TaxTMI 
TaxTMI 
2024 (3) TMI 585
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....akra Beas Management Board & anr., S.J.V.N. Ltd., M/s Surya Kanta Hydro Energies Pvt. Ltd., M/s Himshakti Projects Pvt. Ltd., M/s Patikari Power Pvt. Ltd., M/s Gangdari Hydro Power Pvt. Ltd., M/s Greenko Astha Projects (India) Pvt. Ltd., M/s Greenko Tarela Power Pvt. Ltd., M/s. Technology House (India) Pvt. Ltd., M/s Greenko Tejassarnika Hydro Energies Pvt. Ltd. M/s. Greenko Sri Sai Krishna Hydro Power Energies Pvt. Ltd., M/s Greenko Sumez Hydro Energies Pvt. Ltd., M/s Greenko AT Hydro Pvt. Ltd., M/s Greenko Cimaron Constructions Pvt. Ltd., M/s Greenko Him Kailash Hydro Power Pvt. Ltd., M/s Greenko Anubhav Hydel Power Pvt. Ltd., JSW Hydro Energy Ltd & anr., Taranda Hydro Power Pvt. Ltd., Panchhor Hydro Power Pvt. Ltd. M/s Ramesh Hydro Power Pvt. Ltd., M/s. Kanchanjunga Power Company Pvt. Ltd., Tissa Hydro Power Pvt. Ltd., I.A. Hydro Energy Pvt. Ltd., Rajpur Hydro Power Plant Ltd., M/s Goodwill Energy Enterprises, Himachal Sorang Power Pvt. Ltd., M/s Greenko Budhil Hydro Power Pvt. Ltd. M/s Luni Power Company Pvt. Ltd., Punjab State Power Corporation Ltd., GMR Bajoli Holi Hydro Power Pvt. Ltd. & Anr., Prodigy Hydro Power Pvt. Ltd. Versus State of H.P. & ors. For the petitioner(s)....
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....r General of India and Mr. Rajinder Thakur, Central Government Counsel, for the respondent-Union of India. Mr. Anand Sharma, Senior Advocate with Mr. Karan Sharma, Advocate, for respondent No. 14 in CWP No. 2855 of 2023 and for respondent No. 6 in CWP No. 2869 of 2023. Ms. Sunita Sharma, Sr. Advocate, with Ms. Lalita Sharma, Advocate, for respondent No. 6 in CWP Nos. 2917 & 2918 of 2023 and for respondent No. 8 in CWP No. 2869 of 2023. Mr. Nitin Thakur, Advocate, for respondent No. 7 in CWP No. 2855 of 2023 and for respondents No. 11 to 13 in CWP No. 2869 of 2023. M/s Satish Mukherjee, Abhishek Kumar, Nived, Shubham Mudgil and Mr. Janesh Gupta, Advocates, for respondent No. 11 in CWP No. 2855 of 2023. Mr. Shivom Vashishta, Advocate, for respondent No. 14 in CWP No. 2855 of 2023 and respondent No. 6 in CWP No. 2869 of 2023. JUSTICE TARLOK SINGH CHAUHAN Since, somewhat identical issues of fact and law are involved in these batch of writ petitions, therefore, they have been decided by this common judgment. Case of the Petitioner(s): 1.1. The petitioners are power generation companies engaged in the production of the electricity by using river water. They own, operate and m....
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....ies, with the sanction of the Union Government and, therefore, any restriction imposed by the State Government in the usage of water flowing from the said rivers by way of seeking sanction for non-consumptive usage of river water and further by way of levy of cess on such non-consumptive use of inter-state river water for generation of electricity, is wholly illegal and invalid being beyond the legislative competence/power of the State Government. (vii) The Govt. of India, Ministry of Power taking note of the fact that some of the States have imposed taxes/duties on generation of electricity in the guise of water tax/cess, vide letter dated 25.04.2023 had called upon all the Chief Secretaries of the State Governments and Union Territories not to levy such tax/duty/cess being contrary to the constitutional provisions and the same be promptly withdrawn. (viii) Section 10 of the Act and Rule 7 of Himachal Pradesh Water Cess from Hydro Power Generation Rules, 2023 (for short "the Rules") have impact of taking away the rights that have been crystallized or vested on the petitioners. The impugned Act has a retrospective effect. Even though, the Legislature is entitled t....
