Supreme Court: The Division Bench comprising of M. R. Shah* and Sanjiv Khanna, JJ., reversed the impugned order of the High Court whereby the High Court had held that education institutions run by charitable societies are exempted from payment of electricity duty. The Bench held that if the argument that all the schools/colleges or institutions, imparting education or training are exempted from electricity duty is accepted it would lead to absurd result and in that case, even the private hospitals, nursing homes, dispensaries and clinics, who are profit making entities can also claim exemption from levy of electricity duty.
Factual Backdrop
The State of Maharashtra had preferred the instant appeal to assail the order of the High Court wherein it had held that education institutions run by charitable societies were exempted from payment of electricity duty. The High Court had set aside levy of electricity duty on the respondents- Shri Vile Parle Kelvani Mandal, a society registered under the Societies Registration Act, 1860 and also a public charitable trust registered under the Maharashtra Public Trusts Act, 1950 along with respective electricity bills levying the electricity duty on consumption of electricity charge.
The crux of dispute was that prior to 01-09-2016, the charitable education institutions were exempted from payment of electricity duty levied on the consumption charges or the energy consumption for the purposes of or in respect of a school or college or institution imparting education or training, students’ hostels, hospitals, nursing homes etc. as per Section 3(2)(iii) of the Maharashtra Electricity Duty Act, 1958. However, in the year 2018, the respective electricity supply companies levied the electricity duty pursuant to a letter from the State Government stating that as per Maharashtra Electricity Act, 2016, charitable institutions registered under the Maharashtra Public Trusts Act, 1950 for the purpose of or in respect of school or college imparting education or training in academic or technical subjects are not entitled for electricity duty exemption with effect from 01-09-2016.
Intelligible Differentia vis-a-vis Taxing Statute
The respondents contended that if the interpretation canvassed by the state is accepted then it will lead to absurdity and manifest injustice as school/colleges etc. run by the local authority will fall within the purview of Section 3(2)(iii) of 2016 Act, while those run by the statutory university or charitable institution would fall outside the ambit of Section 3(2)(iii). It was submitted that as such there is no essential difference between schools/colleges etc. run by the statutory university or institution registered under the Maharashtra Public Trusts Act, 1950 and those run by the local authority. Further, that who runs the educational institution could not be the intelligible differentia for the purpose of classification. Hence, it was submitted that Electricity Duty Act being taxing statute, it must be strictly construed and if there is any ambiguity the benefit of ambiguity must lean in favour of the assessee rather than the revenue.
On the contrary, the stand of the State was that on enactment of the Maharashtra Electricity Duty Act, 2016 which repealed the earlier the Maharashtra Electricity Duty Act, 1958, no such exemption from levy/payment of electricity duty has been provided to such charitable education institutions.
Analysis of the Statute
As per subsection (2) of Section 3 of the Act, 1958 the electricity duty was not leviable on the consumption charges or the units of energy consumed…………..by or in respect of charitable institution registered under the Bombay Public Trusts Act, 1950, for the purpose of, or in respect of, school or college imparting education or training in academic or technical subjects.
However, there are material changes under the Act, 2016. As per Section 3(2) of the 2016 Act, even the public undertakings are liable to pay the electricity duty. The Bench observed,
“Section 3(2)(iiia), which was there in 1958 Act, is now conspicuously and deliberately absent in Section 3(2) of the 2016 Act.”
Interpreting the Section 3(2)(iii), under Act, 2016, the Bench stated that electricity duty on the consumption of charges or energy consumed for the purposes of, or in respect of a school or college or institution imparting education or training, student’s, hostels………….run by any local bodies shall alone be exempted from levy of electricity duty and the State Government and Central Government are also specifically excluded from payment of electricity duty. However, the public sector undertakings are not exempted from payment of electricity Act.
Therefore, the Bench held that 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 Act, 2016 from levy of electricity duty so far as the charitable education institutions are concerned.
Findings and Conclusion
In Essar Steel India Ltd. v. State of Gujarat, (2017) 8 SCC 357, it was held that the statutory conditions for grant of exemption can neither be tinkered with nor diluted. The exemption notification must be interpreted by their own wordings, and where the wordings of notification with regard the construction is clear, it has to be given effect to. Similarly, in Commr. of Customs Vs. Dilip Kumar & Co., (2018) 9 SCC 1, it was held that, in the context of exemption notification there is no new room for intendment. Regard must be to the clear meaning of the words. Claim to exemption is governed wholly by the language of the notification, which means by plain terms of the exemption clause. An assessee cannot claim benefit of exemption, on the principle that in case of ambiguity a taxing statue must be construed in his favour, for an exception or exemption provision must be construed strictly.
Hence, the Bench opined that if the submissions of the respondents is accepted that as per Section 3(2)(iii), with respect to all the schools/colleges or institutions, imparting education or training, the electricity duty is not leviable, it would lead to absurd result. In that case, even the private hospitals, nursing homes, dispensaries and clinics, who are profit making entities, can also claim exemption from levy of electricity duty. Therefore, it was held that charitable education institutions are not entitled to any exemption from levy/payment of the electricity duty from the date on which Maharashtra Electricity Duty Act, 2016 came into effect.
Consequently, the Bench concluded, the High Court had committed a grave error in setting aside the levy of electricity duty levied on the respondents. Accordingly, the impugned judgment and order were held unsustainable and thereby, quashed and set aside.
[State of Maharashtra v. Shri Vile Parle Kelvani Mandal, 2022 SCC OnLine SC 18, decided on 07-01-2022]
*Judgment by: Justice M. R. Shah
Appearance by:
For the State: Sachin Patil, Advocate
For the Respondents: Shekhar Naphade, Senior Advocate