[Cites 16, Cited by 0]
Rajasthan High Court - Jodhpur
Urn: Cw / 3813U / 2016Shree Raj. Syntex vs State Ors on 30 April, 2026
[2026:RJ-JD:17459-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Writ Petition No. 1665/2016
Shree Rajasthan Syntex Limited, Simalwara Road, Dungarpur
through it's Registered Office at 'S.R.S.L. House', Post Box
No.209, N.H. 8, Pulla-Bhuvana Road, Udaipur.
----Petitioner
Versus
1. State of Rajasthan Through the Secretary, Ministry of
Finance, Secretariat, Jaipur (Raj.).
2. Ajmer Vidyut Vitran Nigam Limited (AVVNL), Through its
Managing Director, Ajmer (Raj.).
3. The Assistant Engineer, Ajmer Vidhyut Vitran Nigam Limited
(AVVNL), Ratanpur Road, Dungarpur.
4. Tata Power Trading Company Limited, Corporate Centre, "A-
Block", 34 - Sant Tukaram Road, Carmac Bunder, Mumbai-
400 009.
----Respondents
Connected With
D.B. Civil Writ Petition No. 1664/2016
Shree Rajasthan Texchem (Division of Shree Rajasthan Syntex
Limited), Simalwara Road, Dungarpur through it's Registered
Office at 'S.R.S.L. House', Post Box No.209, N.H. 8, Pulla-
Bhuvana Road, Udaipur.
----Petitioner
Versus
1. State of Rajasthan Through the Secretary, Ministry of
Finance, Secretariat, Jaipur (Raj.).
2. Ajmer Vidyut Vitran Nigam Limited (AVVNL), Through its
Managing Director, Ajmer (Raj.).
3. The Assistant Engineer, Ajmer Vidhyut Vitran Nigam Limited
(AVVNL), Ratanpur Road, Dungarpur.
4. Tata Power Trading Company Limited, Corporate Centre, "A-
Block", 34 - Sant Tukaram Road, Carmac Bunder, Mumbai-
400 009.
----Respondents
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For Petitioner(s) : Mr. Sanjeev Johari, Sr. Adv. assisted
by Mr. Shubhankar Johari and Mr.
Hardik Kachhwaha.
For Respondent(s) : Mr. N.S. Chandawat for Mr. Mahaveer
Bishnoi, AAG for respondent No.1
Ms. Anushka Jain for respondent Nos.
2 and 3.
HON'BLE MR. JUSTICE ARUN MONGA
HON'BLE MR. JUSTICE SUNIL BENIWAL
Reportable
Order
Conclusion of Arguments &
Reserved on : 07/04/2026
Pronounced on : 30/04/2026
(Per Sunil Beniwal, J.)
1. These writ petitions have been filed by the petitioners with
the following prayer :-
"(a)- That the impugned levy imposed under Section 3, 3-B &
3-C of the Act 1962 qua the Energy supplied by M/s. Tata
Power Trading Co. Ltd. may be quashed;
(b)- That it may please be held that by conjoint reading &
appreciation of the provisions of Rajasthan Electricity (Duty)
Act 1962, and also of Electricity Act 2003, on the Energy
supplied from outside the State of Rajasthan (from Tata Power
Trading Co. Ltd. herein), the imposed impugned levy is not
sustainable on the Electricity supplied, and the same can be
leviable only on the Electricity consumed, and resultantly the
impugned levy by the respondent no.3 is illegal, de-hors the
legal provisions, and unconstitutional;
(c)- That the levy imposed on the basis of ABT Meters
installed at Grid Sub-Station Dungarpur or at the Bay may be
declared ultra-vires the provisions of the Act 2003, and the levy
can only be sustained on the basis of ABT Meter installed in the
premises of the industrial unit of petitioners herein as ABT
Meter alone indicate the electricity consumed by the petitioner
company's industrial unit.
(d)- Any other order or direction which this Hon'ble Court
deems just and proper may also be passed."
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2. For brevity, facts of DB CWP No.1665/2016 are considered.
The petitioner is a company having its registered office at Udaipur
and industrial operations at Dungarpur in the State of Rajasthan.