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....ts of petitioners totally unviable. (xvii) The impugned Act is framed as taxing the drawl of water, whereas, in essence, it is taxing the generation of electricity which is impermissible in law. (xviii) The Act seeks to charge the water cess based the head of the turbine. Thus, the water cess sought to be charged is directly relatable to the head. The levy of cess under the Act is based on the premise of higher the head, the more will be electricity generated for the same value of the water used. Therefore, the impugned Act seeks to levy cess on the generation of the electricity/hydropower and not drawl of the water alone. (xix) There is no entry in List-II which empowers the State to levy a tax on the generation of the electricity and hence, impugned enactment is void ab initio. (xx) Tax is imposed on "user" who is the person, who draws the water for generation of the electricity. Therefore, taxable event is not mere drawl of water but the drawl of water for the generation of electricity. (xxi) The Act is unconstitutional since the charging section does not lay down any guidelines, limitations or safeguards. Therefore, such legislative ....
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....any law made by the Parliament for regulating or developing inter-State river or river valley as such it does not come under entry No. 56 of List-I, rather it is a cess on non-consumptive use of water meant for usage of water by the hydropower projects, which does not fall under article 288(1) of the Constitution of India and there is no violation of any provisions of The Rivers Boards Act, 1956 and the Inter-State River Water Disputes Act, 1956. 2.5. Cess has been levied by the Act for usage/drawn storage under entry No. 17 of List-II, i.e. for development, management, maintenance and conservation of water resources of the State by creating additional revenue sources on this account, as such directions, as contained in communication dated 25.4.2023 (supra), being not mandatory, are not required to be adopted by the State. 2.6. The Act has come into force w.e.f. 10.3.2023, whereunder existing and forthcoming hydropower projects/ registered users are liable to pay water cess under Section 10(1) and Section 10(2) of the Act for the water usage/water drawn w.e.f. 10.3.2023. Most of the projects have been commissioned since long back and debt servicing period of these projects ha....
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....s in entries-45 to 63. No taxes/duties which have not been specifically mentioned in this list can be levied by the State Governments under any guise whatsoever-as Residuary powers are with the Central Government. 3. That, Entry-53 of List-II (State List) authorizes the States to put taxes on consumption or sale of electricity in its jurisdiction. This does not include the power to impose any tax or duty on the generation of electricity. This is because electricity generated within the territory of one State may be consumed in other States and no State has the power to levy taxes/duties on residents of other States. 4. That State Legislature under the List II of the Seventh Schedule of The Constitution of India, does not have the Legislative power or the Constitutional mandate to make or promulgate any law pertaining to imposition of tax on the water drawn by any person much less for non-consumptive usage of water drawn for generation of electricity. 5. That Article 248 of The Constitution of India, 1950, states as under: "248. Residuary power of Legislation (1) Parliament has exclusive power to make any law with respect to any matter no....
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.... contemplates taxes on to the Union the sale or of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or Commerce. 10. That Entry 54 of List-II of Schedule-VII of The Constitution of India contemplates enacting a law by the State Government in regard to imposition of tax on sale or purchase of goods other than newspaper subject to Entry 92A of List-I, which entry in List 1 empowers solely the Union to make laws for levy of tax on Inter State Sale of Electricity. Additionally none of the above two entries in List II contemplate levy of Cess/ Tax on electricity generated. 11. That Articles-287 and 288 prohibit the imposition of taxes on consumption or sale of electricity consumed by the Central Government or sold to the Central Government for consumption by the Government or its agencies. As per Entry-56 of the Union List of the Constitution of India, regulations of issues related to Inter-State Rivers come under the purview of the Centre. Most of the Hydro-Electric Plants in the State are located/proposed to be developed on inter-State Rivers. Any imposition of tax on the non-consumptive use of water of these riv....
