State cess on industrial use of flowing water upheld in principle, but recovery limited to prospective operation only.
A cess on the use of flowing water from a river for industrial purposes was analysed as a levy falling within the State's legislative field, because standing and flowing water was treated as State property under the Code and the charging provision authorised recovery as land revenue. Applying the doctrine of pith and substance, the impost was described as being within Entry 45 of List II read with Article 246, so legislative competence was not lacking. The commentary also states that executive demand could not be given retrospective effect; recovery was confined to the date of the Government Resolution onwards and required recomputation on a prospective basis only.
Issues: (i) Whether the State had legislative competence to levy cess on the use of flowing water from a river for industrial purposes under Section 70 of the Maharashtra Land Revenue Code, 1966. (ii) Whether the demand for cess could be given retrospective effect.
Issue (i): Whether the State had legislative competence to levy cess on the use of flowing water from a river for industrial purposes under Section 70 of the Maharashtra Land Revenue Code, 1966.
Analysis: The constitutional entries relating to legislative fields are to be construed broadly and with widest amplitude. Section 20 of the Code vests standing and flowing water, as part of the property of the State Government, and Section 70 authorises fixation and recovery of rates for use of water as land revenue. Applying the doctrine of pith and substance, the impost was held to fall within Entry 45 of List II of the Seventh Schedule to the Constitution of India, read with Article 246, and not to suffer from want of legislative competence.
Conclusion: The levy of cess on the use of flowing water for industrial purposes was upheld as within the legislative competence of the State.
Issue (ii): Whether the demand for cess could be given retrospective effect.
Analysis: The demand was made under the machinery of the Code and the Resolution fixing rates. The position accepted by the State was that executive demand could not operate retrospectively. The levy was therefore confined to the period from the date of the Resolution onwards, and the demand had to be recomputed on that basis.
Conclusion: Retrospective recovery was not permitted and the demand was restricted to prospective operation.
Final Conclusion: The levy was sustained on merits, but the demand was limited to prospective recovery from the date of the Government Resolution, with a fresh computation directed accordingly.
Ratio Decidendi: Where flowing water is treated by the statute as part of State property and the charging provision authorises recovery as land revenue, a cess on its use falls within the State's legislative field and may be imposed prospectively only unless the statute clearly authorises retrospective recovery.
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