JUDGMENT
Per: Hon'ble Ravindra Maithani, J.
The constitutional validity of the Uttarakhand Water Tax on Electricity Generation Act, 2012 ("the Act") is under challenge in all these matters. Except Writ Petition (M/S) No. 1739 of 2021, Renew Jal Urja Private Limited v. State of Uttarakhand and others, all the special appeals arise from a common judgment and order dated 12.02.2021, passed by the learned Single Judge, in the writ petitions filed by the appellants [except appellant in SPA No. 367 of 2021 i.e. the Uttar Pradesh Power Corporation Limited; this entity was respondent no. 7 in WP (M/S) No. 123 of 2017] challenging the validity of the Act. By the impugned judgment and order dated 12.02.2021, the learned Single Judge has upheld the constitutionality of the Act.
FACTS
2. The appellants/petitioner ("hereinafter referred to as "the appellants")are power generating companies engaged in the production of electricity by using the river water. They own, operate and maintain these hydropower projects. These appellants entered into agreements with the Government of Uttarakhand on various dates. The projects are running successfully. By the Act, tax has been imposed on "drawal of water for electricity generation". In order to better appreciate the case, the relevant details of each project are given as hereunder:-
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(i) SPA No. 149 of 2021, THDC India Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 187 of
2016):
(a) Name of the project: Tehri Dam & Hydroelectric Project (Tehri Dam Project); Koteshwar Hydroelectric
Project (KHEP) and other projects
(b) The river/source at which the said power project is constructed: Bhagirathi River
(c) Capacity :
Tehri Dam Project: 1000 MW Tehri PSP: 1000MW
KHEP: 400.MW
(d) Date of Restated Implementation Agreement: No IA or RIA
(e) Year of commencement of the Power Project:
(i) Tehri Dam Project - 2006
(ii) KHEP - 2011
(ii) SPA No. 131 of 2021, M/s National Hydro Power Corporation v. State of Uttarakhand and others (arises out of WPMS No. 272 of 2016):
(a) Name of the project: Dhauliganga Hydropower Project &Tanakpur Hydro Power Project
(b) The river/source at which the said power project is constructed: Dhauliganga/Sharda River
(c) Capacity :
Tanakpur Hydro Power Project: 120 MW Dhauliganga Hydropower Project: 280 MW
(d) Date of Power Purchase Agreement: 30.04.2014
(e) Year of commencement of the Power Project: 2005
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(iii) SPA No. 134 of 2021, M/s Jaiprakash Power Venture Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 123 of 2017):
(a) Name of the project: Vishnuprayag Hydroelectric Project
(b) The river/source at which the said power project is constructed: Alaknanda River
(c) Capacity : 400 MW
(d) Date of Implementation Agreement: 22.03.2003
(e) Year of commencement of the Power Project: 2006
(iv) SPA No. 136 of 2021, Alaknanda Hydro Power Co. Ltd.
v. State of Uttarakhand and others (arises out of WPMS No. 1500 of 2016):
(a) Name of the project: Srinagar Hydroelectric Project
(b) The river/source at which the said power project is constructed: Alaknanda River
(c) Capacity : 330 MW
(d) Date of Implementation Agreement: 19.08.1998
(e) Date of Restated Implementation Agreement: 10.02.2006
(f) Year of commencement of the Power Project: 2015
(v) SPA No. 137 of 2021, Alaknanda Hydro Power Co. Ltd.
v. State of Uttarakhand and others (arises out of WPMS No. 279 of 2020):
(a) Name of the project: Srinagar Hydroelectric Project
(b) The river/source at which the said power project is constructed: Alaknanda River
(c) Capacity : 330 MW
(d) Date of implementation Agreement : 28.08.1998
(e) Date of Restated Implementation Agreement: 10.02.2006
(f) Year of commencement of the Power Project: 2015
(vi) SPA No. 139 of 2021, M/s Swasti Power Pvt. Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 641 of 2017):
(a) Name of the project: Bhilangana Hydro Power Project
(b) The river/source at which the
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said power project is constructed: Bhilangana River
(c) Capacity : 22.5 MW
(d) Date of Implementation Agreement: 16.10.2003
(e) Year of commencement of the Power Project: 2009
(vii) SPA No. 140 of 2021, Alaknanda Hydro Power Company Ltd. (AHPCL) v. State of Uttarakhand and others(arises out of WPMS No. 631 of 2017):
(a) Name of the project: Srinagar Hydro Electric Project.