The petitioner procures electricity from two sources, namely,
Ajmer Vidyut Vitran Nigam Limited (hereinafter referred to as
'AVVNL') and Tata Power Trading Company Limited (hereinafter
referred to as 'TATA') through open access under the provisions of
the Electricity Act, 2003 (hereinafter referred to as 'Act of 2003').
2.1 The petitioner is being charged electricity duty, water
conservation cess and urban cess under Sections 3, 3-B and 3-C
of the Rajasthan Electricity (Duty) Act, 1962 (hereinafter referred
to as 'Act of 1962'), respectively. The said duty/cess is being
levied qua the electricity purchased from AVVNL as well as TATA.
2.2 The units for the purpose of calculating the duty are being
considered on th e basis of the readings of the meter installed at
the Grid Sub-Station (hereinafter referred to as 'GSS').
2.3 The present writ petition has been filed, being aggrieved by
the levy of duty/cess on the electricity purchased from TATA, on
the ground that the same is supplied from outside the State of
Rajasthan and, therefore, would not fall within the purview of the
Act of 1962. Further, even if it is assumed that the Act of 1962 is
applicable, the calculation of the said duty ought to be based on
the units "consumed" by the petitioner rather than the units
"supplied". Thus, the reading of the meter installed at the
petitioner's industrial premises ought to be considered instead of
the meter installed at the GSS.
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3. Learned counsel for the petitioners made the following
submissions:-
(i) The electricity procured from TATA through the Indian Energy
Exchange does not fall within the ambit of supply by a "supplier"
as defined under Section 2(h) of the Act of 1962. TATA is merely a
trader licensed under Section 14 of the Act of 2003 by the Central
Electricity Regulatory Commission and is not a licensee within the
meaning of the statutory framework contemplated under the Act
of 1962. Consequently, such a trader cannot be treated as a
"supplier" and the petitioner cannot be brought within the ambit of
a "consumer" as defined under Section 2(c) of the Act of 1962 vis-
à-vis such transactions, and therefore, no duty/cess under the Act
of 1962 can be levied on electricity procured through open access
from such entity.
(ii) Even otherwise, the charging provisions under Sections 3, 3-
B and 3-C of the Act of 1962 clearly stipulate that duty/cess can
be levied only on "energy consumed" by a consumer. In the
present case, the respondents have adopted an impermissible
method of computation by levying duty on the basis of electricity
measured at the 132 KV GSS at Dungarpur, which represents the
point of supply, rather than on the actual electricity consumed at
the petitioners' industrial premises. Such computation is ex facie
contrary to the statutory scheme, as it includes transmission and
distribution losses occurring between the GSS and the petitioners'
unit, which by no stretch of interpretation can be treated as
"energy consumed" by the petitioners, thereby resulting in an
excessive and unauthorized levy. It is settled position of law that
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taxing statutes must be read strictly and not be given liberal
interpretation.
(iii) The action of AVVNL in including, within its billing
mechanism, the electricity procured by the petitioners from TATA
is wholly without jurisdiction and contrary to the Rajasthan
Electricity (Duty) Rules, 1970 (hereinafter referred to as 'the Rules
of 1970'). AVVNL is merely a collecting agency and can levy and
collect duty only in respect of electricity supplied by it, and in the
absence of any statutory provision or notification authorizing it to
collect duty on electricity supplied by a third-party trader, such
inclusion is illegal and unsustainable. The Rajasthan Electricity
Regulatory Commission (Metering) Regulations, 2007 (hereinafter
referred to as 'Regulations of 2007') have no application,
inasmuch as the said regulations pertain only to metering
arrangements and do not confer any substantive power to levy or
expand the scope of taxation under the Act of 1962.
(iv) The levy based on meter readings recorded at the GSS,
instead of the meter installed at the petitioners' premises, is
arbitrary and violative of the fundamental principles governing
fiscal statutes. The electricity from both sources, i.e., AVVNL and
open access procurement, first reaches the GSS and is thereafter
transmitted through a dedicated line to the petitioners' industrial
unit, and therefore, only the electricity recorded at the point of
consumption can legally be regarded as "energy consumed". Any
levy based on supply at the GSS would necessarily include
transmission losses, which are neither consumed by the
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petitioners nor contemplated within the charging provisions, and
hence, such levy travels beyond the authority of law.
