Case Note & Summary
The writ petition under Article 226 of the Constitution of India sought certiorari to quash an appellate order dated 02.01.2013 passed by the first respondent, which dismissed the petitioner's appeal against tax demands raised under the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003. The petitioner, a captive power generating company, was a joint venture unit set up pursuant to directions of the Ministry of Power, Government of India. It generated electricity and wheeled the power through the grid for use by its shareholder companies, with surplus power sold to the third respondent (TANGEDCO) or through the Power Trading Corporation. From 2007, the second respondent (Chief Electrical Inspector) raised multiple tax demands, culminating in a demand of Rs.4,03,54,241 for the periods 5/2007 to 2/2008 and 6/2008 to 8/2008 on captively consumed electricity. The petitioner contested these demands, arguing that it was not liable for tax on electricity consumed by its member companies and that the demands were legally unsustainable. In an earlier round of litigation, W.P. (MD) No.6210/2011, the High Court directed the petitioner to file an appeal before the first respondent under Section 10 of the Act. The petitioner filed an appeal, but the first respondent dismissed it solely on the ground that the entire demand amount had not been paid, despite the petitioner's contention that only admitted tax need be paid under the proviso to Section 10(1) read with Rule 17(1)(iii)(a) of the Tamil Nadu Tax on Consumption or Sale of Electricity Rules, 2003. The petitioner approached the High Court, arguing that the dismissal was arbitrary, illegal, and violative of Article 14, and that the appellate authority had failed to appreciate the distinction between "own use" and "use of members" under Sections 2(2) and 3(1)(b) of the Act. The respondents contended that the appeal did not comply with mandatory disclosure requirements and that the petitioner had admitted to selling electricity to third parties, thus admitting some tax liability. The court began its analysis by noting the undisputed facts of captive generation and consumption, but the provided excerpt ends before any final decision or ratio is rendered.
Headnote
A) Taxation Law - Electricity Tax - Pre-Deposit for Appeal - Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003, Section 10(1) proviso and Rule 17(1)(iii)(a) - The appellate authority dismissed the appeal on ground that the entire demand amount had not been paid, while the petitioner contended that the statutory requirement mandates payment only of the amount admitted as due. The court considered whether the dismissal was justified without examining the merits of the tax dispute; no final ruling is available in the provided excerpt (Paras 8, 11, 15-17).
B) Taxation Law - Charging Provision - Distinction between Own Use and Use of Members - Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003, Sections 2(2) and 3(1)(b) - The petitioner argued that Section 3(1)(b) taxes only electricity consumed for own use, not electricity consumed by member companies, and that importing the phrase "or for the use of members" from Section 2(2) into the charging section would impermissibly enlarge the taxable event and the identity of the person liable. The court noted this argument; no final determination is provided in the excerpt (Paras 13-14).
C) Constitutional Law - Principles of Natural Justice - Violation of Article 14 - Constitution of India, Article 14 and Article 226 - The petitioner challenged the impugned order as arbitrary, illegal, and violative of Article 14, contending that the appellate authority ignored the earlier court direction to decide the appeal on merits. The court was considering the writ petition; no final order is available in the excerpt (Paras 1, 9-10).
Issue of Consideration
Whether the first respondent erred in dismissing the appeal solely on ground of non-payment of entire demand when the statutory precondition under proviso to Section 10(1) read with Rule 17(1)(iii)(a) requires payment only of admitted tax; and whether the tax demand on captively consumed electricity including use by member companies is valid under the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003.
Law Points
- Pre-deposit requirement under Section 10(1) proviso and Rule 17(1)(iii)(a) requires payment of only admitted tax
- not entire assessed demand
- Distinction between own use and use of members under Section 2(2) and Section 3(1)(b) of Tamil Nadu Tax on Consumption or Sale of Electricity Act
- 2003
- Appeal cannot be dismissed for non-payment of disputed demand without considering merits
- Principles of natural justice under Article 14 of Constitution of India
Case Details
2026 LawText (MAD) (08) 42
W.P. (MD) No. 14250 of 2018
Mr. Anirudh Krishnan for petitioner; Mr. B. Saravanan, AAG assisted by Mr. R. Ramasamy for respondents 1 & 2; Mr. S. Deenadhayalan for respondent 3
M/s.Arkay Energy (Rameswaram) Ltd.
