M/S. Magadh Sugar And Energy Ltd. vs The State Of Bihar on 24 September, 2021


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Supreme Court of India

M/S. Magadh Sugar And Energy Ltd. vs The State Of Bihar on 24 September, 2021

Author: Hon’Ble Dr. Chandrachud

Bench: Hon’Ble Dr. Chandrachud, B.V. Nagarathna

                                                                                 REPORTABLE



                                           IN THE SUPREME COURT OF INDIA
                                            CIVIL APPELLATE JURISDICTION


                                               Civil Appeal No. 5728 of 2021




          M/s Magadh Sugar & Energy Ltd.                                        ...Appellant



                                                          Versus

          The State of Bihar & Ors.                                              ...Respondents




                                                     JUDGMENT

Dr Dhananjaya Y Chandrachud, J

1 Leave granted.

2 This appeal arises out of the judgment of a Division Bench of the Patna

High Court dated 18 September 2017. The High Court declined to entertain the

writ petition instituted by the appellant on the ground that the dispute between the

parties is factual in nature and is suitable for adjudication in terms of the statutory

remedy provided in the Bihar Electricity Duty Act 1948 1. The appellant had
Signature Not Verified

invoked the writ jurisdiction of the High Court to challenge the imposition of
Digitally signed by
Chetan Kumar
Date: 2021.09.24
16:26:58 IST
Reason:

1

“Bihar Electricity Act” or “the Act”

1
electricity duty and penalty on the electricity that it was supplying to Bihar State

Electricity Board 2.

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 white crystal sugar. The

waste of sugarcane (bagasse) produced in the process of manufacturing sugar is

used for the production of electricity for its own consumption and the surplus

energy is supplied to BSEB. The appellant has been supplying electricity to

BSEB since 6 March 2008.

4 The Bihar Electricity Duty Act 1948 3 in its initial form empowered the State

Government (the first respondent) to levy electricity duty under Section 3 (1) on

the units of energy consumed or sold, excluding the losses of energy in

transmission and transformation at the rates specified by the first respondent.

Rates of duty were specified in the Schedule to the Act. The Bihar Electricity Act

was amended in 2002 which led to the deletion of the Schedule and amendment

of Section 3(1). The amendment allowed the first respondent to levy tax on the

basis of the units or the value of energy consumed or sold at rates specified by

the State Government by a notification. Section 3 (1) in its current form 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, either on the units or on the value of energy
consumed or sold, excluding losses of energy in

2
“BSEB”
3
“The Act”

2
transmission and transformation, a duty at the rate or rates to
be specified by the State Government in a notification.
Provided that, the State Government may, by notification,
specify different rates of duty in respect of different categories
of consumption or sale of energy.

Provided further that, the rate of duty shall not exceed twenty
paise per unit in case the duty is levied on the basis of units
consumed or sold and ten percentum of the value of the
energy consumed or sold in case the duty is levied on the
basis of the value of energy.

(2) No duty shall be leviable on units of energy-

(a) consumed by the Government of India, or sold to the
Government of India, for consumption by that Government.

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

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

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

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

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

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

5 In pursuance of its power under Section 3(1) of the Act, the first

respondent issued a notification dated 21 October 2002 4 which stipulated that the

rate of duty applicable on the consumption or sale of electricity would be fixed at

six per cent of the value of energy consumed or sold for any other purposes other

than irrigation. The notification was amended by another notification dated 4

March 2005 5 which provided that the rate of duty to be levied on consumption of

electrical energy generated by captive power plants would be six per cent of the

4
SO 137
5
SO 14

3
value of energy, which shall be equivalent to the energy tariff as fixed by the

BSEB. It is also relevant to note that a notification dated 14 January 2011 6 was

issued by the first respondent exercising its powers under Section 9 of the Act 7

granting a blanket exemption from payment of electricity duty on electricity

generated by captive plants for self-consumption.