In support of the aforesaid submissions, learned counsel
placed reliance on the judgment passed by the Apex Court in
State of Mysore v. West Coast Papers Mills Ltd.; (1975) 3
SCC 448, wherein it has been categorically held that electricity
duty is leviable only on the units of electricity actually consumed
and not on electricity generated, supplied or lost in transmission.
Reliance was also placed on the judgment of this Court in
Rampuria Ice Factory v. State of Rajasthan; 1985 SCC
OnLine Raj 292, reiterating that duty is payable only on actual
consumption. Thus, the impugned levy, being based on supply
rather than consumption and including non-consumptive losses, is
arbitrary, without authority of law and liable to be quashed and set
aside.
3.1 In view of the above submissions, learned counsel for the
petitioners submitted that the impugned levy of duty/cess under
Sections 3, 3-B and 3-C of the Act of 1962 qua the electricity
supplied by the TATA may be quashed and set aside.
4. Learned counsel appearing on behalf of AVVNL, while
refuting the submissions made on behalf of petitioners, made the
following submissions:-
(i) Prior to filing the writ petition, the petitioners had
themselves issued a notice acknowledging that electricity duty is
leviable on energy consumed and had only disputed the
component of transmission losses between the 132 KV GSS and
the industrial premises.
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(ii) AVVNL being Distribution Company is duly authorized by the
State Government to act as a collecting agency for duty/cess
under Sections 3, 3-B and 3-C of the Act of 1962.
(iii) The petitioners receive electricity both from the AVVNL and
through open access from TATA, which is transmitted through the
State transmission network. Thus, the petitioners squarely fall
within the definition of "consumer" under the Act of 1962, and the
levy of duty is attracted on the energy consumed within the State,
irrespective of the source of supply.
(iv) The contention of the petitioners that TATA is not a "supplier"
is misconceived as under the applicable regulatory framework,
including the Rajasthan Electricity Regulatory Commission (Terms
and Conditions for Open Access) Regulations, 2016 (hereinafter
referred to as 'Regulations of 2016'), a trader supplying electricity
to an open access consumer qualifies as an "open access
supplier". Therefore, TATA, being a licensed electricity trader under
Section 14 of the Act of 2003, is clearly covered within the ambit
of a supplier for the purposes of levy, and the petitioners cannot
evade their statutory liability on this ground.
(v) The levy of duty is rightly based on the readings of the
interface meter installed at the GSS, which is the designated
billing meter under the Regulations of 2007 and the Central
Electricity Authority (Installation and Operation of Meters)
Regulations, 2006 (hereinafter referred to as 'Regulations of
2006').
(vi) So far as open access consumers having dedicated feeders
are concerned, the point of supply and metering is at the sub-
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station, and the electricity recorded at such interface meter
constitutes the energy supplied and consumed for billing
purposes. The minor variation between the sub-station meter and
the meter at the petitioners' premises is attributable only to
transmission losses, which, as per the applicable regulations and
agreements, are to be borne by the petitioners. As a matter of
fact, the petitioners have agreed to bear the transmission losses
up to 4.2% as is apparent from Concurrence / No Objection /
Prior Standing Clearance issued on 09.10.2015 by the Rajasthan
Rajya Vidyut Prasaran Nigam Limited. That being so, it is not open
for the petitioners to now raise such objection.
(vii) The petitioners cannot blow hot and cold at the same time.
On one hand, the petitioners accept the fiscal and regulatory
benefits under the State framework and simultaneously disclaim
liability to bear statutory levies and taxes. Moreover, the
agreement between the petitioners and TATA specifically stipulates
that all duties and taxes shall be borne by the petitioners.
4.1 In view of the above submissions, learned counsel for the
AVVNL submitted that the levy of duty/cess is strictly in
accordance with the provisions of the Act of 1962, applicable
regulations, and the contractual arrangements between the
parties. Therefore, the writ petitions deserve to be dismissed.
5. Heard learned counsel for the parties and perused the
material available on record.
