M/S MAGADH SUGAR & ENERGY LTD. versus THE STATE OF BIHAR & ORS. on 24 September 2021

SUPREME COURT REPORTS

[2021] 9 S.C.R.

AM/S MAGADH SUGAR & ENERGY LTD.

v.

THE STATE OF BIHAR & ORS.

(Civil Appeal No. 5728 of 2021)

BSEPTEMBER 24, 2021

[DR. DHANANJAYA Y CHANDRACHUD, VIKRAM NATHAND BV NAGARATHNA, JJ.]

Constitution of India: Art. 226 – Writ jurisdiction of HighCourt under – Exercise of – Dispute involving question of facts –CAmenability to writ jurisdiction of the High Court – On facts,appellant company produced electricity for its own consumptionand the surplus energy was supplied to the Bihar State ElectricityBoard (BSEB) – Issuance of notice to appellant demanding electricityduty and penalty on electricity that it was supplying to BSES – WritDpetition by appellant challenging the imposition – Set aside by theHigh Court holding that the dispute between the parties is factualin nature and that the appellant should exercise alternate remedyprovided in the 1948 Act – On appeal, held: Existence of analternative remedy does not by itself bar the High Court fromexercising its jurisdiction in certain contingencies – In view of theElaw on the rule of alternate remedy, the High Court can exercise itswrit jurisdiction if the order of the authority is challenged for wantof authority and jurisdiction, which is a pure question of law – Testfor the determination of a question of law is whether the rights ofthe parties before the court can be determined without reference toFthe facts of the case – Petitions challenged the power/jurisdictionof the State Government to levy tax on sale of electricity to ElectricityBoards – Issues raised are questions of law which require acomprehensive reading of the Electricity Act, and no adjudicationof facts is required – Thus, is amenable to the writ jurisdiction ofthe High Court – High Court erred in declining to entertain the writGpetition – Judgment of the High Court is set aside – Bihar ElectricityDuty Act, 1948.

Art. 226 – Writ Jurisdiction of High Court – Exercise of, inpresence of alternative remedy – General Principles.

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Allowing the appeal, the Court

HELD: 1. The High Court would normally not exercise itswrit jurisdiction under Article 226 of the Constitution if an effectiveand efficacious alternate remedy is available, the existence of analternative remedy does not by itself bar the High Court fromexercising its jurisdiction in certain contingencies. [Para 19][300-E-F]

2. It is not the case of the appellant that the respondentshave miscalculated the duty and penalty imposed on it. Theappellant submitted that the State Government does not havethe power to levy tax on its sale of electricity to BSEB. Thus, theplea strikes at the exercise of jurisdiction by the Government.In view of the law on the rule of alternate remedy, the High Courtcan exercise its writ jurisdiction if the order of the authority ischallenged for want of authority and jurisdiction, which is a purequestion of law. [Para 22][304-A-B]

3. There is no dispute about the nature of the transactionbetween the appellant and BSEB. The appellant in the instantcase is a sugar mill that also produces electricity. The writ petitionfiled by the appellant was dismissed by the impugned judgment.The petitions challenged the power of the State Government tolevy tax on sale of electricity to Electricity Boards. [Para 23][304-C-D]

4. The test to be applied for the determination of a questionof law is whether the rights of the parties before the court can bedetermined without reference to the factual scenario. In the instantcase, the High Court was entrusted with the determination ofthe meaning of the phrases used in Section 3 of the Act todetermine if the supply of electricity by the appellant would fallwithin its ambit. There is no adjudication on facts required here.[Para 23][305-E-F]

5. The issues raised by the appellant are questions of lawwhich require, upon a comprehensive reading of the BiharElectricity Act, a determination of whether tax can be levied onthe supply of electricity by a power generator (which alsomanufacture sugar) supplying electricity to a distributor; andwhether the first respondent has the legislative competence to A

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Alevy duty on the sale of electricity to an intermediary distributor.The question of whether the appellant is liable to file returnsunder Sections 6(B)(1) and 5A of the Act is directly related to theissue of whether the sale of electricity by the appellant to BSEBfalls under the charging provisions of Section 3(1). The questionsraised by the appellant can be adjudicated without delving intoBany factual dispute. Thus, the present matter is amenable to thewrit jurisdiction of the High Court. The High Court made an errorin declining to entertain the writ petition. The judgment of theHigh Court is set aside. The writ petition is restored to the file ofthe High Court for fresh determination. [Para 24, 25][305-G-H;C306-A-B]State of AP v. National Thermal Power Corporation Ltd.(2002) 5 SCC 203 : [2002] 3 SCR 278; Raza TextilesLtd. v. ITO (1973) 1 SCC 633; State Trade Corporationof India Ltd. v. State of Mysore AIR 1963 SC 548:D[1963] SCR 792; Radha Kishan Industries v. State ofHimachal Pradesh (2021) SCC OnLine SC 334;Whirpool Corporation v. Registrar of Trademarks,Mumbai (1998) 8 SCC 1 : [1998] 2 Suppl. SCR 359;Harbanslal Sahni v. Indian Oil Corporation Ltd. (2003)2 SCC 107; Radha Krishan Industries v. State ofEHimachal Pradesh & Ors. (2021) SCC OnLine SC 334;Assistant Commissioner of State Tax v. M/s CommercialSteel Limited Civil Appeal No. 5121 of 2021; State ofHP v. Gujarat Ambuja Cement Ltd. (2005) 6 SCC 499 :[2005] 1 Suppl. SCR 684; Executive Engineer v.FSeetaram Rice Mill (2012) 2 SCC 108 : [2011] 15 SCR211; Union of India v. State of Haryana (2000) 10 SCC482; Sree Meenakshi Mills Ltd. v. Commissioner ofIncome Tax AIR 1957 SC 49 : [1956] SCR 691 -referred to.

