) rupee per kWh (unit) on energy
sales for the Commercial and Industrial Consumers as
indicated in the relevant yearly Retail Supply Tariff Order
issued by Hon’ble APERC. For Domestic Consumers, the
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W.P.No.29672 of 2023 & batchexisting electricity duty of 6 paise per KWh (unit) shall
continue to be levied, while Agriculture consumers shall be
exempted from levy of any such duty.
9. The notification shall come into force with
immediate effect.
(BY ORDER AND IN THE NAME OF THE GOVERNOR OF
ANDHRA PRADESH)
Sd/- B. Sreedhar Secretary to Government‖
6. By virtue of the aforesaid Amendment Act and G.O.Ms.No.7
dated 08.04.2022, the rate of electricity duty, payable by the licensee, on the
sales made to commercial and industrial consumers, had been increased from
six paise per unit to Rs.1 per unit. The rate of duty remained at six paise per
unit for domestic consumers and the sales made to agricultural consumers
were exempted from levy of any duty. It may also be noted that even earlier,
electricity sold to agricultural consumers had already been exempted from
Duty, by way of G.O.Ms.No.82 dated 08.04.2003. The licensees sought to
collect the enhanced duty from the consumers. Aggrieved by this increase of
duty, and the attempts of the licensees, to collect this enhanced duty, various
commercial and industrial category consumers filed writ petitions before this
Court (for ease of reference, the petitioners, in this batch and the various other
consumers who have subsequently joined the litigation, by way of fresh writ
petitions are hereinafter referred to, compendiously, as petitioners) All these
writ petitions came to be disposed of by a learned Single Judge of this Court,
by his order, dated 15.09.2023, in W.P.No.16619 of 2022 and batch.
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W.P.No.29672 of 2023 & batch
7. The petitioners had raised various contentions, before the learned
single judge. The primary contentions, which are relevant for the purposes of
this batch of cases, were:
A) There is hostile discrimination against commercial and industrial
consumers, as they are being singled out for additional taxation, though they
are in the same category of consumers.
B) There is no reasonable differentia to exempt domestic and
agricultural consumers, from payment of duty.
C) The fixation of tariff, by the Andhra Pradesh Electricity Regulatory
Commission, (herein after referred to as APERC), under the provisions of the
Electricity Act, 2003 takes in to account the question of subsidy and cross
subsidy. The tariff order, of 30.03.2022, passed by APERC had taken in to
account these issues and consequently the government could not have issued
G.O.Ms.No.7, on 08.04.2022, increasing the rate of duty, for the purposes of
subsidizing sale of power to agricultural consumers.
D) The Appellate Tribunal, under the Electricity Act, 2003 had
stipulated that the upper limit of cross subsidy, between different consumers,
cannot cross 120% of the cost of supply and the present increase takes the
cost of supply beyond this limit.
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W.P.No.29672 of 2023 & batch
E) The Licensees cannot collect the duty from the consumers,
beyond 6 paise per unit, as there is no previous sanction, under Section 7 of
the Duty Act.
8. The learned Single Judge, after hearing both sides, formulated
the following, as the issues which arise for consideration:
A. Whether G.O.Ms.No.7, Energy (Power-III) Department,
dated 08.04.2022, deserves to be quashed on the grounds
of –
(1) Colourable exercise of power;
(2) Violating Article 14 of the Constitution of India by
imposing duty on industrial and commercial
consumers of electricity, but granting exemption to
agricultural consumers as also for the rte of duty being
unreasonable and excessive;
B. Whether the licensees can recover the duty imposed on
them, from the petitioners / consumers, under Section 7 of
the APED Act?
C. Whether the petitioners / Alloy Industries have to pay the
same duty?
D. Whether the petitioners / cold storage industries are
agriculture consumers and exempted from payment of
duty?
9. The learned Single Judge, after considering these issues, had
observed that there was no challenge to Act 10 of 2021 or the amended or un-
amended provisions of Section 3 of the Duty Act and to the classification of
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W.P.No.29672 of 2023 & batch
electricity energy consumers, and that the challenge was only to G.O.Ms.No.7
dated 08.04.2022.
10. The learned Single Judge, after considering the submissions
made by both sides, had summarized his findings and decided the issues
formulated by him, in the following manner:
189. Accordingly, this Court holds as under:
(a) Point No.A (1) and (2):
The G.O.Ms.No.7, dated 08.04.2022, does not suffer from
vice of colourable exercise of power, nor violative of Article 14
of the Constitution of India.
(b) Point No.B:
The licencees can recover duty from the petitioners /
consumers only @ 6 paisa kWh under the sanction order
under G.O.Ms.No.277, dated 09.12.1994, and not in excess
thereof. There is no other previous sanction of the State
Government for any amount of duty now imposed on
licensees, in excess of 6 paisa kWh.
(c) Point No.C:
The petitioners / Alloy Industries have to pay the same duty
as in Point No.B (supra), unless they are granted exemption
under the statutory provisions.
(d) Point No.D:
The petitioners / Cold Storage industries failed to establish
that they are agricultural consumers. Consequently, they are
not exempted from payment of duty, in terms of Point B
(supra).
190. In the result,
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W.P.No.29672 of 2023 & batch
i. The challenge to the impugned G.O.Ms.No.7,
Energy (Power-III) Department, dated 08.04.2022,
fails. The writ petitions are dismissed to that effect.
ii. The demand notices by licensees to the petitioners
in excess of @6 paise kWh, to the extent of excess,
cannot be enforced.
iii. It is clarified that the petitioners shall have to pay
duty @6 paise kWh, subject to any other previous
sanction of State Government under Section 7 of
APED Act for the rate of duty in excess of 6 paisa
kWh.
iv. The petitioners / consumers are granted liberty to
file applications before their respective licensees for
refund or adjustment of the excess amount of the
duty, if paid by them, in excess of 6 paise kWh,
upon which, the respective licensees shall proceed
accordingly.
v. All the writ petitions are allowed in part in the
aforesaid terms.
11. The learned single judge had held that Duty to the extent of 6
paise per unit, could be passed on to the consumers on account of
G.O.Ms.No.277, dated 09.12.2024, which reads:
―2. After careful examination of the above issue and in
exercise of the powers under sub-section (1) of Section 7 of
the Andhra Pradesh Electricity Duty Act, 1939, as amended
from time to time the Government hereby accord permission
to Andhra Pradesh State Electricity Board to recover the
Electricity Duty from any consumer or class of consumers, to
whom energy is sold at a price of more than 12 paise per unit
20
HCJ & RRR,J
W.P.No.29672 of 2023 & batchand who fall under the durable categories, except consumers
using Low Tension Electrical energy for agricultural
purposes, at an effective tariff rate, presently below twelve
paise per unit the duty, which falls to be paid the Board with
effect from 01.12.1993, at the rate of six paise per unit on
the energy sold, subject to the following conditions:- ….‖
12. Aggrieved by this judgment, both the petitioners as well as the
State preferred appeals before this Court. During the pendency of the writ
appeals, the government, apparently to get over the finding of the learned
single judge that, on account of absence of previous sanction, the duty of one
rupee per unit, levied on the licensees, cannot be collected, beyond 6 paise
per unit, had issued G.O.Ms.No.22, dated 23.10.2023, according permission
to the licensees to recover electricity duty, at the rates notified in
G.O.Ms.No.7, dated 08.04.2022 from the consumers / class of consumers
against whom such rates had been notified. This G.O., as well as
G.O.Ms.No.7 and the amendment, to Section 3(1) of the Duty Act, brought in
by Act 10 of 2021, came to be challenged by way of W.P.No.29672 of 2023
and batch.
13. The petitioners, in W.P.No.29672 of 2023 and batch, apart from
assailing G.O.Ms.No.7, Act 10 of 2021 and, G.O.Ms.No.22, dated 23.10.2023,
on various grounds, had also contended that Act 10 of 2021 had never been
notified and as such never came into effect. Consequently, G.O.Ms.No.7,
which is based on Act 10 of 2021, would also fail. The petitioners also
contended that G.O.Ms.No.22, which empowered the licensees to collect the
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W.P.No.29672 of 2023 & batch
duty levied on them, from the consumers, would at best, only operate
prospectively, from 23.10.2023 and there can be no collection of duty, beyond
6 paise per unit till 23.10.2023.
14. While the batch of writ appeals and W.P.No.29672 of 2023 and
batch were pending, Act 10 of 2024 was enacted to give retrospective effect to
Act 10 of 2021, to take away the complaint that Act 10 of 2021 was not
notified. The Duty Act was again amended, by way of Act No.23 of 2024, with
retrospective effect from 26.08.2021, to answer the contentions that there was
no previous sanction for collection of electricity duty up to 23.10.2023. This
Act amended Section 3(1) as well as Section 7(1) of the Electricity Duty Act.
15. As can be seen from the legislative developments, the objections
being raised by the petitioners, to each of the impugned Amendment Acts, as
well as G.Os were sought to be rectified by way of fresh amendments and
G.Os. These amendments have culminated in Act 23 of 2024, which has
effectively subsumed all the earlier amendments. Act No. 23 of 2024 has
been challenged by way of W.P.No.3017 of 2025 and batch.
16. The issues that arise, on the basis of the submissions made by
either side, for the consideration of this court, are:
1. Whether the amendment to Section 3 of the Duty Act, by Act 23 of
2024 is valid and within the limits of delegated legislation and
whether Act 10 of 2021, as validated by Act 10 of 2024 needs to be
gone into?
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W.P.No.29672 of 2023 & batch
2. Whether the amendments, to Section 7 of the Duty Act, by Act 23 of
2024 is valid?
3. Whether G.O.Ms.No.7, dated 08.04.2022 is valid?
4. Whether G.O.Ms.No.22, dated 23.10.2024 is valid?
ISSUE NO.1
Whether the amendment to Section 3 of the Duty Act, by Act 23 of 2024
is valid and within the limits of delegated legislation and whether the validity of
Act 10 of 2021, as validated by Act 10 of 2024 needs to be gone into?
17. The changes brought in by the two amendment Acts in Section
3(1) read as follows:
Section 3(1) (As stood Section 3(1) (as amended Section 3(1) (as amended
prior to its amendment) by Act No.10 of 2021) by Act No.23 of 2024)Save as otherwise Save as otherwise Save as otherwise provided
provided in sub-section provided in sub-section (2) in sub-section (2) every
(2), every licensee in the every licensee in the State licensee in the State of
State of Andhra Pradesh of Andhra Pradesh shall Andhra Pradesh shall pay
shall pay every month to pay every month to the every month to the State
the State Government in State Government in the Government in the
the prescribed manner, a prescribed manner, a duty prescribed manner, a duty
duty calculated at the calculated at the rate calculated at the rate
rate of (six paise) per notified by the State notified by the State
unit of energy, on and in Government from time Government from time to
respect of all sales of to time for different time for different
energy except sales to the consumer categories, on consumer categories
Government of India for and in respect of all sales which shall not be less
consumption by that of energy except sales to than 6 paise (Rs.0.06) per
Government or sales to the Government of India unit of energy and not be
the Government of India or for consumption by that more than 100 Paise,
a railway company Government or sales to (Rs.1.00 rupee) per unit of
operating any railway for the Government of India or energy, on and in respect of
consumption in the a railway company all sales of energy except
construction, maintenance operating any railway for sales to the Government of
or operation of the railway) consumption in the India for consumption by
effected by the licensee construction, maintenance that Government or sales to
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W.P.No.29672 of 2023 & batchduring the previous month or operation of the railway) the Government of India or a
at a price of more than effected by the licensee railway company operating
(Twelve paise) per unit during the previous month any railway for consumption
(and on and in respect to at a price of more than in the construction,
all energy which was (Twelve paise) per unit maintenance or operation of
consumed by the licensee (and on and in respect to the railway) effected by the
during the previous
all energy which was licensee during the previous
months for purposes other consumed by the licensee month at a price of more
than those connected with during the previous than (Twelve paise) per unit
the construction,
months for purposes other (and on and in respect to all
maintenance and
than those connected with energy which was
operation of his electricalthe construction, consumed by the licensee
undertaking and which, if maintenance and during the previous months
sold to a private consumer operation of his electrical for purposes other than
under like conditions,
undertaking and which, if those connected with the
would have fetched a price sold to a private consumer construction, maintenance
of more than (Twelve under like conditions, and operation of his
paise) per unit. would have fetched a price electrical undertaking and
of more than (Twelve which, if sold to a private
Provided that no duty paise) per unit. consumer under like
under this sub-section conditions, would have
shall be payable on and in Provided that no duty fetched a price of more than
respect of sale of energy under this sub-section (Twelve paise) per unit.
effected (a) by the Andhra shall be payable on and in
Pradesh State Electricity respect of sale of energy Provided that no duty under
Board to any other effected (a) by the Andhra this sub-section shall be
licensee; (b) by the Pradesh State Electricity payable on and in respect of
National Thermal Power Board to any other sale of energy effected (a)
Corporation to the Andhra licensee; (b) by the by the Andhra Pradesh
Pradesh State Electricity National Thermal Power State Electricity Board to
Board. Corporation to the Andhra any other licensee; (b) by
Pradesh State Electricity the National Thermal Power
Board. Corporation to the Andhra
Pradesh State Electricity
Board.