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....e between tax, fee and cess has been culled out. 5.3. During the course of the arguments, various constitutional provisions have also been referred to by the learned counsel for the petitioner, like Articles 245, 246, 248, 265, 286, Entry No. 42, 56, 84, 92A, 97 of List I, Entry 7, 17, 18, 45, 48,49, 53 of List II and entry No. 38 of List -III. 5.4. It is urged that Article 286 deals with supply of goods outside the State and as per the settled law 'electricity' is a 'good' and is normally supplied by the petitioners' projects outside the State. The word used in the article is 'supply of goods' and 'not generation of goods' and thus the State lacks competence to enact the law. Even under entry 56 of List-I, this power is exclusively vested with the Union of India and as per entry 84 only the goods manufactured can at best be taxed and even the Parliament cannot impose tax on 'generation of electricity'. 5.5. It is then argued that taking the case of the State at its best, that it was under the residuary powers that the tax has been imposed, even then such power is not vested with the State and rather is expressly and exclusively vested with the Union of India under entry 9....
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....ss on the use of water for generating electricity. However, though the State may call it a water cess, it is actually a tax on the generation of electricity the tax is to be collected from the consumers of electricity who may happen to be residents in other State. (iv) Article-286 of the Constitution explicitly prohibits States from imposing any taxes/duties on supply of goods or services or on both where the supply takes place outside the State. (v) Articles-287 and 288 prohibit the imposition of taxes on consumption or sale of electricity consumed by the Central Government or sold to the Central Government for consumption by the Government or its agencies. (vi) As per Entry-56 of the Union List of the Constitution of India, regulations of issues related to Inter-State Rivers come under the purview of the Centre. Most of the Hydro-Electric Plants in the States are located/ proposed to be developed on Inter-State Rivers. Any imposition of tax on the non-consumptive use of water of these rivers for electricity generation is in violation of provisions of the Constitution of India. (vii) Hydro Power Projects do not consume water to produce electrici....
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....sued by the Ministry of Power, Government of India (as extracted above). 7.2. In addition thereto, he would argue that the Seventh Schedule of the Constitution of India provides for the substantive Regulatory Law and the taxing power separately. Taxing power can otherwise not be inferred much less imposed by implication. In particular, he has invited the attention of the Court to entry No. 17 of list-II to urge that this entry only regulates the power of the State Government with respect to water and not to impose tax thereupon. Entry No. 17 cannot be read expansively so as to include power to impose tax. 7.3. He then invited our attention to entry No. 53 of the same list i.e., List No. II to contend that both the aforesaid entries i.e., entries No. 17 and 53 have to be read independently and an equitable construction is not permissible in a taxing statute. Moreover, the tax even otherwise can be imposed by the State Government within confines of the State. Even as per entry No. 53 of List -II "sale of electricity" as envisaged thereunder cannot mean and be construed as generation of electricity. Like sale of coal will not include generation of electricity out of the use of c....
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....r the petitioner(s) in CWP Nos. 2864/2023 and 3410/2023, apart from adopting the arguments of all the aforesaid learned counsel(s), would argue that his client i.e. Bhakhra Beas Management Board, is a creation of the statute after coming into force the Punjab Re-organization Act and has also preferred a representation against the impugned levy and till and so long the said representation is not decided, the State cannot levy any cess. Arguments of Mr. Anand Sharma, Senior Advocate: 10.1. Learned Senior Counsel for the petitioner urged to contend that the respondents had no power to impose cess on the project i.e. Shanan Power Project, as the same came into existence and is operating for nearly a century now. Arguments of Mr. K.D. Shreedhar and Mr. Rajnish Maniktala, Senior Advocates: 11.1. Learned Senior Counsels for the petitioners have fully supported the arguments of other learned Senior Counsels appearing for the petitioner(s) and have also addressed independent arguments assailing the competence of the State to enact the impugned Act. They have vehemently urged that the cess has not been imposed on the 'water drawn', but the same has been imposed on the 'generation....