Case Law Reference

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[2002] 3 SCR 278(1973) 1 SCC 633[1963] SCR 792

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M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OFBIHAR & ORS.

CIVIL APPELLATE JURISDICTION: Civil Appeal No.5728 of2021.

From the Judgment and Order dated 18.09.2017 of the High Courtof Judicature at Patna in Civil Writ Jurisdiction Case No.4300 of 2015.

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S. K. Bagaria, Sr. Adv., Praveen Kumar, Kumar Ajit Singh, Ms.Sunaina Kumar, Advs. for the Appellant.

Saket Singh, Mrs. Niranjana Singh, Advs. for the Respondents.

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The Judgment of the Court was delivered by DR DHANANJAYA Y CHANDRACHUD, J.

1. Leave granted.

2. This appeal arises out of the judgment of a Division Bench ofthe Patna High Court dated 18 September 2017. The High Court declinedto entertain the writ petition instituted by the appellant on the ground thatthe dispute between the parties is factual in nature and is suitable foradjudication in terms of the statutory remedy provided in the BiharElectricity Duty Act 1948[1]. The appellant had invoked the writ jurisdictionof the High Court to challenge the imposition of electricity duty andpenalty on the electricity that it was supplying to Bihar State ElectricityBoard[2].

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Facts of the case

3. The appellant is a sugar mill company operating in Narkatiaganj,Bihar. It is engaged in the business of manufacture and sale of whitecrystal sugar. The waste of sugarcane (bagasse) produced in the processof manufacturing sugar is used for the production of electricity for its G

1 "Bihar Electricity Act'' or “the Act”

2 "BSEB''

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Aown consumption and the surplus energy is supplied to BSEB. Theappellant has been supplying electricity to BSEB since 6 March 2008.

4. The Bihar Electricity Duty Act 1948[3] in its initial formempowered the State Government (the first respondent) to levy electricityduty under Section 3 (1) on the units of energy consumed or sold,Bexcluding the losses of energy in transmission and transformation at therates specified by the first respondent. Rates of duty were specified inthe Schedule to the Act. The Bihar Electricity Act was amended in 2002which led to the deletion of the Schedule and amendment of Section3(1). The amendment allowed the first respondent to levy tax on thebasis of the units or the value of energy consumed or sold at rates specifiedCby the State Government by a notification. Section 3 (1) in its currentform provides as follows:

“3. Incidence of duty-(1) Subject to the provisions of sub-section(2), there shall be levied and paid to the State Government, eitheron the units or on the value of energy consumed or sold,Dexcluding losses of energy in transmission and transformation, aduty at the rate or rates to be specified by the State Governmentin a notification.

Provided that, the State Government may, by notification, specifydifferent rates of duty in respect of different categories ofEconsumption or sale of energy.

Provided further that, the rate of duty shall not exceed twentypaise per unit incase the duty is levied on the basis of unitsconsumed or sold and ten percentum of the value of the energyconsumed or sold in case the duty is levied on the basis of theFvalue of energy.

(2) No duty shall be leviable on units of energy- (a) consumed by the Government of India, or sold to theGovernment of India, for consumption by that Government.

G(b) consumed in the construction, maintenance, or operation ofany railway company operating that railway, or sold to thatGovernment or any such railway company for consumption in theconstruction, maintenance or operation of any railway.

(c) consumed by the licensee in the construction, maintenanceand operation of his electrical undertaking.

(d) consumed by or sold by any class of persons exempted frompayment of duty under section 9.

(e) consumed by the Damodar Valley Corporation for thegeneration, transmission or distribution of electricity by thatCorporation.

(f) consumed for any purpose which the state Government may,by notification, in this behalf declare to be a public purpose andsuch exemptions may be subject to such conditions and exemptionsif any, as may be mentioned in the said notification.

(3) when a licensee holds more than one licence, duty shall bepayable separately in respect of each license.”

5. In pursuance of its power under Section 3(1) of the Act, thefirst respondent issued a notification dated 21 October 2002[4] whichstipulated that the rate of duty applicable on the consumption or sale ofelectricity would be fixed at six per cent of the value of energy consumedor sold for any other purposes other than irrigation. The notification wasamended by another notification dated 4 March 2005[5] which providedthat the rate of duty to be levied on consumption of electrical energygenerated by captive power plants would be six per cent of the value ofenergy, which shall be equivalent to the energy tariff as fixed by theBSEB. It is also relevant to note that a notification dated 14 January2011[6] was issued by the first respondent exercising its powers underSection 9 of the Act[7] granting a blanket exemption from payment ofelectricity duty on electricity generated by captive plants for self-consumption.

