TaxTMI 
TaxTMI 
2005 (9) TMI 591
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....vation, preservation and protection of forests and the ecology. When forest land is used for non-forest purposes, what measures are required to be taken to compensate for loss of forest land and to compensate effect on the ecology, is the main question under consideration. Forests are a vital component to sustain the life support system on the earth. Forests in India have been dwindling over the years for a number of reasons, one of it being the need to use forest area for development activities including economic development. Undoubtedly, in any nation development is also necessary but it has to be consistent with protection of environments and not at the cost of degradation of environments. Any programme, policy or vision for overall development has to evolve a systemic approach so as to balance economic development and environmental protection. Both have to go hand in hand. In ultimate analysis, economic development at the cost of degradation of environments and depletion of forest cover would not be long lasting. Such development would be counter productive. Therefore, there is an absolute need to take all precautionary measures when forest lands are sought to be directed for ....
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....e major areas of environmental hazards are not covered. There also exist uncovered gaps in areas of major environmental hazards. There are inadequate linkages in handling matters of industrial and environmental safety. Control mechanisms to guard against slow, insidious build up of hazardous substances, especially new chemicals, in the environment are weak. Because of a multiplicity of regulatory agencies, there is need for an authority which can assume the lead role for studying, planning and implementing long-term requirements of environmental safety and to give direction to, and co-ordinate a system of speedy and adequate response to emergency situations threatening the environment. The EP Act was, therefore, enacted to provide for protection and improvement of environment and for matters connected therewith. The Central Government has been given wide powers to take measures to protect and improve the environment as provided under Section 3 including the power to constitute an authority or authorities for the purpose of exercising and performing such of the powers and functions, including the power to issue directions under Section 5, of the Central Government under the Act and ....
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....change of use of forest land for non-forest purposes and one of the conditions of the permission is that there should be compensatory afforestation, then the responsibility of the same should be that of useragency and it should be required to set apart a sum of money for doing the needful. In such a case the State Government will have to provide or make available land on which reforestation can take place and this land may have to be made available either at the expense of the user-agency or of the State Government, as the State Government may decide. It was decided that the scheme shall ensure that afforestation takes place as per the permissions which are granted and there should be no shortfall. The scheme was submitted by MOEF alongwith an affidavit dated 22nd March, 2002. The Central Empowered Committee (CEC) on consideration of relevant material including the scheme submitted by MOEF made its report (IA 826) containing recommendations dated 9th August, 2002. The report, taking note of the present system of compensatory afforestation as per guidelines issued by MOEF from time to time under the FC Act, the procedure for receipt and utilization of funds for compensatory affores....
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....monitoring and most importantly, in protection of compensatory afforestation. Necessary procedure for this purpose would be laid down by the MOEF with the concurrence of the Central Empowered Committee. (g) Plantations must use local and indigenous species since exotics have long term negative impacts on the environment; and (h) an independent system of concurrent monitoring and evaluation shall be evolved and implemented through the Compensatory Afforestation Fund to ensure effective and proper utilization of funds. The aforesaid report, inter alia, notes that there was general consensus amongst the States/Union Territories that the present practice of concentrating only on artificial regeneration through plantations should be dispensed with as it does not adequately compensates the loss of natural forest and that a part of the fund should also be used for assisted natural regeneration wherein the natural forests are allowed to regenerate and grow by undertaking silvicultural and cultural operations such as fire tracing, singalling of seedlings, protection, etc. These activities help in regenerating the rootstock which may exists in the degraded forests. Besides, this helps in ....
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....rd revision by the MOEF in consultation with CEC as and when necessary. The aforesaid recommendations of CEC were accepted. An application (I.A.No.1046) was filed by the MOEF, inter alia, seeking directions that the NPV calculation shall be part of the detailed project report submitted to it for a forestry clearance under the FC Act. During the course of hearing, learned Solicitor General informed this Court that the Government was agreeable to the suggestions of CEC that money received from user-agencies for compensatory afforestation fund should be kept in an interest bearing account, though initially it had some reservations about it. Reference has also been made in the application about exemption being granted to some projects from payment of NPV, an aspect which we would consider later at an appropriate stage so also the basis of the calculation of the NPV. We may, however, note that although in the application it was stated that the format issued by the World Bank for calculation for NPV for the projects shall be the basis of its calculation, the learned Solicitor General stated that he was not relying upon the said format. Regarding the mining projects, the application ment....
