Bombay High Court Order on- Petitions Regarding Sales Tax on Electricity Supply to Captive Consumers – EQ
Summary:
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### Core Legal Question:
> **Whether sales tax is payable on the sale of electricity to “captive consumers” (e.g., a company generating electricity for its own group companies or facilities)?**
### Key Legal Precedents Cited by Petitioners:
1. **JSW Steel Ltd & Ors v. Secretary, MERC & Anr.** (2019 SCC OnLine Aptel 57) – Appellate Tribunal for Electricity held that such supply does **not** amount to a taxable sale.
2. **MSEDCL v. JSW Steel Ltd & Ors.** (2022) 2 SCC 742 – Supreme Court affirmed that supply of electricity by a generating company to its captive consumers is **not a sale** attracting tax.
### Petitioner’s Argument:
The “tax on sale” component appearing in electricity bills issued by MSEDCL is legally unsustainable. Non-payment of this tax component has led to threats of:
– Disconnection of electricity supply
– Other coercive recovery actions
### Government’s Statement (on instructions from Joint Secretary, Energy Dept.):
– **No recovery** of the tax component will be made until the next hearing.
– **No coercive action** (e.g., disconnection) will be taken against petitioners without court permission.
– However, MSEDCL is permitted to **show the tax amount in bills** “without prejudice” to the rights of either party.
### Court’s Directions:
– **Notice issued** – returnable on **27th April 2026**.
– Respondents to file reply within **two weeks**.
– Petitioners may file rejoinder by **23rd April 2026**.
– No interim order deemed necessary for now, but interim relief prayer will be considered after replies are filed.
– MSEDCL may serve a copy of a consequential order from a previous Division Bench judgment (dated 9th September 2021).
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## 💼 Business Points (Key Takeaways for Companies)
| Business Aspect | Implication |
|—————-|————–|
| **Cash flow relief** | No immediate payment of disputed sales tax required until at least 27th April 2026. |
| **No supply disruption** | Electricity disconnection is stayed during this period – operations can continue normally. |
| **Legal clarity for captive power users** | Strong judicial precedents (including Supreme Court) support the view that captive electricity supply is not a taxable sale. |
| **Strategic opportunity** | Companies with similar captive power arrangements can use this case to challenge similar tax demands. |
| **Risk of future liability** | Tax amount continues to appear on bills – if the court ultimately rules against petitioners, accumulated tax may become payable. |
| **Compliance caution** | While recovery is stayed, companies should still track the billed tax amount for potential future payment or adjustment. |
| **Next steps** | Monitor filings (reply by MSEDCL, rejoinder by petitioners) and attend hearing on 27th April 2026. |
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