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.... ground that the object of the Act is to conserve the water and its management as well as to generate revenue from alternate revenue resources as set out in the object of the Act. 15.2. He would contend that the petitioners are unnecessarily trying to confuse the issue by arguing that the cess has been imposed on generation of electricity and not the water drawn by their projects for non consumptive use of water. He has taken us through the provisions of the Act, more particularly, provisions those contained in Sections 2(c), 2(g), 2(h), 2(i), 2(j), 3, 5, 6, 7, 8, 10 and 12 thereof. He is at pains to argue that the petitioners are liable to pay cess on the 'water drawn' being its users. 15.3. Additionally, he would argue that the State Government has, in its reply, specifically clarified that it has imposed cess on 'water drawn' for 'use of hydropower generation'. The cess is levied under List-II of Seventh Schedule. It is the case of the State that entries No. 17 and 18 are general entries qua field of legislation of the Legislative Assembly of the State. Entries 45 to 50 provide for field of legislation for imposing cess/tax, whereas, entry No. 66 deals with fee. 15.4. T....
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....on record that the impugned Act is a valid piece of legislation, then all the other prayers whereby the petitioners have sought a declaration that the impugned Act is beyond the legislative competence of the State in terms of Articles 245 and 246 of the Constitution, would fall like a pack of cards. (4) The Act is neither retrospective nor retroactive and, therefore, the provisions of the Act have been made applicable to the existing projects sought to be declared unconstitutional, quashed and set aside, is clearly fallacious as the Act is prospective. (5) Under Articles 245 and 246 of the Constitution, in particular, sub Article (3) of Article 246, the State has exclusive power to frame laws as regards List II of the Seventh Schedule i.e. State List and such entry must receive the widest interpretation. The State not only enjoys the exclusive power but also ancillary power under Entry 17, List II, which deals with land and nowhere impinges upon or touches Entry 56 of List-I i.e. Union List, as the tax is confined, as it does not deal with inter-State regulations, and such Act is confined to Himachal Pradesh only. (6) The Parliament has not enacted any la....
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....he Entries, given the fact that the land cannot be interpreted in any narrow and pedantic sense. The impugned piece of legislation is referable to Entries 17, 18, 45, 49, 50 and 60 and does not suffer from any constitutional vice. (16) The petitioner in one of the cases i.e. NHPC made a profit of more than Rs. 3,000 crores and even other projects are earning hundreds of crores and, therefore, has no occasion to complain. (17) After the imposition of General Sales Tax (GST), the State must have complete power to augment its resources and generate its income and any narrow interpretation will hit at the federal structure. (18) The petitioners cannot complain that they will not participate in the progress of the State by making the State prosperous and will have to pay tax, which has been levied strictly in accordance with law. 16.2. Mr. Dave, in support of his contention, urged that the 'land' cannot be interpreted in a narrow and pedantic sense and referred to the following judgments of the Hon'ble Supreme Court:- 1. Navinchandra Mafatlal vs. The Commissioner of Income Tax, Bombay City, 1955 (1) SCR 829 2. The Calcutta Gas Company ....
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....43, 44, 63(1)(d)(e) and Section 103 of the H.P. Land Revenue Act. According to Mr. Dave, the cess is on water and generation of electricity is only a measure. 16.7. He further relied upon the judgment of the Hon'ble Supreme Court in State of W. B. vs. Kesoram Industries Ltd. & Ors. 2004 (10) SCC 201 to canvass that mere fact that the tax would be a burden on the consumer, is no ground to assail the same. 16.8. He would further argue that while interpreting the provisions of the Act, the federal structure is required to be borne in mind. The financial independence of a State is as important as its political independence or it will lose its independence. In support of such contention, reliance is placed on the judgment of the Hon'ble Supreme Court in Government (NCT of Delhi) vs. Union of India & Anr. 2018 (8) SCC 501. Discussions: 17. Before giving point-wise findings to the four questions raised in these petitions, the well settled proposition of interpretation of law which will be necessary while examining the statute needs to be noticed. Interpretation of Law: 18. A Constitution Bench of the Hon'ble Supreme Court in Navinchandra Mafatlal vs. The Commissi....
