Jharkhand HC strikes down electricity duty amendment, orders refunds of excess charges
Ranchi, January 6: In a landmark ruling with wide ramifications for Jharkhand’s industrial and power sectors, the Jharkhand High Court on Monday…
Ranchi, January 6: In a landmark ruling with wide ramifications for Jharkhand’s industrial and power sectors, the Jharkhand High Court on Monday struck down the Jharkhand Electricity Duty (First Amendment) Act, 2021 and the associated Electricity Duty Rules, 2021, declaring them unconstitutional and arbitrary.
The judgment was delivered by a Division Bench of Chief Justice Tarlok Singh Chauhan and Justice Rajesh Shankar in a batch of writ petitions led by M/s Pali Hill Breweries Private Limited vs State of Jharkhand (W.P.(T) No. 3228 of 2021), along with over 30 connected petitions filed by leading industrial units, captive power producers, steel manufacturers, mining companies and industry associations.
Who Approached the Court
The petitions were filed by a cross-section of Jharkhand’s industrial ecosystem, including Ramkrishna Forgings, Usha Martin, RSB Transmissions, BMW Industries, Rungta Mines, ESL Steel, Hindalco Industries, La Opala RG, and the Association of DVC HT Consumers of Jharkhand, among others.
Most petitioners challenged the steep and sudden increase in electricity duty following the 2021 amendment, calling it financially crippling and legally unsustainable.
Why the Amendment Was Struck Down
The Court held that the State had illegally shifted the basis of electricity duty from a per-unit levy to a percentage of “net charges” without amending the charging provision of the parent law—the Bihar Electricity Duty Act, 1948, as adopted by Jharkhand.
The Bench ruled that:
- Electricity duty can be levied only on units of energy consumed or sold
- Levy on “net charges” had no legal backing under the charging section
- The term “net charges” was undefined, rendering the levy vague and arbitrary
The Court noted that in one case, the new formula led to an almost 1,000% jump in electricity duty for an industrial consumer.
Excessive Delegation and Article 14 Violation
Striking down the proviso empowering the State Government to alter duty rates by notification, the Court held that it amounted to excessive delegation of legislative power without any guiding policy.
It further observed that linking electricity duty to tariffs fixed by the regulatory commission could result in unequal treatment of similarly placed consumers, violating Article 14 of the Constitution.
Rules Also Invalidated
The Electricity Duty Rules, 2021 were also quashed as they:
- Were framed to support an invalid amendment
- Were given retrospective effect without statutory authority
- Introduced a new tax mechanism not contemplated under the parent Act
Second Amendment Survives Judicial Scrutiny
The Court, however, upheld the Jharkhand Electricity Duty (Second Amendment) Act, 2021, which restored a unit-based levy for captive power plants at 50 paise per unit with effect from February 17, 2022.
It declined to interfere with the revised rate, holding that tax rate fixation falls within the State’s economic policy domain and does not warrant judicial interference in the absence of constitutional violations.
Key Directions of the Court
- All electricity bills raised under the invalid First Amendment were quashed
- Excess electricity duty already paid must be adjusted against future bills
- Captive power plants are liable to pay duty only under the Second Amendment from February 17, 2022 onward
Wider Impact
The verdict is expected to bring substantial relief to Jharkhand’s steel, mining and manufacturing sectors, which had faced sharp cost escalations due to the disputed levy during a period of industrial slowdown.
Legal observers say the ruling reinforces the constitutional principle that no tax can be imposed without clear legislative authority, offering certainty to investors and industry alike.