6 The appellant through the Bihar Sugar Mills Association challenged the

notifications dated 21 October 2002 and 4 March 2005 in the High Court by filing

a writ petition 8. The High Court by its judgement dated 16 September 2009 struck

down the notifications and the amendment to Section 3 (1) of the Bihar Electricity

Act on the ground that there were no guidelines in the statute or the notifications

for construing the expression ‘value of energy’. The relevant extract of the

judgment is reproduced below:

“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 of energy” is liable to be struck down as there is no
guideline provided in the statute as to in which case the duty
will payable calculated on the basis of the value of energy
consumed or sold. Similarly the notification dated 21.10.2002
providing for payment of duty at 6 per centum of the value of
energy is liable to be quashed as there is no guidelines
provided for the ascertaining the value of energy. The
subsequent Notification SO no. 14 dated 04.03.2005 is also
liable to be struck down on the self-same ground. Since the
amendment as the notification is found to be inoperative, it is
obvious that the duty will be payable as per the schedule
which was in vogue by virtue of the Bihar Electricity
(Amendment) Act, 1993.”

6
SO 1
7
Power of the State Government to grant exemption from the duty payable under this Act.

8

CWJC No 13614 of 2006

4
7 The first respondent aggrieved by judgment of the High Court filed a

special leave petition 9 before this Court. While the matter was pending before this

Court, the first respondent amended the Act through the Bihar Finance Act 2012

with retrospective effect from 17 October 2002 for defining the term ‘value of

energy’. Consequent to the insertion of Section 2 (ee) in the Act, the expression

reads as follows:

“(ee) ‘value of energy’ –

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

1) Meter charges
(2) Interest on delayed payment
(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 value of energy:

Provided further that where the units of energy actually
consumed by a consumer are less than the units of energy for
which prescribed minimum charges are payable, the value of
energy shall, in the case of such consumer, mean the
charges for the units of energy actually consumed by him and
not the prescribed minimum charges:

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

The appellant challenged the amendment by invoking the writ jurisdiction 10 of the

High Court. The petition is pending.

9
Consequent to the grant of special leave, it was converted to Civil Appeal No 2570 of 2010.
10
CWJC No 11126 of 2012

5
8 On 3 January 2015, the fourth respondent issued a notice to the appellant

for its failure to file returns under Section 6B (1) of the Act, concealment of the

sale of electricity of approximately Rs 56 crores and for 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 December 2014 of the Accountant General (Audit)

Bihar. In its reply dated 5 February 2015, the appellant contended that no tax can

be levied on the supply of electricity by the appellant to BSEB for the following

reasons:

(i) Under Section 3 of the Act, tax is levied on the ‘value of energy’.

Section 2(ee) only brings the sale to a consumer within the ambit of the

phrase ‘value of energy’;

(ii) BSEB is a ‘licensee’ and not a ‘consumer’ in view of the definition of

‘licensee’ provided under Section 2(d) of the Act; and

(iii) The resolution dated 12 September 2006 issued by the first respondent

announced various incentives for establishment and development of

sugar and other allied industries including exemption from payment of

electricity duty for cogeneration for five years.

9 The definition of the term ‘consumer’ has a bearing on the present appeal

since the appellant has argued that the term ‘value of energy’ used in Section 3

for the levy of tax is not applicable to it because the definition of ‘consumer’

excludes a licensee. The term ‘consumer’ has been defined in Section 2 (b) of

the Bihar Electricity Act in the following terms:

“(b) ‘consumer’ means any person who is supplied with
energy but does not include either a licensee or the

6
‘distributing licensee’ as described in clause 1 (a) of clause IX
of the Schedule to the [3] Indian Electricity Act, 1910 (9
of 1910), or a person who obtained sanction under section 28
of the said Act.”
(emphasis supplied)

The appellant supplies electricity to BSEB which is undertaking the business of

distributing electricity. The appellant is not supplying electricity to any other

person. Thus, the appellant has submitted that it cannot be charged electricity

duty under Section 3 (1) of the Bihar Electricity Act for supplying electricity to a

licensee.