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....mpose a tax and select the articles, commodities for the exercise of such power and must likewise include the power to fix the rate and prescribe the machinery for the recovery of the tax. This power also gives jurisdiction to the legislature to make such provisions as, in its opinion, would be necessary to prevent the evasion of tax. Point No. 1: Nature and event of taxation under the impugned Act: 22. In order to appreciate the rival contentions, it would first be necessary to consider the nature and event of taxation under the impugned Act. 23. The Statement of Objects and Reasons read as under:- "STATEMENT OF OBJECTS AND REASONS Himachal Pradesh has been blessed with the immense water resources of five major rivers Satluj, Beas, Ravi, Chenab and Yamuna. These rivers are endowed with immense water flow throughout the year which is being used for generation of hydropower. Further, for proper water conservation and water management, the State is spending huge amount of money on environment and social impact mitigation. The developmental activities in the vicinity of hydropower projects are increasing livelihood of the concerned people. Considerable po....
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.... under: (c) "Hydropower" is to mean a renewable source of energy that generates power by using water drawn from any water source flowing within the territory of the State; (g) "User" is to mean any person, group of persons, local body, government department, company, corporation, society or anybody, by whichever name called drawing water from any source for generation of hydropower; (h) "Water" is to mean natural resource flowing in any river, stream, tributary, canal, nallah or any other natural course of water or stipulated upon the surface of any land like, pond, lagoon, swamp or spring; (i) "Water Cess" is to mean the rate levied or charged for water drawn for generation of hydropower and fixed under this Act; and; (j) "Water Source" is to mean a river and its tributaries, stream, nallah, canal, spring, pond, lake, water course or any other source from which water is drawn to generate hydropower. 26. Section 3 provides installation of scheme for usage of water and reads as under: "3. Installation of scheme for usage of water.-(1) No user shall draw water from any source for hydropower generation except in accordance with ....
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....t for measuring the water drawn for hydropower generation or may adopt any indirect method for assessment of water drawn by the user. (2) The expenditure incurred on such installation shall be payable by the user." 30. Chapter IV deals with "Water Cess" and Section 15 is the charging section which reads as under:- "15. Fixation of water cess.-(1) The user shall be liable to pay the water cess at such rates as the Government may, by notification fix in this behalf. (2) The State Government may review, increase, decrease or vary the rates of the water cess fixed under this section from time to time in the manner it deems fit." 31. The procedure for assessment has been provided in Section 17 which reads as under: "17. Procedure for assessment.-(1) The assessment of water drawn by the user for hydropower generation and computation of water cess thereof, shall be carried out by the Commission. (2) The user shall pay the water cess as assessed under sub-section (1) within such time as may be specified by the Commission. (3) If any user fails to pay water cess due on him, penalty shall be imposed on the user as determined by the ....
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.... the imposition of Water cess on all Hydro Power Projects in the State of Himachal Pradesh for use of water for power generation on the following rates:- Sr.No. Head Tariff 1. For Hydroelectric project with head upto 30 mtr Rs. 0.10/m3 2. For Hydroelectric project with head above 30 mtr and upto 60 mtr. Rs. 0.25/m3 3. For Hydroelectric project with head above 60 mtr to 90 m. Rs. 0.35/m3 4. For Hydroelectric project with head above 90 mtr Rs. 0.50/m3 This shall come into force with immediate effect. BY ORDER Amitabh Avasthi Secretary (JSV) to the Government of Himachal Pradesh." 40. It is clearly evident from the aforesaid Notification that the State Government has calibrated the cess keeping in view potentiality of the water i.e. the greater the height from which the water falls on the turbine, the greater the momentum resulting in electromagnetic field causing the generation of electricity. Therefore, it is not essentially the quantum of water but rather it is the head-height, which has been taken into consideration by the State while fixing the rate of levy. 41. In other words, the power to tax....
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....or assessing a tax must not be confused with the nature of the tax. A tax has two elements: first, the person, thing or activity on which the tax is imposed, and secondly, the amount of tax. The amount may be measured in many ways; but a distinction between the subject matter of a tax and the standard by which the amount of tax is measured must not be lost sight of. These are described respectively as the subject of a tax and the measure of a tax. It is true that the standard adopted as a measure of the levy may be indicative of the nature of the tax, but it does not necessarily determine it. The nature of the mechanism by which the tax is to be assessed is not decisive of the essential characteristic of the particular tax charged, though it may throw light on the general character of the tax. 38. In the Hingir-Rampur Coal Co. Ltd. v. State of Orissa, (1961) 2 (SCR) 537, the form in which the levy was imposed was held to be an impermissible test for defining in itself the character of the levy. It was argued that the method of determining the rate of levy was by reference to the minerals produced by the mines and, therefore, it was levy in the nature of a duty of excise. T....
