The Jharkhand High Court has struck down key provisions of the Jharkhand Electricity Duty (Amendment) Act, 2021 and the Jharkhand Electricity Duty (Amendment) Rules, 2021, holding that the State could not fundamentally alter the basis of levy of electricity duty without amending the charging section of the parent statute.
A Division Bench comprising the Chief Justice and Justice Rajesh Shankar allowed a large batch of writ petitions filed by industrial consumers, captive power producers, and trade associations, which had challenged the constitutional validity of amendments introducing a value-based levy of electricity duty calculated as a percentage of “net charges” instead of the earlier unit-based levy under the Bihar Electricity Duty Act, 1948 (as applicable to Jharkhand).
The Court noted that Section 3 of the 1948 Act authorises levy of electricity duty strictly on the basis of units of electricity consumed or sold. It held that the State could not, by amending only the Schedule or by delegated legislation, introduce a completely new method of taxation based on the monetary value of electricity supplied. Such a change, the Bench observed, could only be effected by a substantive amendment to the charging provision itself.
The Bench further held that the proviso inserted in Section 3 by the 2021 Amendment conferred unguided and excessive power on the executive to alter rates and categories in the Schedule, amounting to impermissible delegation of essential legislative functions. The concept of “net charges”, introduced for the first time through the amendment, was found to be undefined and ambiguous, leaving scope for arbitrary interpretation and application.
On the issue of retrospective operation, the Court ruled that the 2021 Rules, which sought to retrospectively define and operationalise “net charges” from 7 July 2021, were ultra vires the parent Act, as there was no statutory authority to frame rules with retrospective effect. The Bench also accepted the contention of captive power producers that a levy based on “net charges” was inherently unworkable in their case, as captive consumption does not involve any sale or tariff-based charges.
The Court further held that the steep and disproportionate increase in electricity duty running into several hundred percent in certain cases without any discernible policy rationale was arbitrary and violative of Articles 14 and 265 of the Constitution.
The Court further quashed all electricity bills issued to consumers and Captive Power Plants pursuant to the 1st Amendment Act, 2021 and the Electricity Duty Rules, 2021. However, the Bench clarified that Captive Power Plants shall be liable to pay electricity duty in terms of the revised Schedule ‘A’ introduced by the Jharkhand Electricity Duty (Second Amendment) Act, 2021, with effect from 17 February 2022, the date on which the said Amendment Act came into force.
Consequently, the impugned provisions of the 2021 Amendment Act and Rules were set aside. The Court also granted consequential relief to the petitioners, including directions for refund or adjustment of electricity duty collected under the invalidated provisions.
Appearances:
For the Petitioners : Mr. M.S. Mittal, Sr. Advocate; Mr. Kavin Gulati, Sr. Advocate; Mr. Bharat Rai Chandani, Advocate; Mr. Salona Mittal, Advocate; Ms. Lavanya Gadodia Mittal, Advocate; Mr. Yashdeep Kanhai, Advocate; Ms. Divya Choudhary, Advocate; Miss Amrita Sinha, Advocate; Mrs. Shweta Suman, Advocate; Miss Pragunee Kashyap, Advocate; Mr. Indrajit Sinha, Advocate; Ms. Sweta Rani, Advocate; Mr. Ankit Vishal, Advocate; Mr. Deepak Kr. Sinha, Advocate; Mr. Vikas Pandey, Advocate; Mr. Omkar Sharma, Advocate; Mr. Piyush Poddar, Advocate; Mr. Janak Kumar Mishra, Advocate
For the State : Mr. Sachin Kumar, AAG-II; Mr. Gaurav Raj, AC to AAG-II; Mr. Srikant Swaroop, AC to AAG-II; Mr. Ashwini Bhushan, AC to Sr. SC-II; Mr. Gaurang Jajodia, AC to G.P.-II
For the DVC : Mr. Srijit Choudhary, Advocate; Mr. Sanjoy Piprawall, Advocate; Mr. Prince Kumar, Advocate
For the JUVNL : Mr. Ashok Kr. Yadav, S.C.; Mr. Aditya Kumar, Advocate
For the TSUISL : Mrs. Varsha Ramsisaria, Advocate
