In a significant judgment, the Punjab & Haryana High Court has directed the refund of octroi charges collected on electricity consumed by the Military Engineering Service (MES), upholding the constitutional provision that exempts the Central Government from such taxes. The division bench comprising Justice Sanjeev Prakash Sharma and Justice Jagmohan Bansal delivered this ruling in the case of Union of India v. Punjab State Electricity Board and Others (CWP-4763-2007).
Background of the Case
The case revolves around the MES, which is responsible for electricity supply within cantonment areas. Between 2000 and 2007, the Punjab State Electricity Board (PSEB) charged the MES a sum of Rs. 4,57,342 as octroi duty on the electricity consumed. The Union of India, through the MES, filed a petition under Articles 226/227 of the Constitution, seeking a refund of this amount along with interest.
Key Legal Issues
The primary legal issue in this case centered around the interpretation and application of Article 287 of the Constitution of India. This article prohibits state laws from imposing taxes on the consumption or sale of electricity to the Government of India.
Arguments Presented
Mr. Tajeshwar Singh Sullar, representing the petitioner, argued that the collection of octroi was in violation of Article 287. He pointed out that other Central Government organizations, such as Diesel Locomotive Works in Patiala, were not charged octroi, highlighting the discriminatory nature of the levy on MES.
Mr. P.S. Thiara, counsel for PSEB (respondent No. 1), contended that they had merely collected the octroi and deposited it with the municipal committee. Mr. Bhuvnesh Satija, Deputy Advocate General for Punjab, acknowledged that octroi was not payable on electricity sales to the Central Government but argued that the state was not responsible for PSEB’s actions.
Court’s Decision and Observations
The High Court allowed the petition, directing respondent No. 3 to refund the sum of Rs. 4,57,342 to the petitioner within eight weeks. In its judgment, the court made several important observations:
1. The court affirmed that the MES is an integral part of the Government of India and falls under the purview of Article 287.
2. It stated, “From the reading of aforesaid Article, it is quite evident that electricity consumed by Government of India cannot be subjected to tax by State Government”.
3. The court criticized the respondents for “shifting responsibility from one shoulder to another”, noting that PSEB, as a state government undertaking, should have been aware of the constitutional provision.
4. Rejecting the argument to relegate the matter to a civil court, the bench observed, “It is a case of collection of tax contrary to mandate of Article 287 of the Constitution of India. No disputed questions of fact are involved and matter is pending before this Court since 2007, thus, there is no reason to relegate the petitioner to Civil Court”.