A. ISSUES
6. The issues which arise for consideration in the present writ
petitions are as follows:-
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(i) Whether electricity duty, water conservation cess, and
urban cess under Sections 3, 3-B, and 3-C respectively of
the Act of 1962 are leviable on the electricity consumed by
the petitioners, which is procured from TATA through the
open access market?
(ii) Whether the loss of energy occurring during its
transmission is liable to be included while levying duty/cess
under the provisions of the Act of 1962?
B. STATUTORY FRAMEWORK
7. Before delving into the above issues, it would be appropriate
to first examine the statutory framework relevant for the purpose
of adjudicating the above issues:-
(i)- Section 2(c) of the Act of 1962 defines 'Consumer' as a
person who is supplied with energy by a supplier or by any other
person who generates energy and includes a supplier in respect of
the energy consumed by him in or upon premises used by him for
his commercial or residential purposes.
Section 2(h) of the Act of 1962 defines 'Supplier' as the
Board or a licensee licensed under Chapter II of the Indian
Electricity Act, 1910 to supply energy and includes any person
having sanction under Section 28 of the said Act. It is noted that
the Electricity Act, 1910 has been repealed by the Act of 2003.
Section 3 of the Act of 1962 provides that there shall be
levied and paid to the State Government, on the energy consumed
by the consumer or by a person generating energy for his own
use, electricity duty at the notified rate. The State has the power
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to levy taxes on the consumption or sale of electricity as per Entry
No. 53 of List II of the Constitution of India, thus, the levy of
electricity duty is within the competence of the State Government.
Section 3-B of the Act of 1962 was introduced by way of
amendment in the year 2009 with the following object:
"The state is facing severe drinking water crisis in almost all parts of
the State. Due to intensive use of ground water, the ground water
level is depleting at a faster rate. Therefore, judicious use of water
along with water conservation has become essential. Construction of
water harvesting structure, both for collecting the run off as well as
for ground water recharge, are required at a large scale to ensure
more water availability in the state. People at large, are to be
informed, educated and sensitized to initiate and sustain the habit of
conserving water in day to day life. All these activities need financial
resources, which at present, amidst pressure of recession is not easily
affordable. The proposed water conservation cess is intended to
provide financial resources to such activities."
Further, the Section 3-C of the Act of 1962 was inserted by
way of amendment in the year 2010 with the following object:
"The State is witnessing rapid urbanization in recent years.
However, the urban local bodies responsible for urban development
do not have sufficient financial resources to provide civic amenities
like payment of bills for street lighting, sanitation or maintenance of
roads. In order to strengthen the financial position of the urban local
bodies to discharge these responsibilities, it is proposed to levy an
urban cess equal to ten paise per unit from urban consumers having
monthly consumption of electricity exceeding 100 units. Further, the
importance of energy conservation measures in this regard cannot be
over emphasized
The cess so collected shall be used for the purpose of providing basic
amenities like street lighting, sanitation, maintenance of roads and
for energy conservation in urban areas. To achieve these objectives,
section 3C is being inserted in the Act".
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Water conservation cess and urban cess is levied on the
energy consumed as per Section 3-B and 3-C of the Act of 1962,
respectively. Thus, the levy and payment under the Act is as per
the consumption of energy.
(ii)- Rule 3 of the Rules of 1970 requires the supplier to include
duty/cess as separate items in the bill for energy supplied by him
and recover the same from the consumer. This Rule regulates the
machinery for collection, it does not alter the nature of charges
created under Sections 3, 3-B and 3-C of the Act of 1962.
(iii)- The Regulations of 2006 recognized the concept of interface
meters having inter connection with the transmission system /
distribution system. The Regulations of 2016 also recognized an
'open access supplier' to include a generating company, trader,
licensee or other person effecting supply to an open access
consumer.