10 On 8 February 2015, the Assistant Commissioner of Commercial Tax,

Bettial rejected the objection raised by the appellant and passed an assessment

order confirming the demand of electricity duty and penalty of about Rs 67 crores

on the following grounds:

(i) It has been conceded by the appellant that it sells electricity in excess of its

consumption. Duty is levied on every sale of electricity; and

(ii) The notification dated 14 January 2011 only exempts the energy

generated by a Generator or Captive Power Plant for self-consumption.

11 Notices of demand dated 14 February 2015 were issued to the appellant

demanding electricity duty and penalty for 2010-11, 2011-12 and 2012-13.

Challenging the notices, the appellant filed a writ petition11 before the High Court

praying for the following reliefs:

“For quashing the notices dated 14.2.2015 issued to the
Petitioner raising demand for payment of duty and further that
the Petitioner is not liable to file return as the provision of

11
CWJC No 4300 of 2015

7
Section 6B(1) and 5A of the Act is not attracted in the case of
the Petitioner and was not liable to pay electricity duty on
supply of electricity to the Bihar State Electricity Board.”

12 In the meantime, National Thermal Power Corporation Limited 12 had filed

a writ petition 13 before the High Court challenging the imposition of electricity duty

on its supply of electricity to various electricity boards including BSEB. NTPC was

supplying electricity exclusively to the Electricity Boards. On 2 December 2015,

the High Court passed an order tagging the writ petitions filed by the appellant

and NTPC on the ground that the issue raised in both the petitions was

substantially similar. Thereafter, on 20 October 2016, the High Court de-tagged

the writ petitions holding that the matters are not similar since NTPC is a power

generation company, while the appellant is a company which 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
of the other two writ petitioners in the batch of cases it is
found that the other writ petitioners are power generating
companies, whereas the petitioner is a Sugar Mill Company
which also generates electricity from molasses.
Moreover, the case of the petitioner along with the
association of Bihar Sugar Mills Association was allowed by
this Court by a judgment dated 16.09.2009, by which certain
amendments in the Bihar Electricity Duty Act have been
struck down but subsequently on an appeal filed by the State
of Bihar in the Supreme Court, the Supreme Court has
remanded the matter to this Court.

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

13 On 14 December 2016, the High Court rendered its decision in the writ

proceedings instituted by NTPC, holding that electricity duty cannot be imposed

12
NTPC
13
CWJC No 17306 of 2014

8
under Section 3 (1) of the Bihar Electricity Act on a power generation company

supplying electricity to a licensee like the Electricity Board. The High Court’s

decision was premised on two reasons. First, it relied on the judgment of this

Court in State of AP v. National Thermal Power Corporation Ltd 14 to arrive at

the conclusion that it is beyond the legislative competence of the State to impose

a tax on the sale of electricity which is not a sale for consumption. In this regard,

the High Court observed that:

“…the Apex Court has interpreted Entry 53 [of List II of the
Constitution] to be read as taxation on the consumption or
sale for consumption of electricity. That being the position
whether the tax levied is under Entry 53 of List II as a tax on
consumption or sale for consumption of electricity, or under
Entry 54 of List II as taxes on sale or purchase of goods, it will
make no difference since the goods which are to be taxed,
that is, ‘electricity’ remains the same under both the
circumstances and the levy can only be on the consumption
or sale for consumption of electricity in terms of what has
been laid down by the Apex Court in the NTPC’s case
(supra). The distinction between the two entries in respect of
electricity has been clarified in para 23 of the said judgment
where it has been said that if the State Legislature chooses to
impose tax on consumption of electricity it will not be possible
to do so under Entry 54, because it does not provide for taxes
on consumption whereas Entry 53 permits the same.