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....ads including office accommodation subject to the approval of the annual budget by the Governing Body." The management of the fund is provided in clause 6.3 and the disbursement of the fund in clause 6.4 of the Notification. These clauses read as under: "6.3 Management of the Fund: (i) The amount collected by the CAMPA shall be invested in Reserve Bank of India, Nationalized Banks, Post Office, Government Securities, Government Bonds and deposits. (ii) The non-recurring as well as recurring cost for the management of CAMPA including the salary and allowances payable to its officers and staff shall be met by utilizing a part of the income by way of accused interest on the funds invested by the CAMPA excluding income from funds received as per para 6.2(ii). (iii) The expenditure incurred on independent monitoring and evaluation shall be borne by the CAMPA out of the income by way of interest on the funds invested by the CAMPA excluding income from funds received as para 6.2(iii). (iv) The CAMPA shall get the annual accounts audited internally as well as externally through chartered accountant(s) who are on the panel of the Comptroller and Auditor-General of India and the audito....
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....n of learned Amicus Curiae that there should be more involvement of NGOs by including in the Executive Body, the conservationists, environmentalists, economists and experts in forestry. We are of the view that the Executive Body deserves to be expanded as, presently, only one professional ecologist is its member, remaining all being officers of the Government. We may note here that a forthright and fair stand was taken by the learned Solicitor General not only in regard to the constitution of CAMPA but on other aspects also, keeping in view the non-adversarial nature of the litigation. Learned Solicitor General submitted that the Government is committed to conserve the forest and protect the environments, and would implement, in letter and spirit, the directions issued by this Court. In view of above, we direct that clause 2.2 shall be suitably amended so as to include two more environmentalists, one of whom may be expert in the field of forest and the other in the field of forest economy development. These members shall be included in the Executive Body in consultation with the Chairperson of the CEC. Regarding clause 6.3(iv), it was suggested that there should be corporate accou....
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....is to be levied and collected not because property rights of the States are affected but on account of effect on ecology by conversion of forest land for non-forest purpose. Further, Mr. Salve submits that the basis for calculation of NPV should be the economic value, spread over a period of 50 years, which would be regenerational value for forest regeneration to be taken into account as opposed to restoration value, i.e., financial value. Regarding legal and jurisdictional basis to levy NPV, Mr. Salve contended that there are various legal principles which act as source of power to levy NPV. In this regard, reference has been made to provision of the FC Act, EP Act and Forest Policy of 1988. It is contended that these enactments and the policy are the measures taken by the legislature and the Government to discharge the constitutional obligation to protect the environments. Reliance is also placed upon the doctrine of public trust, which learned counsel submits is a constitutional doctrine. First, we may consider the meaning of NPV and determine what is NPV. The NPV is the present value (PV) of net cash flow from a project, discounted by the cost of capital. Forestry is a publi....
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....re costs and future benefits by use of appropriate discount rate and brings down such costs and benefits to the reference date which in the present case has been assumed to be the year 2005. The question, which we have to answer, is concerning the relevance of fixing appropriate discount rate in valuation of the costs and benefits arising from forestry as a project. The value of any asset is discounted by present value of the economic benefits it will generate in future years. For example, timber asset value is the discounted future stumpage price for mature timber after deducting costs of bringing the timber to maturity. NPV is one of the methods for valuation of standing timber. The general expression V for the value of an asset, in the base year O, is simply the sum of the net economic benefits it yields in each year over the life time, T, of the Asset, discounted to the present value by the discounted rate. The current method of valuing public sector projects, like forestry, has become contentious as public sector undertakings agrees for lower discount rate on account of long gestation period. However, the flaw with this argument is that the low rate of return is computed wi....