Provided further that in
the absence of any rate of
duty notified by the State
Government for different
consumer categories at
any given time, a
minimum duty of 6 paise
(Rs.0.06) per unit of
energy shall be levied.
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W.P.No.29672 of 2023 & batch
18. By virtue of Act 10 of 2021, the fixed rate of duty of 6 paise per
unit was changed to a rate of duty which would be fixed by the Government.
Further, the Government could also fix different rates of Duty for electricity
sold to different categories of consumers, with complete discretion being given
to the Government to decide the basis on which consumers are to be
categorized.
19. This amendment is challenged, by the petitioners, on the
following grounds:
A) The levy of duty on sale of electricity, which is in the nature of a
Tax, can be done only by the State legislature, under Entry 53 of List II of the
VII Schedule to the Constitution of India. It would also be open to the
legislature to delegate certain parts of this exercise, after laying down
guidelines, to the discretion of the executive. However, there are limitations on
the extent to which such discretion can be delegated. The ratio laid down by
the Hon’ble Supreme Court, in a series of judgments, is to the effect that
essential legislative functions cannot be delegated and any delegation would
have to meet the test of whether such delegation has been made after laying
down guidelines and limits. Failure to lay down such guidelines and limits
would render such delegation invalid and void.
B) The guidelines and limits have to be discernible in the Legislation
itself and such guidelines and limits cannot be imported from any other
source. There is nothing, either in the preamble or the scheme of the Duty
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HCJ & RRR,J
W.P.No.29672 of 2023 & batchAct, to discern any policy or guidelines, for exercise of discretion by the
executive.
C) The delegation of fixing the rate of tax, without prescribing a
maximum limit, and the delegation of discretion, in determining categories of
consumers, without prescribing the basis on which such categories are to be
determined, is beyond the valid limits of delegation. This would amount to
delegation of essential legislative powers. Hence, all the amendments are
invalid and have to be struck down.
D) The Amendment, to Section 3 of the Duty Act, by Amendment Act
10 of 2021, is still born as the amendment Act was not notified.
E) Section 12 (4) of the Andhra Pradesh Electricity Reforms Act,
1998, casts a duty on the Government to consult the APERC, before enacting
any law relating to the field of electricity. No such consultation was carried out,
before Act 10 of 2021 or Act 23 of 2024, were enacted. This lack of
consultation is sufficient to invalidate the Amendment Acts. Reliance is placed
on M.P. Cement Manufacturers Association vs. State of M.P.1 Further, the
slight difference in the phraseology of the Madhya Pradesh Act, which was
under consideration in the above judgment, and the language of the A.P.
Reforms Act, does not make any difference for the application of the said
judgment to the present case.
1
(2004) 2 SCC 249
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W.P.No.29672 of 2023 & batch
F) The levy of additional duty, is a form of cross subsidy and has to
be set aside on the ground that such cross subsidy is violative of the
requirement of the national tariff policy of 2016, capping the tariff at 120% of
the cost of supply.
20. The learned Advocate General, appearing for the State, at the
stage of challenge to Act 10 of 2021, Act and G.O.Ms.No.7 and G.O.Ms.No.22
had sought to defend Act 10 of 2021 on the following grounds:
A) Section 3 (1) of the Duty Act, is not bereft of legislative guidelines
as it sets out the taxable event, the person who is to be taxed, the measure of
tax, that is the duty on a per unit basis and consequently there is no
excessive delegation. Reliance is placed on Union of India and another vs.
Mohit Minerals Private Limited2 and Vivek Narayan Sharma and others
vs. Union of India3.
B) The objects and reasons in the Bill introduced for Act 10 of 2021,
set out the reason for increase of electricity duty and the same is a sufficient
guideline.
C) The circumstances which prevailed, at the time the law was
made, can be looked into for ascertaining the guidelines. The circumstances
have been set out in the objects and reasons in the Bill and they provide
sufficient guidelines. Reliance is placed in Shashikant Laxman Kale and
2
(2022) 10 SCC 700
3
(2023) 3 SCC 1
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W.P.No.29672 of 2023 & batchanother vs. Union of India and another4 and B. Prabhakar Rao and Ors.,
vs. State of Andhra Pradesh and Ors.,5.
D) The judgment of the Hon’ble Supreme court, in Municipal
Corporation of Delhi vs. Birla Cotton, Spinning and Weaving Mills, Delhi
and another6, requires to be considered in view of the following tests set out,
in paragraph 97, in the subsequent judgment of the Hon’ble Supreme Court, in
Union of India and another vs. Mohit Minerals Private Limited. Once the
legislation under question meets these tests, the challenge, on the basis of
excessive delegation would fail. As set out in Ground A, there is compliance of
these tests and Act 10 of 2021 would be valid. The said tests, as set out in the
above judgment, in Union of India v. Mohit Minerals (P) Ltd., are as follows:
97. In assessing this claim, this Court is bound by a
decision of the Constitution Bench in Mathuram Agrawal
vs. State of M.P., 7 which has identified three essential
elements of taxation:
(i) The subject of the tax;
(ii) The person who is liable to pay the tax; and
(iii) The rate at which the tax is to be paid.
This test has been further elaborated by a two-Judge
Bench of this Court in Govind Saran Ganga
Saran [Govind Saran Ganga Saran v. CST, 8 by further
requiring the designation of the measure or the value to
4
(1990) 4 SCC 366
5
1985 Supp SCC 432
6
AIR 1968 SC 1232
7
(1999) 8 SCC 667
8
1985 Supp SCC 205 : 1985 SCC (Tax) 447 : AIR 1985 SC 1041
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W.P.No.29672 of 2023 & batch
which the rate of the tax will be applied. Thus, the four
canons of taxation are as follows:
(i) The taxable event;
(ii) The person on whom the levy is imposed;
(iii) The rate at which the levy is imposed; and
(iv) The measure or the value to which the rate will
be applied.
E) The Duty Act, enacted under Entry 53 of the State list, in the VII
Schedule of the Constitution of India, deals with levy of duty on the sale of
electricity, while the Andhra Pradesh Electricity Reforms Act, 1998 and the
Electricity Act, 2003, enacted under Entry 38 in List 3 of the VII schedule to
the Constitution of India, deal with regulation of the generation, transmission
and distribution of electricity and the tariff to be fixed for such activities. The
inclusion of cross subsidy, in the fixation of tariff, by APERC would not affect
the power of the State to levy duty under the Duty Act.
F) The lack of consultation with APERC, before passing the
Amendment Acts, would not render the Amendment acts invalid, even
according to the judgment of the Hon’ble Supreme Court in M.P. Cement
Manufacturers Association vs. State of M.P.
G) Though, the government had not issued any notification to bring
Act 10 of 2021, into force, Act 10 of 2024 came to be passed for bringing the
provisions of Act 10 of 2021 into force, with effect from 26.08.202.
Consequently, the contention, that Act 10 of 2021 is still born, is incorrect.
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W.P.No.29672 of 2023 & batch
21. The subsequent amendment, of section 3 of the Duty Act, by Act
23 of 24, was assailed by the petitioners, on the following grounds:
A) Though an upper limit and a lower limit, on the rate of duty that
can be fixed, by the government, has been stipulated, the same would
continue to suffer from the vice of excessive delegation. This is because the
range of six paise to one rupee per unit means that the government can fix
any rate of duty from six paise per unit to one rupee which is about sixteen
times that value. Such a large range is excessive delegation.
B) The objection, relating to the discretion granted in relation to
identification of categories, raised against Act 10 of 2021 remains and has not
been addressed.
C) Act 10 of 2021 was reserved for the assent of the Hon’ble
president of India and was brought into force after obtaining such assent.
However, no such assent of the Hon’ble President of India was obtained for
Act 23 of 2024 and as such Act 23 of 2024 is invalid.
D) The Appellate Tribunal, under the Electricity Act, 2003 had
stipulated that the upper limit of cross subsidy, between different consumers,
cannot cross 120% of the cost of supply and the outer limit of one rupee per
unit takes the cost of supply beyond this limit. No additional duty could have
been levied, once APERC had fixed the tariff after fixing the cross subsidy.
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22. The learned Advocate General, answering the challenge raised to
Act 23 of 2024, contended that:
A) The fixation of a minimum and maximum limit, by Act 23 of 2024,
on the rate of duty, is a sufficient guideline and the ground of excessive
delegation would not remain.
B) The objects and reasons, set out in Act 23 of 2024, set out the
guidelines for identification of categories and the same would suffice to meet
the challenge, of lack of guidelines, raised by the petitioners.
C) The objections relating to cross subsidy and the alleged breach of
the upper limit fixed by the Appellate tribunal do not arise as the levy of duty to
subsidize the tariff payable by agricultural consumers is outside the purview of
the regulatory commissions and the ambit of the Electricity Reforms Act, 1998
or the Electricity Act, 2003.
CONSIDERATION OF THE COURT:
23. In view of these rival submissions, Issue No.1, can be subdivided
into the following issues:
1A. Whether, lack of consultation with APERC, said to be required
under section 12 (4) of the Andhra Pradesh Electricity Act, 1998,
would invalidate Act 10 of 2021 and Act 23 of 2024?
1B. Whether, levy of additional duty, under the Duty Act, can be set
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W.P.No.29672 of 2023 & batchaside on the ground that it amounts to cross subsidy which goes
beyond the limit set out in the national tariff policy and is against
the tariff fixed by APERC or the appellate commission?
1C. Whether the Amendment, to Section 3 of the Duty Act, by
Amendment Act 10 of 2021, is still born as the Amendment Act
was not notified?
1D. Whether the lack of Presidential assent would invalidate Act 10 of
2024 or Act 23 of 2024?
1E. Whether Act 10 of 2021 and Act 23 of 2024 would amount to
abdication of essential legislative functions of the legislature on
account of excessive delegation of power to the executive, in
terms of fixation of rates of duty and identification of categories
of consumers?
ISSUE 1A:
24. Section 12 (4) of the Andhra Pradesh Electricity Reforms Act,
1998, reads as follows:
12(4). The State Government shall consult the
Commission in relation to any proposed legislation or rules
concerning any policy direction and shall duly take into
account the recommendation by the Commission on all
such matters.
25. The Madhya Pradesh Vidyuth Sudhar Adhiniyam, 2000 was
enacted for the purposes of carrying out electricity reforms, in the same
manner as the Andhra Pradesh Electricity Reforms Act, 1998. Section 12 (3)
of this Act reads as follows:
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W.P.No.29672 of 2023 & batch―12. (3) The State Government shall consult the
Commission in relation to any policy directive which it
proposes to issue or any legislation is proposed to be
enacted affecting the electricity industry it shall duly take
into account the recommendation if any, given by the
Commission within such reasonable time as the State
Government may specify.
26. An earlier Act, known as the Madhya Pradesh Upkar Adhiniyam
1981, was sought to be amended for the purposes of levying a cess of 20
paise per unit of power produced by captive power producers in the State of
Madhya Pradesh. This amendment was challenged on various grounds,
including the ground that, the requirement of consulting the Commission,
before enacting the amendment act, was not undertaken. The Hon’ble
Supreme Court after considering this objection, in M.P.Cement
Manufacturers Association Vs. State of M.P., held as follows:
33. The first question, therefore, is, whether Section 12(3)
does in fact impose any fetter on the power of the State to
legislate. Sub-section (3) refers to ―any policy directive
which it proposes to issue‖ or ―any legislation proposed to
be enacted affecting the electricity industry‖. It does not
stop the State from enacting the legislation but merely
states that prior to any legislation being proposed, the
Government shall ―duly take into account the
recommendation if any, given by the Commission‖. It was
and is open to the State Legislature to repeal this law. As
long as it continues to be operative, it must be assumed
that it was not a mere exercise in futility and some effect
must be given to the words of sub-section (3) of Section
12. As we read the sub-section, it is a mandate to the
policy-makers who, before proposing legislation, are
required to consult the State Regulatory Commission.
38. In our opinion, the consequence of non-consultation in
terms of Section 12(3) of the Sudhar Adhiniyam would not
33
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W.P.No.29672 of 2023 & batchbe an incompetent piece of legislation but a legislation
introduced in breach of a salutary requirement to consult
an expert statutory body. The statutory requirement for
consultation with a body of experts before proposing
legislation will serve as an inbuilt safeguard against a
challenge under Article 14 of the Constitution apart from
anything else.
39. Nevertheless, we do not propose to decide, whether
by reason only of such non-consultation, Section 3(2) of
the 1981 Adhiniyam is violative of Article 14, nor do we
propose to decide whether the cess of 20 paise is
excessive, nor the other grounds urged by the appellants
pertaining to Article 14. We have referred to the provisions
of the Sudhar Adhiniyam so that the State Government
may in future act in consonance with Section 12(3).
27. Though, the Hon’ble Supreme Court had held that it would not go
into this question, the ratio laid down in paragraph 38, of the above judgment,
would be binding on this court. There was some objection raised, by the State,
that there was some difference, in the language of section 12 (4) of the
Andhra Pradesh Electricity Reforms Act, 1998, and section 12 (3) of the
Madhya Pradesh Vidyuth Sudhar Adhiniyam, 2000. This objection need not
detain us, as the judgment of the Hon’ble Supreme Court would not in any
manner assist the case of the petitioners. This issue is held against the
petitioners.