(iv)- Regulation 11(1)(a)(i) of the Regulations of 2007 provides
for the meter location for open access consumers. It provides that
the main and check meters shall be installed at delivery point or
relevant to termination point of service line at outgoing isolator of
licensee's sub-station. Further, the standby meter shall be
installed at other end of line. The said arrangement is applicable
to open access interface meters having inter connection with
transmission system/distribution system. It is noted that the said
Regulations have been repealed by the Rajasthan Electricity
Regulatory Commission vide notification dated 09.04.2021. In
place of the Regulations of 2007, the Rajasthan Electricity
Regulatory Commission (Metering) (Practice Directions) Order
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2021 has been issued, wherein too, the location for interface
meter has been provided in same terms as was provided under
Regulation 11(1)(a)(i) of the Regulations of 2007. Therefore, the
repeal of the Regulations of 2007 does not materially affect the
adjudication of issues in the present case.
8. Considering the above discussed statutory framework, this
Court will now proceed to examine the issues framed.
C. ISSUE NO.1
(i) Whether electricity duty, water conservation
cess, and urban cess under Sections 3, 3-B, and 3-
C respectively of the Act of 1962 are leviable on the
electricity consumed by the petitioners, which is
procured from TATA through the open access
market?
9. True it is that with the introduction of the open access
market, private entities can generate and sell energy, and such
sale may not be restricted to within the State where the electricity
is generated. Therefore, it becomes imperative to examine the
applicability of the Act of 1962 on such electricity. The preamble of
the Act of 1962 indicates that the enactment applies to the
consumption of electricity in the State of Rajasthan. Thus, the Act
of 1962 does not, per se, draw any distinction between electricity
generated outside the State of Rajasthan and electricity generated
within the State. Rather, the expression employed is the
"consumption" of electricity.
10. The petitioners are admittedly receiving electrical energy in
Rajasthan for industrial use in the unit situated at Dungarpur. The
argument founded solely upon the status of TATA as a trading
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licensee seeks to defeat the levy by placing undue emphasis on
the identity of the intermediary rather than on the taxable
incidence, namely, consumption of electricity within the State. The
open access framework itself recognizes that electricity may be
supplied to an open access consumer through a generating
company, trader, or licensee. More so, it is to be noted that in the
present case, the petitioners are procuring electrical energy from
a source outside the State, however, the supply to the petitioners'
unit is being made through the State agency, i.e. the DISCOM,
namely AVVNL, through its transmission lines. Therefore, it is not
open for the petitioners to argue that since the supply of energy is
from a source outside the State, duty/cess cannot be levied.
11. At the same time, it is noted that the petitioners are right in
contending that a taxing statute must be read strictly. Therefore,
this Court does not hold that the regulatory expressions such as
"open access supplier" automatically amend the definition of
"supplier" in Section 2(h) of the Act of 1962. What this Court
holds, in the narrower sense, is that the petitioners, who are
indisputably consumers of electricity within Rajasthan, cannot
escape the incidence of duty/cess under the Act of 1962 solely
because the procurement route is open access through a trader.
The source of procurement by itself does not neutralize the
duty/cess where the statute taxes consumption within the State.
More so, considering the fact that the arrangement is such that
the energy is generated by TATA and transmitted to the industrial
unit of the petitioners through the network of AVVNL. It is not the
case herein that the supply of electricity is directly from TATA to
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the petitioners; rather, a third party is involved, which is, in fact, a
"supplier" within the meaning of the Act of 1962. Regardless, the
place of generation of electricity does not play a vital role in the
present case, as the Act of 1962 focuses on the "consumption" of
electricity in the State of Rajasthan and not on where such
electricity is generated.
Considering the submissions made by the parties so also
applicable provisions of law, in the considered opinion of this
Court, the petitioners' contention that no duty/cess at all is
leviable merely because the electricity was procured through a
trader outside the State does not merit acceptance in the broad
form in which it has been urged. The taxable event under Sections
3, 3-B, and 3-C of the Act of 1962 is not the sale transaction as
such, but the consumption of energy in the State. Therefore, the
challenge to the levy of such duty/cess per se fails.
12. It has also been argued on behalf of the petitioners that
AVVNL, not being the supplier of electricity purchased from TATA,
lacks the authority to collect the duty/cess applicable to the said
electricity. The respondent-AVVNL, on the other hand, has relied
on the Rules of 1970 to establish its power to collect the
duty/cess.