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....revenue. It is important to bear in mind that a benefit or cost received or incurred now is worth more than that received or incurred later. Therefore, using the appropriate discount rate helps to aggregate marginal benefits and costs. The choice of interest rate depends upon time preference. For public project, such as forestry, a social discount rate, which indicates time preference of the society, should be used. Forest sustainability is an integral part of forest management and policy that also has a unique dominating feature and calls for forest owners and society to make a long-term (50 years or longer) commitment to manage the forest for future generation. One of the viewpoints for sustaining forest is a naturally functioning forest ecosystem. This view point takes a man and nature relationship to the point of endorsing to, the extent possible, the notion of letting forest develop and process without significant human intervention. A strong adoption of the naturalistic value system that whatever nature does is better than what humans do, this is almost the "nature dominates man" perspective. Parks and natural reserve creations; non-intervention in insect, disease and fire p....
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....ternative. Such information could include outcome levels for water yield, sediment production, and timber growth; population trends for important wildlife species; and recreation use for backcountry and developed recreation sites. Similarly, information on the economic value of these outcomes can be estimated by means of the methods discussed in chapter 8 and added to our impact table. To this avalanche of information, we could add the impacts on the social well-being of local and regional communities. The forest management analyst can easily overwhelm the decision makers and stakeholders with information." Dealing with fundamental of decision analyses to achieve ecological, economic and social goals, it is said that what is to be broadly kept in view is: "Ecological and environmental goals are important to forest managers, landowners, and their stakeholders, we need information about how decision alternatives affect such goals. These goals can be broadly stated as 1. Maintaining and enhancing forest productivity 2. Conservation of biological diversity 3. Protecting and enhancing environmental conditions." The aforesaid also shows that NPV as a tool of SBCA is required to be ....
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....irect Use Values (DUV) refer to the current use (consumption) of the resources and services provided directly by natural and environmental resources. Examples are the use of timber and nontimber forest products. Recreation (tourism to wildlife sanctuaries or Himalayan Glaciers, mountains), education, research etc., are examples of direct non-consumptive use values. Indirect Use Values (IUV) generally are referred to the ecological functions that natural resource environments provide. It can be broadly classified into three groups watershed values, ecosystem services and evolutionary processes. The Optional Value (OV) is associated with the benefits received by retaining the option of using a resource (say a river basin) in the future by protecting or preserving it today, when its future demand and supply is uncertain. Take the example of the Narmada river basin. It is not necessary to delve further in this matter since ultimately it would be for the experts to examine and assist this Court as to the Model to be adopted for valuation, namely, TEV, CVM, SBCA etc. It is for the experts to tell us as to what NPV should be applied in case of mines and different types of forests. We may....
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.... It also leads to the need to carry out bio-diversity valuation both in terms of its market linkage and the existence value outside the market as considered relevant by a set of pre-identified stakeholders. It is, however, evident that while working out bio-diversity valuation, it is not trees and the leaves but is much more. Various techniques for valuing biodiversity that have been developed to assess the value of living resources and habitats rich in such resources have been considered by the author for her case study while considering the aspect of value, their nature and stakeholders interest. In so far as the value of ecology function in which the stakeholders or scientists, tourists, village residents, non-users, the nature of value is regulation of water, nutrient cycle, flood control. These instances have been noted to highlight the importance of the biodiversity valuation to protect the environments. The conclusions and the policy recommendations of the author are: "Biodiversity valuation has important implications for decision making with respect to alternative uses of land, water and biological resources. Since all value does not get reflected in markets, its valuation ....
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....ressed by different categories of stakeholders namely scientists, tourists, local villagers and non-users is an important object in the process of valuation. In the KNP study, a fair degree of congruence with respect of ecological function value and livelihood value is discovered to exist in the perceptions of diverse groups. Stakeholders as diverse as scientists, tourists, local villagers and non-users give high rankings to these uses." Next question is to which expert reference shall be made. Counsel for parties agree that Institute of Medical Economic Growth is an institute of eminence having been set up about half a century earlier. It has also been pointed out that this Institute is getting regular maintenance and development grant from Indian Council of Social Sciences research (ICSSR). Further, it appears that the Institute is also receiving research and training grants from Ministry of Finance, Ministry of Health and Family Welfare and Ministry of Agriculture, besides National Bank for Agriculture and Rural Development. We have been informed that eminent faculty members in the institute are engaged in the field of research and Ms.Kanchan Chopra, (Ph.D. Economics, Universit....
