When Consumer Purchases Electricity From Open Access Source, Electricity Tax Payable On That Rate : Karnataka High Court

The Karnataka High Court has held that whenever a consumer purchases electricity from Open Access Source, the tax on electricity will be chargeable on the rate at which consumer purchased electricity, instead of the higher charges at which it is supplied by a licnesee."if a consumer is to pay electricity tax on charges higher than the one supplied by the licensee, necessarily, whenever, the licensee procures through Open Access Source, electricity at a lower rate, thecharges would have to be calculated on the rate at which the consumer had purchased the electricity", the Court said.A single bench of Justice N.S. Sanjay Gowda, while allowing the petition filed by M/S SOUTHERN FERRO LTD, on March 15, said "If the argument of the State is accepted that electricity tax is payable at the rate at which the licensee sell the electricity to consumers, it would fundamentally defeat the very purpose for which the electricity reforms were initiated which enabled the consumers to procure electricity from private purchasers and through Open Access Source." Company's submissions: Senior Advocate Gurudas Kannur, appearing for the company submitted "Apart from electricity supplied by the licensee i.e., Hubli Electricity Supply Company Limited (HESCOM), it is also supplying energy from the energy exchange every month which is called as purchase of electricity from Open Access Source. The price paid for the purchase of electricity through Open Access Source is different than the price paid by it for the electricity sold to it by the licensee –HESCOM." Further, it was contended that the electricity purchased from HESCOM, is liable to pay tax at the rate of 6% on the procurement price. It is stated that similarly in respect of electricity purchased from Open Access Source, electricity tax would have to be levied at the rate of 6% on the price at which the electricity was procured from the Open Access Source. But, however, HESCOM had issued a demand calling upon the petitioner to pay tax on electricity consumed at the rate of 6% on the charges that HESCOM had fixed for the sale of the units. A demand to pay a sum of `94,47,534, was made by HESCOM which was challenged before the court. The petitioner also contended that "Since the petitioner had procured electricity at a lower rate from the Open Access Source, HESCOM could not demand tax at the rates at which it supplied. Therefore, the demand made by computing tax for electricity consumed at the rates prescribed by HESCOM would be illegal and would be liable to be quashed." Submission of the State Additional Advocate General K.Vidyawati appearing for the state submitted that the petition is not maintainable since the company had admittedly submitted a representation to the State Government requesting grant of 24 monthly installments for payment of arrears of tax on electricity. On merits, it was said it is now a settled law that irrespective of source of electricity, every consumer is liable to pay tax on the electricity consumed within the State and since, admittedly, petitioner had consumed the electricity within the State of Karnataka, it was bound to pay electricity tax on the rates at which electricity had been supplied by HESCOM. She also placed reliance on the fact that the statute made it clear that whenever a consumer consumed electricity at a concessional rate or free of charge, the consumer would, nevertheless, be liable to pay electricity tax on the charges of electricity levied by the licensee to other consumers. For the purpose of calculating electricity tax, the rate at which the electricity supplied by the licensee should be taken into consideration and not at the rate at which the consumer had purchased electricity from the Open Access Source. Court findings: The court referring to section 3 of the Karnataka Electricity (Taxation on Consumption or Sale) Act, 1959, noted "The intent of the said Section is clear that whenever electricity is consumed by a consumer within the State of Karnataka, the consumer is bound to pay electricity tax on that on ad volorem basis at the rate of 6% on the charges payable on the electricity sold or consumed." It added "It is to be borne in mind that the Legislature was conscious of the fact that after the electricity reforms ushered in, it was open for a consumer of electricity to either purchase electricity from a licensee such as HESCOM or from the Open Access Source. It, therefore, categorically stated in Section 3 that the tax had to be paid at 6% on the charges payable on the electricity sold or the electricity charges payable on the electricity consumed." Further the court said "In case, the electricity procured by the licensee from Open Access Source is costlier than the electricity supplied through the licensee, obviously, higher revenue would yield to the State. The corollary of this would also have to be given...

When Consumer Purchases Electricity From Open Access Source, Electricity Tax Payable On That Rate : Karnataka High Court

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When Consumer Purchases Electricity From Open Access Source, Electricity Tax Payable On That Rate : Karnataka High Court

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