In a landmark Judgement, the Bombay High Court quashing the Government Circular that private educational Institutions are liable to pay duty has has ruled that all kinds of educational Institutions, whether public or private are exempted from paying electricity duty on the consumed energy.
The Petition was filed challenging levying of electricity duty on the Educational Institutions, being managed by Shri Vile Parle Kelvani Mandal, which also manages Narsee Monjee Institutions, against imposition of a 21 percent electricity duty, which mounted to arrears of around 3 Crores. The Respondents in the Petition were TATA Power, Reliance Infrastructure and Adani Electricity.
It was argued by the Petitioners that educational institutions run and managed by a society and a public charitable trust and hence though they are liable to pay for consumption of energy but not liable to pay electricity duty on the consumed energy. It was pointed out that even under the old Act, i.e., Maharashtra Electricity Duty Act, 1958 the electricity duty was not levied on the consumption charges or the energy consumed for the purposes of or in respect of a school or college or institution imparting education or training, students’ hostels, hospitals, nursing homes etc.
However, in June 2018, the State Government by misreading the provision of Maharashtra Electricity Duty Act, 2016, informed them that charitable institutions registered under the Bombay Public Trust Act, 1950 are not entitled for electricity duty exemption with effect from 1st September, 2016. The petitioners argued that letter revoking the exemption was contrary to the Maharashtra Electricity Duty Act, 2016.
On the other hand, the Advocate General appearing for the State argued that provision relating to exemption is not absolute and is a restricted exemption. It was also argued by the State that the educational institutions should pay electricity duty, as they are earning huge income by way of fees etc. and infrastructure is used for commercial gain. They can avail of the exemption only if it is granted conditionally or unconditionally.
The Court therefore proceeded to interpret Section 3(2) of the MED Act, 2016 in context of the State Government circular that such of the educational institutions which are registered under the Maharashtra Public Trust Act, 1950 are excluded from the purview of the exemption and that exemption is now restricted only to the schools run and managed by the local bodies and other educational institutions will have to pay the electricity duty.
Section 3(2) of the MED Act, 2016 reads as under:
(2) Electricity duty shall not be levied on the consumption charges or energy consumed,- (i) ……; (ii) ………..; (iii) for the purposes of, or in respect of a school or college or institution imparting education or training, students’ hostels, hospitals, nursing homes, dispensaries, clinics, public streets lighting, public water works, sewerage systems, public gardens including zoos, public museums, administrative offices forming whole or, as the case may be, a part of system run by any local bodies constituted under any law for the time being in force in the State of Maharashtra.
The Court also observed that the words employed in section 3(2)(iii) of the new law would indicate is that the electricity duty shall not be levied on the consumption charges or energy consumed by school or college or institution imparting education or training, students’ hostels, hospitals, nursing homes, dispensaries, clinics. Therefore, education and health, irrespective of whether service in such fields is rendered by public body or private body, is covered. Even the students’ hostels are covered by exclusionary clause.
The Court after elaborating upon the provisions concluded that there is no intent to restrict the exclusion or the provision regarding non-application of the levy or non-application of the charging section to only Government premises or premises belonging to local bodies. The services in the field of health, education etc. run by local bodies or by institutions like the petitioners would equally be covered by the exclusionary clause or non-application of the charging section.
The reason, which found favour with the Court was:
………. Today we have a changed scenario. Post liberalisation, privatisation era, we have enormous presence of private sector in several fields. The service sector is now dominated by private entities. It has now been understood and as a matter of policy measure that it is impossible to reach out to a large section of our population and render all services to it. The Government has itself allowed the participation of the private sector and we have several services rendered by adopting PPP method. This means, Public Private Participation Method. The private sector has joined the Government or the public bodies, including local authorities in providing varied services which are essential for the public. Now, there is an increasing trend of handing over administration of public hospitals as well to charitable trusts and organisations. There is also encouragement provided to the private sector to independently enter the field of these services. In this field, the public services, which were hitherto provided only by the Government, public bodies and local authorities, are now either provided in the PPP method or by exclusive permission granted to the private sector to provide it. This may be done additionally. Therefore, it will not be proper to hold, as is suggested by the learned Advocate General, that it is only the educational, health, public services, which are provided either wholly or as a part of a system run by the local bodies constituted by any law for the time being in force in the State of Maharashtra, which are covered by the exclusionary provision or non-application of the charging section.
The Court thus finally held that as the word “public” does not precede the words school or college or institution imparting education or training, students’ hostels, hospitals, nursing homes, dispensaries, clinics etc. in the new law, it allowed the Petition and quashed the Government Circular levying the electricity duty on the energy consumed.
The Petitioner was represented though Shri Milind Sathe, Senior Counsel and Gaurav Srivastava, Advocate. Shri Ashutosh Kumbhakoni, Advocate General argued on behalf of the State. The Judgement of the Court was delivered through bench of Hon’ble Justice S C Dharmadhikari and Hon’ble Justice M S Karnik.
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