Delhi High Court Upholds ₹197 Crore Electricity Tax On NTPC's Auxiliary Consumption At Badarpur Plant
The Delhi High Court has dismissed a plea filed by NTPC Ltd challenging a municipal electricity tax demand of around ₹197.15 crore on electricity consumed to operate its Badarpur Thermal Power Station.
The Division Bench of Justices Anil Kshetarpal and Bharat Parashar held that electricity used for auxiliary purposes at a power plant constitutes taxable consumption and cannot be treated merely as part of the process of generating electricity.
It held that the municipal tax could be levied on electricity generated and consumed by NTPC itself, rejecting its challenge to the validity of the relevant bye-law under the Delhi Municipal Corporation Act, 1957.
The demand relates to auxiliary consumption at the Badarpur Thermal Power Station from June 1, 2006, to October 15, 2018, when the plant was permanently shut down. The Municipal Corporation had raised a demand of ₹197,15,84,639 in November 2021, followed by a show-cause notice in December 2021.
NTPC had challenged the levy, arguing that auxiliary consumption was incidental to electricity generation and that the relevant bye-law impermissibly expanded the scope of the parent legislation.
Rejecting this contention, the Court observed that the taxable event under Section 113(2)(d) of the Delhi Municipal Corporation Act is the consumption of electricity. The fact that electricity is used to operate equipment for generating more electricity does not change the nature of that use.
It relied on Supreme Court decisions recognising that electricity consumed by the very person who generates it can attract a tax on consumption. It noted that auxiliary electricity is used to operate the generating station's equipment and is not merely lost during transmission.
The Court also rejected NTPC's challenge to Bye-law 3(3) of the Delhi Municipal Corporation (Assessment and Collection of Tax on the Consumption, Sale or Supply of Electricity) Bye-Laws, 1962. It held that the provision does not create a new tax or go beyond the parent Act, but identifies the person liable to pay tax on consumption of self-generated electricity.
The court further rejected the argument that taxing auxiliary consumption amounted to double taxation because the cost of such consumption was already factored into the tariff charged for electricity supplied to distribution companies.
It explained that tariff and taxation operate in separate fields. “While tariff represents the schedule of prices and charges payable for the supply of electricity, tax constitutes a statutory levy payable to the State over and above the tariff.”
The Court further observed that electricity supplied to end consumers and electricity consumed by the generating station are distinct quantities of electricity consumed by different persons. Tax paid by end consumers on electricity supplied to them therefore does not amount to tax already paid on the electricity consumed by NTPC.
The Court also rejected the challenge based on the delay in raising the demand. It held that the absence of a prescribed limitation period does not mean that a demand can be raised at any time, as the power must ordinarily be exercised within a reasonable period. However, delay alone does not extinguish a tax liability that has lawfully accrued.
In the present case, the Court noted that the liability accrued month by month under the applicable bye-laws and that NTPC was required to maintain accounts of the electricity consumed. The demand sought recovery of an existing statutory liability and did not impose a new levy.
As such the Bench dismissed NTPC's petition.
For Petitioner: Senior Advocate Gopal Jain, with Advocates Sakie Jakharia, Aseem Aggarwal and Kriti Sharma.
For Respondents: Senior Advocate Sanjay Poddar, with Dr. Divya Swamy, Standing Counsel for MCD, and Advocates Govind Kumar, Yagyawalkya Singh, R. R. Panda, Apurv Kumar, Anshika Singh, Sameer Pandey, Ankit Kakkar and Akriti Singh for SDMC/MCD (Respondent 1). Tushar Sannu, Additional Standing Counsel for NDMC. Advocates Anupam Varma, Aditya Gupta and Yash Srivastava for Respondents 3 and 4. Advocates Nitin Kala, Kunal Singh, Tanmay Jain and Kanishka Rawat for Respondent 5.