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.... which list it would fall under and also to trace the State's competence to have promulgated the impugned Act arises. As per Article 265, no tax can be levied or collected except by authority of law. Competence of the State to promulgate the impugned Act whether can be traced to Entry 49 of List-II to the Seventh Schedule of the Constitution as contended by the State: 46. Entry 49 of List II (State List) provides for "Taxes on lands and buildings." 47. The State has relied on Anant Mills Co. Ltd. vs. State of Gurajat & others (1975) 2 SCC 175, in the said case the question was with regard to assessment of property tax of large premises like textile mills and factories. The property tax, in that context, comprised (a) water tax, (b) conservancy tax, and (c) a general tax. It was argued in that case that the State legislature has no competence under Entry 49 of List-II to enact a law for levying tax in respect of an area occupied by underground supply line. It was argued that the word land denotes the surface of land and not the underground strata. Rejecting the arguments, the Hon'ble Supreme Court observed that the word "land" includes not only the face of earth but....
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....iii Entry 23. Highways declared by or under law made by Parliament to be national highways. iv. Entry 24. Shipping and navigation on inland waterways, declared by Parliament by way to be national waterways, as regards mechanically propelled vessels; the rule of the road on such water ways. v. Entry 26. Lighthouses, including lightships, beacons and other provision for the safety of shipping and aircraft. vi. Entry 29. Airways; aircraft and air navigation; provision of aerodromes; regulation and organization of air traffic and of aerodromes; provision for aeronautical education and training and regulation of such education and training provided by States and other agencies. vii. Entry 53. Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable. viii. Entry 87. Estate duty in respect of property other than agricultural land. ix. Entry 88. Duties in respect of succession to property other than agricultural land. x. Entry 89. Terminal taxes on goods or passengers, carried by railway, sea or a....
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....preme Court in Ichchapur Industrial Coop. Society Ltd. vs. Competent Authority, Oil & Natural Gas Commission (1997) 2 SCC 42, to contend that water is a mineral, therefore, the rights in such mineral can be taxed by it. 57. Adverting to Ichchapur's case (supra), it needs to be noticed that Hon'ble Supreme Court clarified that the term "Minerals" was being interpreted for the purposes of Petroleum & Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 (User Rights Acquisition Act) only considering the definition of the terms under the Mines Act, 1952. Further, the Hon'ble Supreme Court held that the User Rights Acquisition Act utilizes the device "Legislation by reference or incorporation", whereby the definition of Minerals" under Mines Act, 1952 could be deemed to have been bodily lifted and incorporated in the later act i.e., User Rights Acquisition Act (supra). However, the same ratio cannot be applied to the instant cases to hold that there is legislation by reference or incorporation under List-II of the Constitution insofar as definition of the term "Minerals" contained under Mines Act, 1952 is concerned. The Mines Act, 1952 was promulgated subsequen....
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....evenue purposes and records of rights and alienation of revenues". 62. In order to support its contention that the State has competence to enact the impugned Act, strong reliance is placed on Entry 45 of List-II and also the judgment of the Hon'ble Supreme Court in R.S. Rekchand Mohota Spg. & Wvg. Mills Ltd. vs. State of Maharashtra (1997) 2 SCC 12. 63. Adverting to the facts of the aforesaid case, it was the Government of Maharashtra that had by way of resolution dated 05.06.1973 (Resolution) under Section 70 of the Maharashtra Land Revenue Code, 1966 (Code) imposed water cess on use of flowing water from River 'Wana' for non-agricultural purpose, specifically industrial purpose. 64. In order to better appreciate the aforesaid case vis-a-vis, the facts and the law involved in the instant case, it would be necessary to have a comparative analysis of the said case with the present case and the same is set out in a table below:- Code and Resolution Impugned Act and Notification A. Code A. The Impugned Act Section 70-Rates for use of water "The State Government may authorise the Collector or the Officer in charge of a survey or such other o....