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....ticle 199(1)(f) read as under: "110. Definition of "Money Bills".(1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely :-- (a) to (d) . (f) the receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or XXX XXX XXX 199. definition of "Money Bills".(1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely : (a) to (d) (f) the receipt of money on account of the Consolidated Fund of the State or the public account of the State or the custody or issue of such money; or" The contention is that Notification constituting CAMPA shall be deemed to be a Money Bill. Articles 294 and 295 deal with succession to property, assets, rights, liabilities and obligations in certain cases as from the commencement of the Constitution of India, providing for vesting of the properties and assets in the Union and in the States. These articles were....
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....elating to contingency funds and public account; to audit all trading, manufacturing, profit and loss accounts and balance sheet and other subsidiary accounts kept in any department of the union or of a State; and in each case to report on the expenditure, transactions or accounts so audited by him. Section 14 of CAG Act deals with audit of receipts and expenditure of bodies and authorities substantially financed from Union or State revenues. Section 15 provides for the functions of CAG in the case of the grants or loans given to other authorities or bodies. Section 16 deals with audit of receipts of Union or of States and Section 17 with audit of accounts of stores and stock. Section 18 provides for the powers of CAG in connection with audit and accounts. The audit of Government companies and corporations by CAG is dealt with under Section 19. Section 20 is in the nature of a residuary provision providing that CAG, if requested by the President of India or the Governor of the State or the Administrator of Union of Territory having a Legislative Assembly to undertake the audit of the accounts of such other body or authority of which audit has been entrusted to CAG, the CAG shall un....
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....here is an additional reason for the view that NPV will not fall under Article 110 or 199 or 195 of the Constitution. Our constitution draws a distinct line between a "TAX" and a "FEE". In case of Ratilal Panachand Gandhi v. State of Bombay & Ors. [1954 SCR 1055], one of the questions which arose for determination was regarding constitutional validity of Section 58 of Bombay Public Trust Act, 1950. That section makes it obligatory on every Public Trust to pay to the Administration Fund a contribution at such time and in such manner as may be prescribed. Under the rules, the contribution was fixed at the rate of 2% per annum upon the gross annual income of every Public Trust. Failure to pay such contribution was made liable to penalty under Section 66 of the Act. It was contended on behalf of the Trustees that the levy of contribution under Section 58 was in substance the levy of a tax, it was beyond the competence of the State legislature to enact such a provision. This argument was rejected by this Court by holding that the Administration Fund constituted under Section 57 of Bombay Public Trust Act was a Special Fund which was to be applied exclusively for payment of charges for e....
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....Lawrence S. Davis, Professor Emeritus, University of California-Brakeley, K. Norman Johnson, Orgeon State University, Peter S. Bettinger, Orgeon State University and Theodore E. Howard, University of New Hampshire, authors have said that "forest management remains the attempt to guide forests toward a society's goals. A forest manager is the catalyst of this effort. As such, the manager needs an earthy understanding of biological process; a knowledge of animals and their habitats; an appreciation of streams and their environments; the longrange viewpoint of a planner; the patience of a labour negotiator, the skills of an administrator; and the alertness, flexibility and all-round resourcefulness of a successful business executive. Above all, the forest manager requires a genuine sense and feeling for the forest as an entity." This objective is to be borne in mind while considering the question of ecology as opposed to mere compensatory afforestation. Compensatory afforestation is only a small portion in the long range efforts in the field of regeneration. It has been said that recognizing the aforesaid uniqueness while applying the principles of management is the heart of forest ma....
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....the Statutory Auditors to be taken from the panel of CAG. The internal audit shall be conducted every six months. The duty to preserve natural resources in pristine purity has been highlighted in M.C. Mehta v. Kamal Nath & Ors. [(1997) 1 SCC 388]. After considering the opinion of various renowned authors and decisions rendered by other countries as well on environment and ecology, this Court held that the notion that the public has a right to expect certain lands and natural areas to retain their natural characteristics is finding its way into the law of the land. The Court accepted the applicability of public trust doctrine and held that it was founded on the ideas that certain common properties such as rivers, sea-shore, forests and the air were held by the Government in trusteeship for the free and unimpeded use of the general public. These natural resources have a great importance to the people as a whole that it would wholly unjustified to make them subject to private ownership. These resources being a gift of nature, should be made freely available to everyone irrespective of the status in life. The doctrine enjoins upon the Government to protect the resources for the enjoym....