ISSUE 1B :
28. The learned single Judge, in W.P.No.16619 of 2022 and batch,
had held that the issue of fixation of tariff and levy of duty arise out of different
Acts and no conflict arises between the two Acts. The learned single judge
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had also held that the plenary power of taxation available under Entry 53 of
the 2nd list, in the VII schedule of the constitution, cannot be controlled by the
regulatory power granted under Entry 38 of the 3rd list. We have not been
shown any reason to differ with this view of the learned single judge. However,
we think it would be appropriate, to add our reasons, in support of the view of
the learned single judge.
29. Entry 38 of the 3rd list, (concurrent list) in the VII schedule to the
Constitution, empowers both the Central and the State government to regulate
all aspects of electricity. The Electricity Reforms Act, 1998 and the Electricity
Act, 2003, had been enacted under this entry. It may be noted that this entry
does not give power to either the state or central legislature to levy any tax or
duty on any aspect of electricity. However, Entry 53 of the 2 nd list (state list) in
the VII Schedule empowers a state legislature to levy duty on the sale and
consumption of electricity. The Duty Act, though it is a pre-constitutional
legislation, would draw it’s sustenance from this entry. Both Acts operate in
different and discrete zones, with no overlap. Clearly, the regulation of tariffs,
by appropriate commissions, cannot extend to a supervisory role over the
power of the State, under the provisions of the Duty Act, to levy Duty. We are
fortified, in this view, by the judgment of the Hon’ble Supreme Court, in
Southern Petrochemical Industries Company Ltd., vs. Electricity
Inspector Etio And Ors.,9.
9
(2007) 5 SCC 447 [Paras 138 and 139]
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30. Even if such a supervisory role is permissible, the contentions of
the petitioners are not made out. Part VII of the Electricity Act, 2003,
consisting of sections 61 to 66 sets out the manner and method in which tariff
is to be fixed. Section 61, empowers the appropriate regulatory commission,
subject to the guidelines set out in section 61, to frame regulations, specifying
the terms and conditions for the determination of tariff. One such guideline is
Section 61 (g), which stipulates that the Tariff should progressively reflect the
cost of supply of electricity and to reduce cross subsidies in the manner
specified by the Appropriate Commission. The petitioners contend that the
requirement of reducing cross subsidies falls squarely within the ken of the
regulatory scheme of the Electricity Act, 2003 and the regulation of Tariff by
the APERC or the appellate Commission. They contend that the levy of duty,
where it seeks to subsidize any class of consumers or even otherwise would
have to be subject to the regulation of tariff, by APERC. The petitioners
contend that, the levy of additional duty is an attempt at cross subsidy, by
indirect means. They contend that, as long as the cost of subsidy is being
recovered from them, by way of extra duty, or by increase in tariff rates, it
would remain a cross subsidy.
31. The producers of electricity and the intermediaries such as
transmission and distribution service providers, whether in the form of
monolithic state electricity boards or private entities, were entitled to the price
of electricity and the price of their services. The fixation of such price was
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done by the state governments, under the provisions of the Indian Electricity
Act, 1910 and the Electricity (Supply) Act, 1948. Initially, the state
governments fixed tariff on the basis of the cost incurred by the entities
producing, transmitting or distributing electricity. Over time, the state
governments, sought to cushion the burden of increasing tariffs on certain
categories, including agricultural consumers. This could only be done by
subsidizing such consumers. For this purpose, the tariff was fixed at a rate,
higher than the cost of supply, for some categories of consumers such as
industrial and commercial consumers and the surplus, so obtained, was
adjusted against the Tariff fixed for other consumers. This method of
subsidizing the electricity charges payable by consumers is ―cross subsidy‖. In
this method, one category of consumers subsidizes the cost of supply of
electricity to another category of consumers.
32. This method of subsidy casts a huge burden on certain
categories of consumers and skewed the system of Tariff fixation. The
Electricity Act, 2003 seeks to end this method of subsidy and bring in a
system of direct subsidy by the state. The scheme of the Act and the
guidelines, in the form of regulations or the Tariff policy is to ensure that the
tariff fixed for consumers is as close as possible, to the cost of supply of
electricity. The regulatory authorities, under the Electricity Act, 2003, are
empowered to regulate and fix the tariff for consumers. This power would be
restricted to deciding the components of the Tariff. Cross subsidy is a part of
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W.P.No.29672 of 2023 & batch
the Tariff and can be regulated. At this stage, it is necessary to understand
that Tariff is the cost of supply of energy and other components, including
cross subsidy, which goes to the coffers of the person generating, transmitting
or distributing electricity. Duty is the amount which is paid by such persons to
the State, over and above the Tariff, with discretion to the State to permit such
person to reimburse itself from the consumer. Electricity duty is outside the
Tariff and is additional to Tariff. Hence, levy of Duty cannot be regulated under
the provisions of the Electricity Act, 2003. In fact, the Electricity Act itself does
not speak of doing away with all forms of subsidy or regulating all forms of
subsidy. It only seeks to remove or reduce cross subsidy, while permitting
direct subsidy by the State. Section 65 of the Electricity Act, 2003, which
reads as follows, makes it clear:
65. Provision of subsidy by State Government.-
If the State Government requires the grant of any subsidy
to any consumer or class of consumers in the tariff determined
by the State Commission under section 62, the State
Government shall, notwithstanding any direction which may
be given under section 108, pay, in advance and in such
manner as may be specified, the amount to compensate the
person affected by the grant of subsidy in the manner the
State Commission may direct, as a condition for the licence or
any other person concerned to implement the subsidy
provided for by the State Government:
Provided that no such direction of the State Government
shall be operative if the payment is not made in accordance
with the provisions contained in this section and the tariff fixed
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W.P.No.29672 of 2023 & batchby the State Commission shall be applicable from the date of
issue of orders by the Commission in this regard.
33. Under this provision, a fair price/tariff is to be fixed for all
categories of consumers. In the event of the State being desirous of
subsidizing the tariff for any category of consumer, an estimate would have to
be made about the quantum of such subsidy and the state government would
pay this subsidy to the licensees, who are supplying such electricity.
34. When the State pays the subsidy amount, it would be a direct
subsidy. The decision to pay such subsidy is within the purview of the State.
The appropriate commission can only insist on payment of the subsidy
amount, to the licensee, and would not have any control over how much of the
Tariff can be subsidized by the State. The language of section 65 does not
give such regulatory oversight to the appropriate commission.
35. The Central Government, in Paragraph 8.3 of the Tariff policy,
dated 28.01.2016, also took the following view:
―In terms of the Section 61(g) of the Act, the Appropriate
Commission shall be guided by the objective that the Tariff
progressively reflects the efficient and prudent cost of supply
of electricity.
36. The State Governments can give subsidy, to the extent they
consider appropriate, as per the provisions of Section 65 of the Act. Direct
subsidy is a better way to support the poorer categories of consumers than
the mechanism of cross- subsidizing the Tariff across the board. Subsidies
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W.P.No.29672 of 2023 & batch
should be targeted effectively and in a transparent manner. As a substitute of
cross subsidies, the State Government has the option of raising resources
through the mechanism of electricity duty and giving direct subsidies to only
needy consumers. This is a better way of targeting subsidies effectively.‖
37. To sum up, cross subsidy which is a part of the Tariff can be
regulated under the provisions of the Electricity Act. However, levy of Duty,
either for the purposes of subsidizing consumers or for any other purpose,
would be outside the scope of the regulatory process under the Electricity Act,
2003. The levy of Duty or additional Duty is the sole prerogative of the State
and cannot be regulated under the Electricity Act, 2003. This issue is held
against the petitioners.
ISSUE 1C:
38. Though this issue may not arise for consideration, it is being dealt
with as it has been raised by the petitioners. Section 1 (2) of Act 10 of 2021
stated that: “It shall come into force on such date as the State government
may, by notification, appoint”.
39. There is no dispute that no notification has been issued by the
State Government. However, Section 1 (2) of Act 10 of 2021 was amended by
Act 10 of 2024, to read as follows: “It shall be deemed to have come into force
on the date of publication of the Act in the A.P. Gazette, dated 26th August
2021” By virtue of this amendment, the requirement of issuing a notification, to
bring Act 10 of 2021, into force has been dispensed with. Even if it is held that
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W.P.No.29672 of 2023 & batch
Act 10 of 2021 did not come into effect, till Act 10 of 2024 had been enacted,
the same would not make any difference as the amended provision of Section
1(2) had brought Act 10 of 2021 into force, with effect from 26.08.2021.
Accordingly, the contention of the Petitioners, that Act 10 of 2021 is a still born
Act which never came into force, cannot be accepted.
ISSUE 1D:
40. Act 10 of 2021 was reserved by the Governor on the 24 th of
December, 2020 for the consideration and assent of the President and
received the assent, of the President, on 07.08.2021. The subsequent
amendment Acts 10 of 2024 and 23 of 2024, were neither reserved for the
assent of the President nor was such assent received. The petitioners contend
that since consent was not obtained, both Act 10 of 2024 and 23 of 2024 are
invalid.
41. It cannot be said that the assent of the President is required, for
the amending Act, on the sole ground that the principal Act had obtained the
assent of the President, unless it can be shown that such assent is required
under any of the provisions of the Constitution. The petitioners, except
contending that the assent of the President is needed for Act 10 of 2024 and
23 of 2024, have not explained why such assent of the President was
required. The assent of the President is required, in the circumstances
enumerated under Article 301 read with 304, Article 254 and where the
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W.P.No.29672 of 2023 & batch
Governor, reserves a Bill for the assent of the President, under Article 200 and
201 of the Constitution.
42. In case of Article 254 (2), If a law is made by the State
legislature, with respect to any matter enumerated in the Concurrent list and
contains any provision which is repugnant to any earlier law made by
parliament or any existing law, the State law would prevail if the assent of the
President is received. Act 10 of 2024 and Act 23 of 2024 have been enacted
in respect of matters enumerated in Entry 53 of the State list and not under
any entry in the concurrent list. The impugned Acts are not related to any
entry in the concurrent list. The question of seeking the assent of the
president, on this ground, would not arise. The Duty Act seeks to levy Duty on
the sale of electricity, within the State. This Act does not restrict any interstate
trade or commerce, to attract the provisions of Article 301 to 304 of the
Constitution. The main Duty Act, which is a pre Constitutional Act, obviously
did not receive the assent of the President. However, Act 10 of 2021, which
amended section 3 of the Duty Act, received the assent of the President, after
it had been reserved, for such assent, by the Governor. However, the reasons
for such a course of action have not been explained, either by the petitioners
or the State. The Hon’ble Supreme Court, when faced with a similar situation,
had held in Syed Ahmed Aga And Ors., vs. State Of Mysore And Ors.,10
that reservation of a Bill, for the assent of the President, is not necessary for
10
(1975) 2 SCC 131
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W.P.No.29672 of 2023 & batch
an Act seeking to amend a principal Act, which has obtained such assent, if
the amendment is within the purview of the principal Act. In the present case
the amendments to section 3 and 7 of the Duty Act, are within the purview of
the main Duty Act and as such no further assent would be required. This issue
is held against the petitioners.
ISSUE 1E:
43. The delegation of the functions of (1) fixation of rate of duty and
(2) identification of categories of consumers is challenged on the ground of
excessive delegation. It would be necessary to consider this twin challenge,
separately.
44. The limits of legislative delegation came to be considered by, a 7
member Bench of, the Hon’ble Supreme Court, while answering a reference,
by the President, under Article 143 of the Constitution, in Delhi Laws Act, 1912,
In Re, 1951 SCC 568 : 1951 SCC OnLine SC 45 at page 606. Separate opinions
were given by the Bench. The summary of these opinions has been set out, in
a subsequent judgment, by the Hon’ble Supreme Court in Rajnarain Singh
vs. Patna Administration Committee11, in the following manner:
26. The Court had before it the following problems. In
each case, the Central Legislature had empowered an
executive authority under its legislative control to apply, at
its discretion, laws to an area which was also under the
legislative sway of the Centre. The variations occur in the11
(1954) 2 SCC 82
43
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W.P.No.29672 of 2023 & batchtype of laws which the executive authority was authorised
to select and in the modifications which it was empowered
to make in them. The variations were as follows:
1) Where the executive authority was permitted, at its
discretion, to apply without modification (save incidental
changes such as name and place), the whole of any Central
Act already in existence in any part of India under the
legislative sway of the Centre to the new area:
This was upheld by a majority of six to one.
2) Where the executive authority was allowed to select and
apply a Provincial Act in similar circumstances:
This was also upheld, but this time by a majority of five to
two.
3) Where the executive authority was permitted to select
future Central laws and apply them in a similar way:
This was upheld by five to two.
4) Where the authorization was to select future Provincial
laws and apply them as above:
This was also upheld by five to two.
5) Where the authorization was to repeal laws already in
force in the area and either substitute nothing in their
places or substitute other laws, Central or Provincial, with or
without modification:
This was held to be ultra vires by a majority of four to
three.
(6) Where the authorization was to apply existing laws,
either Central or Provincial, with alterations and
modifications; and(7) Where the authorisation was to apply future laws under
the same conditions:
44
HCJ & RRR,J
W.P.No.29672 of 2023 & batchThe views of the various members of the Bench were not
as clear cut here as in the first five cases, so it will be
necessary to analyse what each Judge said.