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....ic Project with head above 30 mtr and upto 60 mtr Rs. 0.25/ m^3 3. Purpose for the Railways Rs. 12.50 -do- 3. For Hydroelectric Project with head above 60 mtr to upto 90 mtr Rs. 0.35/m^3 4. Domestic Use (i.e. for drinking water) Nil 4. For Hydroelectric Project with head above 90 mtr Rs. 0.50/m^3 65. Now, in case the aforesaid comparison is adverted to, it would be noticed that in Rekchand case (supra), the levy was imposed on drawl of flowing water by artificial contrivance for industrial purpose. The rates of such levy were specified under Resolution. It was on account of the definition of land under the Transfer of Property Act, 1882, which included right to water flowing therefrom, the said levy was sustained by the Hon'ble Supreme Court under Entry 45, List-II. 66. However, in the instant cases, the levy being imposed on electricity generation and supply, which are inextricable parts of the single event which is taxed under the Impugned Act i.e., "water drawn for hydropower generation", which the State is not competent to do. It appears that the very definition of "water source" has been altered to include generatio....
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....ther AIR 1958 SC 468, more particularly para 51 thereof, which reads as under:- "51. In List 1, Entries I to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of Entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. Thus, Entry 22 in List I is " Railways ", and Entry 89 is " Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights ". If Entry 22 is to be construed as involving taxes to be imposed, then Entry 89 would be superfluous. Entry 41 mentions "Trade and commerce with foreign countries; import and export across customs frontiers ". If these expressions are to be interpreted as including duties to be levied in respect of that trade and commerce, then Entry 83 which is " Duties of customs including export duties " would be wholly redundant. Entries 43 and 44 relate to incorporation, regulation and winding up of corporations. Entry 85 provides separately for Corporation tax. Tur....
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....icult to comprehend the submission that there can be intrusion by a law made by Parliament under Entry 33 of List III into a forbidden field viz. the State s exclusive power to make a law with respect to the levy and imposition of a tax on sale or purchase of goods relatable to Entry 54 of List II of the Seventh Schedule. It follows that the two laws viz. sub-s. (3) of s. 5 of the Act and paragraph 21 of the Control order issued by the Central Government under sub-s. (1) of s. 3 of the Essential Commodities Act, operate on two separate and distinct fields and both are capable of being obeyed. There is no question of any clash between the two laws and the question of repugnancy does not come into play." 73. In view of the above, considering the charging section, taxable event and nature of levying under the impugned Act as well as subjecting the impugned Act to the test of "pith and substance", it is absolutely clear that the impugned Act imposes tax on generation of electricity and not merely on water as a subject or on drawl of water, which the State is not competent to do. It also imposes an inter-State tax on inter-State supply of electricity for which again the State is not ....
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....part of land. Even the principle of leaning in favour of constitutionality of a provision will not be applicable as there is patent lack of legislative competence. 79. The reliance of the State on the judgment of the Hon'ble Supreme Court in State of West Bengal vs. Kesoram Industries (2004) 10 SCC 201 is entirely misplaced as the said judgment by Hon'ble five-Judge Constitution Bench, to the extent relied upon by the State, has not attained finality, and has been referred to a Constitution Bench of Nine Hon'ble Judges of the Supreme Court. 80. Thus, once it is held that the cess sought to be imposed by the impugned Act is not on the "water drawn" but on the "generation of electricity", then, it is the Central Government alone which could levy tax on generation electricity. 81. In coming to such conclusion, we are duly supported by the judgment of the Hon'ble Supreme Court in M.P. Cement Manufacturer's case (supra), wherein the Hon'ble Supreme Court was examining Entry 84 of List I and Entry 53 of List II of the Seventh Schedule in the following manner:- "9. The two competing entries in the Seventh Schedule to the Constitution are Entry 84 of List-I and Entry ....
