National Thermal Power Corporation Ltd. vs State of Andhra Pradesh and Others

B.P. Jeevan Reddy, J.—Andhra Pradesh Electricity Duty Act, 1939 - originally enacted as Madras Act 5 of 1939 and subsequently made applicable to the entire State of Andhra Pradesh - provides for levy of duty on certain sales and consumption of electrical energy by licensees in the State of Andhra Pradesh. Section 2 defines certain expressions occurring in the Act. "Energy" is defined to mean electrical energy [clause (a)]. "Licensee" is defined to mean :

"(i) any person including a company or a local authority licensed under Part II of the Indian Electricity Act, 1910, to supply energy, or any person including a company or a local authority who has obtained the sanction of the State Government u/s 28 of that Act to supply energy;

(ii) the Andhra Pradesh State Electricity Board constituted u/s 5 of the Electricity (Supply) Act, 1948;

(iii) the National Thermal Power Corporation or any other corporation engaged in the business of supplying energy" [clause (b)].

Section 3 is the charging section. Sub-section (1) alone is relevant for our purposes, and may be set out in full :

"3. Levy of duty in certain sales of electrical energy. - (1) Save as otherwise provided in sub-section (2), every licensee in the State of Andhra Pradesh shall pay every month to the State Government in the prescribed manner, a duty calculated at the rate of four paise per unit of energy, on and in respect of all sales of energy, except sales to the Government of India, for consumption by that Government or sales to the Government of India or a railway company operating any railway for consumption in the construction, maintenance or operation of that railway, effected by the licensee during the previous month, at a price of more than twelve paise per unit, and on and in respect of all energy which was consumed by the licensee during the previous month for purposes other than those connected with the construction, maintenance and operation of his electrical undertaking and which, if sold to a private consumer under like conditions, would have fetched a price of more than twelve parse per unit :

Provided that no duty under this sub-section shall be payable on and in respect of sale of energy effected :

(a) by the Andhra Pradesh State Electricity Board to any other licensee;

(b) by the National Thermal Power Corporation to the Andhra Pradesh State Electricity Board ......"

An analysis of sub-section (1) of section 3 yields the following features :

(a) Duty is levied on "all sales of energy" effected by the licensee during the previous month at a price more than twelve paise per unit. The rate of duty is four paise per unit of energy. However, sales to (i) Government of India for consumption by that Government, (ii) sales to the Government of India, or a railway company operating any railway, for consumption in the construction, maintenance or operation of that railway, are exempted from duty. Similarly, sales (i) by A.P. State Electricity Board to any other licensee, and (ii) by the National Thermal Power Corporation to the A.P. State Electricity Board, are again exempted.

(b) Duty at the same rate is also levied on all energy consumed by the licensee during the previous month for purposes other than those connected with the construction, maintenance and operation of his electrical undertaking and which, if sold to a private consumer under like conditions, would have fetched a price of more than twelve paise per unit.

In this case, we are not concerned with duty levied on consumption, mentioned as clause (b) in the above analysis.

Both the National Thermal Power Corporation (NTPC), the writ-petitioner herein, and the A.P. State Electricity Board, are "licensees" within the meaning of the definition of "licensee" in section 2(b).

National Thermal Power Corporation (NTPC) is a Government company wholly owned by the Government of India. It was set up to meet the fast growing demand of power in the country. More than one super thermal power station has been set up by the Corporation in different parts of the country. Normally they are located near coal-pit heads. One such super thermal power station is set up in Ramagundam, in Karimnagar District of this State. Power from this super thermal power station is supplied to entire southern region, viz., to the States of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, and Goa, in terms of long term bulk supply agreements entered into with the concerned Electricity Boards of those States. (Goa was a Union Territory until May 30, 1987, on which date it became a State).