32. In our opinion, the majority view was that an executive
authority can be authorised to modify either existing or future
laws but not in any essential feature. Exactly what
constitutes an essential feature cannot be enunciated in
general terms, and there was some divergence of view about
this in the former case, but this much is clear from the
opinions set out above; it cannot include a change of policy.
45. The issue again came up in Calcutta Corporation vs. Liberty
Cinema12. In this case, section 548 of the Calcutta Corporation Act, granted
absolute discretion to the Corporation to fix the license fee that can be
collected from cinema theatres. A change in the method of calculating the said
fees resulted in the fee being increased from Rs. 400 per annum to Rs. 6000
per annum approximately. The scope of delegation came to be challenged, on
the ground of unguided delegation amounting to abdication of the essential
legislative functions. The Hon’ble Supreme Court, in its majority decision held
that fixation of rate of tax was not an essential legislative function and even
otherwise such delegation was permissible if guidelines are given. In that
case, the Hon’ble Supreme court also held that such guidance could be found
in the financial needs of the corporation and the purposes for which the funds
would be used, under the Corporation Act.
12
AIR 1965 SC 1107 :: (1965) 2 SCR 477
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46. The aforesaid view, of the Hon’ble Supreme Court, came up for
consideration in Devi Dass Gopalkrishnan and Others vs. The State of
Punjab and Others 13. In this case, Section 5 of the East Punjab General
Sales Tax Act which had provided for levy of sales tax on the turnover of the
dealer at such rates as the provincial Government notified, was declared to be
void by the High Court of Punjab. It was declared to be void on the ground that
it gave unlimited power to the Government to levy a tax at any rate it thought
fit. Thereafter, Section 5 was amended to include and be deemed to have
always included the words “not exceeding two paise in a rupee”. The High
Court held that the amendment cured the defect and gave new life to section
5. This view was challenged before the Hon’ble Supreme Court. The State, in
its defense, relied upon the judgment of the Hon’ble Supreme Court in
Calcutta Corporation vs. Liberty Cinema. The Hon’ble Supreme court held
as follows:
The law on the subject is fairly well settled though
difficulties are met in its application to each case. In
Corporation of Calcutta v. Liberty Cinema (1), on which
Mr. Ganapathy Iyer relied, relates to a levy imposed on
cinema houses under the Calcutta Municipal Act (33 of
1951). There, the majority held that the levy therein was a
tax, that the fixing of a rate of tax was not of the essence
of legislative power, that the fixing of rates might be left to
a non-legislative body and that when it was so left to such
a body, the Legislature must provide guidance for such13
AIR 1967 SC 1895
46
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W.P.No.29672 of 2023 & batchfixation. The majority held in that case that such a
guidance was found in the monetary needs of the
municipality for discharging the functions entrusted to it
under the Act. Sarkar, J., speaking for the majority, said
thus:
“It (the Municipal Corporation) has to perform various
statutory functions. It is often given power to decide when
and in what manner the functions are to be performed. For
all this it needs money and its needs will vary from time to
time with the prevailing exigencies. Its power to collect tax,
however, is necessarily limited by the expenses required
to discharge those functions. It has, therefore, where rates
have not been specified in the statute, to fix such rates as
may be necessary to meet its needs. That, we think,
would be sufficient guidance to make the exercise of its
power to fix the rates valid.”
If this decision is an authority for the position that the
Legislature can delegate its power to a statutory authority
to levy taxes and fix the rates in regard thereto, it is
equally an authority for the position that the said statute to
be valid must give a guidance to the said authority for
fixing the said rates and that guidance cannot be judged
by stereotyped rules but would depend upon the
provisions of a particular Act. To that extent his judgment
is binding on us. But we cannot go further and hold, as the
learned counsel for the respondents asked us to do, that
whenever a statute defines the purpose or purposes for
which a statutory authority is constituted and empowers it
to levy a tax that statute necessarily contains a guidance
to fix the rates; it depends upon the provisions of each
statute.
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Learned counsel for the State argued that under Article
162 of the Constitution the executive power of the State
shall extend to matters with respect to which the
Legislature of a State has power to make laws: that is to
say, the executive power of a State extends to matters
mentioned in List II of the Seventh Schedule to the
Constitution; that under Article 266(1) of the Constitution
all the taxes collected will go to the Consolidated Funds of
the State, that the State has an unlimited power to raise
funds by taxation to discharge its vast constitutional duties
and that necessarily the amount of tax required would
depend upon its needs which can only be known to it. In
the said circumstances, the argument proceeds, the
doctrine of constitutional and statutory needs would afford
reasonable guidelines for the Government to fix the rate
and that the principle laid down by this Court in the
aforesaid decision would equally apply to this case. If this
argument be accepted, it would mean that every statute
conferring a naked power on the Government to impose
taxes would be good, for in every case the discharge of
the constitutional duties by the Government would be
deemed to be a sufficient guide for fixing the rate. We
cannot accept this argument for three reasons, namely,
(1) the decision of this Court in Calcutta Corporation v.
Liberty Cinema(1) should be confined only to the
provisions of the Calcutta Municipal Act wherein this Court
found a guidance; (2) the provisions of the Sales Tax Act,
including the preamble, do not disclose any policy or
guidance to the State for fixing the rates; and (3) the
general constitutional power to impose taxes has no
relevance for discovering a statutory policy under a
particular Act.
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47. The next case of importance, was Muncipal Corporation of
Delhi Vs. Birla Cotton Spinning and Weaving Mills. In this case, another
7 judge bench, of the Hon’ble Supreme Court, was again called upon to
consider the limits of delegation of legislative power. The Hon’ble Supreme
Court reviewed the law and held as follows:
20. The last case to which reference may be made
is Devi Das Gopal Krishnan v. State of Punjab [AIR (1967)
SC 1895]. There the law on the subject of excessive
delegation on was summarized thus at p. 1901:
―The Constitution confers a power and imposes a duty
on the legislature to make laws. The essential legislative
function is the determination of the legislative policy and
its formulation as a rule of conduct. Obviously it cannot
abdicate its functions in favour of another. But in view of
the multifarious activities of a welfare State, it cannot
presumably work out all the details to suit the varying
aspects of a complex situation. It must necessarily
delegate the working out of details to the executive or any
other agency. But there is danger inherent in such a
process of delegation. An over-burdened legislature or
one controlled by a powerful executive may unduly
overstep the limits of delegation. It may not lay down any
policy at all; it may declare its policy in vague and general
terms; it may not set down any standard for the guidance
of the executive; it may confer an arbitrary power on the
executive to change or modify the policy laid down by it
without reserving for itself any control over subordinate
legislation. This self effacement of legislative power in
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beyond the permissible limits of delegation. It is for a court
to hold on a fair, generous and liberal construction of an
impugned statute whether the legislature exceeded such
limits. But the said liberal construction should not be
carried by the courts to the extent of always trying to
discover a dormant or latent legislative policy to sustain an
arbitrary power conferred on executive authorities. It is the
duty of the court to strike down without any hesitation any
arbitrary power conferred on the executive by the
legislature.‖It may be added that Devi Dass case [AIR (1967) SC
1895] did not differ from the Liberty Cinema case [(1965) 2
SCR 477] . What was held there was that there can be no
general principle that merely the needs of the delegate
can necessarily and always be a guideline. It was further
held that each statute has to be examined to find out
whether there are guidelines therein which prevent
delegation from being excessive.
28. A review of these authorities therefore leads to the
conclusion that so far as this Court is concerned the
principle is well established that essential legislative
function consists of the determination of the legislative
policy and its formulation as a binding rule of conduct and
cannot be delegated by the legislature. Nor is there any
unlimited right of delegation inherent in the legislative
power itself. This is not warranted by the provisions of the
Constitution. The legislature must retain in its own hands
the essential legislative functions and what can be
delegated is the task of subordinate legislation necessary
for implementing the purposes and objects of the Act.
Where the legislative policy is enunciated with sufficient
50
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W.P.No.29672 of 2023 & batch
clearness or a standard is laid down, the courts should not
interfere. What guidance should be given and to what
extent and whether guidance has been given in a
particular case at all depends on a consideration of the
provisions of the particular Act with which the Court has to
deal including its preamble. Further it appears to us that
the nature of the body to which delegation is made is also
a factor to be taken into consideration in determining
whether there is sufficient guidance in the matter of
delegation.
29. What form the guidance should take is again a
matter which cannot be stated in general terms. It will
depend upon the circumstances of each statute under
consideration; in some cases guidance in broad general
terms may be enough; in other cases more detailed
guidance may be necessary. As we are concerned in the
present case with the field of taxation, let us look at the
nature of guidance necessary in this field. The guidance
may take the form of providing maximum rates of tax upto
which a local body may be given the discretion to make its
choice, or it may take the form of providing for consultation
with the people of the local area and then fixing the rates
after such consultation. It may also take the form of
subjecting the rate to be fixed by the local body to the
approval of the Government which acts as a watch-dog on
the actions of the local body in this matter on behalf of the
legislature. There may be other ways in which guidance
may be provided. But the purpose of guidance,
whatsoever may be the manner thereof, is to see that the
local body fixes a reasonable rate of taxation for the local
area concerned. So long as the legislature has made
provision to achieve that reasonable rates of taxation are
51
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W.P.No.29672 of 2023 & batch
fixed by local bodies, whatever may be the method
employed for this purpose — provided it is effective — it
may be said that there is guidance for the purpose of
fixation of rates of taxation. The reasonableness of rates
may be ensured by fixing a maximum beyond which the
local bodies may not go. It may be ensured by providing
safeguards laying down the procedure for consulting the
wishes of the local inhabitants. It may consist in the
supervision by Government of the rate of taxation by local
bodies. So long as the law has provided a method by
which the local body can be controlled and there is
provision to see that reasonable rates are fixed, it can be
said that there is guidance in the matter of fixing rates for
local taxation. As we have already said there is pre-
eminently a case for delegating the fixation of rates of tax
to the local body and so long as the legislature has
provided a method for seeing that rates fixed are
reasonable, be it in one form or another, it may be said
that there is guidance for fixing rates of taxation and the
power assigned to the local body for fixing the rates is not
uncontrolled and uncanalised. It is on the basis of these
principles that we have to consider the Act with which we
are concerned.
27. The last case to which reference may be made
is Devi Das Gopal Krishnan [AIR (1967) SC 1895]. This
was not a case of municipal taxation. In this case the
legislature gave power to the State Government to fix
sales tax at such rates as the State Government thought
fit. The case of Liberty Cinema [(1965) 2 SCR 477] was
distinguished in this case and it was pointed out that the
needs of the State and the purposes of the Act could not
give sufficient guidance for the purpose of fixing rate of
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W.P.No.29672 of 2023 & batch
sales tax by the State Government. There is in our opinion
a clear distinction between delegation of fixing the rate of
tax like sales tax to the State Government and delegation
of fixing rates of certain taxes for purposes of local
taxation. The needs of the State are unlimited and the
purposes for which the State exists are also unlimited. The
result of making delegation of a tax like sales tax to the
State Government means a power to fix the tax without
any limit even if the needs and purposes of the State are
to be taken into account. On the other hand, in the case of
a municipality, however large may be the amount required
by it for its purposes it cannot be unlimited, for the amount
that a municipality can spend is limited by the purposes for
which it is created. A municipality cannot spend anything
for any purposes other than those specified in the Act
which creates it. Therefore, in the case of a municipal
body, however large may be its needs, there is a limit to
those needs in view of the provisions of the Act creating it.
In such circumstances there is a clear distinction between
delegating a power to fix rates of tax, like the sales tax, to
the State Government and delegating a power to fix
certain local taxes for local needs to a municipal body.
48. The learned Counsel, appearing on both sides, cited subsequent
judgments, to buttress their point of view. These judgments, which are
discussed below have, with some variations, adhered to the above principles.
{V. Nagappa vs. Iron Ore Mines Cess Commissioner and Anr., 14, M.K.
Papaiah & Sons vs. Excise Commissioner and Anr.,15, Supreme Court
14
{1973 (2) SCC 1 [Paragraphs 5, 14 to 18]
15
1975 (1) SCC 492 [Paragraphs 9 and 18],
53
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W.P.No.29672 of 2023 & batch
Employees’ Welfare Association vs. Union of India and Anr., 16 A.N.
Parasuraman and Ors., vs. State of Tamil Nadu,17, Agricultural Market
Committee vs. Shalimar Chemical Works Ltd.,18 and Union of India and
Anr., vs. Mohit Minerals Private Limited}.