6. The appellant through the Bihar Sugar Mills Associationchallenged the notifications dated 21 October 2002 and 4 March 2005 inthe High Court by filing a writ petition[8]. The High Court by its judgement 4 SO 137

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6 SO 17 Power of the State Government to grant exemption from the duty payable under thisAct.

8 CWJC No 13614 of 2006

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Adated 16 September 2009 struck down the notifications and theamendment to Section 3 (1) of the Bihar Electricity Act on the groundthat there were no guidelines in the statute or the notifications forconstruing the expression ‘value of energy’. The relevant extract of thejudgment is reproduced below:

B“19. In view of the above discussion, the amendment of Section 3(1), so far as it provides for payment of duty “on the value ofenergy” is liable to be struck down as there is no guideline providedin the statute as to in which case the duty will payable calculatedon the basis of the value of energy consumed or sold. Similarlythe notification dated 21.10.2002 providing for payment of duty atC6 per centum of the value of energy is liable to be quashed asthere is no guidelines provided for the ascertaining the value ofenergy. The subsequent Notification SO no. 14 dated 04.03.2005is also liable to be struck down on the self-same ground. Since theamendment as the notification is found to be inoperative, it isDobvious that the duty will be payable as per the schedule whichwas in vogue by virtue of the Bihar Electricity (Amendment) Act,1993.”

7. The first respondent aggrieved by judgment of the High Courtfiled a special leave petition[9] before this Court. While the matter wasEpending before this Court, the first respondent amended the Act throughthe Bihar Finance Act 2012 with retrospective effect from 17 October2002 for defining the term ‘value of energy’. Consequent to the insertionof Section 2 (ee) in the Act, the expression reads as follows:

“(ee) ‘value of energy’ –

F(i) in case of energy sold to a consumer by a licensee or byany person who generates energy, means the chargespayable by the consumer, to the licensee or to any personwho generates such energy, for the energy supplied by suchlicensee or person, as the case may be; but it shall not includeGthe following charges, namely —

(1) Meter charges

(2) Interest on delayed payment

9 Consequent to the grant of special leave, it was converted to Civil Appeal No 2570 ofH2010.

(3) Fuse-off call charges and reconnection charges:

Provided that where no energy has been consumed by a consumer,minimum charges payable by him shall not deemed to be the valueof energy:

Provided further that where the units of energy actually consumedby a consumer are less than the units of energy for whichprescribed minimum charges are payable, the value of energyshall, in the case of such consumer, mean the charges for theunits of energy actually consumed by him and not the prescribedminimum charges:

(ii) in case of energy consumed by the person generating suchenergy, means the charges payable by any other consumer forsuch quantum of power to the Bihar State Electricity Boardconstituted under section 5 of the Electricity (Supply) Act, 1948(Act 54 of 1948) in respect of energy supplied by the Bihar StateElectricity Board within the area where the consumer is located;”

The appellant challenged the amendment by invoking the writjurisdiction[10] of the High Court. The petition is pending.

8. On 3 January 2015, the fourth respondent issued a notice to theappellant for its failure to file returns under Section 6B (1) of the Act,concealment of the sale of electricity of approximately Rs 56 crores andfor raising a demand of electricity duty and penalty of about Rs 67 crores.The notice was issued on the basis of the report dated 24 December2014 of the Accountant General (Audit) Bihar. In its reply dated 5February 2015, the appellant contended that no tax can be levied on thesupply of electricity by the appellant to BSEB for the following reasons:

(i) Under Section 3 of the Act, tax is levied on the ‘value ofenergy’. Section 2(ee) only brings the sale to a consumerwithin the ambit of the phrase ‘value of energy’;

(ii) BSEB is a ‘licensee’ and not a ‘consumer’ in view of thedefinition of ‘licensee’ provided under Section 2(d) of theAct; and A

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A(iii) The resolution dated 12 September 2006 issued by the firstrespondent announced various incentives for establishmentand development of sugar and other allied industries includingexemption from payment of electricity duty for cogenerationfor five years.

B9. The definition of the term ‘consumer’ has a bearing on thepresent appeal since the appellant has argued that the term ‘value ofenergy’ used in Section 3 for the levy of tax is not applicable to it becausethe definition of ‘consumer’ excludes a licensee. The term ‘consumer’has been defined in Section 2 (b) of the Bihar Electricity Act in thefollowing terms:C

“(b) ‘consumer’ means any person who is supplied with energybut does not include either a licensee or the ‘distributinglicensee’ as described in clause1 (a) of clause IX of the Scheduleto the [3] Indian Electricity Act, 1910 (9 of 1910), or a personwho obtained sanction under section 28 of the said Act.”D

The appellant supplies electricity to BSEB which is undertakingthe business of distributing electricity. The appellant is not supplyingelectricity to any other person. Thus, the appellant has submitted that itEcannot be charged electricity duty under Section 3 (1) of the BiharElectricity Act for supplying electricity to a licensee.

