HC directs Punjab to refund octroi levied on army’s electricity bill
Octroi amounting to ₹4.57 lakh was levied by PSEB on sale of electricity to cantonment areas between 2000 and 2007
Reiterating that no tax can be levied on the sale of electricity to the Government of India, the Punjab and Haryana high court has directed Punjab to refund octroi amounting to ₹4.57 lakh ( ₹4,57,342).
Disposing of a petition filed by the Union government, the division bench of justice Sanjeev Prakash Sharma and justice Jagmohan Bansal, gave Punjab 8 weeks to refund the money.
In the petition, the Union government had sought direction for the refund amount, which was collected as octroi duty by the then Punjab State Electricity Board (PSEB) and deposited with a local municipal body.
“PSEB is also State Government Undertaking. Despite knowing the fact that sale of electricity to Government of India cannot be subjected to tax, the respondent No.1 (PSEB) collected octroi and deposited with local body. The act of respondent was in violation of Article 287 of Constitution of India,” ruled the high court while issuing directions to Punjab to refund the sum within eight weeks from July 30.
Advocate Tajeshwar Singh Sullar, counsel appearing for the Union government argued that the Military Engineering Service (MES), a department under the ministry of defence, purchased electricity from the PSEB for use in cantonment areas. From 2000 to 2007, PSEB charged and collected octroi duty on the electricity supplied, which was then deposited with the local municipal committee. The petitioner argued that, under Article 287 of the Constitution, no state law can impose a tax on electricity consumed by or sold to the Government of India.
It may be mentioned that Punjab had abolished octroi in 2007.
“Article 287 of the Constitution of India specifically provides that save as otherwise provided by Parliament by law, no law of a state shall impose or authorise the imposition of tax on the consumption or sale of electricity which is consumed by Government of India, or sold to the Government of India for consumption by that government,” observed the high court bench.
“It is quite evident that electricity consumed by the Government of India cannot be subjected to tax by state government. The respondent has levied octroi in terms of Section 61 of the Punjab Municipal Act, 1911. The respondent given Article 287 of the Constitution of India was prohibited from charging any tax on the sale to petitioner, electricity for its consumption,” read the court order.
The high court order observed: “The respondent has conceded that octroi was not charged with respect to sale of electricity to other government departments. The respondents are shifting responsibility from one shoulder to another.”