NTPC (the petitioner herein) was brought within the definition of "licensee" u/s 2(b) of the Act, with effect from October 30, 1984, by virtue of Ordinance 32 of 1984, which was subsequently replaced by A.P. Act 10 of 1985. According to the Government of Andhra Pradesh, the result of this legislative action was that the sale of energy by NTPC, except the sales expressly exempted by section 3, became chargeable to duty. In other words, sales of energy by NTPC to Government of India, to Railways, and to A.P. State Electricity Board were exempted. But, says the Government of Andhra Pradesh, all sales of energy by NTPC to the Electricity Boards of other States, and all sales to any other consumer, became dutiable. Duty was, accordingly, demanded, and was paid till the year 1986. The petitioner (NTPC) says, it paid the duty under a bona fide mistake of law, and that when it realised that the said levy is not sanctioned by law and by the Constitution, it objected to the same. It refused to pay duty any further, and also called upon the Government of Andhra Pradesh to refund the amount of duty already paid by it. The Government of Andhra Pradesh naturally stood by its stand, and justified the levy. It is the said controversy which arises for consideration in this writ petition.

Under the agreements entered into between the petitioner and the Electricity Boards of other Southern States, any statutory duty, cess or levy imposed by the Central Government or State Government on generation and/or sale of electrical energy shall be paid by the purchaser-Board in addition to the rate for supply of power. By way of illustration, we may refer to clause B.5.1 of annexure-B (Rate Schedule) to the agreement entered into between the petitioner and Karnataka Electricity Board, which reads as follows :

"The rate for supply of power shall be exclusive of any statutory duty, cess or levy imposed by the Central or State Government on generation and/or sale of electrical energy which shall be payable additionally through the monthly bills."

Since the burden of duty is passed on to them, the Electricity Boards of other States are supporting the stand of NTPC. They too say that levy of duty on sale of energy by NTPC to them, is impermissible in law and under the Constitution.

Sri T. Anantha Babu, learned counsel for the petitioner, contended that the sale of energy by the petitioner to Electricity Boards of other States, is an inter-State sale. The power to tax an inter-State sale is conferred exclusively upon Parliament by entry 92-A of List I in the Seventh Schedule to the Constitution. Reading the said entry along with article 246, it must be held that the State Legislature has no power to tax an inter-State sale. The agreements entered into between the petitioner and the Electricity Boards of other States do clearly establish that the electricity is moving across the border of Andhra Pradesh State in pursuance of, and in terms of the said agreements. The State Legislature has no extra-territorial jurisdiction. Section 3 of the Central Sales Tax Act merely gives effect to the ordinary and natural meaning of an inter-State sale. Even without the said statutory definition, an inter-State sale carries the very same meaning and connotation.

The learned counsel appearing for the State of Karnataka supported the above contentions, and submitted further that once the sale of energy by the petitioner to Karnataka Electricity Board is held to be an inter-State sale, it is unnecessary to examine further, where does the sale take pace. The State Legislature has no power to tax an inter-State sale, that being the exclusive prerogative of Parliament. Counsel relied upon the provisions in articles 269 and 286 of the Constitution in support of his argument.

The learned Advocate-General for Goa, while supporting the contentions urged by the petitioner, urged certain further grounds. According to him, Goa was a Union Territory until May 30, 1987, on which date it became a State. In the case of a Union Territory, its Government is the Government of India. There is no separate Government for a Union Territory, notwithstanding that there is a legislature, an administration, and a Lt. Governor. For the said reason, the sale of energy to the Electricity Board of Goa till May 30, 1987, is exempt from duty, in terms of sub-section (1) of section 3 itself. The further contention urged by him is that section 3(1) of the Act is violative of article 303 of the Constitution and, therefore, void. Section 3(1) exempts sales of energy by the petitioner to the A.P. State Electricity Board from duty, but levies such duty upon sales to Electricity Boards of other States. This is a clear case of State Legislature making a law giving preference to one State over the other, and thereby bringing about a discrimination between one State and another. Such preference and discrimination is expressly prohibited by article 303.