10. On 8 February 2015, the Assistant Commissioner ofCommercial Tax, Bettial rejected the objection raised by the appellantand passed an assessment order confirming the demand of electricityFduty and penalty of about Rs 67 crores on the following grounds:

(i) It has been conceded by the appellant that it sells electricity inexcess of its consumption. Duty is levied on every sale ofelectricity; and

(ii) The notification dated 14 January 2011 only exempts the energyGgenerated by a Generator or Captive Power Plant for self-consumption.

11. Notices of demand dated 14 February 2015 were issued tothe appellant demanding electricity duty and penalty for 2010-11, 2011- H

12 and 2012-13. Challenging the notices, the appellant filed a writpetition[11] before the High Court praying for the following reliefs:

“For quashing the notices dated 14.2.2015 issued to the Petitionerraising demand for payment of duty and further that the Petitioneris not liable to file return as the provision of Section 6B(1) and 5Aof the Act is not attracted in the case of the Petitioner and wasnot liable to pay electricity duty on supply of electricity to theBihar State Electricity Board.”

12. In the meantime, National Thermal Power CorporationLimited[12] had filed a writ petition[13] before the High Court challengingthe imposition of electricity duty on its supply of electricity to variouselectricity boards including BSEB. NTPC was supplying electricityexclusively to the Electricity Boards. On 2 December 2015, the HighCourt passed an order tagging the writ petitions filed by the appellantand NTPC on the ground that the issue raised in both the petitions wassubstantially similar. Thereafter, on 20 October 2016, the High Court de-tagged the writ petitions holding that the matters are not similar sinceNTPC is a power generation company, while the appellant is a companywhich runs a sugar mill and also generates electricity from molasses.The relevant portion of the order is extracted below:

“On an examination of the facts of the present matter as also ofthe other two writ petitioners in the batch of cases it is found thatthe other writ petitioners are power generating companies, whereasthe petitioner is a Sugar Mill Company which also generateselectricity from molasses.

Moreover, the case of the petitioner along with the association ofBihar Sugar Mills Association was allowed by this Court by ajudgment dated 16.09.2009, by which certain amendments in theBihar Electricity Duty Act have been struck down but subsequentlyon an appeal filed by the State of Bihar in the Supreme Court, theSupreme Court has remanded the matter to this Court.

For the aforesaid reasons, the present matter shall not be heardalong with the other writ petitions.”

11 CWJC No 4300 of 201512 NTPC

13 CWJC No 17306 of 2014

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A13. On 14 December 2016,the High Court rendered its decision inthe writ proceedings instituted by NTPC, holding that electricity dutycannot be imposed under Section 3 (1) of the Bihar Electricity Act on apower generation company supplying electricity to a licensee like theElectricity Board. The High Court’s decision was premised on tworeasons. First, it relied on the judgment of this Court in State of AP v.BNational Thermal Power Corporation Ltd[14]to arrive at theconclusion that it is beyond the legislative competence of the State toimpose a tax on the sale of electricity which is not a sale for consumption.In this regard, the High Court observed that:

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“…the Apex Court has interpreted Entry 53 [of List II of theCConstitution] to be read as taxation on the consumption or sale forconsumption of electricity. That being the position whether thetax levied is under Entry 53 of List II as a tax on consumption orsale for consumption of electricity, or under Entry 54 of List II astaxes on sale or purchase of goods, it will make no differenceDsince the goods which are to be taxed, that is, ‘electricity’ remainsthe same under both the circumstances and the levy can only beon the consumption or sale for consumption of electricity in termsof what has been laid down by the Apex Court in the NTPC’scase(supra). The distinction between the two entries in respectof electricity has been clarified in para 23 of the said judgmentEwhere it has been said that if the State Legislature chooses toimpose tax on consumption of electricity it will not be possible todo so under Entry 54, because it does not provide for taxes onconsumption whereas Entry 53 permits the same.

Thus, the charging Section 3(1) of the Act when it speaks of levyFof duty on either units or on the value of energy consumed or sold,has to be similarly read as the Constitutional Entry 53 providingthe power to the State Legislature, to levy electricity duty eitheron the unit or on the value of energy consumed or sold forconsumption. In the said circumstances, any sale of electricityGwhich is not a sale for consumption would be beyond the purviewof the State Legislature to enact and thus the charging Section3(1) of the Act has to be read in the said light as levy of electricityduty for consumption or sale for consumption of electricity.”

Second, the High Court observed that in terms of the provisionsof the Bihar Electricity Act, a power generation company is liable to payduty only if it is selling electricity to the consumer, as defined in thelegislation. The High Court held that:

“We are also in agreement with the submission of learned counselfor the petitioners on the basis of the provisions of Section 3(1)read with Section 2(b),(d) and ( ee) of the Act. It is evident fromthe definition of value of energy in Section 2(ee) which is thecomputation provision brought in by amendment, after the earlierprovisions and notifications had been struck down by the Court asproviding no guidelines, that it provides for only two type of casesunder sub-clause (i) that is, firstly, energy sold to a consumer by alicensee and, secondly, energy sold to a consumer by a personwho generates energy. Since we are not concerned with the 2ndtype of case mentioned in sub-clause (ii) with regard to the persongenerating energy consuming the same, the only circumstanceunder which a generation company like the petitioners or any otherperson who generates energy would be liable for payment ofelectricity duty would be when it sells the energy, to the consumeritself. The petitioners are evidently not a licensee in the matters inhand, they are certainly not selling energy to the consumer; ratherthey are selling it to the BSEB, which is a licensee under Section2(d) and which in turn sells the energy for ultimate consumption.

