The Supreme Court has upheld the power of the State Government to withdraw or modify the exemption granted under Section 5A of the Bombay Electricity Duty Act, 1958. However, the Court held that the notifications dated April 01, 2000 and April 04, 2001 would operate only after the expiry of a period of one year from their respective dates. The Court ruled that a period of one year would constitute a reasonable notice, enabling the captive power generators to adjust their operations and financial planning, thereby serving the interest of justice.
The Division Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe observed that an exemption granted under a statutory provision in a fiscal statute is a concession granted by the State Government so that the beneficiaries of such concession are not required to pay the tax or duty they are otherwise liable to pay under such statute. The recipient of a concession has no legally enforceable right against the Government to grant of a concession except to enjoy the benefits of the concession during the period of its grant. This right to enjoy is a defeasible one, in the sense that it may be taken away in exercise of the very power under which the exemption was granted.
The Bench explained that the doctrine of promissory estoppel is applicable against the State Government but, in case there is a supervening public equity, the Government must be allowed to change its stand and withdraw the representation made by it. If a party claiming application of the doctrine acted on the basis of a notification, it should have known that such notification was liable to be amended or rescinded at any point of time, if the Government felt that it was necessary to do so in public interest.
Further, the Bench explained that the withdrawal and modification of the exemption was a policy decision taken in the realm of fiscal administration to augment public revenue and address budgetary constraints. The decision to withdraw and modify the exemption was taken in public interest and therefore the doctrines of legitimate expectation and promissory estoppel have no application to the facts and circumstances of the case. The court must defer to legislative judgment in matters relating to social and economic policies and must not interfere unless the exercise of executive power appears to be palpably arbitrary.
While the State possesses the power to withdraw or modify a concession granted under a statutory provision, the manner in which such statutory power to withdraw exemption is exercised must also satisfy the requirements of reasonableness and fairness, emphasised the Bench, while stating that the principles of fair play demand that such withdrawal should not operate in a manner that causes undue hardship to those who have structured their affairs on the basis of the concession earlier extended to them.
Thus, the Bench concluded that the Government ought to resile from its stand by giving reasonable notice so as to afford the beneficiary a reasonable opportunity to reorganise their affairs. The sudden withdrawal of the exemption without providing a reasonable transitional period to the industries had the effect of placing the captive power generators in a position to immediately bear an additional fiscal burden.
Briefly, the Bombay Electricity Duty Act, 1958 provides for the levy and collection of duty on the consumption of electrical energy in the State of Maharashtra, and Section 5A of the Act empowers the State Government to exempt the consumption of energy from payment of the whole or any part of the electricity duty payable under the Act, if it considers it necessary in the public interest. In exercise of these powers, the State Government issued notifications in 1994 and 1996, granting exemption from payment of electricity duty in respect of electricity consumed by industries through captive power plants.
Subsequently, the State Government issued a notification on April 01, 2000 to enable the State to bill electricity duty in the whole State of Maharashtra, along with another notification exempting payment for energy generated through non-conventional sources by a person carrying on industry in the cooperative sector. Later, on April 04, 2001, another notification was issued exempting the consumption of energy in excess of fifteen paise per unit, subject to certain conditions.
During the pendency of petitions challenging the April 01, 2000 and April 04, 2001 notifications, the State Government issued a notification on June 16, 2005, restoring the exemption from payment of electricity duty on electricity generated and consumed from captive power plants with effect from May 01, 2005. However, for the intervening period between April 01, 2000 and April 30, 2005, the exemption was not restored.
The High Court disposed of the petitions directing the petitioners to submit a representation to the State Government regarding the payment of the enhanced rate during the period when the concession stood reduced or withdrawn. The State Government rejected the representation and notices were issued, demanding payment of arrears of electricity duty for the intervening period. The Captive Power Plant Producers challenged the notification dated April 04, 2001. The High Court quashed the notifications dated April 01, 2000 and April 04, 2001, finding them to be discriminatory, arbitrary, and suffering from the vice of non-application of mind.
Appearances:
Senior Advocate Shyam Mehta, AOR Aaditya Aniruddha Pande, along with Advocates Siddharth Dharmadhikari, Shrirang B. Varma, and Varad Kilor, for the Appellants
Senior Advocates C. S. Vaidyanathan, Harish M Jagtiani, Basava S Prabu Patil, and Harish M Jagtiani, AORs K. R. Sasiprabhu, Parmanand Pandey, Rakesh K. Sharma, M/s Khaitan & Co., M/s. Parekh & Co., Pranaya Goyal, Bhargava V. Desai, Praveena Gautam, M/s. Karanjawala & Co., and Bhargava V. Desai, along with Advocates Gaurav Thakur, Mahesh Sahasranaman, Vishnu Sharma A S, Vinayak Goel, Yasharth Misra, Ronak Shankar Agarwal, Vijay Valsan, Vidhatri, Sandeep Sudhakar Deshmukh, Adviteeya, D. Tejaswi Reddy, Sanjeev K. Kapoor, Divya Chaturvedi, Srishti Rai, Jai Dhanani, Sumit Goel, Ishan Nagar, Swati Bhardwaj, Apurba Pattanayak, Akhil Shresth, Suvasita Chopra, Jahnavi Vohra, Yash Jain, Shivam Sharma, Ruby Singh Ahuja, Megha Dugar, Jappanpreet Hora, Brijendra Chahar, K K Gupta, Pawan Shukla, Tissy Annie Thomas, Rohan Bansla, Arijit, Omm Mitra, Jahnavi Vohra, Yash Jain, and Shivam Sharma, for the Respondents
