Jharkhand High Court Scraps 'Net Charges' Formula For Electricity Duty Levy, Flags Excessive Delegation

The Jharkhand High Court on Monday struck down a proviso introduced by a state amendment to the Bihar Electricity Duty Act, 1948 that allowed electricity duty to be levied as a percentage of consumers' “net charges”. The court held that the legislature had delegated its taxing power to the executive without laying down any policy guidance. It further held that empowering the state government to fix electricity duty on a value-based formula, without prescribing standards or limits, amounted to excessive delegation of legislative power and conferred unfettered discretion on the executive.A division bench comprising Chief Justice Tarlok Singh Chauhan and Justice Rajesh Shankar was hearing a batch of writ petitions filed by industrial consumers and captive power plants challenging the vires of the Jharkhand Electricity Duty (Amendment) Act, 2021. Certain captive consumers had also questioned the validity of the subsequent Jharkhand Electricity Duty (Amendment) Act, 2022. Under the Electricity Duty Act, 1948, electricity duty had traditionally been levied on the number of units of power sold or consumed, at rates set out in the Schedule. That changed with the 2021 amendment, which shifted the levy to a percentage of consumers' “net charges” for electricity. Consumers argued that this single change dramatically inflated their tax burden, in some cases by nearly ten times. They said the charging provision permitted duty to be levied only on units of electricity, and that it could not be reworked to support a value-based levy tied to net charges. The State, however, maintained that the parent law gave it the power to fix rates through the Schedule, and that both the 2021 and 2022 amendments applied prospectively from the dates they were notified. The High Court was not persuaded. It held that the proviso introduced in 2021 effectively rewrote the basis of taxation, even though the Legislature had laid down no policy or guidance to justify such a shift. It noted that no policy or guiding principles had been laid down before delegating to the executive the power to add, amend or alter the categories or rates of electricity duty. The court observed, “In the case in hand, the Schedule introduced by the 1st Amendment Act, 2021 is completely inconsistent with the charging provision as the methodology of charging the electricity duty has been changed from units of energy consumed or sold to percentum of 'net charges' of energy consumed or sold… Moreover, the term 'net charges' has not been defined either in the Act, 1948 or in the 1st Amendment Act, 2021 and as such there is a possibility that the same would be interpreted in more than one way” Reiterating settled principles governing taxing statutes, the bench held, “It is a well-settled rule of interpretation that in construing a taxing statute, one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. In a taxing statute there is no room for intendment. There is no equity about a tax, and there is also no presumption as to a tax. If the legislature fails to clarify its meaning by use of appropriate language, the benefit must go to the taxpayer. Even if there is any doubt as to interpretation, it must be resolved in favour of the subject” Accordingly, the High Court declared the proviso introduced by the 2021 amendment and the Jharkhand Electricity Duty (Amendment) Rules, 2021, to be ultra vires the 1948 Act. It, however, upheld the validity of the Jharkhand Electricity Duty (Amendment) Act, 2022. The court also quashed electricity bills raised against consumers and captive power plants pursuant to the impugned proviso and the 2021 RulesCase Title: Pali Hill Breweries Private Limited v. State of Jharkhand and Others (along with connected matters)Citation: 2026 LLBiz HC(JHA)1Case Number: WP (T) No. 3228 of 2021For Petitioners: Advocates M.S. Mittal, Kavin Gulati, Bharat Rai Chandani, Salona Mittal, Lavanya Gadodia Mittal, Yashdeep Kanhai, Divya Choudhary, Amrita Sinha, Shweta Suman, Pragunee Kashyap, Indrajit Sinha, Sweta Rani, Ankit Vishal, Deepak Kumar Sinha, Vikas Pandey, Omkar Sharma, Piyush Poddar, and Janak Kumar Mishra. For Respondents: Advocates Sachin Kumar, Gaurav Raj, Srikant Swaroop, Ashwini Bhushan, Gaurang Jajodia, Srijit Choudhary, Sanjoy Piprawall, Prince Kumar, Ashok Kumar Yadav, Aditya Kumar, and Varsha Ramsisaria.Click Here To Read/Download Order

Jharkhand High Court Scraps 'Net Charges' Formula For Electricity Duty Levy, Flags Excessive Delegation

Rushil Batra

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