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Therefore, even on the ground of the applicability of the chargingprovision it has to be held that the charging provision under Section3(I) read with the definition of ‘consumer’, ‘licensee’ and ‘valueof energy’ as provided in the Act cannot be used to levy any taxon a generating company supplying energy to a licensee like theElectricity Board as in the present matter, as no tax can becomputed in their cases.”

Aggrieved by the judgement of the High Court, the respondentsfiled special leave petitions[15] before this Court. By an order dated 3 July2017, the special leave petitions were summarily dismissed by a two-judge Bench of this Court.

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A14. By its judgement dated 18 September 2017,the High Courtdismissed the writ petition instituted by the appellant, holding that theliability of the appellant to file returns would require a factual determinationon the nature of the supply of electricity made to BSEB. It furtherobserved that the appellant should exercise the alternative statutoryremedy provided in the Act. The High Court observed:B

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“Having considered the contentions we find the question as towhether the petitioner itself liable to file the return and what is thenature of supply made by the petitioner to the Bihar State ElectricityBoard and the nature of transaction is a dispute which warrantsconsideration based on enquiry of facts and once there is a statutoryCremedy available to the petitioner we are not inclined to allow thispetition. However, granting liberty to the petitioner to take recourseto the remedy of appeal we dispose of the writ petition.”

The judgment of the High Court has given rise to the presentappeal. Notice was issued on 4 January 2018.D

Submissions of the Parties

15. We have heard Mr SK Bagaria, learned Counsel appearingon behalf of the appellant sugar mill and Mr Saket Singh, learned SeniorCounsel appearing on behalf of the respondent State.

EOn behalf of the appellant, the following submissions have beenurged:

(i) On a combined reading of Section 3 with Sections 2(b),2(d) and 2(ee) of the Act, the sale of electricity by agenerator to a licensee would not attract the levy of tax forFthe following reasons:

(a) Section 3 of the Act is the charging provision of thestatute which states that tax shall be levied either on theunits or on the value of the energyconsumed or sold;

(b) Section 2(ee) defines the phrase ‘value of energy’ asthe charge payable by the consumer to the licensee or bythe consumer to the person who generates the energy; G

(c) Section 2(d) defines the term ‘licensee’ to include theBihar Electricity Board; H

(d) The phrase ‘value of energy’ states that it is the chargepayable by the consumer to either the licensee or thegenerator. Since the BSEB is a ‘licensee’ under Section2(d) of the Act and not a consumer, the sale by the generatorof the electricity (the appellant ) to the licensee (BSEB) isnot covered in the phrase ‘value of energy’ and is not taxableunder Section 3 of the Act;

(ii) BSEB pays electricity duty for the electricity sold by it toconsumers, including the electricity supplied by the companyto the Board. The levy of tax on the electricity supplied bythe company would thus amount to double taxation;

(iii) The question of filing a return under Sections 6B(1) and 5Aof the Act does not arise when the appellant is not liable topay the tax;

(iv) Without prejudice to the above submissions, even if it isconceded that the State has the power to levy tax on thesupply of electricity by the generator to the licensee underSection 3 of the Act, the Government of Bihar has notexercised its power since under Section 3, a notificationmust be issued for specifying the rate of charge. Thenotification issued on 21 October 2002 by the StateGovernment is the only notification providing the rate ofduty on ‘consumption or sale of electricity’. The notificationstates that for the electricity energy that is consumed orsold for any purpose other than irrigation, the rate of dutyshall be sixper centum of the ‘value of energy’. However,the definition of the term value of energy only includessupply to the consumer;

(v) There is no dispute on facts. BSEB is a licensee and not aconsumer. If power is exercised without jurisdiction, thenthe rule of alternate remedy will not apply (relied on RazaTextiles Ltd. v.ITO[16], State Trade Corporation of IndiaLtd. v. State of Mysore[17]and Radha Kishan Industriesv.State of Himachal Pradesh[18]). Since the power A

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exercised by the State under Section 3 of the Act to levyelectricity duty on sale of electricity by the appellant toBSEB is a jurisdictional issue, the rule of alternate remedywould not apply; A

(vi) A Constitution Bench of this court in State of AP (supra)Bheld that Entry 53 of List II of the Seventh Schedule whichdeals with ‘Taxes on consumption or the sale of electricity’must be read as ‘Taxes on consumption or sale for’consumption of electricity. Since the appellant does notsell the electricity to BSEB for consumption but rather fordistribution, such sale cannot be taxed in view of theCinterpretation of Entry 53 rendered in State of AP(supra).Thus, the State does not have the legislativecompetence to enact a law that levies tax on the supply ofelectricity by the generator to the licensee; and

(vii) The facts of the decision in NTPC and the facts giving riseDto the writ petition filed by the appellant before the HighCourt were substantially similar. The High Court erroneouslyde-tagged the writ petitions and then dismissed theappellant’s writ petition while entertaining the writ petitionfiled by NTPC.