49. In V. Nagappa vs. Iron Ore Mines Cess Commissioner and
Anr, the Hon’ble Supreme Court was faced with a challenge to the Iron Ore
Mines Labour Welfare Cess Act (Central Act 58 of 1961), on the ground of
excessive delegation of legislative power as the power to fix the rate of cess
has been delegated to the government without any guidelines. This contention
was negatived by the Hon’ble Supreme Court on the ground that the Act itself
gave guidelines in the following manner:
18. The policy of the Act has been clearly stated; the
purposes for which the tax collected should be expended
have been enumerated and the purposes are such that it
is reasonably possible for the delegate to calculate the
amount necessary to meet them. In these circumstances,
we think that the necessary guidance for fixing the rate
can be found in the amount of expenditure necessary for
carrying out the purposes of the Act. Quite apart from
these circumstances, the fact that Section 2 has fixed the
maximum rate would indicate that the delegate is not
given an uncontrolled discretion in the matter of fixing the
rate. The area within which the discretion has to be
exercised having been clearly demarcated, it cannot be16
1989 (4) SCC 187 [Paragraphs 62, 99 and 100]
17
1989 (4) SCC 683 [paragraphs 3 and 5 to end],
18
1997 (5) SCC 516 [Paragraphs 6,7 21 to 26]
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W.P.No.29672 of 2023 & batchsaid that a blanket power to fix the rate has been
delegated to Government.
This judgment would not be applicable to the present
case, as the Duty Act does not set out the purposes for
which the Duty, collected under the Duty Act, is to be
expended. In the absence of such purposes being
enumerated, no estimate of the quantum of Duty, required
for such purposes can be calculated.
50. In M.K. Papaiah & Sons vs. Excise Commissioner and Anr.,
Section 22 of the Mysore Excise Act, which gave power to the government to
fix rates of excise duty on the arrack purchased by excise contractors from
government depots was challenged on the ground of excessive delegation.
This plea was negatived by the Hon’ble Supreme Court on the basis of the
following ratio:
18. That laying of rules before the Legislature is control
over delegated legislation is implied in the speech of Lord
Thankerton in the House of Lords in Minister of
Health v. King [1931 AC 524] where he said:
―In this case, as in similar cases that have come before
the courts, Parliament has delegated its legislative
function to a Minister of the Crown, but in this case
Parliament has retained no specific control over the
exercise of the function by the Minister, such as a
condition that the order should be before Parliament and
might be annulled by a resolution of either House within a
limited period.‖
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51. In the present case, the fixation of rates and categorization of
consumers is by executive order and not by way of rules issued under the
Duty Act. In such a situation, the principle laid down in the above judgment
would not be applicable to the present case.
52. The judgment in Supreme Court Employees Welfare
Association vs. Union Of India And Anr., , has been cited for the purposes
of contending that the validity of subordinate legislation has to be considered
on the basis of the nature, objects and scheme of the parent Act and the
purpose for which the power has been delegated. There can be no quarrel
with this proposition of law.
53. In A.N. Parasuraman and Ors., vs. State of Tamil Nadu,
certain provisions of The Tamil Nadu Private Educational Institutions
(Regulation) Act, 1966, came to be challenged on the ground that the
government has been vested with unrestricted discretion amounting to
abdication of legislative power. The Hon’ble Supreme Court, upheld this
challenge, by observing:
8. The provisions of the Act indicate that the State
Government has been vested with unrestricted discretion in the
matter of the choice of the competent authority under Section
2(c) as also in picking and choosing the institutions for
exemption from the Act under Section 22. Such an unguided
power bestowed on the State Government was struck down as
offending Article 14 in the case of the State of W.B. v. Anwar Ali
Sarkar [(1952) 1 SCC 1 : AIR 1952 SC 75 : 1952 SCR 284 :
56
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W.P.No.29672 of 2023 & batch1952 Cri LJ 510] . A similar situation arose in K.T. Moopil
Nair v. State of Kerala [AIR 1961 SC 552 : (1961) 3 SCR 77]
where, under Section 4 of the Travancore-Cochin Land Tax Act,
1955, all lands were subjected to the burden of a tax and
Section 7 gave power to the Government to grant exemption
from the operation of the Act. The section was declared ultra
vires on the ground that it gave un-canalized, unlimited and
arbitrary power, as the Act did not lay down any principle or
policy for the guidance of exercise of the discretion in respect of
the selection contemplated by Section 7.
9. Similar is the position under Sections 6 and 7 of the
present Act. The learned counsel for the respondent State
contended that by reference in Section 4 to the particulars to be
supplied in the application for permission, it can be easily
imagined that the competent authority has to take into account
all that may be validly relevant for the grant or refusal of
permission. We are afraid, the section cannot be saved by
recourse to this argument in absence of any helpful guidance
from the Act. The position in this case cannot be said to be on a
better footing than that of the Gold (Control) Act, 1968, which
was challenged in Harakchand Ratanchand Banthia v. Union of
India [(1969) 2 SCC 166 : (1970) 1 SCR 479] . As is indicated
by the judgment, the Gold (Control) Act had to be passed as
gold was finding its way into the country through illegal
channels, affecting the national economy and hampering the
country’s economic stability and progress, and the customs
department was found unable to effectively combat the
smuggling. Section 27(6)(a) of the said Act stated that in the
matter of issue or renewal of licences the ―Administrator shall
have regard to the number of dealers existing in the region in
which the applicant intends to carry on business as a dealer‖.
The expression ―region‖ was not defined in the Act and Section
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W.P.No.29672 of 2023 & batch
27(6)(b) required the Administrator to have regard to ―the
anticipated demand, as estimated by him, of ornaments in the
region‖. The argument in support of the validity of the Act was
that these provisions provided adequate guidance to the
Administrator, which the Court rejected, holding that the
expression ―anticipated demand‖ was vague and not capable of
objective assessment and, therefore, was bound to lead to a
great deal of uncertainty. The other provisions mentioning
―suitability of the applicant‖ in Section 27(6)(e) and ―public
interest‖ in Section 27(6)(g) were also held to have failed in
laying down any objective standard or norm so as to save the
Act. The provisions of the Act, with which we are dealing in the
present cases, are far less helpful for the purpose of upholding
its validity.
54. In Agricultural Market Committee vs. Shalimar Chemical
Works Ltd., the question that came up before the Hon’ble Supreme Court
was whether a rule which created a legal fiction of sale within the area of
market committee if the agricultural product was weighed within the market
area, was beyond the legislative policy. The Hon’ble Supreme court, after
noticing that the provisions of the Act did not provide for such a legal fiction
had held as follows:
26. The principle which, therefore, emerges out is that
the essential legislative function consists of the
determination of the legislative policy and the legislature
cannot abdicate essential legislative function in favour of
another. Power to make subsidiary legislation may be
entrusted by the legislature to another body of its choice
but the legislature should, before delegating, enunciate
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W.P.No.29672 of 2023 & batcheither expressly or by implication, the policy and the
principles for the guidance of the delegates. These
principles also apply to taxing statutes. The effect of these
principles is that the delegate which has been authorized
to make subsidiary rules and regulations has to work
within the scope of its authority and cannot widen or
constrict the scope of the Act or the policy laid down
thereunder. It cannot, in the garb of making rules, legislate
on the field covered by the Act and has to restrict itself to
the mode of implementation of the policy and purpose of
the Act.
27. Applying the above principles to the instant case, it
will be seen that the market fee can be levied under the
Act only on the sales and purchase of notified agricultural
produce within the notified area. Explanation I to Section
12 creates a legal fiction and provides that if any notified
agricultural produce is taken out of a notified market area,
it shall be presumed to have been purchased or sold
within such area. The presumption is a rebuttable
presumption and can be shown to be not correct. The
policy in enacting this provision is only to cover such
transactions of sale and purchase for which direct
evidence may not be available. Since a notified
agricultural produce can be sold only within the notified
market area, and, that too, by a trader having a licence
issued to him by the committee, it is obvious that if such
commodity is moved out of the notified area, it would
mean either that it has been sold or purchased. Otherwise,
there would be no occasion to move such commodity out
of the notified market area. The legal fiction was thus
limited to the ―moving‖ of the commodity from within the
market area to a place outside the market area.
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W.P.No.29672 of 2023 & batch
28. The Government to whom the power to make rules
was given under Section 33 and the committee to whom
power to make bye-laws was given under Section 34
widened the scope of ―presumption‖ by providing further
that if a notified agricultural produce is weighed, measured
or counted within the notified area, it shall be deemed to
have been sold or purchased in that area. The creation of
legal fiction is thus beyond the legislative policy. Such
legal fiction could be created only by the legislature and
not by a delegate in exercise of the rule-making power.
We are, therefore, in full agreement with the High Court
that Rule 74(2) and Bye-law 24(5) are beyond the scope
of the Act and, therefore, ultra vires. The reliance placed
by the assessing authority as also by the appellate and
revisional authority on these provisions was wholly
misplaced and they are not justified in holding, merely on
the basis of weighment of ―copra‖ within the notified area
committee that the transaction of sale took place in that
market area.
55. In Union of India and Anr., vs. Mohit Minerals Private Limited,
two notifications, issued under the GST regime, were under challenge. In the
course of the challenge, certain provisions of law were also challenged on the
ground of excessive delegation. The Hon’ble Supreme Court, while
considering such contentions, had held as follows:
92. The contention of the respondents is that Section
5(3) of the IGST Act only delegates the power to identify
the categories of goods or services on which the tax shall
be paid on reverse charge basis. It is contended that since
Notification No. 10 of 2017 identifies an importer as a
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W.P.No.29672 of 2023 & batchservice recipient for the purposes of Section 5(3), it is ultra
vires the parent Act on the ground of excessive
delegation.
93. The legislature is required to perform its essential
legislative functions. Once the skeletal structure of the
policy is framed by the legislature, the details can emerge
through delegated legislations. [MCD v. Birla Cotton Spg.
& Wvg. Mills, AIR 1968 SC 1232; Avinder Singh v. State of
Punjab, (1979) 1 SCC 137.] It is a settled position that the
legislature cannot delegate its ―essential legislative
functions‖. [Delhi Laws Act, 1912, In re, 1951 SCC
568; Edward Mills Co. Ltd. v. State of Ajmer, AIR 1955 SC
25; A.N. Parasuraman v. State of T.N., (1989) 4 SCC
683.] The essential legislative functions with respect to the
GST law are the levy of tax, subject-matter of tax, taxable
person, rate of taxation and value for the purpose of
taxation. The principles governing these essential aspects
of taxation find place in the IGST Act : Section 5(1)
identifies the subject-matter of taxation as inter-State
supplies of goods, services or both; Section 2(107) of the
CGST Act identifies a taxable person; Section 5(1)
provides a maximum cap of 40% as the rate of taxation;
and Section 5(1) stipulates that the value of taxation be
determined under Section 15 of the CGST Act.
96. In determining the vires of the impugned
notifications, a few preliminary contentions raised by the
respondents would have to be addressed. The
respondents have argued that no charge has been
created for the ocean freight transaction to be taxed in the
hands of the importer. It has been alleged that only
Section 5(1) is a charging provision and Sections 5(3) and
5(4) cannot independently create a charge.
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W.P.No.29672 of 2023 & batch
97. In assessing this claim, this Court is bound by a
decision of the Constitution Bench in Mathuram
Agrawal [Mathuram Agrawal v. State of M.P., (1999) 8
SCC 667] which has identified three essential elements of
taxation:
(i) The subject of the tax;
(ii) The person who is liable to pay the tax; and
(iii) The rate at which the tax is to be paid.
This test has been further elaborated by a two-Judge
Bench of this Court in Govind Saran Ganga Saran [Govind
Saran Ganga Saran v. CST, 1985 Supp SCC 205 : 1985
SCC (Tax) 447 : AIR 1985 SC 1041] by further requiring
the designation of the measure or the value to which the
rate of the tax will be applied. Thus, the four canons of
taxation are as follows:
(i) The taxable event;
(ii) The person on whom the levy is imposed;
(iii) The rate at which the levy is imposed; and
(iv) The measure or the value to which the rate will be
applied.
98. Section 5(1) of the IGST Act specificies the four
canons of taxation : (i) the inter-State supply of goods and
services as the taxable event; (ii) the ―taxable person‖ as
the person on whom the levy is imposed; (iii) the taxable
rate as such a rate notified by the Union Government on
the recommendation of the GST Council, capped at forty
per cent; and (iv) the taxable value as the value
determined under Section 15 of the CGST Act.
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W.P.No.29672 of 2023 & batch
56. In Vivek Narayan Sharma and Ors., vs. Union Of India, a
Constitution Bench of, the Hon’ble Supreme Court, had reviewed the law, in
this regard, in the following manner:
135. It is thus necessary to cull out the legislative policy
from various factors like the words in the statute, the
Preamble to the Act, the Statement of Objects and
Reasons, and in a given case, even the attendant
circumstances. After the legislative policy is found, then the
words used in the statute must be so interpreted such that it
advances the purpose of the statute and does not defeat it.
179. K.N. Wanchoo, C.J., speaking for himself and J.M.
Shelat, J. held in Birla Cotton, Spinning and Weaving
Mills [MCD v. Birla Cotton, Spg. & Wvg. Mills, (1968) 3 SCR
251 : AIR 1968 SC 1232] that where the legislative policy is
enunciated with sufficient clarity or a standard is laid down,
the courts should not interfere. What guidance should be
given and to what extent and whether guidance has been
given in a particular case at all depends on a consideration
of the provisions of the particular Act with which the Court
has to deal, including its Preamble. They further held that
the nature of the body to which delegation is made is also a
factor to be taken into consideration in determining whether
there is sufficient guidance in the matter of delegation. The
Court further held that what form the guidance should take
is again a matter which cannot be stated in general terms. It
will depend upon the circumstances of each statute under
consideration. It further held that in some cases guidance in
broad general terms may be enough, in other cases more
detailed guidance may be necessary.
