M.P.CEMENT MANUFACTURERS ASSOCIATION versus STATE OF MADHYA PRADESH AND ORS.

Citation: [2003] SUPP. 6 S.C.R. 557 · Decided: 09-12-2003 · Supreme Court of India · Bench: RUMA PAL · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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________ , 
·
M.P. CEMENT MANUFACTURERS' ASSOCIATION 
A 
V. 
STATE OF MADHYA PRADESH AND OR.S. 
DECEMBER 9, 2003 
B 
[RUMA PAL AND P. VENKATARAMA REDDI, JJ.] 
Madhya Pradesh Upkar Adhiniyam, 1981 and Amendments made 
thereunder by the Amending Acts of 2001 & 2003/Constitution of India 
1950; Article 14, Entry 84 of List I and Entry 53 of List II to the Seventh C 
Schedule: 
Levy of energy development cess by the State Legislature-Amend-
ment in the Act-Constitutional validity of-High Court held that levy of 
cess on electric energy consumed falls under Entry 53 of List II to the VJ/th D 
Schedule-Hence valid-On appeal, Held: Despite explanation appended 
to Section 3(2) by the amendment, charge continues to be on production 
of electricity and nothing else-State Legislature intends to alter the 
subject matter of levy-However, levy sought to be imposed only on 
generation of electricity which falls under entry 84 of 'List I-State F; 
legislature incompetent to impose such levy-Hence amendment ultra vires 
l the Constitution-Interpretation of Statutes. 
Madhya Pradesh Vidyut Sudhar Adhiniyam, 2000; Section 12(3) : 
F 
Consultation with Electricity Regulatory Commission before levy of 
cess-Nature of-Held: Effect must be given to such statutory require-
ment-It is mandatory for the policy makers to consult the Commission 
before proposing any legislation on the subject of electricity-Consultation 
serves as safeguard as against challenge under Article 14 of the Constitution. G 
Words and Phrases: 
'Whether/or sale or supply '~Meaning of In the context of Section 
3(2) of the Madhya Prad~h Upkar Adhiniyam. 
H 
557 
558 
SUPREME COURT REPORTS [2003] SUPP. 6 S.C.R. 
A 
Appellants were owners of captive power plants. They have 
challenged the constitutional validity of the amendment to the Madhya 
Pradesh Upkar Adhiniyam whereby a cess of 20 paise per unit was 
imposed on the electrical energy produced by them. The High Court 
dismissed the writ petitions holding that ,the impugned cess was on 
B electric energy consumed and thus falls under Entry 53, List II to the 
VII Schedule of the Constitution, and the State legislature was com-
petent to levy cess and as such levy is not violative of Article 14. Hence 
the present app~al and writ petitions. 
It was contended for the appellant-Association that the State was 
C incompetent to impose cess on the producti<m of electric energy since 
the subject matter is covered exclusively by Entry 84 of List I to the 
VII Schedule of the Constitution; that the statute was passed without 
fulfilling the mandatory requirement of consultation with the Electric-
ity Regulatory Commission as per Section 12(3) of the Madhya· 
D Pradesh Vidyut Sudhar Adhiniyam, 2000; that the levy was violative 
of Article 14 of the Constitution; and that the effect of the Explanation 
to Section 3(2) of the Act could be construed as either replacing the 
import or alternative cess or additional cess. 
E 
The Respondent-State contended that the levy imposed. by the 
Amending Act, 2001 was on the electric energy sold or supplied .by_ or 
from Captive Power Units and it was clarified further by ·introducing 
the Explanation to Section 3(2) of the Adhiniyam and doubts, if any, 
should be resolved in favour of upholding the Constitu~ional validity 
of the amendment; that the State is competent to introduce such 
F amendment, that since Madhya Pradesh. Vidyut Sudhar Adhiniyam 
2000 was introduced later to the Legislation levying cess on electricity, 
making the consultation with· the Commission necessary, such provi-
sion of law has no application on legislation o.n levy of cess on ~lectric 
energy, that the Court could not review tbe Legislative process; and 
G that there was no pleading to justify discrimination. 
Allowing the appeal, the Court 
HELD : 1.1. Electricity is go9ds. Thus, the levy of excise duty on 
H the production of electricity which falls within the phrase "other goods 
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M.P. CEMENT MANUFACTURERS' ASSN. v. STATE 
5,59 
manufactured" in Entry 84 of List-I is within the exclusive j'!riS'diction A 
-of Parliament and the State has the competence to levy tax only on the 
sale and consumption of electricity. [565-F-GJ 
Commissioner v. MPSEB, (1969) 1 SCC 200, 204 and Hoechst v. 
Bihar, (1983) 3 SCR 130, relied on. 
.. 
1.2. A plain reading of sub-section (2) of sub-section 3 introduced 
by the amendment to the 1981 Adhiniyam makes it clear that the levy of 
cess was "on the electrical energy pro

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