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....r which the Government has proprietary rights, or to the whole or any part of the forest produce of which the Government is entitled in a reserved forest in the manner provided in the Act. As provided in Section 5, no right can be acquired over the land in respect whereof notification has been issued under Section 4. In the manner provided in Section 11, the Forest Settlement Officer is empowered to acquire the land. Section 20 provides for declaration of reserved forest. No right in or over a reserved forest can be acquired, as provided in Section 23. Acts prohibited in respect of forests have been incorporated in Section 25. Section 29 deals with declaration of protect forest and Section 30 empowers the State Government to issue notification reserving trees etc. in a protected forest. The power of the State Government for protection of forest has been provided in Section 35. The power to impose duty on timber and other forest produce is contained in Section 39 of the Act. From the above, it can be seen that scheme of 1927 Act is a State management and regulation of the forest. On the assumption that local communities were incapable of scientific management of forest, the Britis....
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.... should govern the National Forest Policy are the following: -- Maintenance of environmental stability through preservation and, where necessary, restoration of the ecological balance that has been adversely disturbed by serious depletion of the forests of the country. -- Conserving the natural heritage of the country by preserving the remaining natural forests with the vast variety of flora and fauna, which represent the remarkable biological diversity and genetic resources of the country. -- Checking soil erosion and denudation in the catchment areas of rivers, lakes reservoirs in the interest of soil and water conservation, for mitigating floods and droughts and for the retardation of silation of reservoirs. -- Checking the extension of sand-dunes in the desert areas of Rajasthan and along the coastal tracts. -- Increasing substantially the forest/tree cover in the country through massive afforestation and social forestry programmes, especially on all denuded, degraded and unproductive lands. -- Meeting the requirements of fuelwood, fodder, minor forest produce and small timber of the rural and tribal populations. -- Increasing the productivity of forests to meet essentia....
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....-forest purpose should be subject to the most careful examinations by specialists from the standpoint of social and environmental costs and benefits. Construction of dams and reservoirs, mining and industrial development and expansion of agriculture should be consistent with the needs for conservation of trees and forests. Projects which involve such diversion should be least provide in their investment budget, funds for regeneration/ compensatory afforestation. 4.4.2. Beneficiaries who are allowed mining and quarrying in forest land and in land covered by trees should be required to repair and re-vegetate the area in accordance with established forestry practice. No mining lease should be granted to any party, private or public, without a proper mine management plan appraised from the environmental angle and enforced by adequate machinery. XXX XXX XXX 4.6 Having regard to the symbiotic relationship between the tribal people and forests, a primary task of all agencies responsible for forest management, including the forest development corporations should be to associate the tribal people closely in the protection, regeneration and development of forests as well as to provide gai....
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....uch forests will not, therefore, be made available to industries for undertaking plantation and for any other activities. -- Framers, particularly small and marginal farmers would be encouraged to grow, on marginal/degraded lands available with them, wood species required for industries. These may also be grown along with fuel and fodder species on community lands not required for pasture purposes, and by forest department/corporations on degraded forests, not earmarked for natural regeneration. -- The practice of supply of forest produce to industry at concessional prices should cease. Industry should be encouraged to use alternative law materials. Import of wood and wood products should be liberalized. -- The above considerations will, however, be subject to the current policy relating to land ceiling and land-laws. XXX XXX XXX 4.16. The objective of this revised Policy cannot be achieved without the investment of financial and other resources on a substantial scale. Such investment is indeed fully justified considering the contribution of forests in maintaining essential ecological processes and lifesupport systems and in preserving genetic diversity. Forest should not be l....
