Legislative competence and double levy concerns led to interim protection against compensation cess on already taxed coal stocks.

A prima facie challenge was accepted to the legislative competence for the Goods and Services Tax (Compensation to States) Act, 2017, because the asserted constitutional basis for a fresh cess was not clearly supported at this stage. The court also granted limited interim protection against compensation cess on coal stocks where Clean Energy Cess had already been paid, noting the risk of repeated levy on the same stock and the absence of transition credit for the earlier cess. Payment on other stocks was left subject to the petition pending final adjudication of the constitutional challenge.

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Issues: (i) Whether a prima facie case existed that Parliament lacked legislative competence to enact the Goods and Services Tax (Compensation to States) Act, 2017; (ii) Whether interim protection was warranted against levy of compensation cess on coal stocks on which Clean Energy Cess had already been paid.

Issue (i): Whether a prima facie case existed that Parliament lacked legislative competence to enact the Goods and Services Tax (Compensation to States) Act, 2017.

Analysis: The challenge was examined in the backdrop of the abolition of Clean Energy Cess and the introduction of the GST regime. The impugned levy was traced to the compensation mechanism under the constitutional amendment, but the Court found that the legislative source relied upon by the respondents did not, at this stage, clearly support a fresh cess of the nature imposed. The materials placed before the Court disclosed a substantial question as to whether the impugned enactment could validly be anchored in the constitutional provision invoked for compensation to States.

Conclusion: A prima facie case was made out on the question of legislative competence, in favour of the petitioner.

Issue (ii): Whether interim protection was warranted against levy of compensation cess on coal stocks on which Clean Energy Cess had already been paid.

Analysis: The Court noted that the compensation cess operated on the same taxable event as the GST levy and that the petitioner would otherwise be required to pay cess again on coal stocks already subjected to Clean Energy Cess. The absence of transition credit for the earlier cess, coupled with the immediate risk of repeated levy on the same stock, justified limited protection pending final disposal. The Court therefore directed that no further payment be insisted upon for stocks on which prior cess payment was shown, while payment on other stocks would remain subject to the petition.

Conclusion: Partial ad interim relief was granted in favour of the petitioner against repeated levy on already taxed stock.

Final Conclusion: The petition was not finally decided, but the petitioner obtained limited interim protection against double levy pending adjudication of the constitutional challenge.

Ratio Decidendi: Where a fresh cess is imposed on the same taxable event after an earlier cess has already been paid on existing stock, and the statutory and constitutional basis of the new levy is prima facie in doubt, limited interim protection may be granted to prevent repeated exaction pending final determination.

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