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

14
(2002) 5 SCC 203; referred to as “State of AP”

9
Second, the High Court observed that in terms of the provisions of the Bihar

Electricity Act, a power generation company is liable to pay duty only if it is selling

electricity to the consumer, as defined in the legislation. The High Court held that:

“We are also in agreement with the submission of learned
counsel for 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 from the definition of value of energy in Section
2(ee)
which is the computation provision brought in by
amendment, after the earlier provisions and notifications had
been struck down by the Court as providing no guidelines,
that it provides for only two type of cases under sub-clause (i)
that is, firstly, energy sold to a consumer by a licensee and,
secondly, energy sold to a consumer by a person who
generates energy. Since we are not concerned with the 2nd
type of case mentioned in sub-clause (ii) with regard to the
person generating energy consuming the same, the only
circumstance under which a generation company like the
petitioners or any other person who generates energy would
be liable for payment of electricity duty would be when it sells
the energy, to the consumer itself. The petitioners are
evidently not a licensee in the matters in hand, they are
certainly not selling energy to the consumer; rather they are
selling it to the BSEB, which is a licensee under Section 2(d)
and which in turn sells the energy for ultimate consumption.


Therefore, even on the ground of the applicability of the
charging provision it has to be held that the charging
provision under Section 3(I) read with the definition of
‘consumer’, ‘licensee’ and ‘value of energy’ as provided in the
Act cannot be used to levy any tax on a generating company
supplying energy to a licensee like the Electricity Board as in
the present matter, as no tax can be computed in their
cases.”
Aggrieved by the judgement of the High Court, the respondents filed special

leave petitions 15 before this Court. By an order dated 3 July 2017, the special

leave petitions were summarily dismissed by a two-judge Bench of this Court.

14 By its judgement dated 18 September 2017, the High Court dismissed the

writ petition instituted by the appellant, holding that the liability of the appellant to

15
SLP (C) No 17231-17238 of 2017

10
file returns would require a factual determination on the nature of the supply of

electricity made to BSEB. It further observed that the appellant should exercise

the alternative statutory remedy provided in the Act. The High Court observed:

“Having considered the contentions we find the question as to
whether the petitioner itself liable to file the return and what is
the nature of supply made by the petitioner to the Bihar State
Electricity Board and the nature of transaction is a dispute
which warrants consideration based on enquiry of facts and
once there is a statutory remedy available to the petitioner we
are not inclined to allow this petition. However, granting liberty
to the petitioner to take recourse to the remedy of appeal we
dispose of the writ petition.”

The judgment of the High Court has given rise to the present appeal. Notice was

issued on 4 January 2018.

Submissions of the Parties

15 We have heard Mr SK Bagaria, learned Counsel appearing on behalf of

the appellant sugar mill and Mr Saket Singh, learned Senior Counsel appearing

on behalf of the respondent State.

On behalf of the appellant, the following submissions have been urged:

(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 a generator to a licensee would not

attract the levy of tax for the following reasons:

(a) Section 3 of the Act is the charging provision of the statute which

states that tax shall be levied either on the units or on the value of

the energy consumed or sold;

11

(b) Section 2(ee) defines the phrase ‘value of energy’ as the charge

payable by the consumer to the licensee or by the consumer to the

person who generates the energy;

(c) Section 2(d) defines the term ‘licensee’ to include the Bihar

Electricity Board;

(d) The phrase ‘value of energy’ states that it is the charge payable by

the consumer to either the licensee or the generator. Since the

BSEB is a ‘licensee’ under Section 2(d) of the Act and not a

consumer, the sale by the generator of the electricity (the appellant )

to the licensee (BSEB) is not covered in the phrase ‘value of energy’

and is not taxable under Section 3 of the Act;

(ii) BSEB pays electricity duty for the electricity sold by it to consumers,

including the electricity supplied by the company to the Board. The levy

of tax on the electricity supplied by the company would thus amount to

double taxation;

(iii) The question of filing a return under Sections 6B(1) and 5A of the Act

does not arise when the appellant is not liable to pay the tax;