The learned Advocate-General of the Andhra Pradesh, however, supported the validity of levy. According to him, sale of energy by the petitioner to other Electricity Boards does not constitute an inter-State sale; it is an intra-State sale. A law made by the State Legislature levying duty upon sale and consumption of electricity is relatable to entry 53 in List II of the Seventh Schedule, and not to entry 54. While entry 54 is expressly made subject to the provisions of entry 92-A of List I, no such restriction is contained in entry 53. The definition of "inter-State sale" contained in section 3 of the Central Sales Tax Act has, therefore, no application. Since the electricity is generated in the State and transmitted to other States, the A.P. Legislature is perfectly competent to levy duty on such sales. There is sufficient territorial nexus entitling the A.P. Legislature to tax the said sales.

Clause (1) of article 245 of the Constitution empowers the Parliament to make laws for the whole, or any part of the territory of India, subject to the provisions of the Constitution. It similarly empowers the legislature of a State to make laws for the whole, or any part of the State. It declares further that no law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation. Article 246 has four clauses. Clauses (1) to (3) of article 246 read together have the effect of declaring that (i) Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I of the Seventh Schedule; (ii) the State Legislature has exclusive power to make laws in respect of any of the matters enumerated in List II; (iii) with respect to any of the matters enumerated in List III, Parliament and the Legislature of State are both empowered to make laws. But, this provision must be read along with the one contained in article 254, which confers a certain primacy upon Parliament. If both the Parliament and the State Legislature make a law with respect to a matter enumerated in List III, the law made by Parliament prevails over the law made by State Legislature to the extent of repugnancy. This is so irrespective of the fact whether the Parliamentary legislation is anterior to, or subsequent to the State legislation. Clause (4) of article 246 - which is not really relevant for our purposes - declares that Parliament alone shall have the power to make laws with respect to any matter for any part of the territory of India not included in a State, notwithstanding that such matter is a matter enumerated in the State List. In short, it empowers the Parliament to make laws for Union Territory in respect of all matters enumerated in the Seventh Schedule. Article 248 confers the residuary powers of legislation upon Parliament.

The A.P. Electricity Duty Act is not relatable to any of the entries in List III. It is, therefore, unnecessary to go into the question of Parliament''s primacy over the State Legislature, or for that matter, the theories relating to repugnancy. The said Act is primarily relatable to entry 53 in List II. Entry 53 does not contain the restrictive words as are contained in entry 54 of List II; while entry 54 in List II is expressly made subject to the provisions of entry 92-A of List I, no such restrictive words are to be found in entry 53. Yet, the contention of the petitioner and the other State Electricity Boards is that such a restriction is inherent in the situation and it must, therefore, be held that the A.P. State Legislature has no power to tax a sale which is an inter-State sale. What is within the purview of Parliament, cannot be within the purview of the State Legislature, the argument runs. Once the power to tax an inter-State sale is with the Parliament, they say, the State Legislature is denuded of that power.

It is the correctness of this contention that falls for our consideration.

Entries 53 and 54 of List II, and entry 92-A of List I read as follows :

"List II :

Taxes on the consumption or sale of electricity.

Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A of List I."

"List I :

92-A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce."

Entry 53 in List II of the Constitution corresponds to entry 48-B of List II in the Seventh Schedule to the Government of India Act, 1935. The said entry was inserted by the India and Burma (Miscellaneous Amendment) Act, 1940. Entry 48-B read as follows :

"Taxes on the consumption or sale of electricity subject, however, to the provisions of section 154-A of this Act."

Section 154-A of the said Act exempted the Federal Government from the taxing power of the Provincial Legislature.

Entry 54 of the Constitution, as originally enacted, read as follows :

"54. Taxes on the sale or purchase of goods other than news-papers."

It corresponds to entry 48 in List II of the Seventh Schedule to the 1935 Act, which read :

"Taxes on the sale of goods and on advertisements."

Article 286, as originally enacted, disabled a State from imposing a tax on a sale or purchase of goods where such sale or purchase takes place outside the State, or in the course of the import of goods into, or export of goods out of the territory of India. The explanation to clause (1) of article 286 clarified that a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase, for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods, the property in the goods has, by reason of such sale or purchase, passed in another State. Clause (2) provided further that, except in so far as the Parliament may, by law, otherwise provide, no State shall be entitled to impose a tax on an inter-State sale, or on an inter-State purchase. Clause (3) provided that no law made by the Legislature of a State imposing a tax on the sale or purchase of "declared goods" shall have effect unless it is assented to by the President. For the purpose of this case, it is unnecessary to trace the controversy arising from the language of article 286. Suffice it to state that, as a result of the decision of the Supreme Court in The Bengal Immunity Company Limited Vs. The State of Bihar and Others, , article 286 was amended by the Constitution (Sixth Amendment) Act. The article was totally recast. It now reads as follows :

"286. Restrictions as to imposition of tax on the sale or purchase of goods. - (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place -

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of, -

(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or

(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366,

be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify."

