Auxiliary Consumption Of Electricity At Power Station Is “Consumption” & Not Generation; Taxable Event Under DMC Act Is Consumption: Delhi High Court
The Bench said that the Bye-Law 3(3) does not enlarge the Act but only identifies the person liable on self-generated electricity; tariff and tax operate in separate fields and levy does not amount to double taxation.
The Delhi High Court has held that the taxable event under Section 113(2)(d) of the Delhi Municipal Corporation Act, 1957 is consumption of electricity, and that auxiliary consumption at a generating station is consumption and not generation. It therefore dismissed NTPC Ltd’s challenge to a municipal electricity tax demand of Rs 197,15,84,639 for the Badarpur Thermal Power Station for the period June 1, 2006 to October 15, 2018.
The Court held that Bye-Law 3(3) of the 1962 Bye-Laws does not travel beyond the parent Act, as it does not create a new tax but identifies the person liable to pay tax on self-generated electricity, which the Act already taxes. It also held that tariff and tax operate in distinct fields, so the levy on auxiliary consumption does not result in double taxation.
A Division Bench of Justice Anil Kshetarpal and Justice Bharat Parashar observed, “…the taxable event under Section 113(2)(d) of the Act is consumption of electricity, hence, the auxiliary consumption at BTPS is consumption, and a levy thereon does not, merely by reason of its use in the process of generation, constitute a duty of excise on generation”.
“…this Court is of the view that Bye-Law 3(3) gives effect to the Act and does not supplant it, therefore, cannot be held to be ultra vires the Act”, it noted further.
Senior Advocate Gopal Jain appeared for the petitioner and Senior Advocate Sanjay Poddar appeared for the respondent.
The Badarpur plant was set up in 1973, its management passed to NTPC in 1978 and its ownership in 2006. It was permanently shut on October 15, 2018. On November 8, 2021, the South Delhi Municipal Corporation demanded the tax on auxiliary consumption, followed by a demand-cum-show cause notice dated December 6, 2021 and communications of January 3 and 24, 2022. NTPC sought to have Bye-Law 3(3) declared ultra vires and the demands quashed.
NTPC argued that consumption during generation is an incident of generation, that the bye-law enlarges the Act, and that the demand was barred by delay and amounted to double taxation. The Corporation said consumption is the taxable event irrespective of source, purpose or consumer. Two distribution-side respondents supported the double taxation plea, and one opposed recovery through future tariffs.
Placing reliance on precedents, the Court held that source, purpose and the consumer’s identity are immaterial to a levy on consumption. It held that the Bye-Law is at its highest declaratory and found no infirmity in compliance with Section 150. On the illustration offered on double taxation, it held the 80 units supplied and the 20 units consumed by the plant are distinct quantities taxed separately. On delay, it held that liability accrued monthly under Bye-Law 7(2) and that NTPC filed no returns and paid no tax, so it could not rely on delay.
The petition was dismissed, and the Court clarified that its findings are confined to this petition and that disputes on computation may be raised before the appropriate forum under Section 169 of the Act.
Cause Title: NTPC Ltd v. South Delhi Municipal Corporation & Ors. (Neutral Citation: 2026:DHC:9358-DB)
Appearances:
Petitioner: Gopal Jain, Senior Advocate, Sakie Jakharia, Aseem Aggarwal and Kriti Sharma, Advocates.
Respondents: Sanjay Poddar, Senior Advocate, Dr. Divya Swamy, Standing Counsel, Tushar Sannu, ASC, Anupam Varma, Aditya Gupta and Yash Srivastava, Nitin Kala, Kunal Singh, Tanmay Jain and Kanishka Rawat, Advocates.