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....1995 published by Forest Survey of India when compared with the State of Forest Report 1997 also shows that there has been considerable depletion of forest cover. It also shows the limited regeneration. A comparison of the two reveals that total forest cover of the country decreased from 638,879 sq.km. to 633,397 sq.km., thus showing a net loss of 5,482 sq.km. Further it reveals that there has been a net decrease of 17,777 sq.km. of dense forest cover of the country while open forests and mangroves have increased by 12,001 sq.km. and 294 sq.km respectively. The redeeming feature, however, is an improvement which can be seen from the State of Forest Report 2001. Learned Amicus Curiae submits that improvement is a result of strict vigil on account of various orders passed by this Court from time to time. It cannot be doubted that it is necessary to continue the efforts for regeneration of forest. It would also be useful to make a mention of the order dated 22nd September, 2000 passed by this Court which led to grant of sanction of rupees 1,000 crores for maintenance of forest under the 12th Finance Commission (2005-2010). The said order took note of the fact that felling of the tree....
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....ld be over and above what the States have been spending through their forest departments. The amount was distributed among the States based on their forest area, to be spent for preservation of forest wealth. In this light, it is not open to the State Government to contend that the amount of NPV paid by the user agency shall be handed over to them. Reference may also be made to report of the Planning Commission (Chapter IX) relating to forest environments in Tenth Five Year Plan (2002- 2007) which has taken note of the fact that sustainability is not an option but imperative since without it environmental deterioration and economic decline will be feeding each other leading to poverty, pollution, poor health, political upheaval and unrest. Environment cuts across all sectors of development. The rapid increase in green house gases in the atmosphere, land degradation, deteriorating conditions of fragile eco systems, deforestation, loss of biodiversity and environmental pollution have become subjects of serious global concern. The overall impact of these phenomena is likely to result in depletion of ozone layer, change of climate, rise in sea-level loss of natural resources, reductio....
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....al development agenda must recognize the necessity of protecting the long-term ecological security. The problem area is the growing population, high degree of mechanism and steep rise in energy use which has led to activities that directly or indirectly affect the sustainability of the environment. It is recognized that the sustainable use of bio-diversity is fundamental to ecological sustainable. The loss of bio-diversity stems from destruction of the habitat, extension of agriculture, filling up of wet lands, conversion of rich bio-diversity sites for human settlement and industrial development, destruction of coastal areas and uncontrolled commercial exploitation. It is thus evident that the preservation of ecosystems, bio-diversity and environment whether examined on common law principle or statutory principle or constitutional principle eying from any angle it is clearly a national issue to be tackled at the national level. All initiatives are required to seriously pursue. Dealing with inter-generational justice, it has been rightly observed that posterity shall not be treated like dirt. In an article published in 2003 Columbia Journal of Environmental Law (28 Colum.J.Envtl.....
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....perts. Turning now to the grant of exemption to certain projects, learned Solicitor General submitted that Government hospitals, dispensaries, noncommercial government ventures like schools, rain water harvesting tanks, sever lines, village roads etc. are the projects meant for public welfare and have no adverse impact on environment as such and, therefore, these cases deserve to be granted exemption. Learned Amicus Curiae has no objection to non-commercial and non-revenue earning Government public welfare projects being treated differently and granted exemption from the purview of the payment of NPV. Submission was also made by learned counsel appearing for some of the parties that other projects like irrigation, hydro electricity or other similar projects engaged in public welfare and public utility activities too deserve to be similarly treated and granted exemption. On behalf of the National Hydro Project Corporation Ltd. (NHPC), it was submitted that dams/hydro electric projects and other similar projects are undertaken in public interest and these will also not create environmental pollution and mere fact of these are revenue earning projects should not be taken as a ground t....
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....nciples laid in this judgment and in receipt of the report from them, this Court would further examine the matter and issue appropriate directions. However, prima facie we feel that revenue earning projects do not deserve similar treatment as non-revenue earning public welfare projects. We are clear that if let loose, the benefits achieved as indicated in the State Forest Report of 2001 would be lost and we may be again where we were in 1990's or 1980's and earlier period during which there was immense depletion of forest and insignificant regeneration. The work of regeneration and also of compulsory afforestation requires special, specific and expert attention and we see no illegality in establishment of Special Purpose Vehicle (SPV) in terms of clause 6.6 above quoted except that for present till further orders it would be necessary to monitor the establishment of SPV. Thus, in respect of clause 6.6 in relation to establishment of SPV, we hold that before establishing SPV, its format shall be filed in Court and SPV shall not be established without permission of the Court. Further in our view the constitution of authority (CAMPA) is necessary to fully and effectively implement rec....