Simultaneous with the amendment of article 286, the Sixth Amendment also amended certain other provisions in the Constitution, and certain entries in the Seventh Schedule. In so far as it is relevant for our present purposes, sub-clause (g) was introduced in clause (1) of article 269, and a new clause, i.e., clause (3), was added in the said article. After the said amendment, article 269, in so far as it is relevant for our purposes, reads as follows :

"269. Taxes levied and collected by the Union but assigned to the States. - (1) The following duties and taxes shall be levied and collected by the Government of India but shall be assigned to the States in the manner provided in clause (2), namely :-

(a) to (f) ..............

(g) taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce;

(h) ..........

(2) ..........

(3) Parliament may by law formulate principles for determining when a sale or purchase of (or consignment of) goods takes place in the course of inter-State trade or commerce."

[The words within brackets in clause (3) were inserted by the Constitution (Forty-sixth Amendment) Act, 1982.]

In entry 54 of List II certain restrictive words were added. As amended, entry 54 in List II reads as follows :

"Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A of List I".

A new entry, i.e., 92-A, was inserted in List I. It reads :

"92-A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce."

In exercise of the authority conferred upon the Parliament by article 286 and article 269(3), the Parliament enacted the Central Sales Tax Act, 1956. Section 3 of the said Act defined "inter-State sale", as envisaged by clause (3) of article 269. Section 4 sets out when does a sale or purchase take place outside a State [as envisaged by clause (a) of article 286(1)], and section 5 specifies when does a sale or purchase take place in the course of import or export [as envisaged by clause (b) of article 286(1)]. It may be remembered that in all these three situations, a State Legislature has no power to levy a tax. According to section 3, a sale or purchase of goods is deemed to take place in the course of inter-State trade or commerce, if it (a) occasions the movement of goods from one State to another, or (b) is effected by transfer of documents of title to the goods during their movement from one State to another. Section 6 is the charging section. It levies a tax "on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce". In short, it levies tax on all inter-State sales except sales of electrical energy. The words "other than electrical energy" were inserted by the Central Sales Tax (Amendment) Act (61 of 1972).

Entry 53 in List II of the Seventh Schedule, it must be noted, remained unamended. Entry 53 is an entry exclusively confined to electricity. It empowers the State Legislature to levy tax on the consumption or sale of electricity, while tax on the sale or purchase of all other goods (except newspapers) is provided by entry 54. Entry 53 does not contain any restrictive or qualifying words as does entry 54. The question is, whether such a restriction should be read into entry 53 all-the-same because of the other provisions in, and the scheme of, the Constitution ?

Pausing here, we may appropriately refer to the terms of the agreements entered into between the petitioner (NTPC) and the Electricity Boards of other Southern States. We are told that these agreements are identical in nature. It would, therefore, be sufficient if we notice the relevant clauses in the agreement entered into between the petitioner and the Karnataka Electricity Board. It is dated March 21, 1985.