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W.P.No.29672 of 2023 & batch
190. It has been held in Gwalior Rayon [Gwalior Rayon
Silk Mfg. (Wvg.) Co. Ltd. v. CST, (1974) 4 SCC 98 : 1974
SCC (Tax) 226] that the essential legislative function is the
determination of the legislative policy and its formulation as
a rule of conduct. The legislature cannot abdicate its
functions in favour of another. However, in view of the
multifarious activities of a welfare State, it cannot
presumably work out all the details to suit the varying
aspects of a complex situation. It must, therefore,
necessarily delegate the working out of details to the
executive or any other agency. The Court also cautions
about the danger inherent in the process of delegation. It
observed that an overburdened legislature or one controlled
by a powerful executive may unduly overstep the limits of
delegation. It may not lay down any policy at all; it may
declare its policy in vague and general terms; it may not set
down any standard for the guidance of the executive; it may
confer an arbitrary power on the executive to change or
modify the policy laid down by it without reserving for itself
any control over subordinate legislation. It has been held
that it is for the court to hold on a fair, generous and liberal
construction of an impugned statute to examine whether the
legislature exceeded such limits.
191. We may gainfully refer to the following
observations in the concurring judgment of K.K. Mathew, J.
: (Gwalior Rayon Silk case [Gwalior Rayon Silk Mfg. (Wvg.)
Co. Ltd. v. CST, (1974) 4 SCC 98 : 1974 SCC (Tax) 226] ,
SCC pp. 121-22, para 57)
―57. Delegation of ―law-making‖ power, it has been said,
is the dynamo of modern Government. Delegation by the
legislature is necessary in order that the exertion of
legislative power does not become a futility. Today, while
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W.P.No.29672 of 2023 & batch
theory still affirms legislative supremacy, we see power
flowing back increasingly to the executive. Departure from
the traditional rationalisation of the status quo arouses
distrust. The legislature comprises a broader cross-section
of interests than any one administrative organ; it is less
likely to be captured by particular interests. We must not,
therefore, lightly say that there can be a transfer of
legislative power under the guise of delegation which would
tantamount to abdication. At the same time, we must be
aware of the practical reality, and that is, that Parliament
cannot go into the details of all legislative matters. The
doctrine of abdication expresses a fundamental democratic
concept but at the same time we should not insist that law-
making as such is the exclusive province of the legislature.
The aim of Government is to gain acceptance for objectives
demonstrated as desirable and to realise them as fully as
possible. The making of law is only a means to achieve a
purpose. It is not an end in itself. That end can be attained
by the legislature making the law. But many topics or
subjects of legislation are such that they require expertise,
technical knowledge and a degree of adaptability to
changing situations which Parliament might not possess
and, therefore, this end is better secured by extensive
delegation of legislative power. The legislative process
would frequently bog down if a legislature were required to
appraise beforehand the myriad situations to which it
wishes a particular policy to be applied and to formulate
specific rules for each situation. The presence of Henry VIII
clause in many of the statutes is a pointer to the necessity
of extensive delegation. The hunt by Court for legislative
policy or guidance in the crevices of a statute or the nook
and cranny of its Preamble is not an edifying spectacle. It is
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W.P.No.29672 of 2023 & batch
not clear what difference does it make in principle by saying
that since the delegation is to a representative body, that
would be a guarantee that the delegate will not exercise the
power unreasonably, for, if ex hypothesi the legislature
must perform the essential legislative function, it is certainly
no consolation that the body to which the function has been
delegated has a representative character. In other words, if,
no guidance is provided or policy laid down, the fact that the
delegate has a representative character could make no
difference in principle.‖
(emphasis supplied)
192. Though the learned Judge in Gwalior
Rayon [Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CST,
(1974) 4 SCC 98 : 1974 SCC (Tax) 226] cautions against
abdication under the guise of delegation, he also
emphasises a necessity to be aware about the practical
reality i.e. Parliament cannot go into the details of all
legislative matters. The learned Judge observed that the
aim of the Government is to gain acceptance for objectives
demonstrated as desirable and to realize them as fully as
possible. The learned Judge observed that there are many
topics or subjects of legislation which are such that they
may require expertise, technical knowledge and a degree of
adaptability to changing situations which Parliament might
not possess and, therefore, this end is better secured by
extensive delegation of legislative power. It has been held
that the legislative process would frequently bog down if a
legislature were required to appraise beforehand the myriad
situations to which it wishes a particular policy to be applied
and to formulate specific rules for each situation. The Court
further emphasised for guidance for the delegate to
exercise the delegated power.
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W.P.No.29672 of 2023 & batch
208. For considering the question as to whether the RBI
Act provides guidance to the delegatee or not, the entire
scheme, object and the purpose of the Act has to be taken
into consideration. The guidance could be sought from the
express provision empowering delegation or the other
provisions of the statute, the Preamble, the scheme or even
the very subject-matter of the statute. If the guidance could
be found in whatever part of the Act, the delegation has to
be held to be valid. A great amount of latitude has to be
given in such matters. It has been consistently held that
Parliament and the State Legislatures are not bodies of
experts or specialists. They are skilled in the art of
discovering the aspirations, the expectations and the needs
of the people whom they represent. It has been held that
they function best when they concern themselves with
general principles, broad objectives and fundamental issues
instead of technical and situational intricacies which are
better left to better equipped full-time expert executive
bodies and specialist public servants.
210. We are of the considered view that there is
sufficient guidance in the Preamble as well as the scheme
and the object of the RBI Act. As already discussed
hereinabove, there cannot be a straitjacket formula, and the
question whether excessive delegation has been conferred
or not has to be decided on the basis of the scheme, the
object and the purpose of the statute under consideration.
57. The principles that can be extracted, from these judgments, are:
1. The function of the legislature is to formulate legislative policy and to
enact it into binding Law.
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W.P.No.29672 of 2023 & batch
2. After such formulation, the legislature may fill in the details of
implementation or delegate the same to the executive or any other
agency. However, such delegation, for the purposes of implementing
the enactment, has to be within the guidelines and limits set out in the
enactment itself. Any delegation beyond that would amount to
excessive delegation and would be invalid.
3. The guidelines or limits can be explicit or should be discernible from the
scheme and objects of the enactment.
4. The extent of guidance necessary and the form of guidance would
differ, on a case to case basis, and would also be dependent upon the
nature of the authority, to whom, legislation has been delegated.
58. Applying these principles, the delegation of fixing the rate of duty,
without any minimum or maximum limit, by way of Act 10 of 2021, prima facie,
appears to be excessive delegation. The State has contended that this prima
facie view would not stand further scrutiny, once the attendant circumstances
and scheme of the Act are taken into account. However, the law which needs
to be tested is the Duty Act, as amended by Act 23 of 2024, as it had
effectively subsumed the amendment put in place by Act 10 of 2021. The
impugned part of Section 3 (1) of the Duty Act, as it stands today, is:
A duty calculated at the rate notified by the State
Government from time to time for different consumer
categories which shall not be less than 6 paise
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W.P.No.29672 of 2023 & batch(Rs.0.06) per unit of energy and not be more than 100
Paise, (Rs.1.00 rupee) per unit of energy,
59. The executive is delegated the power to fix the rate of duty
between 6 paise and 1 rupee, per unit of electricity. The Hon’ble Supreme
Court, in Municipal Corporation of Delhi Vs. Birla Cotton Spinning and
Weaving Mills, had held that stipulation of the outer limit would be a sufficient
guideline, in the following passage:
29. What form the guidance should take is again a
matter which cannot be stated in general terms. It will
depend upon the circumstances of each statute under
consideration; in some cases guidance in broad general
terms may be enough; in other cases more detailed
guidance may be necessary. As we are concerned in the
present case with the field of taxation, let us look at the
nature of guidance necessary in this field. The guidance
may take the form of providing maximum rates of tax upto
which a local body may be given the discretion to make its
choice, or it may take the form of providing for consultation
with the people of the local area and then fixing the rates
after such consultation. It may also take the form of
subjecting the rate to be fixed by the local body to the
approval of the Government which acts as a watch-dog on
the actions of the local body in this matter on behalf of the
legislature. There may be other ways in which guidance
may be provided. But the purpose of guidance,
whatsoever may be the manner thereof, is to see that the
local body fixes a reasonable rate of taxation for the local
area concerned. So long as the legislature has made
provision to achieve that reasonable rates of taxation are
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W.P.No.29672 of 2023 & batchfixed by local bodies, whatever may be the method
employed for this purpose — provided it is effective — it
may be said that there is guidance for the purpose of
fixation of rates of taxation. The reasonableness of rates
may be ensured by fixing a maximum beyond which the
local bodies may not go. It may be ensured by providing
safeguards laying down the procedure for consulting the
wishes of the local inhabitants. It may consist in the
supervision by the Government of the rate of taxation by
local bodies. So long as the law has provided a method by
which the local body can be controlled and there is
provision to see that reasonable rates are fixed, it can be
said that there is guidance in the matter of fixing rates for
local taxation. As we have already said there is pre-
eminently a case for delegating the fixation of rates of tax
to the local body and so long as the legislature has
provided a method for seeing that rates fixed are
reasonable, be it in one form or another, it may be said
that there is guidance for fixing rates of taxation and the
power assigned to the local body for fixing the rates is not
uncontrolled and uncanalized. It is on the basis of these
principles that we have to consider the Act with which we
are concerned.
60. One of the guidelines that can be given, as per the above
passage, would be the fixation of a maximum rate of tax or Duty. Though, this
passage arises in a case of municipal taxation, the principle, of guidance
being given by fixing the maximum rate, would be applicable even to taxes
imposed by the State. The petitioners had further contended that, the range
of six paise to one rupee, which is approximately 16 times the minimum rate,
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W.P.No.29672 of 2023 & batch
is too wide a gap and amounts to unbridled discretion being given to the
executive. However, this gap is not so large, if the value of money, in absolute
terms, is taken into account. Further, the rate of Duty, at 6 paise per unit had
not been touched for 28 years. Keeping in view the fall, in the value of money,
the range of 6 paise to one rupee per unit cannot be termed to be too
excessive. For these reasons, it must be held that the amendment to Section
3 of the Duty Act, by Act 23 of 2024, to the extent of giving discretion, to the
executive, to fix the rate of Duty between six paise and one rupee per unit, is
valid.
61. The learned Advocate General also sought to rely upon the
judgment of the Hon’ble Supreme Court, in Govind Saran Ganga Saran vs.
CST., to contend that delegation of the power to fix the rate of duty, after fixing
various other parameters would not amount to excessive delegation. This
court is not going into this question in view of the opinion of this court that the
fixation of a maximum rate is a sufficient guideline to save it from the vice of
excessive delegation.
62. The question of identification of categories of consumers remains.
The case of the petitioners is that the Duty Act, is a taxing statute, enacted for
the purpose of raising funds, which can be used for any purpose, by the
Government. Apart from this, no other object can be gleaned from the
provisions of the Duty Act. The object of raising funds does not give out any
guideline or policy for fixing the basis of categorization. In the absence of any
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such guidance, the identification of categories of customers could not have
been delegated.
63. The learned Advocate General, contends that, under
G.O.Ms.No.7, different rates of duty are levied on sale of electricity, based on
the categories of consumers mentioned in the yearly retail supply tariff orders
that would be passed by APERC. He submits that G.O.Ms.No.7 is mentioned
in the objects and reasons of Act 23 of 2024 and as such the categorization of
consumers, by APERC, in the yearly retail supply orders, is the guidance that
would be followed by the Government, while identifying different categories of
consumers. He would also contend that, in similar circumstances, the
erstwhile High Court of Andhra Pradesh, in D.K.V.Prasada Rao and Ors., vs.
The Government Of Andhra Pradesh19, had upheld similar delegation to fix
rates of admission to various classes, within cinema theatres.
64. The petitioners contend that Objects and Reasons cannot be
looked into, for interpreting the provision of an Act. Reliance is placed upon
Aswini Kumar Ghose and Anr., vs. Arabinda Bose and Anr., 20 and
Kavalappara Kottarathil Kochuni @ Moopil Nayar and Ors., vs. States of
Madras and Kerala and Ors.,21. Further, the petitioners also contend that, the
provisions of G.O.Ms.No.7 cannot be read into the provisions of the Duty Act,
as Act 23 of 2024, mentions G.O.Ms.No.7, in passing and there is nothing in
19
AIR 1984 AP 75:: 1983 SCC Online AP 61
20
AIR 1952 SC 369
21
AIR 1960 SC 1080
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the language of the Objects and Reasons of Act 23 of 2024 to make out a
case for reading such guidelines as part and parcel of the Duty Act. The
petitioners also dispute the applicability of the judgment in D D.K.V.Prasada
Rao and Ors., vs. The Government Of Andhra Pradesh. The learned
Advocate General contends that the Objects and Reasons of an Act, on the
basis of Vivek Narayan Sharma and Ors., vs. Union Of India and Dharani
Sugars and Chemicals Limited vs. Union of India and Ors., , can be
looked into for obtaining guidance.
