The Chhattisgarh High Court has clarified that a government exemption from electricity duty cannot be revoked merely by issuing a new tariff schedule. The ruling reinforces that statutory exemptions, once granted by notification, require explicit cancellation through a separate, unambiguous notification. This decision has profound implications for captive power producers and fiscal policy enforcement across India.
Background & Facts
The Dispute
The respondent, M/s. ACB India Ltd., operates a 270 MW captive power plant in Korba, Chhattisgarh. In 2013, it entered into a power purchase agreement with the state-owned Chhattisgarh State Power Trading Co. Ltd. In 2016, the State Government issued a notification under Section 3B of the Chhattisgarh Electricity Duty Act, 1949, granting a 12-year exemption from full electricity duty to captive power generators, including the respondent. The exemption was to apply from April 1, 2016, or commercial production, whichever was later, and was set to expire in August 2028.
Procedural History
- 2016: State issues Notification dated 12.08.2016 granting 12-year exemption to captive power producers.
- 2022: State issues new Notification dated 11.10.2022 revising electricity duty slabs, increasing rates for captive generators.
- 2023: Chief Electrical Inspector issues demand notice for arrears from January 2017 to March 2023, applying the revised rates.
- 2023: Respondent files writ petition challenging the demand, arguing the 2016 exemption remains in force.
- 2025: Single Judge allows the writ petition, quashing the demand.
- 2026: State files writ appeal before the High Court.
Relief Sought
The respondent sought quashing of the demand notice and declaration that the 2016 exemption remained valid. The State sought reversal of the Single Judge’s order and enforcement of the revised duty rates.
The Legal Issue
The central question was whether the State Government could withdraw an exemption granted under Section 3B of the Chhattisgarh Electricity Duty Act, 1949, merely by issuing a new tariff schedule, or whether an express cancellation notification was mandatory.
Arguments Presented
For the Appellant/State
The State contended that Section 3B empowers it to both grant and withdraw exemptions, and Section 3C allows amendment of the duty schedule. It relied on Yamuna Expressway Industrial Development Authority v. Shakuntla Education and Welfare Society and Subhash Photographics v. Union of India to argue that fiscal policy must remain flexible. It further invoked Section 21 of the General Clauses Act, 1897, asserting that power to issue a notification includes power to amend or rescind it. The State argued that the 2022 notification implicitly superseded the 2016 exemption by altering the duty structure.
For the Respondent
The respondent argued that the 2016 exemption was a specific, time-bound grant under Section 3B(b), which requires cancellation only by a like notification. No such cancellation notification had been issued. The exemption was not a general concession but a contractual assurance tied to investment decisions. The State’s failure to issue a formal withdrawal rendered the 2016 notification still operative.
The Court's Analysis
The Court examined the statutory scheme under Section 3B of the Act of 1949. It noted that Section 3B(a) permits exemption by notification, while Section 3B(b) explicitly states that such exemption may be cancelled "by a like notification." The phrase "by a like notification" was interpreted as requiring a formal, explicit instrument of cancellation.
"Provisions under Section 3 (B) (iii)(b) of the Act of 1949 in clear terms provides ‘cancel any such notification’. If grant of exemption is by notification, then the cancellation of earlier notification should also be by issuing notification clearly mentioning that earlier notification is withdrawn/cancelled."
The Court rejected the State’s argument that the 2022 tariff revision implicitly revoked the 2016 exemption. It held that fiscal flexibility does not override statutory procedure. The State’s reliance on Yamuna Expressway and Subhash Photographics was distinguished: those cases concerned policy shifts in licensing or taxation regimes, not the revocation of specific, time-bound exemptions granted under express statutory conditions.
The Court emphasized that Section 21 of the General Clauses Act does not override specific statutory mandates. Where a statute prescribes a particular mode for revocation - here, "by a like notification" - that mode must be followed. The absence of any cancellation notification meant the 2016 exemption remained legally valid until its expiry in 2028.
The Verdict
The respondent won. The Court held that an exemption granted under Section 3B of the Chhattisgarh Electricity Duty Act, 1949, cannot be withdrawn except by a separate, express notification. The State’s demand based on the 2022 tariff revision was quashed. The Court granted liberty to the State to recalculate and raise a fresh demand only after issuing a valid cancellation notification.
What This Means For Similar Cases
Cancellation Must Be Express, Not Implied
- Practitioners must now challenge any tax or duty demand based on implied revocation of exemptions.
- Governments cannot rely on new schedules or circulars to override prior exemptions without formal cancellation.
- Any demand notice issued without a valid cancellation notification is procedurally invalid.
Statutory Language Trumps Policy Flexibility
- Even in fiscal matters, statutory mandates govern procedure. Courts will not defer to policy arguments when the statute prescribes a specific mode of revocation.
- The doctrine of "public interest" cannot override explicit statutory language.
- This principle applies equally to exemptions under RERA, GST, and other fiscal statutes with similar withdrawal clauses.
Documentation Is Critical for Compliance
- Businesses granted exemptions should retain copies of the original notification and monitor for any cancellation notice.
- Legal teams must audit exemption validity before responding to tax demands.
- State authorities must now draft cancellation notifications with clear language: "This notification dated [X] is hereby cancelled and superseded."