(iv) Without prejudice to the above submissions, even if it is conceded that

the State has the power to levy tax on the supply of electricity by the

generator to the licensee under Section 3 of the Act, the Government of

Bihar has not exercised its power since under Section 3, a notification

must be issued for specifying the rate of charge. The notification issued

on 21 October 2002 by the State Government is the only notification

providing the rate of duty on ‘consumption or sale of electricity’. The

12
notification states that for the electricity energy that is consumed or sold

for any purpose other than irrigation, the rate of duty shall be six per

centum of the ‘value of energy’. However, the definition of the term

value of energy only includes supply to the consumer;

(v) There is no dispute on facts. BSEB is a licensee and not a consumer. If

power is exercised without jurisdiction, then the rule of alternate remedy

will not apply (relied on Raza Textiles Ltd. v. ITO 16, State Trade

Corporation of India Ltd. v. State of Mysore 17 and Radha Kishan

Industries v. State of Himachal Pradesh 18). Since the power

exercised by the State under Section 3 of the Act to levy electricity duty

on sale of electricity by the appellant to BSEB is a jurisdictional issue,

the rule of alternate remedy would not apply;

(vi) A Constitution Bench of this court in State of AP (supra) held that Entry

53 of List II of the Seventh Schedule which deals 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 not sell the electricity to BSEB for consumption but rather for

distribution, such sale cannot be taxed in view of the interpretation of

Entry 53 rendered in State of AP (supra). Thus, the State does not

have the legislative competence to enact a law that levies tax on the

supply of electricity by the generator to the licensee; and

16
(1973) 1 SCC 633
17
AIR 1963 SC 548
18
2021 SCC OnLine SC 334

13

(vii) The facts of the decision in NTPC and the facts giving rise to the writ

petition filed by the appellant before the High Court were substantially

similar. The High Court erroneously de-tagged the writ petitions and

then dismissed the appellant’s writ petition while entertaining the writ

petition filed by NTPC.

16 On behalf of the respondent, the following submissions have been 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 of energy’, only a sale to

the consumer is included. Though the sale to a licensee is not covered

by the first part, it is covered by the second portion of Section 3, which

refers to the ‘units’ of energy sold;

(ii) Section 3(2)(c) provides that no duty shall be leviable on the units of

energy consumed by the licensee in the construction, maintenance and

operation of its electrical undertaking. Section 4 provides that every

licensee shall pay duty to the State Government on the ‘units of energy

consumed or sold by him’. Section 4A provides that duty shall be

leviable ‘at each point in a series of sales of energy’. If Section 3 is read

in a restricted manner by excluding the ‘units’ of energy sold in the

definition, then it would render Sections 3(2)(c), 4 and 4A of the Act

redundant;

(iii) Section 4A(2) states that the amount of duty paid at ‘each preceding

stage of sale’ shall be adjusted at the subsequent stage. Therefore,

14
levy of tax on the sale by the generator to the licensee would not

amount to double taxation;

(iv) The Patna High Court in the judgement rendered in NTPC interpreted

Section 3 only with reference to the definition clauses and the statute

was not read as a whole. The judgement constrained itself to the

interpretation of the phrase ‘value of energy’ and no reference was

made to the phrase ‘unit of energy’; and

(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 the electricity can neither be stored

nor preserved, and thus, there can be no sale except for its

consumption. In view of the above reasoning, Entry 53 must

purposively be construed to include the sale by the generator to a

licensee for eventual consumption. The judgment does not exclude the

sale to the ‘intermediary distributor’ for eventual consumption.

Analysis

17 The rival submissions fall for our consideration. The High Court in the

judgement impugned in the appeal declined to entertain the writ petition on two

counts: (i) the appellant has an alternate statutory remedy under Section 9A of

the Act; and (ii) the dispute involves questions of fact which are not amenable to

the writ jurisdiction of the High Court.