65. It is necessary to first go into the question of whether the Objects
and Reasons of an Act can be looked into for obtaining guidance. The Hon’ble
Supreme Court, which was considering the question of whether an Advocate
enrolled with the Hon’ble Supreme Court was entitled to act before the
Hon’ble High Court of Calcutta, in the case of Aswini Kumar Ghose v.
Arabinda Bose, at page 266, refused to take the aid of the statement in the
Objects and Reasons, for interpreting the Act, for the following reason:
32. As regards the propriety of the reference to the
Statement of Objects and Reasons, it must be
remembered that it seeks only to explain what reasons
induced the mover to introduce the Bill in the House and
what objects he sought to achieve. But those Objects and
Reasons may or may not correspond to the objective
which the majority of members had in view when they
passed it into law. The Bill may have undergone radical
changes during its passage through the House or Houses,
and there is no guarantee that the reasons which led to its
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W.P.No.29672 of 2023 & batchintroduction and the objects thereby sought to be achieved
have remained the same throughout till the Bill emerges
from the House as an Act of the Legislature for they do not
form part of the Bill and are not voted upon by the
members. We, therefore, consider that the Statement of
Objects and Reasons appended to the Bill should be ruled
out as an aid to the construction of a statute.
66. This principle was followed, by a Constitution bench of the
Hon’ble Supreme Court, in Kavalappara Kottarathil Kochuni @ Moopil
Nayar and Ors., vs. States of Madras and Kerala and Ors.
67. In Dharani Sugars and Chemicals Limited vs. Union of India
and Ors., the Hon’ble Supreme Court, while considering the question of lack
of guidance, in the course of delegation of legislative functions, had held:
28. When it comes to lack of any guidelines by which
the power given to RBI is to be exercised, it is clear from a
catena of judgments that such guidance can be obtained
not only from the Statement of Objects and Reasons and
the Preamble to the Act, but also from its provisions. Thus,
in Harishankar Bagla v. State of M.P. [Harishankar
Bagla v. State of M.P., (1955) 1 SCR 380 : AIR 1954 SC
465 : 1954 Cri LJ 1322] , this Court held: (SCR pp. 388-89
: AIR p. 468, para 9)―9. The next contention of Mr Umrigar that Section 3 of
the Essential Supplies (Temporary Powers) Act, 1946,
amounts to delegation of legislative power outside the
permissible limits is again without any merit. It was settled
by the majority judgment in Delhi Laws Act case [Delhi
Laws Act, 1912, In re, 1951 SCC 568 : 1951 SCR 747 :
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W.P.No.29672 of 2023 & batchAIR 1951 SC 332] that essential powers of legislature
cannot be delegated. In other words, the legislature
cannot delegate its function of laying down legislative
policy in respect of a measure and its formulation as a rule
of conduct. The legislature must declare the policy of the
law and the legal principles which are to control any given
cases and must provide a standard to guide the officials or
the body in power to execute the law. The essential
legislative function consists in the determination or choice
of the legislative policy and of formally enacting that policy
into a binding rule of conduct.
In the present case the legislature has laid down such
a principle and that principle is the maintenance or
increase in supply of essential commodities and of
securing equitable distribution and availability at fair
prices. The principle is clear and offers sufficient guidance
to the Central Government in exercising its powers under
Section 3. Delegation of the kind mentioned in Section 3
was upheld before the Constitution in a number of
decisions of their Lordships of the Privy Council,
vide Russell v. R. [Russell v. R., (1882) LR 7 AC 829 (PC)]
, Hodge v. R. [Hodge v. R., (1883) LR 9 AC 117 (PC)]
and Shannon v. Lower Mainland Dairy Products
Board [Shannon v. Lower Mainland Dairy Products Board,
1938 AC 708 (PC)] and since the coming into force of the
Constitution delegation of this character has been upheld
in a number of decisions of this Court on principles
enunciated by the majority in Delhi Laws Act case [Delhi
Laws Act, 1912, In re, 1951 SCC 568 : 1951 SCR 747 :
AIR 1951 SC 332] . As already pointed out, the Preamble
and the body of the sections sufficiently formulate the
legislative policy and the ambit and character of the Act is
75
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W.P.No.29672 of 2023 & batchsuch that the details of that policy can only be worked out
by delegating them to a subordinate authority within the
framework of that policy. Mr Umrigar could not very
seriously press the question of the invalidity of Section 3 of
the Act and it is unnecessary therefore to consider this
question in greater detail.‖
68. At first blush, there does appear to be a contradiction between
these two judgments. However, a closer look would reveal that there is no
such contradiction. In Aswini Kumar Ghose v. Arabinda Bose, the Hon’ble
Supreme Court had held that the statement in the Objects and Reasons,
cannot be used to interpret a provision of the Statute. In Dharani Sugars and
Chemicals Limited vs. Union of India and Ors., the Hon’ble Supreme Court
was not looking at an interpretation of the Statute. The Hon’ble Supreme
Court, after considering whether any guidelines, for exercise of discretion by
the executive, can be extracted from the statement in the Objects and
Reasons of that Statute, had held that such an exercise was permissible. In
such circumstances, it would be open to this court to see if any such
guidelines can be made out from the statement of Objects and Reasons, set
out in Act 23 of 2024.
69. The law, as laid down by the Hon’ble Supreme Court, in the
judgments cited above, is that the function of the legislature is to formulate the
policy and purpose for which a Statute is sought to be enacted, leaving the
details of the implementation to the executive. This latitude has to be given to
the executive due to the complexity of present day economic activity and the
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multifarious requirements of the regulatory and taxation framework. However,
this latitude is, explicitly or implicitly, controlled by the requirement of adhering
to the purposes of the Statute. Therefore, this Court is required to see what
the purpose and object of the Act is, and consider whether such an inherent
control, over the discretion given to the executive, can be found and
formulated.
70. The Duty Act has been enacted to levy Duty on the sale and
consumption of electricity in the State of Andhra Pradesh. It is a taxation
statute, brought into existence to create revenue for the State. The Duty,
collected under the Duty Act, is not a cess, which is to be used for a specific
purpose. It would go into the general revenue stream of the State. No
guidance can be gleaned from the structure of the Duty Act or from any of the
attendant circumstances. The Learned Advocate General also does not
contend that there is guidance, in the Duty Act, relating to categorization of
consumers, even prior to Act 23 of 2024. It is his case that such guidelines
have been introduced, by mention of G.O.Ms.No.7, in the objects and reasons
given in Act 23 of 2024. For this purpose it is necessary to take a closer look
at G.O.Ms.No.7 and the objects and reasons of Act 23 of 2024.
71. The relevant part of G.O.Ms. No.7, reads as follows:
In exercise of the powers conferred by sub-section (1)
Section 3 of the Andhra Pradesh Electricity Duty Act,
1939, the Government of Andhra Pradesh hereby levy an
electricity duty of 1 (one) rupee per kWh (unit) on energy
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W.P.No.29672 of 2023 & batchsales for the Commercial and Industrial Consumers as
indicated in the relevant yearly Retail Supply Tariff Order
issued by Hon’ble APERC. For Domestic Consumers, the
existing electricity duty of 6 paise per KWh (unit) shall
continue to be levied, while Agriculture consumers shall be
exempted from levy of any such duty.
72. The Retail Supply Tariff Order, dated 30.03.2022, for 2022-23,
which has been placed before this court, is the relevant Tariff Order. In this
order, consumers have been categorized, for purposes of fixing Tariff, at the
retail level, into two broad categories, namely LT category and HT category,
with further sub division in the following manner:
LOW TENSION
(I) Domestic, (II) Commercial, (III) Industry, (IV)
Institutional, (V) Agriculture & related.
Each sub category is further categorized, on the
basis of consumption of electricity or on the basis of
the nature of the consumer.
HIGH TENSION
(I) HT at 11 KV
A. Townships, Colonies, Gated Communities and
Villas, B. Commercial & others, C. Industry D.
Institutional and E. Agriculture and Related.
(II) HT at 33 KV,
A. Townships, Colonies, Gated Communities and
Villas, B. Commercial & others, C. Industry D.
Institutional and E. Agriculture and Related.
(III) HT at 132 KV.
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A. Townships, Colonies, Gated Communities and
Villas, B. Commercial & others, C. Industry D.
Institutional and E. Agriculture and Related.
73. In G.O.Ms.No.7, the Government, while fixing the rates of Duty,
appears to have relied upon this categorization. However, there are certain
significant variations. The Tariff order speaks of two categories of Low
Tension (LT) and High Tension (HT) consumers which are, sub-divided into
5 sub-categories. G.O. Ms. No. 7, does not differentiate between LT and HT
consumers and only refers to Domestic, Commercial, Industrial and
Agricultural categories. There is no mention of the sub categories, within the
categories relating to Low Tension consumers. There is no mention of
Institutional consumers, in LT or HT categories or of ―Townships, Colonies,
Gated Communities and Villas‖, in the HT category. There is neither levy of
Duty or exemption from Duty, on these two classes of consumers. In such a
situation, it can only be said that the classification, in G.O.Ms.No.7, is an
adaptation and not an unequivocal adoption of the categories in the Tariff
order.
74. Another aspect that needs to be gone into is the relevance and
effect, of the mention of G.O.Ms.No.7, in the Objects and Reasons of Act 23
of 2024. The Objects and Reasons, given for enacting Act 23 of 2024, are as
follows:
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W.P.No.29672 of 2023 & batchi. The rate of Duty, at 6 paise per unit, which was fixed on 01.12.1993,
had remained unchanged for the past 28 years and there was a
need to increase it, especially because other states had increased
the rate of Duty substantially. Since, the attempt to increase this rate
of Duty, by way of Act 10 of 2021, was found to be burdened by
some defects, it was necessary to bring in a fresh legislation to
rectify these defects;
ii. to provide legislative guidance for the range of Duty rates, in the Act
itself;
iii. to protect all Duty recovery actions, by the licensees, from various
persons (iv) to protect the collection of Duty, between 26.08.2021,
when Act 10 of 2021 was brought into force, by Act 10 of 2024 and
the notification of Duty, by G.O.Ms.No.7, dated 08.04.2022.
75. The relevant extract of the Objects and Reasons, where G.O. Ms.
No. 7 is mentioned is:
To achieve the above objectives, the State Legislature
has passed the Act No.10 of 2021 i.e., Andhra Pradesh
Electricity Duty (Amendment) Act, 2020. As the said Act
was published, pursuant to securing all the mandatory
assents, by way of Gazette Notification on 26th August
2021, the same date was intended for the purposes of
bringing the Act No. 10 of 2021 into force. However, the
terms ―appoint‖ / ―appointed date‖ could not be defined
under section 1 (2) of the said Amendment Act, which
provides that ―it shall come into force on such date as the
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W.P.No.29672 of 2023 & batchState Government may, by notification, appoint,‖ and a
separate ―notification‖ could not be issued due to an
inadvertent omission. To avoid potential legal
complications, the State Legislature passed Act No. 10 of
2024 i.e., Andhra Pradesh Electricity Duty (Amendment)
Act, 2024 on March 6th, 2024, which amended the
A.P.E.D. Amendment Act of 2020. This 2024 amendment
brought the APED; Amendment Act of 2020 into force
from the date of its publication in the A.P. Gazette on 26th
August, 2021.
Further, due to the imminent need to 1) protect all duty
recovery actions of the licensees from various persons or
classes of persons for the entire extent of the electricity
duty collected by the State Government from the
licensees, 2) to protect the collection of electricity duty
during the period between the date of A.P.E.D.
Amendment Act 2020 coming into force, i.e., 26.08.2021,
and the duty rates notified vide G.O.Ms.No.7, dated
08.04.2022, and 3) to provide appropriate legislative
guidance on the range of duty by way of validating
amendments and substitutions to the fiscal statute with
retrospective effect, it has been felt necessary to propose
amendments to sections 3(1) and 7(1) of the Andhra
Pradesh Electricity Duty Act, 1939 (as amended by Act
No.10 of 2021 and Act No.10 of 2024) (hereinafter
referred to as ―the Act‖).
In order to provide legislative guidance for the range of
duty rates in the Act itself, a rate of duty between 0.06
rupees (6 paise) per unit (KWH) of energy and 1.00
rupees (100 paise) per unit (KWH) of energy is being
provided in Section 3 (1) of the Act. Within the range of
duty provided, the State Government may decide on the
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rate to be levied, considering the increase in cost of supply
and current consumption year by year, the costs and
obligations of developing physical infrastructure, and a
variety of dynamic factors with a bearing on the subject
which vary from time to time.
76. None of the Objects and Reasons relate to the question of
categorization. They are either relating to fixation of rate of Duty or the need to
rectify the legal defects, in the earlier legislative attempts, to increase the rate
of Duty and the recovery of such Duty, by the licensees. Even the part relating
to fixation of Duty, is on the question of the range within which such discretion
is to be given, and not on categorization. G.O.Ms.No.7 is a solitary executive
order, adapting the classification, adopted by the APERC, in its Tariff order.
Neither the Text nor the Context, of G.O.Ms.No.7, indicates that this
adaptation of the classification, in the Tariff order, is a long term or permanent
feature of classification by the executive. The adaptation or adoption of the
nomenclature, used in the Tariff Order, in G.O.Ms.No.7, does not make out
any case of giving future guidance, in relation to the method or basis of
identifying categories of consumers. There is every possibility of the
Government coming up with a new and different basis for classification of
consumers and the classification, mentioned in G.O.Ms.No.7, does not bind
the Government to adhere only to this classification.
