Supreme Court Clarifies Electricity Duty Exemption for Charitable Educational Institutions: State of Maharashtra vs. Shri Vile Parle Kelvani Mandal & Ors. (2022)

Date of the Judgment: January 7, 2022

Citation: (2022) INSC 17

Judges: M. R. Shah, J., Sanjiv Khanna, J.

Can charitable educational institutions be exempted from paying electricity duty? The Supreme Court of India addressed this question in a recent judgment, overturning a decision by the High Court of Judicature at Bombay. The core issue revolved around interpreting the provisions of the Maharashtra Electricity Duty Act, 2016, and whether it continued the exemption previously available to charitable educational institutions under the repealed 1958 Act. The Supreme Court bench, consisting of Justices M. R. Shah and Sanjiv Khanna, delivered the judgment, with Justice M.R. Shah authoring the opinion.

Case Background

Shri Vile Parle Kelvani Mandal, a society registered under the Societies Registration Act, 1860, and a public charitable trust under the Maharashtra Public Trusts Act, 1950, runs several educational institutions. These institutions had electricity connections from various power supply companies. Before September 1, 2016, these charitable educational institutions were exempt from paying electricity duty under Section 3(2)(iii) of the Maharashtra Electricity Duty Act, 1958. However, in 2018, power supply companies began levying electricity duty at 21%, citing a letter from the Industries, Energy, and Labour Department of the Government of Maharashtra. This letter stated that the Maharashtra Electricity Act, 2016, did not provide an exemption for charitable institutions registered under the Maharashtra Public Trusts Act, 1950, effective from September 1, 2016. Aggrieved, the educational institutions filed a writ petition before the High Court of Judicature at Bombay.

Timeline:

Course of Proceedings

The High Court of Judicature at Bombay allowed the writ petition filed by the educational institutions, setting aside the levy of electricity duty. The High Court held that the educational institutions were exempt from paying electricity duty. Consequently, the High Court also set aside the electricity bills that had levied the duty on the consumption of electricity. The State of Maharashtra appealed this decision to the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation of the Maharashtra Electricity Duty Act, 1958 and the Maharashtra Electricity Duty Act, 2016.

Maharashtra Electricity Duty Act, 1958:

Section 3(2) of the Maharashtra Electricity Duty Act, 1958, stated that electricity duty was not applicable to:

• Government of Maharashtra (except for residential premises) [Section 3(2)(i)]
• Local authorities for educational institutions, hospitals, public lighting, etc. [Section 3(2)(ia)]
• Statutory universities and their institutions for education, research, and training [Section 3(2)(iii)]
• Charitable institutions registered under the Bombay Public Trusts Act, 1950, for schools and colleges [Section 3(2)(iiia)]

Specifically, Section 3(2)(iiia) of the 1958 Act exempted charitable institutions registered under the Bombay Public Trusts Act, 1950, from paying electricity duty for schools or colleges imparting education or training in academic or technical subjects.

Maharashtra Electricity Duty Act, 2016:

The Maharashtra Electricity Duty Act, 2016, repealed the 1958 Act. Section 3(2) of the 2016 Act states that electricity duty shall not be levied on:

• State Government (excluding public undertakings) [Section 3(2)(i)]
• Central Government (excluding public undertakings) [Section 3(2)(ii)]
• Schools, colleges, institutions, hospitals, etc., run by local bodies [Section 3(2)(iii)]
• Government hostels [Section 3(2)(iv)]
• Licensees for construction, maintenance, or operation of transmission and distribution systems [Section 3(2)(v)]

The 2016 Act does not include a specific exemption for charitable educational institutions, which was present in the 1958 Act. The 2016 Act only provides exemption to those institutions which are run by local bodies.

Arguments

Arguments by the State of Maharashtra:

• The High Court erred in holding that charitable educational institutions are not liable to pay electricity duty.
• The High Court should not have set aside the levy of electricity duty without a challenge to the relevant provisions of the Maharashtra Electricity Act, 2016.
• The High Court failed to properly consider the relevant provisions of the Maharashtra Electricity Act, 2016, which repealed the 1958 Act.
• Under the 1958 Act, charitable institutions were exempt, but the 2016 Act does not provide such an exemption.
• The language of the 2016 Act is clear and unambiguous, and should be interpreted strictly, especially in favor of revenue.
• An exemption provision must be construed strictly, and any ambiguity should be resolved in favor of the revenue.
• Relied on the following cases:
  • Commr. of Customs Vs. Dilip Kumar & Co., (2018) 9 SCC 1
  • Central Public Information Officer, Supreme Court of India Vs. Subhash Chandra Agarwal, (2020) 5 SCC 481
  • Essar Steel India Ltd. & Anr. Vs. State of Gujarat & Anr., (2017) 8 SCC 357
  • Star Industries Vs. Commr. of Customs (Imports), (2016) 2 SCC 362
  • Giridhar G. Yadalam Vs. Commissioner of Wealth Tax & Another, (2015) 17 SCC 664
  • Godrej & Boyce Mfg. Co. Ltd. Vs. Deputy Commissioner of Income Tax & Anr., (2017) 7 SCC 421

Arguments by the Educational Institutions:

• The High Court correctly held that charitable educational institutions are exempt from paying electricity duty.
• A literal interpretation of the 2016 Act would lead to an absurd result where schools run by local authorities are exempt, but those run by statutory universities or charitable institutions are not.
• There is no essential difference between schools run by local authorities and those run by statutory universities or charitable institutions.
• The legislature is presumed not to violate Article 14 of the Constitution of India, and the interpretation by the State would lead to discrimination and arbitrariness.
• There is a presumption that the legislature does not intend to make radical changes in existing law.
• The 1958 Act clearly exempted educational institutions run by charitable trusts, and there is nothing in the 2016 Act to suggest a radical change in this policy.
• The doctrine of last antecedent should be applied, meaning that the phrase “run by any local bodies” only qualifies the activities mentioned after “training” and not the educational institutions.
• Electricity Duty Act is a taxing statute and must be strictly construed, and any ambiguity should be resolved in favor of the assessee.
• Relied on the following cases:
  • C.W.S. (India) Ltd. Vs. Commissioner of Income Tax, 1994 Supp (2) SCC 296
  • B.R. Enterprises Vs. State of U.P. & Ors., (1999) 9 SCC 700
  • Byram Pestonji Gariwala Vs. Union Bank of India & Ors., (1992) 1 SCC 31

Submissions Categorized by Main Arguments

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the original writ petitioners, being charitable education institutions registered under the provisions of the Public Trusts Act (the Maharashtra Public Trusts Act, 1950), are entitled to the exemption from payment of electricity duty post 01.09.2016 i.e. as per the provisions of the Maharashtra Electricity Duty Act, 2016?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Supreme Court relied on the principles laid down in Commr. of Customs Vs. Dilip Kumar & Co. [(2018) 9 SCC 1], Central Public Information Officer, Supreme Court of India Vs. Subhash Chandra Agarwal [(2020) 5 SCC 481], Essar Steel India Ltd. & Anr. Vs. State of Gujarat & Anr. [(2017) 8 SCC 357], Star Industries Vs. Commr. of Customs (Imports) [(2016) 2 SCC 362], Giridhar G. Yadalam Vs. Commissioner of Wealth Tax & Another [(2015) 17 SCC 664] and Godrej & Boyce Mfg. Co. Ltd. Vs. Deputy Commissioner of Income Tax & Anr. [(2017) 7 SCC 421] to emphasize that exemption provisions must be interpreted strictly and literally. The Court distinguished the case of C.W.S. (India) Ltd. Vs. Commissioner of Income Tax [1994 Supp (2) SCC 296], stating that the literal interpretation of the 2016 Act does not lead to an absurd result. The arguments based on B.R. Enterprises Vs. State of U.P. & Ors. [(1999) 9 SCC 700] and Byram Pestonji Gariwala Vs. Union Bank of India & Ors. [(1992) 1 SCC 31] were also not accepted by the Court.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the clear and unambiguous language of the Maharashtra Electricity Duty Act, 2016. The Court emphasized that the 2016 Act deliberately omitted the specific exemption for charitable educational institutions that was present in the 1958 Act. The Court also reiterated the principle that exemption provisions must be interpreted strictly and literally, and any ambiguity should be resolved in favor of the revenue. The Court rejected the arguments of the educational institutions that a literal interpretation would lead to absurd results, and that the legislature did not intend to make a radical change in the law. The Court also held that there was no room for applying the doctrine of last antecedent.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

The Court’s reasoning was primarily based on the legal interpretation of the statute rather than the factual aspects of the case. The emphasis was on the absence of a specific exemption in the 2016 Act and the strict interpretation of exemption provisions.

Logical Reasoning

Key Takeaways

• Charitable educational institutions are not exempt from paying electricity duty under the Maharashtra Electricity Duty Act, 2016.
• The Maharashtra Electricity Duty Act, 2016, does not provide the same exemption to charitable educational institutions as the repealed 1958 Act.
• Exemption provisions in tax laws must be interpreted strictly and literally.
• The absence of a specific exemption in the 2016 Act indicates a deliberate change in policy by the legislature.

Directions

The Supreme Court did not provide any specific directions in this case, other than setting aside the High Court’s judgment and ruling that the educational institutions are liable to pay electricity duty.

Development of Law

The ratio decidendi of this case is that charitable educational institutions are not exempt from electricity duty under the Maharashtra Electricity Duty Act, 2016. This decision overturns the High Court’s ruling and clarifies that the exemption previously available under the 1958 Act is not continued under the 2016 Act. This represents a change in the previous position of the law, as the 1958 Act specifically exempted such institutions, and the 2016 Act does not.

Conclusion

The Supreme Court’s judgment in The State of Maharashtra vs. Shri Vile Parle Kelvani Mandal & Ors. clarifies that charitable educational institutions are not exempt from paying electricity duty under the Maharashtra Electricity Duty Act, 2016. The Court emphasized the strict interpretation of exemption provisions and the deliberate omission of the exemption for charitable institutions in the 2016 Act. This decision has significant implications for charitable educational institutions in Maharashtra, as they are now liable to pay electricity duty, which they were previously exempt from under the 1958 Act.