E16. On behalf of the respondent, the following submissions havebeen urged referring to the scheme of the statute:

(i) Section 3 has two parts (i)levy of tax on the ‘value of energy’consumed; and (ii)levy of tax on the ‘units’ of energy sold.Under Section 2(ee) which defines the phrase ‘value ofFenergy’, only a sale to the consumer is included. Thoughthe sale to a licensee is not covered by the first part, it iscovered by the second portion of Section 3, which refers tothe ‘units’ of energy sold;

(ii) Section 3(2)(c) provides that no duty shall be leviable onGthe units of energy consumed by the licensee in theconstruction, maintenance and operation of its electricalundertaking. Section 4 provides that every licensee shallpay duty to the State Government on the ‘units of energyconsumed or sold by him’. Section 4A provides that dutyshall be leviable ‘at each point in a series of sales of energy’.H

If Section 3 is read in a restricted manner by excluding the‘units’ of energy sold in the definition, then it would renderSections 3(2)(c), 4 and 4A of the Act redundant; A

(iii) Section 4A(2) states that the amount of duty paid at ‘eachpreceding stage of sale’ shall be adjusted at the subsequentstage. Therefore, levy of tax on the sale by the generatorBto the licensee would not amount to double taxation;

(iv) The Patna High Court in the judgement rendered in NTPCinterpreted Section 3 only with reference to the definitionclauses and the statute was not read as a whole. Thejudgement constrained itself to the interpretation of thephrase ‘value of energy’ and no reference was made tothe phrase ‘unit of energy’; and C

(v) The Constitution Bench of this Court in State of AP (supra)read Entry 53 of List II to include ‘Tax on sale’ to mean‘Tax on sale for consumption’ on the ground that theDelectricity can neither be stored nor preserved, and thus,there can be no sale except for its consumption. In view ofthe above reasoning, Entry 53 must purposively be construedto include the sale by the generator to a licensee for eventualconsumption. The judgment does not exclude the sale tothe ‘intermediary distributor’ for eventual consumption.E

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Analysis

17. The rival submissions fall for our consideration. The HighCourt in the judgement impugned in the appeal declined to entertain thewrit petition on two counts: (i) the appellant has an alternate statutoryremedy under Section 9A of the Act; and (ii) the dispute involves questionsof fact which are not amenable to the writ jurisdiction of the High Court.

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18. The appellant has challenged the imposition of electricity dutyand penalty, inter alia, on primarily two grounds:

(i) The first respondent is only empowered to levy tax on theGvalue of energy consumed or sold under Section 3(1).Section 2(ee) defines ‘value of energy’ as the energy soldto a consumer by a licensee or by any other person. Thedefinition of consumer under Section 2(b) specificallyexcludes a licensee while Section 2(d) defines a licensee to H

include the BSEB. Since, the appellant is supplying electricityto the licensee which is not the consumer, tax cannot belevied under Section 3(1) of the Act; and A

(ii) Entry 53 of List II of the Seventh Schedule of theConstitution provides for taxes on consumption or sale ofelectricity. In terms of the judgement of this Court in Stateof AP (supra), the meaning assigned to the word ‘sale’ and‘consumption’ would be the same since the very act of saleof electricity means that it is being consumed becauseelectricity can neither be preserved nor stored. Entry 54 ofList II dealt (at the material time) with the levy of taxes onthe sale or purchase of goods including electricity butexcluding newspapers and was subject to provisions of Entry92-A of List I. The meaning of ‘sale’ of electricity underEntry 54 would mean the sale for consumption of electricityin view of the decision of this Court in State of AP(supra).Thus, irrespective of the provisions of the Bihar ElectricityAct, the first respondent does not have the legislativecompetence to levy a tax on the sale of electricity that isnot for consumption. The appellant is not selling electricityto BSEB for the consumption of BSEB; rather it is BSEBwhich is distributing electricity for the consumption of the B

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Eend users.

19. While a High Court would normally not exercise its writjurisdiction under Article 226 of the Constitution if an effective andefficacious alternate remedy is available, the existence of an alternateremedy does not by itself bar the High Court from exercising its jurisdictionFin certain contingencies. This principle has been crystallized by this Courtin Whirpool Corporation v. Registrar of Trademarks, Mumbai[19]and Harbanslal Sahni v. Indian Oil Corporation Ltd[20]. Recently, inRadha Krishan Industries v.State of Himachal Pradesh & Ors[21 ]atwo judge Bench of this Court of which one of us was a part of (JusticeGDY Chandrachud) has summarized the principles governing the exerciseof writ jurisdiction by the High Court in the presence of an alternateremedy. This Court has observed:

19 (1998) 8 SCC 120 (2003) 2 SCC 107H21 2021 SCC OnLine SC 334

“28. The principles of law which emerge are that:

(i) The power under Article 226 of the Constitution to issue writscan be exercised not only for the enforcement of fundamentalrights, but for any other purpose as well;