Paragraph 1 of the agreement dated Match 21, 1985, sets out the installed capacity of the first phase of Ramagundam station, and how it is to be allocated between the Electricity Boards of several Southern States, including the Union Territory of Goa. Paragraph 2 sets out the transmission arrangements for supply of power from Ramagundam station to the purchasers. It specifies various transmission lines and sub-stations, through which power shall be transmitted to the purchasers. This paragraph contemplates the petitioner laying its own lines of transmission, and until then utilizing the transmission lines of A.P. State Electricity Board in the State. Paragraph 3 deals with metering. It says : "A set of meters shall consist of export meter and import meter to measure export and import of energy". It provides for main meters and check meters. These meters are to be located at various points including Ramagundam, Cuddapah, and Bangalore. The quantity of electrical energy supplied has to be computed from the readings of the main meters. Paragraph 6 deals with billing and payment. The bills have to be prepared every month. The bill shall have to be the aggregate of (a) energy charge calculated upon the generation and transmission tariffs, (b) adjustment on account of O & M expenditure, (c) fuel cost adjustment, and (d) taxes, duties, etc., and any other charge within the purview of the agreement. It is unnecessary to notice the other provisions of the agreement, except the one already noticed, viz., clause B.5.1 of annexure-B (Rate Schedule), which provides that the rate for supply of power shall be exclusive of any statutory duty, cess or levy imposed by the Central Government or State Government on generation and/or sale of electrical energy which shall be payable additionally through monthly bills.

Yet another circumstance before we express ourselves on the question at issue. In each of the States in India there is an Act imposing duty upon sale and consumption of electricity. Confining our attention to the Southern States, there is the Tamil Nadu Electricity Duty Act, 1939. It is the same Madras Act which is continued in Andhra Pradesh. The only difference appears to be that the said Act does not expressly treat NTPC as a licensee, nor does it exempt the sale of energy by NTPC to the Tamil Nadu Electricity Board. In Karnataka and Maharashtra also there are similar Acts. We are noticing these Acts just to show that in all concerned Southern States the sale of energy by respective Electricity Boards to consumers is chargeable to duty, and if the State of Andhra Pradesh is allowed to levy duty upon sale of energy by NTPC to those Electricity Boards, it is bound to add to the burden of the consumers in those States. So far as the consumers in Andhra Pradesh are concerned, there is no such additional burden, because the sale of energy by NTPC to A.P. State Electricity Board is exempted from the said duty.

Both the counsel have tried to impress upon us the consequences of our decision. Mr. T. Anantha Babu, learned counsel for the petitioner, stated that NTPC is an All India organisation; that its activities are not confined to Andhra Pradesh alone, but to the entire country; that, location of a power plant in Andhra Pradesh does not mean that it is meant for Andhra Pradesh; that, all its plants have an All India character, notwithstanding their location at a particular place; that, location of power plants is determined by easy availability of coal, communications, and other circumstances, and that should not detract from the All India character of the Corporation. The power generated at Super Thermal Power Station situated at Ramagundam is fed into the southern grid and is made available to all Southern States. In such a situation, levy of duty by Andhra Pradesh would not be proper. On the other hand, the learned Advocate-General for Andhra Pradesh submitted that if the petitioner''s contention is accepted, the Act itself would become a dead letter. The Government of India, the Railways and the A.P. State Electricity Board are already exempted from the said duty by section 3(1). If it is held by a process of reasoning that the sale of energy to the Electricity Boards of other States is also exempt from duty, no content will be left in the Act. In our opinion, however, the question at issue has to be decided keeping in view the legal and constitutional provisions. This court is not concerned with the desirability or advisability of the said duty.

