HP High Court Caps Electricity Duty on Stone Crushers, Slashes 37.5% Levy to 24.75%
SHIMLA, AUGUST 11: In a major relief to stone crusher and mining units in Himachal Pradesh, the High Court has held that the State Government could not increase electricity duty from 11 per cent to 37.50 per cent through successive notifications issued within a period of about five months.
A Division Bench comprising Justice Vivek Singh Thakur and Justice Ranjan Sharma, while deciding a batch of 141 petitions, has directed that electricity duty payable by the petitioners shall be calculated at 16.5 per cent from September 1, 2023, and 24.75 per cent from January 18, 2024, instead of the 25 per cent and 37.50 per cent rates imposed by the State Government.
The court observed that Section 11(2) of the Himachal Pradesh Electricity (Duty) Act, 2009, empowered the State to revise electricity duty by up to 50 per cent at one time, but the provision lacked clear guiding principles and did not prescribe any minimum interval between successive increases.
The court noted that electricity duty on stone crushers stood at 11 per cent in 2017. The government increased it to 25 per cent through its September 1, 2023 notification and then raised it further to 37.50 per cent on January 18, 2024. The two increases resulted in the duty rising from 11 per cent to 37.50 per cent—an overall increase of 240 per cent—in just about five months.
The Bench held that the first enhancement from 11 per cent could have been only up to 16.5 per cent, representing a 50 per cent increase over the existing rate. A subsequent 50 per cent enhancement over 16.5 per cent could have taken the rate only to 24.75 per cent.
Section 11(2) found vague and unguided
The court held that the provision empowering the government to revise electricity duty was “vague, uncertain, unbridled, unguided and arbitrary” because it did not prescribe a definite interval between successive revisions.
However, instead of striking down Section 11(2) itself, the Bench issued interim guidelines for revision of electricity duty until the State makes appropriate amendments or frames rules.
The High Court directed the State Government to introduce clear guiding principles, including a definite time interval and limits for enhancement of electricity duty, to prevent arbitrary increases.
Under the interim mechanism laid down by the court, the maximum permissible enhancement would depend upon the period elapsed since the previous determination of duty. For instance, an increase of up to 5 per cent is permissible after one year, rising progressively to a maximum of 50 per cent after ten years.
Excess payment to be adjusted
The court has also ordered that any excess electricity duty already paid by the petitioners should be adjusted against future electricity duty, preferably within one year. Any shortfall would similarly be recovered in the same manner.
The judgment came on a batch of petitions filed by stone crusher units and other industrial establishments challenging the government's electricity duty notifications. The petitioners had argued that stone crushers had earlier been treated as large industrial consumers and that the subsequent decision to impose substantially higher electricity duty on them was beyond the government's statutory powers.
The court clarified that the State does have the power to create or reclassify categories for the purpose of levying electricity duty. However, that power remains subject to the statutory ceiling and cannot be exercised through successive steep increases without adequate guiding principles.
The Bench also stressed that excessive taxation can adversely affect the very industrial base from which revenue is generated, observing that electricity duty should not become so excessive that it places an unreasonable burden on industrial consumers.
The petitions and pending applications were accordingly disposed of in these terms.