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....ion as held by the Hon'ble Supreme Court in The Corporation of Calcutta and another vs. Liberty Cinema AIR 1965 SC 1107, more particularly, paras 21 to 26, which read as under:- "21. It was then said that if S. 548 authorised the levy of a tax as distinct from a fee in return for services rendered, it was invalid as it amounted to an illegal delegation of legislative functions to the Corporation because it left it entirely to the latter to fix the amount of the tax and provided no guidance for that purpose. We wish to point out here that the contention now is that the section is invalid while the contention that we have just dealt with proceeded on the basis that the section was valid as it provided for the levy of a fee in return for services and as this necessarily implied a limit of the levy, namely, that it had to be commensurate to the amount of the costs of the services, no guidance for 491 fixing the amount of the fee to be levied was required to be provided. That argument only challenged the resolution on the ground that it fixed the amount of the fee at a figure much in excess of the costs for the services rendered. 22. Here again there is no dispute ....
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....the Court sitting in a Constitution Bench, rejected this contention and after having read what we have earlier set out from the judgment of Bose J. in Rajnarain Singh's case([1955] 1 S. C. R. 290.), observed at p. 435: "On these observations, the point for determination is whether the impugned notification relates to what may be said to be an essential feature of the law, and whether it involves any change of policy. Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like." The Act was a statute imposing taxes for revenue purposes. This case would appear to be express authority for the proposition that fixation of rates of taxes may be legitimately left by a statute to a non-legislative authority, for we see no distinction in principle between delegation of power to fix rates simpliciter; if power to fix rates in some cases can be delegated then equally the power to fix rates generally ca....
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....etermine at what rate he will have to pay the tax has to be upheld. The last case was Hampton Jr. & Co. v. United States([1927] 72 L. ed. 624. 494), in which the power conferred by a statute on the President to make an increase or decrease in the rate of customs duty was upheld. There it was said at p. 630, "It is conceded by counsel that Congress may use executive officers in the application and enforcement of a policy declared in law by Congress and authorise such officers in the application of the Congressional declaration to enforce it by regulation equivalent to law. But it is said that this never has been permitted to be done where Congress has exercised the power to levy taxes and fix customs duties. The authorities make no such distinction. The same principle that permits Congress to exercise its rate making power in interstate commerce by declaring the rule which shall prevail in the legislative fixing of rates, and enables it to remit to a rate making body created in accordance with its provisions the fixing of such rates, justifies a similar provision for the fixing of customs duties on imported merchandise." This therefore is clear authority that the fixing of ....
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.... said power may be exercised not only in the name of the people but also by the people speaking through their representatives. The rule against excessive delegation of legislative authority flows from and is a necessary postulate of the sovereignty of the people. The rule contemplates that it is not permissible to substitute in the matter of legislative policy the views of individual officers or other authorities, however competent they may be, for that of the popular 'will as expressed by the representatives of the people. As observed on page 224 of Vol. 1 in Cooley's Constitutional Limitations, 8th Ed. "One of the settled maxims in constitutional law is, that the power conferred upon the legislature to make laws cannot be delegated by that department to any other body or authority. Where the sovereign power of the State has located the authority, there it must remain; and by the constitutional agency done the laws must be Made until the constitution Itself is changed. The power to whose judgment, wisdom and patriotism this high prerogative has been entrusted cannot relieve itself of the responsibility by choosing other agencies upon which the power shalt be devot....
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....State Government issued a Notification dated 26.08.2023 (supra), whereby the tariff structure on water cess was fixed on the basis of "Head". However, even the said notification failed to prescribe the measure of tax and instead proceeded to prescribe tariff rate without any indication or measure on which such tariff rate will be applied. Moreover, measure of tax being vague, based upon the "assessment" or water drawn, which would form the basis of the tax imposed is also vague and fraught with lack of adequate guidelines, as is evident from the combined reading of Section 12 with Section 17 of the impugned Legislation (supra). 91. That apart, even the Statement of Objects and Reasons as well as the preamble of the impugned Act does not lend any guidance for the delegate. The preamble of the impugned Act merely states that it is an act to levy water cess on hydropower generation in the State of Himachal Pradesh, the Statement of Objects and reasons merely states that the objective of the impugned Act is revenue generation. Therefore, on account of having delegated power to fix rates of impugned levy to Government of Himachal Pradesh without any legislative policy or guidance, th....