(ii) The High Court has the discretion not to entertain a writ petition.One of the restrictions placed on the power of the High Court iswhere an effective alternate remedy is available to the aggrievedperson;

(iii) Exceptions to the rule of alternate remedy arise where (a) thewrit petition has been filed for the enforcement of a fundamentalright protected by Part III of the Constitution; (b) there has beena violation of the principles of natural justice; (c) the order orproceedings are wholly without jurisdiction; or (d) the viresof a legislation is challenged;

(iv) An alternate remedy by itself does not divest the High Courtof its powers under Article 226 of the Constitution in an appropriatecase though ordinarily, a writ petition should not be entertainedwhen an efficacious alternate remedy is provided by law;

(v) When a right is created by a statute, which itself prescribesthe remedy or procedure for enforcing the right or liability, resortmust be had to that particular statutory remedy before invokingthe discretionary remedy under Article 226 of the Constitution.This rule of exhaustion of statutory remedies is a rule of policy,convenience and discretion; and

(vi) In cases where there are disputed questions of fact, the HighCourt may decide to decline jurisdiction in a writ petition. However,if the High Court is objectively of the view that the nature of thecontroversy requires the exercise of its writ jurisdiction, such aview would not readily be interfered with.”

The principle of alternate remedies and its exceptions was alsoreiterated recently in the decision in Assistant Commissioner of StateTax v. M/s Commercial Steel Limited[22]. In State of HP v. GujaratAmbuja Cement Ltd[23 ]this Court has held that a writ petition is 22 Civil Appeal No. 5121 of 2021

23 (2005) 6 SCC 499

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Amaintainable before the High Court if the taxing authorities have actedbeyond the scope of their jurisdiction. This Court observed:

“23. Where under a statute there is an allegation of infringementof fundamental rights or when on the undisputed facts the taxingauthorities are shown to have assumed jurisdiction which they doBnot possess can be the grounds on which the writ petitions can beentertained. But normally, the High Court should not entertainwrit petitions unless it is shown that there is something more in acase, something going to the root of the jurisdiction of the officer,something which would show that it would be a case of palpableinjustice to the writ petitioner to force him to adopt the remediesCprovided by the statute. It was noted by this Court in L. HirdayNarain v. ITO [(1970) 2 SCC 355: AIR 1971 SC 33] that if theHigh Court had entertained a petition despite availability ofalternative remedy and heard the parties on merits it would beordinarily unjustifiable for the High Court to dismiss the same onDthe ground of non-exhaustion of statutory remedies; unless theHigh Court finds that factual disputes are involved and it wouldnot be desirable to deal with them in a writ petition.”

20. The above principle was reiterated by a three-judge Bench ofthis Court in Executive Engineer v. Seetaram Rice Mill[24]. In thatEcase, a show cause notice/provisional assessment order was issued tothe assessee on the ground of an unauthorized use of electricity underSection 126 (1) of the Electricity Act 2003 and a demand for payment ofelectricity charges was raised. The assessee contended that Section126 was not applicable to it and challenged the jurisdiction of the taxingauthorities to issue such a notice, before the High Court in its writFjurisdiction. The High Court entertained the writ petition. When thejudgement of the High Court was appealed before this Court, it held thatthe High Court did not commit any error in exercising its jurisdiction inrespect of the challenge raised on the jurisdiction of the revenueauthorities. This Court made the following observations:

G“81. Should the courts determine on merits of the case or shouldthey preferably answer the preliminary issue or jurisdictional issuearising in the facts of the case and remit the matter forconsideration on merits by the competent authority? Again, it is H24 (2012) 2 SCC 108

somewhat difficult to state with absolute clarity any principlegoverning such exercise of jurisdiction. It always will depend uponthe facts of a given case. We are of the considered view thatinterest of administration of justice shall be better subservedif the cases of the present kind are heard by the courtsonly where they involve primary questions of jurisdictionor the matters which go to the very root of jurisdiction andwhere the authorities have acted beyond the provisions ofthe Act.

82. It is argued and to some extent correctly that the High Courtshould not decline to exercise its jurisdiction merely for the reasonthat there is a statutory alternative remedy available even whenthe case falls in the above stated class of cases. It is a settledprinciple that the courts/tribunal will not exercise jurisdiction infutility. The law will not itself attempt to do an act which would bevain, lex nil frustra facit, nor to enforce one which would befrivolous—lex neminem cogit ad vana seu inutilia—the law willnot force anyone to do a thing vain and fruitless. In other words,if exercise of jurisdiction by the tribunal ex facie appearsto be an exercise of jurisdiction in futility for any of thestated reasons, then it will be permissible for the High Courtto interfere in exercise of its jurisdiction. This issue is nolonger res integra and has been settled by a catena of judgmentsof this Court, which we find entirely unnecessary to refer to indetail...”

21. In Union of India v State of Haryana[25]the assessingauthorities imposed sales tax on the rentals charged for supply oftelephones. Writ petitions were filed in the High Court challenging thelevy. The writ petitions were dismissed on the ground that an alternativeremedy of a statutory appeal was available. An appeal against theseorders was filed before this Court. The appeal was allowed and thematter was remanded back to the High Court for determination since itinvolved a question of law on whether the supply of telephones amountedto sale.