13. Rule 3 of the Rules of 1970 provides that the supplier is the
agency through which the amount is recovered from the consumer
along with the charges for the energy supplied by it. The
respondents assert that AVVNL has been functioning as the
collecting agency, and the petitioners themselves appear to have
vehemently contested principally the mode of computation and
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levy of duty/cess rather than the competence of the State to
collect duty on the electricity consumed.
14. This Court is of the opinion that, considering the
arrangement for supply of electricity in the present matter, which
originates from TATA and reaches the petitioners' premises
through the set-up of the DISCOM, i.e. AVVNL, and further
considering that AVVNL is duly authorized under the Rules of 1970
to collect the duty/cess provided under the Act of 1962, and also
considering the fact that in the bills so prepared, separate
calculations are provided for consumption through open access
and for supply from the DISCOM, it cannot be inferred that there
is any overlap of charges. Therefore, this Court is not inclined to
accept the contention of the petitioners that AVVNL is not
authorized to collect the duty/cess from the petitioners qua the
electricity purchased from TATA. However, such collection can
survive only to the extent that it accords with the charging
provision and not beyond it.
15. In view of the above observations, the first issue is decided
in the terms that electricity duty, water conservation cess, and
urban cess under Sections 3, 3-B, and 3-C respectively of the Act
of 1962 are leviable on the electricity consumed by the
petitioners, which is procured from TATA through the open access
market.
D. ISSUE NO.2
(ii) Whether the loss of energy occurring during
its transmission is liable to be included while
levying duty/cess under the provisions of the Act of
1962?
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16. The parties involved in transmission of electricity purchased
from open access market are TATA, AVVNL and the petitioners.
The electricity is generated by TATA which is outside the State of
Rajasthan. The electricity is then received at GSS and thereafter,
is transmitted to the industrial premises of the petitioners. It can
be fairly concluded that there are two stages where transmission
loss occurs, first, when electricity is transferred from TATA to
AVVNL and second, when electricity is transferred from AVVNL to
the petitioners.
16.1. It is pertinent to note that it is an admitted position
that transmission loss occurs during the transfer of electricity.
Learned counsel for the respondent-AVVNL has placed reliance on
the NOC issued by the Rajasthan Rajya Vidyut Prasaran Nigam
Ltd. in favour of the petitioners, wherein the petitioners have
allegedly agreed to bear the transmission losses. Learned counsel
for the petitioners, on the other hand, has not denied the said
position, rather, he has emphasized that the legislative intent
behind the Act of 1962, as well as the language incorporated
therein, clearly indicates that, in substance, duty/cess is leviable
on the energy "consumed," which cannot include transmission
losses.
17. It is unambiguously clear that the phrase used under
Sections 3, 3-B, and 3-C of the Act of 1962 is "energy consumed".
Thus, this Court is of the opinion that interpreting the said phrase
to include transmission losses would amount to adding something
to the provision which it does not envisage, as by no reasonable
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stretch of imagination can it be concluded that transmission losses
are 'consumed' by the consumer.
18. The Apex Court in the case of West Coast Papers Mills
Ltd. (supra) while dealing with a similar issue observed as under:
"4. It would at this stage be appropriate to advert briefly
to the process of generation and distribution of electricity.
The process of generation of electricity normally consists
of converting mechanical energy into electrical energy
through what is known as the "generator". Such
mechanical energy is normally supplied by turbine or
piston engine. The motive power for such turbine or piston
engine is supplied by falling water, steam, gas, mineral oil
or nuclear fuel. Electrical energy so generated is
transmitted through metal conductors to places where it is
to be used. Some loss of electrical energy takes place in
the transmission. Such loss is described as transmission
loss. Electricity is transmitted over long distances at
comparatively high voltage to minimise the 'transmission
loss. If electricity is generated at low voltage before
transmission, it is stepped up to relatively high voltage
through what is known as "transformer". When electrical
energy reaches the place where it is be used, the voltage of
electric current is brought down through a transformer
before it is put to use. The reason for that is that it is more
safe and convenient to. have low voltage at the point of
consumption. Some energy is lost in the process of
stepping up and stepping down of the voltage through
transformers. Such loss is described as the transformer
loss.