The situation, in our opinion, admits of two equally plausible views. One, that is espoused by the State of Andhra Pradesh, is this : The A.P. Electricity Duty Act is an Act relatable to entry 53 in List II; it is in no way relatable to entry 54. Entry 54 deals with taxes on sale or purchase of goods, while entry 53 deals with taxes on consumption or sale of electricity. The Sixth Amendment, which introduced the aforementioned restrictive words into entry 54 and also inserted entry 92-A in List I, besides amending articles 286 and 269, pertains only to sale or purchase of goods, and has nothing to do with taxes on consumption or sale of electricity. The concept of inter-State sale was evolved only under unamended article 286, and is now referable to article 269(3) read with article 286. The concept of inter-State sale cannot be read into, and is not relevant in the context of sale of electricity. Just as article 286 read with article 269(3) places certain restrictions on the Legislature of the State in the matter of imposing taxes on sale or purchase of goods, article 287 too places certain restrictions on the State Legislature in the matter of levy of taxes on consumption or sale of electricity. Article 287, and for that matter, article 288, are in no way concerned with sale of goods. Conversely, articles 286 and 269(3) are in no way connected with, or relevant in the case of levy of taxes on sale of electricity. In view of this basic constitutional position, the State Legislature is competent to levy tax on sale of energy which is generated within that State and sold to another State, inasmuch as there is sufficient territorial nexus empowering the State Legislature to impose the tax. In short, the position is akin to the one obtaining under the Government of India Act, 1935, in the matter of levy of tax by Provincial Legislatures on sale of goods. According to this view, the words "other than electrical energy", introduced by the Central Sales Tax (Amendment) Act (61 of 1972), were inserted only by way of clarification, or, in any event, to provide for a different situation, referred to in the objects and reasons, viz., "exemption from Central sales tax on inter-State sales of electrical energy is now dependent on the exemption from tax by the State Government on local sales of electrical energy. It is now proposed to provide specifically that inter-State sale of electrical energy would not be liable to Central sales tax". The said words in section 6(1), according to this view, are in no way relevant on the question of the power of the State Legislature to impose taxes on the consumption or sale of electricity.

The other point of view which is put forward by the petitioner, supported by the other Southern States, is this : Electricity is "goods", as held by the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh, Indore Vs. Madhya Pradesh Electricity Board, Jabalpur, . If so, levy of tax on sale of electricity is relatable to both the entries, i.e., 54 and 53 in List II. In this view of the matter, the fact that while adding certain restrictive words into entry 54 no such restrictive words were added in entry 53, is of little consequence. Entry 92-A inserted in List I governs all inter-State sales of goods, including electricity. In other words, the power to levy tax on inter-State sale or purchase of goods is the exclusive prerogative of Parliament and, by the same logic, out of bounds for the State Legislature. Similarly, articles 269(3) and 286 apply to sale and purchase of all goods, including electricity. Article 287 merely imposes certain additional restrictions on the power of State Legislature to levy taxes on consumption or sale of electricity. According to this view, the words "other than electrical energy" inserted by the Central Sales Tax (Amendment) Act (61 of 1972), in section 6(1) of the Central Sales Tax Act, in fact affirm the Parliament''s power to tax inter-State sale of electricity. By inserting the said words, inter-State sale of electricity was exempted from Central sales tax; but for the said words, an inter-State sale or purchase of electricity would be liable to Central sales tax u/s 6 of the Central Sales Tax Act. The objects and reasons appended to the Bill [which was enacted into the Central Sales Tax (Amendment) Act (61 of 1972)] also affirm this reasoning.

After giving our earnest consideration to rival points of view, we are inclined to agree with the point of view propounded by the petitioner, supported as it is by other Southern States. Electricity is "goods", as held by the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh, Indore Vs. Madhya Pradesh Electricity Board, Jabalpur, . Sale of electricity can be taxed by the State Legislature, and such an enactment can be related either to entry 54, or to entry 53 in List II of the Seventh Schedule. Merely because the A.P. Electricity Duty Act, 1939, calls the levy imposed by it as "duty", it does not cease to be a tax. In so far as the said Act provides for levy of duty on sale of electricity, it is relatable both to entry 53 and entry 54 in List II. Precisely because the sale of electricity is subjected to tax by this Act, the A.P. General Sales Tax Act exempted the sale of electricity from its purview. Once we are of this view, it follows logically that the power of the State Legislature to tax the sale of electricity becomes subject to entry 92-A of List I. In other words, an inter-State sale of electricity cannot be taxed by the State Legislature. Such a tax can be levied only by Parliament. Indeed, it was so taxable u/s 6 of the Central Sales Tax Act, before it was amended by the Central Sales Tax (Amendment) Act (61 of 1972). The objects and reasons appended to the Bill (which was enacted into Act 61 of 1972) clearly state the purpose behind exempting the sale of electrical energy from the levy of Central sales tax. The objects and reasons state : "The exemption from Central sales tax on inter-State sales of electrical energy is now dependent on the exemption from tax by a State Government on local sales of electrical energy. It is now proposed to provide specifically that inter-State sale of electrical energy would not be liable to Central sales tax". But for the specific exemption provided by section 6 of the Central Sales Tax Act, inter-State sales of electrical energy were undoubtedly chargeable to Central sales tax. We may not be understood as construing the entries in the Constitution with reference to the law made by Parliament; all that we are saying is that the Parliament has also understood the said entries in the same sense as we are now understanding them. The same result would follow if entry 92-A is treated as a special and specific head of legislation dealing with the subject of inter-State sales of all goods. We must, accordingly, hold that inter-State sale of electrical energy cannot be taxed by the State Legislature. Inter-State sales - whether it be of electrical energy or other goods - can only be the subject-matter of legislation by Parliament under entry 92-A of List I. In this view, the applicability of the A.P. Electricity Duty Act should only be confined to sales other than inter-State sales. Another logical consequence of this point of view is that the definition of "inter-State sale" contained in section 3 of the Central Sales Tax Act is also attracted, and determines what is an inter-State sale. Applying the said definition, it is clear in this case that the sale is an inter-State sale. Electricity is moving from this State to other Southern States in pursuance of contracts of sale entered into between NTPC and the purchasing States. Neither in the counter nor in the course of arguments, inter-State character of sale has been seriously disputed.

