Charitable Education Institutions Not Exempted From Payment Of Electricity Duty Under Maharashtra Electricity Duty Act 2016: Supreme Court

A bench comprising Justices M.R. Shah and Sanjiv Khanna allowed the appeal filed by the State of Maharashtra assailing the order of the Division Bench of the Bombay High Court, which had granted the educational institutions run by a public trust the right to exemption from paying electricity duty under the Maharashtra Electricity Duty Act, 2016.

Factual Background

Prior to 01.09.2016, the education institutions run and managed by Shri Vile Parle Kelvani Mandal, a public trust registered under the Maharashtra Trusts Act, 1950 (respondent) were exempt from paying electricity duty levied on consumption charges as per Section 3(2)(iii) of the Maharashtra Electricity Duty Act, 1958 ("1958 Act"). In 2018, the Industries, Energy and Labour Department, Government of Maharashtra clarified that as per Maharashtra Electricity Act, 2016 ("2016 Act") the exemption on electricity duty provided to the charitable institution had been relaxed from 01.09.2016. In view of the same, post 01.09.2016 the electricity companies levied electricity duty at 21% on the bills of the respondent education institutions. Aggrieved by the same, the respondents had approached the Bombay High Court and the Division Bench allowed the writ petition and set aside the duty so levied by the State.

Contentions raised by the State

Advocate, Mr. Sachin Patil appearing on behalf of the State of Karnataka argued that the High Court had erred in allowing the Writ Petition in absence of a challenge to the relevant provisions of the Maharashtra Electricity Act, 2016 under which the electricity duty was being levied. It was contended that the change in stand in the 2016 Act was not appreciated and considered by the High Court. Though as per Section 3(2)(a)(iiia) of the 1958 Act, the respondents enjoyed exemption, the 2016 Act, which repealed the 1958 Act did not provide for any exemption for charitable education institutions. It was submitted that any departmental order which granted exemption under the 1958 Act did not survive once the 2016 Act came into force. Further, Mr. Patil had averred that the latter Act being clear and unambiguous, would be subjected to literal interpretation in favour of the revenue department (State).

Senior Advocate, Mr. Shekhar Naphade, appearing on behalf of the charitable trust and the educational institutions relied on C.W.S. (India) Ltd. v. Commissioner of Income Tax 1994 Supp (2) SCC 296, to argue that when literal interpretation leads to absurdity then the wordings of the statute could be modified in consonance with the legislative intent. It was pointed out that if the State's interpretation is accepted it would mean education institutions run by local authorities would enjoy exemption under Section 3(2)(iii) of the 2016 Act, whereas the education institution run by charitable trusts would be kept from enjoying such benefit in violation of principles of equality envisaged in Article 14 of the Constitution. B.R. Enterprises v. State of U.P. And Ors. (1999) 9 SCC 700 was cited and it was argued that who runs an education institution cannot be the intelligible differentia for classification. Placing reliance on Byram Pestonji Gariwala v. Union Bank of India And Ors. (1992) 1 SCC 31, Mr. Naphade submitted that there is a presumption that the legislature does not make radical changes in existing law. Comparing the two statutes, it was averred that the entities who were not subjected to imposition of duty had remained the same. Further, it was argued that as a taxing statute the benefit of any ambiguity should be given to the assessee.

Analysis by the Supreme Court

Though in cases of ambiguity in taxing statutes the benefit goes to the assessee, referring to Novopan India Ltd. v. CCE and Customs 1994 Supp (3) SCC 606 and Hansraj Gordhandas v. H.H. Dave, Assistant Collector of Central Excise Customs, Surat And Ors. AIR 1970 SC 755, the Court observed that exemption is to be allowed on the basis of the language of the exemption clause and the same cannot be gathered from necessary implication. It is also the duty of the assessee to demonstrate that it comes under the purview of exemption. As per Collector of Central Excise, Bombay­I And Anr. v. Parle Exports (P) Ltd. (1989) 1 SCC 345 and Union of India & Ors. v. Wood Papers Ltd. And Anr. (1998) 4 SCC 256, only when the application of the exemption is established, the statute is to be construed strictly. The Court noted that in Essar Steel India Ltd. And Anr. v. State of Gujarat And Anr. (2017) 8 SCC 357, which dealt with grant of exemption under the 1958 Act, it held that the statutory conditions for grant of exemption could not be diluted in any manner. Where the language of the statute is clear, literal interpretation has to be given to the exemption clause, especially in case of a taxing statutes as had been held by the Court in Giridhar G. Yadalam. v. Commissioner of Wealth Tax And Anr. (2015) 17 SCC 664 and Godrej & Boyce Mfg. Co. Ltd. v. Deputy Commissioner of Income Tax And Anr. (2017) 7 SCC 421.

The Court observed that the present facts and circumstances did not even fit into any of the eventualities under Section 16 of the 2016 Act, which survived the repeal of the 1958 Act. For the grant of exemption, the Court was of the view that Section 3(2) of the 2016 Act had to be looked into. On perusal of the provision, the Court reached the conclusion that -

"Therefore, under Section 3(2) of the 2016 Act, the charitable institutions running the educational institutions are not exempted from payment of electricity duty, which as such was specifically exempted under Section 3(2)(iiia) of the 1958 Act. The language and words used in Section 3(2) are plain and simple and are capable of only one definite meaning that there is no exemption provided under the 2016 Act from levy of electricity duty so far as the charitable education institutions are concerned…Under the 2016 Act, charitable education institutions running the schools or colleges are specifically excluded from the exemption clause/exemption provision – Section 3(2)."

The Court clarified that if the submission of the charitable institution that all education institutes ought to be exempted from payment of electricity duty is to be accepted, then it would lead to absurdity as the private institutions making profits would also claim exemption from levy of electricity duty. Thus, the Court categorically spelled out -

"Other than the State Government, Central Government and the local bodies and the Government hostels, no exemption from payment of electricity duty has been provided."

Case Name: State of Maharashtra v. Shri Vile Parle Kelvani Mandal And Ors.

Citation: 2022 LiveLaw (SC) 32

Case No. and Date: Civil Appeal No.7319 of 2021 | 7 Jan 2022

Corum: Justices M.R. Shah and Sanjiv Khanna

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