XXX XXX XXX
7. We have set out the relevant provisions of the Act, and it
would appear therefrom that electricity tax is payable on
the units of energy consumed. The one question with which
we are concerned in this appeal is whether electricity tax
is payable in respect of the electrical energy which is lost
in transmission as a result of transmission loss or
transformer loss. So far as this question is concerned, we
are of the view that no tax is payable on the electricity so
lost. The entire scheme of the Act is to tax the consumption
of electrical energy. Where some energy is not consumed
but lost before it reaches the point of consumption, the
question of levy of tax on consumption of such energy
would not in the very nature of things arise. The place of
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consumption of electrical energy is normally at some
distance from the place where electrical energy is
generated. Electrical energy has consequently to be
transmitted through metal conductors to the place where it
is consumed. Such transmission admittedly entails loss of
some electrical energy and what is lost can plainly be not
available for consumption and as such would not be
consumed. If a person, for example, generates 100 units of
electrical energy and loses 10 units in the process of
transmission from the point of generation to the point of
consumption, he would in the very nature of things be able
to supply only 90 units of electrical energy to the
consumers. The tax which would be payable on the
electrical energy consumed in such a case would be only
for 90 units and not 100 units. To hold otherwise and to
realise tax on 100 units of electrical energy would be
tantamount to levying tax on the generation or production
of electrical energy and not on its consumption. Such a tax
on the generation or production of electrical energy is
plainly not permissible under the Act. The fact that the
consumer happens in the present case to be the same
company which generated the electrical energy would, in
our opinion, make no material difference.
XXX XXX XXX
12. We, therefore, partially accept the appeal and hold
that electricity tax under the Act is payable in respect of
electrical energy consumed for generating further
electricity. No such tax is, however, payable in respect of
electrical energy lost as a result of transmission loss and
transformer loss. The judgment of the High Court is
modified accordingly. The parties in the circumstances are
left to bear their own costs throughout."
18.1. The Apex Court has held in clear terms that the electricity
tax is payable only on the units of energy consumed and not on
electricity lost in transmission. Where the energy is not consumed
but lost before reaching the point of consumption, levy on such
loss of energy is impermissible. The Apex Court considered the
judgment rendered in West Coast Papers Mills Ltd. (supra) in
the case of Southern Petrochemical Industries Company
Limited Vs. Electricity Inspector and Ors.; (2007) 5 SCC
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447 and observed that the concept of tariff and tax is different
wherein tax must be on actual basis.
19. Learned counsel for the respondents has placed considerable
reliance on the Regulations of 2006 so also the Regulations of
2007 to argue that, as per the statutory scheme, the location of
the meter must be at the GSS. Further reliance has been placed
on the agreement entered into between AVVNL and the
petitioners, wherein the clause relating to the point of supply and
metering location reads as under:
"03. The point of supply as well as the metering point shall be
at the Nigam's substation at Dungarpur (FOR EHT ONLY)."
19.1. It is pertinent to note that the said agreement was
executed in the year 2008 and was not entered into in relation to
the electricity supplied by TATA. This is further fortified by the fact
that the agreement between TATA and the petitioners was
executed only in the year 2015. Therefore, in the considered
opinion of this Court, the agreement between AVVNL and the
petitioners does not assist the DISCOM in contending that the
petitioners had agreed to the metering location being at the GSS
even in respect of the electricity supplied by TATA.
The issue may also be examined from another perspective.
The submission on behalf of respondent-AVVNL that the
petitioners had contractually agreed to bear transmission losses
does not answer the legal objection. Such contractual liability may
govern tariff adjustment, commercial settlement, or network
charges, however, tax liability must rest on statutory authority. A
private agreement cannot convert non-consumed electricity into
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[2026:RJ-JD:17459-DB] (20 of 23) [CW-1665/2016]
"energy consumed" for the purposes of Sections 3, 3-B, and 3-C
of the Act of 1962. Article 265 of the Constitution mandates that
both the levy and collection of tax must have the authority of law.
What the statute does not recognize as a taxable event cannot be
introduced by contract.