18 The appellant has challenged the imposition of electricity duty and penalty,

inter alia, on primarily two grounds:

15

(i) The first respondent is only empowered to levy tax on the value of energy

consumed or sold under Section 3(1). Section 2(ee) defines ‘value of

energy’ as the energy sold to a consumer by a licensee or by any other

person. The definition of consumer under Section 2(b) specifically

excludes a licensee while Section 2(d) defines a licensee to include the

BSEB. Since, the appellant is supplying electricity to the licensee which is

not the consumer, tax cannot be levied under Section 3(1) of the Act; and

(ii) Entry 53 of List II of the Seventh Schedule of the Constitution provides for

taxes on consumption or sale of electricity. In terms of the judgement of

this Court in State of AP (supra), the meaning assigned to the word ‘sale’

and ‘consumption’ would be the same since the very act of sale of

electricity means that it is being consumed because electricity can neither

be preserved nor stored. Entry 54 of List II dealt (at the material time) with

the levy of taxes on the sale or purchase of goods including electricity but

excluding newspapers and was subject to provisions of Entry 92-A of List I.

The meaning of ‘sale’ of electricity under Entry 54 would mean the sale for

consumption of electricity in view of the decision of this Court in State of

AP (supra). Thus, irrespective of the provisions of the Bihar Electricity Act,

the first respondent does not have the legislative competence to levy a tax

on the sale of electricity that is not for consumption. The appellant is not

selling electricity to BSEB for the consumption of BSEB; rather it is BSEB

which is distributing electricity for the consumption of the end users.

19 While a High Court would normally not exercise its writ jurisdiction under

Article 226 of the Constitution if an effective and efficacious alternate remedy is

16
available, the existence of an alternate remedy does not by itself bar the High

Court from exercising its jurisdiction in certain contingencies. This principle has

been crystallized by this Court in Whirpool Corporation v. Registrar of

Trademarks, Mumbai 19 and Harbanslal Sahni v. Indian Oil Corporation Ltd 20.

Recently, in Radha Krishan Industries v. State of Himachal Pradesh & Ors 21

a two judge Bench of this Court of which one of us was a part of (Justice DY

Chandrachud) has summarized the principles governing the exercise of writ

jurisdiction by the High Court in the presence of an alternate remedy. This Court

has observed:

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

(i) The power under Article 226 of the Constitution to issue
writs can be exercised not only for the enforcement of
fundamental rights, 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 is where an effective alternate remedy is
available to the aggrieved person;

(iii) Exceptions to the rule of alternate remedy arise where

(a) the writ petition has been filed for the enforcement of a
fundamental right protected by Part III of the Constitution;

(b) there has been a violation of the principles of natural
justice; (c) the order or proceedings are wholly without
jurisdiction; or (d) the vires of a legislation is challenged;

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

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

19
(1998) 8 SCC 1
20
(2003) 2 SCC 107
21
2021 SCC OnLine SC 334

17

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

The principle of alternate remedies and its exceptions was also reiterated

recently in the decision in Assistant Commissioner of State Tax v. M/s

Commercial Steel Limited 22. In State of HP v. Gujarat Ambuja Cement Ltd 23

this Court has held that a writ petition is maintainable before the High Court if the

taxing authorities have acted beyond the scope of their jurisdiction. This Court

observed:

“23. Where under a statute there is an allegation of
infringement of fundamental rights or when on the undisputed
facts the taxing authorities are shown to have assumed
jurisdiction which they do not possess can be the grounds on
which the writ petitions can be entertained. But normally, the
High Court should not entertain writ petitions unless it is
shown that there is something more in a case, something
going to the root of the jurisdiction of the officer, something
which would show that it would be a case of palpable injustice
to the writ petitioner to force him to adopt the remedies
provided by the statute. It was noted by this Court in L. Hirday
Narain v. ITO
[(1970) 2 SCC 355: AIR 1971 SC 33] that if the
High Court had entertained a petition despite availability of
alternative remedy and heard the parties on merits it would be
ordinarily unjustifiable for the High Court to dismiss the same
on the ground of non-exhaustion of statutory remedies;

unless the High Court finds that factual disputes are involved
and it would not be desirable to deal with them in a writ
petition.”