1. State of Tamil Nadu, 2. The Chief Electrical Inspector to Government, 3. Tamil Nadu Generation & Distribution Corporation Ltd. (TANGEDCO)
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India seeking certiorari to quash order dated 02.01.2013 passed by first respondent dismissing appeal filed by petitioner against tax demand under Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003.
Remedy Sought
Petitioner sought quashing of impugned order and revival of appeal for consideration on merits.
Filing Reason
The appellate authority dismissed the appeal on ground of non-payment of entire demand amount, contrary to statutory requirement of paying only admitted tax.
Previous Decisions
Earlier, in W.P. (MD) No.6210/2011, the High Court directed petitioner to file appeal before first respondent under Section 10 of the Act; first respondent dismissed appeal by order dated 02.01.2013.
Issues
Whether the first respondent erred in dismissing the appeal solely on ground of non-payment of entire demand when the statutory precondition under proviso to Section 10(1) read with Rule 17(1)(iii)(a) requires payment only of admitted tax?
Whether the tax demand on captively consumed electricity including electricity consumed by shareholder companies is valid given the distinction between 'own use' and 'use of members' under Section 2(2) and the charging provision Section 3(1)(b) which refers only to 'own use'?
Whether the impugned order is violative of principles of natural justice and Article 14 of the Constitution?
Submissions/Arguments
Petitioner contended that the impugned order was arbitrary, illegal, and violative of Article 14; the appeal should be heard on merits as directed earlier; the pre-deposit requirement under proviso to Section 10(1) read with Rule 17(1)(iii)(a) mandates payment only of admitted tax, and since the petitioner disputed the entire demand, no admitted amount was payable; the charging section Section 3(1)(b) taxes only consumption for own use, not use by members, and importing words from Section 2(2) would expand the taxable event; the demand constituted double taxation and was raised against the wrong taxable entity; and the amendment act was under challenge before the Supreme Court, where assessments were permitted but no coercive disconnection.
Respondents argued that Rule 17 requires mandatory disclosure of particulars and payment of admitted tax; the appeal lacked the necessary particulars and did not assert either the amount due or that no amount was due; the petitioner admitted in its affidavit that a substantial quantum of energy was sold to the third respondent and third parties, thereby admitting tax liability to that extent; non-compliance with Rule 17 read with Section 10 justified the dismissal.
Judgment Excerpts
The 2nd respondent, over the period from 2007 to 2012, has raised five demands culminating in the issuance of Form E-2 notice for the period from 5/2007 to 2/2008 and 6/2008 to 8/2008 demanding tax on captively consumed electricity to the tune of Rs.4,03,54,241/-.
proviso to Section 10 (1) of the Act r/w Rule 17 (1)(iii)(a) of the Tamil Nadu Tax on Consumption or Sale of Electricity Rules, 2003 requires payment only of such amount of tax or interest as the appellant admits to be due and it does not prescribe the deposit of the entire assessed demand as a condition of entertaining an appeal.
There is a clear distinction between ‘ own use’ and ‘ use of members’ as provided u/s 2 (2) of the Act, as the said provision clearly and consciously distinguishes between electricity generated by a captive generating plant " for his own use" and electricity generated "for the use of members".
Procedural History
From 2007 to 2012, the second respondent raised multiple tax demands against the petitioner under the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003, culminating in a demand of Rs.4,03,54,241. The petitioner challenged an E-2 demand notice dated 16.5.2011 in W.P. (MD) No.6210/2011, and the High Court directed the petitioner to file an appeal before the first respondent under Section 10 of the Act. The petitioner filed an appeal, but the first respondent dismissed it by order dated 02.01.2013 on the ground that the entire demand amount had not been paid. Aggrieved, the petitioner filed the present writ petition seeking certiorari to quash that order.
Acts & Sections
- Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003: Section 2(2), Section 3(1)(b), Section 10, Section 10(1) proviso, Section 10(3)
- Tamil Nadu Tax on Consumption or Sale of Electricity Rules, 2003: Rule 17, Rule 17(1)(iii)(a), Rule 17(1)(e)
- Constitution of India: Article 14, Article 226