77. The Objects and Reasons, of Act 23 of 2024, state that the Act is
being enacted for protecting the collection and recovery of Duty levied under
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W.P.No.29672 of 2023 & batch
G.O.Ms.No.7. In view of the context, in which it has been mentioned, the mere
mention of G.O.Ms.No.7, in the Objects and Reasons, would not mean that
guidance is being provided to the executive.
78. The stand of the State is that, guidance has to be elicited on the
basis of the Objects and Reasons, of Act 23 of 2024. As discussed above, no
guidance can be obtained from these Objects and Reasons. Consequently,
the delegation of power, to the executive, to identify categories without any
guideline or policy, would amount to excessive delegation, which is not
permissible.
79. The learned Advocate General, had contended, in the alternative,
that the ratio in D.K.V. Prasada Rao and Ors., vs. The Government of
Andhra Pradesh, would be applicable to the facts of the present case. In the
above case, the delegation of the power to fix rates of admission, to various
classes, in cinema theatres, was challenged before the erstwhile High Court of
Andhra Pradesh. The challenge was negatived on the ground that fixation of
rates, in that case, had sufficient guidance. The said judgment would not be of
assistance to the State, as there was no challenge to the classification of the
different classes of admission into the theatres and this case only dealt with
fixation of rates and not with the issue of classification or categorization.
80. Accordingly, it is held that the delegation of the power, to
categorize, is not accompanied by any guidance, either in the Duty Act or
otherwise and consequently, the amendment to section 3, by Act 23 of 2024,
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W.P.No.29672 of 2023 & batch
as well as Act 10 of 2021, to the extent of giving discretion to the government
to categorize consumers as per its discretion is invalid. This invalidity is on
account of excessive delegation. The other amendments to section 3 do not
suffer from any infirmity and are upheld.
ISSUE NO. 2
Whether the amendment to Section 7 of the Duty Act, by Act 23 of 2024
is valid?
81. The changes made in section 7, of the Duty Act are as follows:
Section 7(1) (As stood prior to its Section 7(1) (as amended by Act
amendment No.23 of 2024)Any licensee may with the previous Any Licensee may, with the sanction of
sanction of the State Government and the state government, whether granted
subject to such conditions as they may prior or post facto and subject to such
impose, recover from any person or class condition as may be imposed at any
of persons to whom energy, is sold at a time, recover from any person or class of
price of more than twelve paise per unit, persons to whom energy, is sold at a
the duty which falls to be paid by the price of more than twelve paise per unit,
licensee in respect of energy so sold or the duty which falls to be paid by the
any part of it, as may be determined by licensee in respect of energy so sold or
the State Government. any part of it, as may be determined by
the State Government.
Provided that the duty recovered or
to be recovered by the licensee from
any person or class of persons, for
the full amount of duty paid/falls to be
paid by the licensee to the state
government, shall always be deemed
to have been recovered with the
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W.P.No.29672 of 2023 & batchsanction of the State Government,
which sanction can be granted either
before or after any action for recovery.
82. The petitioners contend that, under section 7 of the un-amended
Duty Act, prior sanction was necessary for recovery of duty, by the Licensees
from the consumers, whereas the amendment removes this safeguard and
gives unbridled and unguided power to the executive to grant sanction post or
pre facto, for collection of Duty from the consumers. They would point out to a
situation where, the licensee recovers Duty, without sanction and is permitted
to utilize the same, for any length of time, on the pretext that the Government
had not taken a decision to sanction such recovery or not. The petitioners
contend that in such a situation, there would be collection of Duty without
authority of Law. Further, such power is given, to the licensees, without any
guidelines and would be bad for excessive delegation of power.
83. The learned Advocate General would contend that the plenary
power of the legislature would include the power to legislate retrospectively.
He would also contend that the State is the ultimate beneficiary of the
collection of Duty and as such, pre or post facto sanction would not make any
difference. It is further contended that this amendment had been carried out
for the purposes of saving the collection of the Duty from 26.08.2021 till
19.12.2024, when Act 23 of 2024 had been brought into force.
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84. The scheme of the Duty Act, prior to the impugned amendment of
Section 7 of the Duty Act, needs to be considered. The Duty, under the Duty
Act is levied and collected, by the State, from the licensee. However, the
State, under Section 7, can permit the licensee to reimburse itself, by
collecting the said Duty from its consumers. This permission was to be
obtained before any Duty could be collected from the consumers. At this stage
another facet needs to be considered. Taxation statutes are broadly
categorized into direct taxes and indirect taxes. Direct taxation statutes are
Acts where the levy and collection is on the taxpayer under that Act, without
any opportunity to pass on the liability. Indirect Taxation statutes are Acts
where the person who is liable to pay the tax, is permitted to pass on the
burden. Normally, passing on the burden is again a matter of contract
between the person liable to pay the tax and the person to whom such liability
is being passed on. In short, the person to whom the liability is sought to be
passed on has a say in the matter and can decline to bear the burden. This
does not appear to be the case, under the Duty Act. The language of Section
7 makes it clear that this permission is a sanction to collect, without reference
to consent of the consumers. The consumer has no say in the matter and the
licensee is entitled to pass on the Duty. Effectively, wherever such prior
sanction is given, the levy and collection of Duty is shifted to the consumer.
This can also be seen in the language in which G.O.Ms.No.277, dated
09.12.1994, has been couched. In this G.O., sanction is granted to collect
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Duty from the consumers subject to certain conditions contained therein. None
of the conditions require the consent of the consumers for collection of Duty
from them. On the contrary, it is stipulated, in condition (d) that the licensee
can exercise powers under section 24 (1) of the Indian Electricity Act, 1910 to
recover the Duty. Condition (e) directs that interest at the rate of 24% per
annum can be collected as interest, on unpaid Duty, from the consumer.
85. Under the above scheme, the Duty Act is neither a classical direct
tax nor indirect tax system. It is a statute where a direct tax regime could be
changed into an indirect tax regime, of sorts, by the government giving prior
sanction. The option of making such a switch was delegated to the
government alone. This scheme is now modified to permit the licensees to
collect the Duty, levied on them, without any prior sanction. The sanction can
be pre or post facto. The collection of Duty, from the consumers, is at the sole
discretion of the licensees. In effect, the burden and liability of payment of
Duty, on the consumers, can be decided by the licensees, who are non state
entities, without reference to the government and the situation can be rectified
only if the government intervenes, subsequently. This kind of delegation is not
delegation to the government, but delegation to private/public entities, with
oversight given to the government. Such a delegation, by any stretch of
imagination, would not be permissible.
86. The Hon’ble Supreme Court in M.P.Cement Manufacturers
Association vs. State of M.P., had held that electricity Duty is a tax. Under
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the amended Section 7, a licensee, without prior approval, can collect Duty
from its consumers. This collection, as observed above, is not a matter of
contract between the licensee and the consumers. It is collection of tax, by the
licensee, under authority of Law, acting as an agent of the State. The
government which does not interfere in such collection can at a later stage
refuse post facto sanction. This would mean that a tax has been collected,
from the consumers, without authority of Law. Such a recovery of tax would be
violative of Article 265 of the Constitution of India. A provision of law, which
enables such a situation, would also be violative of Article 265 of the
Constitution.
87. It was open to the legislature to have shifted to an indirect tax
regime, by simply stipulating that Duty can always be collected, by a licensee,
from its consumers, subject to an exemption being given by the government,
from such collection. Instead, the legislature chose to amend section 7, in the
manner set out above. It would have to be construed that, the legislature was
not proposing to change the system, except to the extent of giving discretion
to the licensees to collect Duty from the consumers. The learned Advocate
General contends that this amendment is for the purposes of protecting the
collection of Duty between 21.08.2021 and 19.12.2024. Such a contention
could have been considered, if the amendments had restricted itself to this
period, by treating the same as a onetime ratification of the collection of Duty.
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However, the open ended provision, permitting such collection in the future
also, militates against any such consideration.
88. In the circumstances, the amendment to section 7, including the
proviso would have to be declared to be invalid and violative of Article 265 of
the Constitution of India apart from amounting to excessive delegation.
ISSUE – 3
Whether G.O.Ms.No.7, dated 08.04.2022 is valid?
89. G.O.Ms.No.7 has been issued on the basis of the amended
section 3 of the Duty Act, empowering the government to fix different rates of
Duty to different categories of consumers. The power to fix any rate of Duty,
between six paise to one rupee per unit, has been upheld by this court. The
power to categorize consumers has been struck down. Consequently, the
fixation of different rates of Duty, for different categories identified by the
government would have to be set aside. In view of the above, this court is not
going into the other contentions raised by either side. Accordingly,
G.O.Ms.No.7 is struck down.
90. However, it would also have to be observed that the proviso to
Section 3, fixing the minimum rate of Duty at 6 paise per unit is valid.
Consequently, levy of Duty, irrespective of the category of the consumer,
subject to such exemptions that may have been given, under section 3A of the
Duty Act, would be valid.
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ISSUE – 4
Whether G.O.Ms.No.22, dated 23.10.2024 is valid?
91. Clause 3 (a) of G.O.Ms.No.22 reads as follows:
3. Without prejudice to the Government’s stand that the
levy as undertaken pursuant to the G.OMs.No.7, date
08.04.2022 is strictly in accordance with law and in
accordance with the sanction as obtained in
G.O.Ms.No.277 (Energy & Forests (Pr.III) Department),
date 09.12.1994. However, as an abundant precaution,
Government after careful examination of the above issue
and in exercise of the powers under sub-section (1) of
Section 7 of the Andhra Pradesh Electricity Duty Act, 1939
(as amended from time to time)
a. Accords permission to the Licenses / DISCOMSs
(APCPDCL, APSPDCL and APEPDCL) to recover the
Electricity Duty at the rate(s) and from the consumers /
class of consumers as notified in the G.O.Ms.No.7,
Energy (Power.III) Department, dated 08.04.2022, to
whom energy is sold at a price of more than 12 paise
per unit, subject to the following conditions.
i) The electricity duty recoverable from such consumer
or class of consumers shall not be a part of the price
charged for the energy sold by the Licensees /
DISCOMs.
ii) The duty recoverable from a consumer or class of
consumers shall be a first charge on the amounts
recoverable by the Licensees / DISCOMs for the
energy supplied by the Licensees / DISCOMSs and
shall be a debt due by the Licensees / DISCOMSs to
the State Government.
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92. As can be seen from the above extract, this G.O. has been
issued for permitting licensees to collect, from consumers, the Duty fixed
under G.O.Ms.No.7. Since G.O.Ms.No.7, has been struck down, the question
of granting sanction to collect Duty, fixed under G.O.Ms.No.7, would not arise.
Accordingly, G.O.Ms.No.22 is also struck down. As this G.O. has been struck
down, on this ground, this court is not going into the other contentions raised
against this G.O.
93. The Government, while issuing G.O.Ms.No.22, had stated, in
clause 3, that earlier sanction, for licensees, to collect Duty from consumers,
was already available, under G.O.Ms.No.277, dated 09.12.1994. This G.O.
has not been challenged. Therefore, sanction, to collect Duty, at the rate of six
paise per unit, from the consumers would continue to be in effect.
94. For the aforesaid reasons, all the cases are disposed of in terms
of the following order:
1. The amendment to Section 3, by Act 23 of 2024, to the extent of
granting power to the government to fix the rate of Duty between six
paise to one rupee per unit is upheld.
2. The amendment to Section 3, by Act 10 of 2021 and Act 23 of 2024, to
the extent of granting power to the government to identify categories of
consumers, for purposes of fixing the rate of tariff is set aside.
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3. The proviso, to Section 3, stipulating that, in the absence of the rate of
duty notified by the state government for different consumer categories
at any given time, a minimum duty of 6 paise (Rs. 0.06) per unit of
energy shall be levied, shall remain unaffected.
4. The amendments to Section 7, by Act 23 of 2024, are struck down.
5. G.O.Ms.No.7, dated 08.04.2022 is struck down. However, the
government is entitled to collect Duty at the rate of 6 paise per unit,
throughout the period from the date when Act 10 of 2021 was published
in the Gazette till such time as the rate of duty is modified, in
accordance with law. Further, the exemption granted to agricultural
consumers under G.O.Ms.No.82, dated 07.07.2003, remains in force.
6. G.O.Ms.No.22, dated 23.10.2024, is struck down. However,
G.O.Ms.No.277, dated 09.12.1994, remains in force throughout the
disputed period and the Licensees are permitted to recover Duty, at the
rate of 6 paise per unit, from the consumers, subject to any exemption
that may have been granted, or would be granted, under section 3A of
the Duty Act.
There shall be no order as to costs.
As a sequel, pending miscellaneous applications, if any, shall stand
closed.
DHIRAJ SINGH THAKUR, CJ R. RAGHUNANDAN RAO, J
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Js.
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HON’BLE MR. JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE
&
HON’BLE MR. JUSTICE R. RAGHUNANDAN RAO
W.P.No.29672 of 2023 & batch
(per Hon’ble Sri Justice R.Raghunandan Rao)
26th June, 2025
Js