20 The above principle was reiterated by a three-judge Bench of this Court in

Executive Engineer v. Seetaram Rice Mill 24. In that case, a show cause

notice/provisional assessment order was issued to the assessee on the ground of

22
Civil Appeal No. 5121 of 2021
23
(2005) 6 SCC 499
24
(2012) 2 SCC 108

18
an unauthorized use of electricity under Section 126 (1) of the Electricity Act 2003

and a demand for payment of electricity charges was raised. The assessee

contended that Section 126 was not applicable to it and challenged the

jurisdiction of the taxing authorities to issue such a notice, before the High Court

in its writ jurisdiction. The High Court entertained the writ petition. When the

judgement of the High Court was appealed before this Court, it held that the High

Court did not commit any error in exercising its jurisdiction in respect of the

challenge raised on the jurisdiction of the revenue authorities. This Court made

the following observations:

“81. Should the courts determine on merits of the case or
should they preferably answer the preliminary issue or
jurisdictional issue arising in the facts of the case and remit
the matter for consideration on merits by the competent
authority? Again, it is somewhat difficult to state with absolute
clarity any principle governing such exercise of jurisdiction. It
always will depend upon the facts of a given case. We are of
the considered view that interest of administration of
justice shall be better subserved if the cases of the
present kind are heard by the courts only where they
involve primary questions of jurisdiction or the matters
which go to the very root of jurisdiction and where the
authorities have acted beyond the provisions of the Act.

82. It is argued and to some extent correctly that the High
Court should not decline to exercise its jurisdiction merely for
the reason that there is a statutory alternative remedy
available even when the case falls in the above stated class
of cases. It is a settled principle that the courts/tribunal will not
exercise jurisdiction in futility. The law will not itself attempt to
do an act which would be vain, lex nil frustra facit, nor to
enforce one which would be frivolous—lex neminem cogit ad
vana seu inutilia—the law will not force anyone to do a thing
vain and fruitless. In other words, if exercise of jurisdiction
by the tribunal ex facie appears to be an exercise of
jurisdiction in futility for any of the stated reasons, then it
will be permissible for the High Court to interfere in
exercise of its jurisdiction. This issue is no longer res
integra and has been settled by a catena of judgments of this
Court, which we find entirely unnecessary to refer to in
detail…”
(emphasis supplied)

19
21 In Union of India v State of Haryana 25 the assessing authorities imposed

sales tax on the rentals charged for supply of telephones. Writ petitions were filed

in the High Court challenging the levy. The writ petitions were dismissed on the

ground that an alternative remedy of a statutory appeal was available. An appeal

against these orders was filed before this Court. The appeal was allowed and the

matter was remanded back to the High Court for determination since it involved a

question of law on whether the supply of telephones amounted to sale.

22 It is not the case of the appellant that the respondents have miscalculated

the duty and penalty imposed on it. The appellant contends that the State

Government does not have the power to levy tax on its sale of electricity to

BSEB. Thus, the plea strikes at the exercise of jurisdiction by the Government. In

view of the law discussed above on the rule of alternate remedy, the High Court

can exercise its writ jurisdiction if the order of the authority is challenged for want

of authority and jurisdiction, which is a pure question of law

23 The appellant is admittedly a sugar mill producing electricity from bagasse

(a by-product of sugar production). The electricity that is produced is used for

running the mill and the excess is sold to BSEB. There is no dispute about the

nature of the transaction between the appellant and BSEB. The petition before

the High Court was initially tagged with the petition filed by NTPC since it

involved similar issues. However, it was subsequently de-tagged and heard

separately on the ground that the appellant in this case is a sugar mill that also

produces electricity, while NTPC is a power generation company. The writ

25
(2000) 10 SCC 482

20
petition filed by the appellant was dismissed by the impugned judgment. Both the

petitions – filed by the appellant and NTPC before the High Court challenged the

power of the State Government to levy tax on sale of electricity to Electricity

Boards. A three judge Bench of this court in Sree Meenakshi Mills Ltd. v

Commissioner of Income Tax 26 succinctly 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 a
promissory note the defence taken is one of denial of
execution. The court finds that the disputed signature is unlike
the admitted signatures of the defendant. It also finds that the
attesting witnesses who speak to execution were not, in fact,
present at the time of the alleged execution. On a
consideration of these facts, the court comes to the
conclusion that the promissory note is not genuine, Here,
there are certain facts which are ascertained, and on these
facts, a certain conclusion is reached which is also one of
fact.