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A22. It is not the case of the appellant that the respondents havemiscalculated the duty and penalty imposed on it. The appellant contendsthat the State Government does not have the power to levy tax on itssale of electricity to BSEB. Thus, the plea strikes at the exercise ofjurisdiction by the Government. In view of the law discussed above onthe rule of alternate remedy, the High Court can exercise its writBjurisdiction if the order of the authority is challenged for want of authorityand jurisdiction, which is a pure question of law.

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23. The appellant is admittedly a sugar mill producing electricityfrom bagasse (a by-product of sugar production). The electricity that isproduced is used for running the mill and the excess is sold to BSEB.CThere is no dispute about the nature of the transaction between theappellant and BSEB. The petition before the High Court was initiallytagged with the petition filed by NTPC since it involved similar issues.However, it was subsequently de-tagged and heard separately on theground that the appellant in this case is a sugar mill that also producesDelectricity, while NTPC is a power generation company. The writ petitionfiled by the appellant was dismissed by the impugned judgment. Boththe petitions - filed by the appellant and NTPC before the High Courtchallenged the power of the State Government to levy tax on sale ofelectricity to Electricity Boards. A three judge Bench of this court inSree Meenakshi Mills Ltd. v Commissioner of Income Tax[26]Esuccinctly explained the tests for the identification of questions of fact,questions of law and mixed questions of law and facts. Justice T. L.Venkatarama Aiyar writing for the Bench observed that:

“9. [..]To take an illustration, let us suppose that in a suit on apromissory note the defence taken is one of denial of execution.FThe court finds that the disputed signature is unlike the admittedsignatures of the defendant. It also finds that the attesting witnesseswho speak to execution were not, in fact, present at the time ofthe alleged execution. On a consideration of these facts, the courtcomes to the conclusion that the promissory note is not genuine,GHere, there are certain facts which are ascertained, and on thesefacts, a certain conclusion is reached which is also one of fact.

10. In between the domains occupied respectively by questionsof fact and of law, there is a large area in which both these questions run into each other, forming so to say, enclaves withineach other. The questions that arise for determination in that areaare known as mixed questions of law and fact. These questionsinvolve first the ascertainment of facts on the evidence adducedand then a determination of the rights of the parties on an applicationof the appropriate principles of law to the facts ascertained. Totake an example, the question is whether the defendant hasacquired title to the suit property by adverse possession. It is foundon the facts that the land is a vacant site that the defendant is theowner of the adjacent. residential house and that he has beendrying grains and cloth and throwing rubbish on the plot. Thefurther question that has to be determined is whether the abovefacts are sufficient to constitute adverse possession in law. Is theuser continuous or fugitive? Is it as of right or permissive incharacter? Thus, for deciding whether the defendant has acquiredtitle by adverse possession the court has firstly to find on anappreciation of the evidence what the facts are. So far, it is aquestion of fact. It has then to apply the principles of law regardingacquisition of title by adverse possession, and decide whether onthe facts established by the evidence, the requirements of law aresatisfied. That is a question of law.”

The test that is to be applied for the determination of a question oflaw is whether the rights of the parties before the court can be determinedwithout reference to the factual scenario. In this case, the High Courtwas entrusted with the determination of the meaning of the phrasesused in Section 3 of the Act to determine if the supply of electricity bythe appellant would fall within its ambit. Unlike a dispute on the executionof a promissory note or a plea of adverse possession, there is noadjudication on facts required here. There is also no dispute on the natureof the transaction involved.

24. The issues raised by the appellant are questions of law whichrequire, upon a comprehensive reading of the Bihar Electricity Act, adetermination of whether tax can be levied on the supply of electricityby a power generator (which also manufactures sugar) supplyingelectricity to a distributor; and whether the first respondent has thelegislative competence to levy duty on the sale of electricity to anintermediary distributor in view of the decision of this Court in State ofAP (supra). The question of whether the appellant is liable to file returns ABC

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Aunder Sections 6B(1) and 5A of the Act is directly related to the issue ofwhether the sale of electricity by the appellant to BSEB falls under thecharging provisions of Section 3(1). The questions raised by the appellantcan be adjudicated without delving into any factual dispute. Thus, thepresent matter is amenable to the writ jurisdiction of the High Court.

B25. We are of the considered view that the High Court made anerror in declining to entertain the writ petition and it would be appropriateto restore the proceedings back to the High Court for a fresh disposal.In order to facilitate the decision on remand, we have recorded the broadsubmissions of the parties on merits but leave the matter open for afresh evaluation by the High Court. We accordingly allow the appealCand set aside the judgement of the High Court dated 18 September 2017arising out of CWJC No 4300 of 2015. The writ petition is restored tothe file of the High Court for fresh determination. The appeal is disposedof in the above terms with no order as to costs.

26. The appellant had filed an application[27] for amendment of theDcause title since pursuant to a merger the right to contest the appealsurvived with Magadh Sugar and Energy Ltd, the application is allowed.

27. Pending application, if any, are disposed of.

ENidhi Jain

Appeal allowed.

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H27 IA No 75651 of 2021