State Cannot Levy Tax On Electricity Consumed By Central Govt: Punjab & Haryana High Court Orders Rs 4.5L Refund
Observing that State Government cannot charge tax from the Central Government for using electricity in the state as per Article 287 of the Constitution, the Punjab & Haryana High Court has directed the Punjab Government to refund a sum of Rs.4.57 lakh to the Union of India.
Military Engineering Service (MES), which is part of Ministry of Defence and looks after supply of electricity within cantonment was charged Rs.4,57,342 as octroi duty (tax levied by the State) by the Punjab Government.
Justice Sanjeev Prakash Sharma and Justice Jagmohan Bansal said,
"The petitioner is part of Government of India and it has purchased electricity for its consumption. In view of aforesaid Article (Art. 287 of Constitution), the respondent could not charge octroi on sale of electricity still respondent has recovered octroi from petitioner. The respondent has conceded that octroi was not charged with respect to sale of electricity to other Government departments. The respondents are shifting responsibility from one shoulder to another. The respondent No.1 i.e. PSEB is also State Government Undertaking. Despite knowing the fact that sale of electricity to Government of India cannot be subjected to tax, the respondent No.1 collected octroi and deposited with local body. The act of respondent was in violation of Article 287 of Constitution of India."
A writ petition was filed by the Union of India, against Punjab Government electricity body, Punjab State Electricity Board (PSEB) and other authorities seeking direction to the State Government to refund a sum of Rs.4,57,342 along with interest which was collected from a department (MES) under Ministry of Defence, Union Government on purchasing the electricity.
Counsel for the Union Government, submitted that in view of Article 287 of the Constitution of India, the State Government cannot not charge octroi from the Centre.
The State Government submitted that, it does not dispute that as per Article 287 of the Constitution octroi was not payable on sale of electricity to Government of India, however, State is not responsible for payment of octroi to PSEB. It was a contract between two departments and the petitioner should approach Civil Court for its claim, he added.
After hearing the submissions, the bench noted that MES, is an integral part of Government of India and it purchased electricity from PSEB which was utilised in the cantonment area.
"Article 287 of the Constitution of India specifically provides that save as otherwise provided by Parliament by law, no law of a State shall impose or authorize the imposition of tax on the consumption or sale of electricity which is consumed by Government of India, or sold to the Government of India for consumption by that Government," observed the division bench.
Perusing Article 287, the Court said, "it is quite evident that electricity consumed by Government of India cannot be subjected to tax by State Government. The respondent has levied octroi in terms of Section 61 of the Punjab Municipal Act, 1911. The respondent No.1- PSEB collected octroi from petitioner and deposited with local body."
The bench also added that the Punjab Government in view of Article 287 of the Constitution of India was prohibited from charging any tax on sale to petitioner, electricity for its consumption.
The Court rejected the Punjab Government's contention that, there was a contract between the parties and Union should approach the Civil Court.
"The respondent is further trying to delay the matter on the ground that there was contract between petitioner and respondent No.1, thus, petitioner should approach Civil Court. It is a case of collection of tax contrary to mandate of Article 287 of the Constitution of India. No disputed questions of fact are involved and matter is pending before this Court since 2007, thus, there is no reason to relegate the petitioner to Civil Court," said the Court.
In the light of the above, the Court directed the Punjab Government to refund "a sum of Rs.4,57,342/- to petitioner within 08 weeks..."
Mr.Tajeshwar Singh Sullar, Central Govt. Counsel for the petitioner.
Mr. P.S.Thiara, Advocate for respondent No.1.
Mr. Bhuvnesh Satija, DAG, Punjab.
Case Title: UNION OF INDIA v. PUNJAB STATE ELECTRICITY BOARD AND ORS.
Citation: 2024 LiveLaw (PH) 180