INDIAN ALUMINIUM CO Vs. STATE OF KERALA

JUDGEMENT

(1.) Leave granted in all the special leave partitions.

(2.) This batch of appeals by special leave arises from common judgment dated November 22,1994 of the Kerala High Court made in O. P. No. 5957 of 1987 and batch.

(3.) By Section 36 of Finance Act 1978, the Central Excises and Salt Act 1944 (for short, the "Excise act", was amended to impose central excise duty on electricity under Item 11-E in the Ist Schedule to the Excise Act and fixed 2 paise per kilo watt of electricity unit. Consequently , the Kerala State electricity Board (KSEB) was liable to pay excise duty on electricity generated and produced by it. To recoup that loss, the Government of Kerala, exercising its power under Section 3 of the Kerala Essential Articles Control (Temporary Powers) Act, 1961, issued an order. By clause (4) of the said order, surcharge at the rate of 2.5 paise per unit of electrical energy was levied on all supplies of electrical energy made by the KSEB either directly or through licensees of Extra High Tension (EHT) and High Tension (HT) consumers. Thereunder, the licensees were allowed to retain 1% of the amount collected as collection charges. On October 1,1984 the Government of India had withdrawn the levy of excise duty on electricity. The Government of Kerala in supersession of its Order dated April 6,1979 had notified the State Electricity Supply (Kerala State Electricity Board and Licensees Area) Surcharge Order, 1984 effective from October 1,1984. Under clause (4) of the said Order all supplies of electrical energy made by KSEB either directly or through licensees, were liable to surcharge at the rate fixed at 2.5 paise per unit. In the explanatory note it was stated that though excise duty was discontinued, the State Government desired to continue the levy of surcharge. The EHT and HT consumers had filed writ petitions challenging the validity of the 1984 Order. pending writ petitions, on August 1, 1988, the State Government discontinued the levy of surcharge with effect from that date by issuing an Ordinance called the Kerala Electricity Duty (Amendment) Ordinance, 1988 which later on became an enactment. The rate of electricity duty was 30% of the price of energy. Later, it was revised to 10 paise per unit for HT consumers and 6.5 paise per unit for EHT consumers. After a representation was made through the Association of the HT and EHT consumers, the Government of Kerala decided to discontinue the surcharge on the electricity duty of 10 paise per unit On September 27, 1988, a Division Bench of the High Court in Chakolas Spinning and Weaving Mills Ltd. v. K. S. E. Board (1988) 2 Ker L. T 680 held that the levy of surcharge is in substance a compulsory exaction intended to enrich the confers of the State and in effect partakes the character of tax on electricity. The Government, acting as a delegate under the Kerala Essential Articles Control Act, 1986 (Act 16 of 1986), is not competent to impose any tax. A writ of mandamus was issued directing refund of excise duty collected from those writ petitioners before the High Court. The Kerala State Electricity Supply (Kerala State Electricity Board and Licensees Area) Surcharge Order, 1984 was declared ultra vires the power of the State Government. The said judgment was confirmed by this Court dismissing the Special Leave Petitions in limine.