10. In between the domains occupied respectively by
questions of fact and of law, there is a large area in which
both these questions run into each other, forming so to say,
enclaves within each other. The questions that arise for
determination in that area are known as mixed questions of
law and fact. These questions involve first the ascertainment
of facts on the evidence adduced and then a determination of
the rights of the parties on an application of the appropriate
principles of law to the facts ascertained. To take an example,
the question is whether the defendant has acquired title to the
suit property by adverse possession. It is found on the facts
that the land is a vacant site that the defendant is the owner
of the adjacent. residential house and that he has been drying
grains and cloth and throwing rubbish on the plot. The further
question that has to be determined is whether the above facts
are sufficient to constitute adverse possession in law. Is the
user continuous or fugitive? Is it as of right or permissive in
character? Thus, for deciding whether the defendant has
acquired title by adverse possession the court has firstly to
find on an appreciation of the evidence what the facts are. So

26
AIR 1957 SC 49

21
far, it is a question of fact. It has then to apply the principles of
law regarding acquisition of title by adverse possession, and
decide whether on the facts established by the evidence, the
requirements of law are satisfied. That is a question of law.”

The test that is to be applied for the determination of a question of law is whether

the rights of the parties before the court can be determined without reference to

the factual scenario. In this case, the High Court was entrusted with the

determination of the meaning of the phrases used in Section 3 of the Act to

determine if the supply of electricity by the appellant would fall within its ambit.

Unlike a dispute on the execution of a promissory note or a plea of adverse

possession, there is no adjudication on facts required here. There is also no

dispute on the nature of the transaction involved.

24 The issues raised by the appellant are questions of law which require,

upon a comprehensive reading of the Bihar Electricity Act, a determination of

whether tax can be levied on the supply of electricity by a power generator (which

also manufactures sugar) supplying electricity to a distributor; and whether the

first respondent has the legislative competence to levy duty on the sale of

electricity to an intermediary distributor in view of the decision of this Court in

State of AP (supra). The question of whether the appellant is liable to file returns

under Sections 6B(1) and 5A of the Act is directly related to the issue of whether

the sale of electricity by the appellant to BSEB falls under the charging provisions

of Section 3(1). The questions raised by the appellant can be adjudicated without

delving into any factual dispute. Thus, the present matter is amenable to the writ

jurisdiction of the High Court.

22
25 We are of the considered view that the High Court made an error in

declining to entertain the writ petition and it would be appropriate to restore the

proceedings back to the High Court for a fresh disposal. In order to facilitate the

decision on remand, we have recorded the broad submissions of the parties on

merits but leave the matter open for a fresh evaluation by the High Court. We

accordingly allow the appeal and set aside the judgement of the High Court dated

18 September 2017 arising out of CWJC No 4300 of 2015. The writ petition is

restored to the file of the High Court for fresh determination. The appeal is

disposed of in the above terms with no order as to costs.

26 The appellant had filed an application27 for amendment of the cause title

since pursuant to a merger the right to contest the appeal survived with Magadh

Sugar and Energy Ltd, the application is allowed.

27 Pending application, if any, are disposed of.

….…………..……………………………..J
[Dr Dhananjaya Y Chandrachud]

..………..……………………………………J
[Vikram Nath]

…..…..………..…………………………….J
[BV Nagarathna]

New Delhi;

September 24, 2021
27
IA No 75651 of 2021

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