We may also point out the peril of accepting the other point of view. In such a case, it would be open to the Legislatures of both the A.P. State and the purchasing States to levy the tax on such sale/purchase of electrical energy relying upon the theory of territorial nexus. By way of illustration, the sale of electrical energy by the A.P. State to Karnataka State would be taxed by the Legislature of this State on the ground that the electricity is generated in this State, and being transmitted from this State. Simultaneously, the Legislature of Karnataka State would equally be competent to tax the purchase of electricity by its Electricity Board on the ground that Karnataka is the delivery State. This would be a repetition of the situation obtaining in this country with respect to sales tax prior to the coming into force of the Constitution. Such a situation was found to be prejudicial to the interest of trade and commerce, and the unity and integrity of the country, and was sought to be remedied and rectified by the Constitution makers. It would not be advisable to give rise to such a situation over again.

Before concluding, there is one more aspect which needs to be considered. By the Constitution (Sixth Amendment) Act, the expression "subject to the provisions of entry 92-A of List I" has been added to entry 54 of List II; whereas no such restriction has been transplanted into entry 53. Prima facie, it might indicate that the Constitutional Amendment intended to make entry 54 of List II subservient to entry 92-A of List I while keeping entry 53 of List II unaffected by entry 92-A. But, in our view, the non-introduction of the words "subject to entry 92-A" in entry 53 does not necessarily lead to the conclusion that all sales of electrical energy - whether local or inter-State - will be within the exclusive domain of the State Legislature. First of all, the omission of the said words may be by reason of the fact that entry 53 mentions not only sale but also consumption and secondly the Parliament might have thought that electricity being goods, there was no need to repeat the expression "subject to the provision of entry 92-A of List I" in entry 53 as well.

We, therefore, declare that the levy of duty by the State of Andhra Pradesh on the sales of electrical energy generated by the petitioner-corporation and sold to other Southern States in pursuance of contracts of sale occasioning inter-State movement is incompetent, and outside the power of the State Legislature. The logical consequence of our holding so is that the tax already levied and collected must be held to be without the authority of law, and is liable to be refunded in accordance with law.

In this view of the matter, it is unnecessary for us to consider the other contention urged by the learned Advocate-General for Goa, that prior to May 30, 1987, Government of India was the Government of Union Territory and therefore the sale of electricity to such Union Territory is exempt by virtue of section 3 of the A.P. Electricity Duty Act, 1939, read with article 287 of the Constitution.

The writ petition is accordingly allowed. There shall be no order as to costs.

The learned Advocate-General makes an oral request for leave to appeal to the Supreme Court under article 132 of the Constitution of India. In our opinion, this is a case involving substantial question of law as to the interpretation of Constitution and therefore, we direct that a certificate shall issue under article 132 of the Constitution.

So far as the refund of the amount consequent upon this judgment is concerned, the refund is stayed for a period of two months.

Writ petition allowed.