19.2. So far as the Regulations of 2006 and the Regulations of
2007 are concerned, a bare perusal of the provisions therein
reveals that there is no provision pertaining to taxation on
electricity procured through open access. Rather, the Regulations
of 2006 provide for different types of meters, including the
"interface meter" defined under Regulation 2(1)(n), which reads
as under:
"(n) 'Interface Meter' means a meter used for accounting and
billing of electricity, connected at the point of interconnection
between electrical systems of generating company, licensee
and consumers, directly connected to the Inter-State
Transmission System or Intra-State Transmission System or
Distribution System and who have been permitted open
access by the Appropriate Commission;"
19.3. Further, Regulation 7 of the Regulations of 2006 provides
for the location of the interface meter. However, it cannot be
discerned from either Regulation 7 or Regulation 2(1)(n) that, qua
electricity procured through open access, the units of energy
recorded at the substation are to be considered for the purposes
of calculating tax on electricity. This is further fortified by the
definition of "interface meter," which states that it is a meter used
for "accounting and billing" of electricity, and not for the purposes
of taxation. As discussed in the preceding paragraphs and as
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[2026:RJ-JD:17459-DB] (21 of 23) [CW-1665/2016]
observed by the Apex Court in the case of Southern
Petrochemical Industries Company Limited (supra), the
concepts of tariff and tax are distinct, and tax must be levied on
an actual basis. In other words, when the Act of 1962, which is
the governing statute for levying duty/cess on electricity
consumption, imposes such duty/cess only on "consumption," it is
not open to this Court to travel beyond the Act of 1962 to hold
that transmission losses, which may be included in the tariff or
charges for the supply of electricity, are also to be included for the
purposes of calculating duty/cess. This is particularly so when
such transmission losses cannot, in any manner, be said to be
"consumed," which is an essential requirement under Sections 3,
3-A, and 3-C of the Act of 1962.
19.4. Similarly, Regulations of 2007, more particularly Regulation
11(1)(a)(i), which has been laid much emphasis upon by learned
counsel for the respondent-AVVNL also provides for metering
system requirement and only clarifies as to the place of
installation of meters qua open access consumers.
Therefore, the Regulations of 2006 and the Regulations of
2007 may identify the interface point for accounting, scheduling,
location of meters and commercial settlement, but they cannot
justify the levy of duty/cess on units that never reached the point
of use and were lost in route. The machinery provision cannot
enlarge the charge.
20. In view of the discussion made above, this Court is of the
firm opinion that the levy of duty/cess under the provisions of the
Act of 1962 cannot be made on units of energy lost during
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[2026:RJ-JD:17459-DB] (22 of 23) [CW-1665/2016]
transmission. In other words, transmission losses occurring during
the transfer of electricity cannot be included for the purposes of
levying duty/cess under the Act of 1962, as the same would be
contrary to the scheme of the said Act. The second issue is
answered accordingly.
E. CONCLUSION
21. For the reasons recorded above, this Court holds as under:-
(i)- The levy of duty, water conservation cess and urban cess
under the Rajasthan Electricity (Duty) Act, 1962 is attracted on
the electricity consumed by the petitioners within the State of
Rajasthan, and the mere fact that such electricity was procured
through open access from TATA Power Trading Company Limited
does not, by itself, place the transaction outside the scope of the
Act of 1962.
(ii)- The electricity duty, water conservation cess, and urban cess
provided respectively under Sections 3, 3-B, and 3-C of the Act of
1962 operate on the energy consumed. Consequently, the loss of
energy that occurs during transmission of electricity cannot be
included for the purpose of computation of duty and cess under
the provisions of the Act of 1962.
22. As an upshot of the above discussion, the writ petitions are
partly allowed. Henceforth, the respondent-AVVNL is directed to
compute the electricity duty, water conservation cess, and urban
cess provided respectively under Sections 3, 3-B, and 3-C of the
Act of 1962, on the actual energy consumed by the petitioners,
which is purchased through open access market from TATA,
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[2026:RJ-JD:17459-DB] (23 of 23) [CW-1665/2016]
excluding the transmission losses. So far as the recording of meter
readings for the purpose of determining transmission losses is
concerned, the respondent-AVVNL shall take into consideration
the readings of the standby meter installed at the petitioners'
premises.
23. Any pending applications stand disposed of.
(SUNIL BENIWAL),J (ARUN MONGA),J
Rmathur/-
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