(b) The river/source at which the said power project is constructed: Alaknanda River
(c) Capacity : 330 MW
(d) Initial implementation (IA) agreement entered between Duncans North Hydro Power Company Limited (Duncans) (Now known as Alaknanda Hydro Power Company Ltd.) on: 28.09.1998
(e) Date of Restated Implementation Agreement (RIA) between AHPCL, Govt. of UP and Uttarakhand: 10.02.2006
(f) Year of commencement of the Power Project: 2015
(viii) SPA No. 141 of 2021, M/s Alaknanda Hydro Power Co. Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 2396 of 2019):
(f) Name of the project: Srinagar Hydroelectric Project
(a) The river/source at which the said power project is constructed: Alaknanda River
(b) Capacity : 330 MW
(c) Date of Implementation Agreement: 19.08.1998
(d) Date of Restated Implementation Agreement: 10.02.2006
(e) Year of commencement of the Power Project: 2015
(ix) SPA No. 142 of 2021, M/s Swasti Power Pvt. Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 2074 of 2016):
(a) Name of the project: Bhilangana Hydro Power Project
(b) The river/source at which the
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said power project is constructed: Bhilangana River
(c) Capacity : 22.5 MW
(d) Date of Implementation Agreement: 16.10.2003
(e) Year of commencement of the Power Project: 2009
(x) SPA No. 143 of 2021, Alaknanda Hydro Power Co. Ltd.
v. State of Uttarakhand and others (arises out of WPMS No. 3603 of 2019):
(a) Name of the project: Srinagar Hydroelectric Project
(b) The river/source at which the said power project is constructed: Alaknanda River
(c) Capacity : 330 MW
(d) Date of Implementation Agreement: 19.08.1998
(e) Date of Restated Implementation Agreement: 10.02.2006
(f) Year of commencement of the Power Project: 2015
(xi) SPA No. 363 of 2021, M/s Bhilangana Hydro Power Ltd.
v. State of Uttarakhand and others (arises out of WPMS No. 3084 of 2016):
(a) Name of the project: Bhilangana Hydro Power Project
(b) The river/source at which the said power project is constructed: Bhilangana River
(c) Capacity : 24 MW
(d) Date of Implementation Agreement: 25.01.2007
(e) Year of commencement of the Power Project: 2011
(xii) SPA No. 367 of 2021,Uttar Pradesh Power Corporation Limited v. State of Uttarakhand and others (arises out of WPMS No. 123 of 2017):
(a) Name of the project: Vishnuprayag Hydroelectric Project
(b) The river/source at which the said power project is constructed: AlaknandaRiver
(c) Capacity : 400 MW
(d) Date of Restated Implementation Agreement: 22.03.2003
(e) Year of commencement of the Power Project: 2006
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(xiii) WPMS No. 1739 of 2021, Renew Jal Urja Private Limited v. State of Uttarakhand and others :
(a) Name of the project: Singoli Bhatwari Hydro Power Project
(b) The river/source at which the said power project is constructed: Mandakini River
(c) Capacity : 99 MW
(d) Date of Implementation Agreement: 26.11.2009
(e) Year of commencement of the Power Project: 2020
3. The grounds on which the constitutional validity of the Act has been challenged, are enumerated in para three of the impugned judgment as follows:-
"(i) The enactment, promulgation and notification of the said Act being in violation of the provisions of Articles 200, 246, 248, 256, 285, 288(2) and 300A of the Constitution of India.
(ii) The enactment, promulgation and notification of the said Act being in violation of the provision of Entry 97 of List I of the Seventh Schedule of the Constitution of India.
(iii) The enactment, promulgation and notification of the said Act being in violation of the provisions of Entry 17 of List II of the Seventh Schedule of the Constitution of India.
(iv) The consideration of and the assent given for the enactment and the notification of the said Act being in violation of Article 200 and 288(2) of the Constitution of India having been accorded the consent by the Governor of the State of Uttarakhand, without obtaining the consent of the President of India.
(v) The fixation of the rates of water tax in terms of the provisions of Chapter 5 of the said Act by means of a notification issued by respondent no. 1 to 5 being in violation of Article 288(2) of the Constitution of India as that the said Act was promulgated without obtaining consent from the President of India, in violation of mandatory provisions under the Article 288(2) of the Constitution of India, wherein it is obligatory on part of the State Legislature, in case of fixation of any rates and other incidents of such tax by means of rules or orders to be made under the law by any authority, the law shall provide for the previous consent of the President being obtained
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to the making of any such rule or order. The rates of Water Tax having not received the previous consent of the President.
(vi) The enactment, promulgation and notification of the said Act imposing Water Tax violating the fundamental rights of the petitioner of carry on its trade and business under Article 19(1)(g) of the Constitution of India.
(vii) The enactment, promulgation and notification of the said Act, being arbitrary, manifesting arbitrariness in State action and being exercise of the colourable powers of the respondent State of Uttarakhand, thus violating the fundamental rights of the petitioner under Articles 14 and 19(1)(g) of the Constitution of India."
4. In Writ Petition (M/S) No. 1739 of 2021, the challenge to the Act is made, inter alia, on the following grounds:
(i) That the Act is ultra vires to Article 14, 19(1)(g), 246, 248, 265 and 300A of the Constitution.
(ii) The State legislature lacks competence to legislate the Act.
(iii) There is no taxing Entry in the State List, which may allow the State Legislature to levy the water tax on electricity generation.
(iv) The field of legislation is available to the Parliament under Entry ("E") 97, List ("L") I of the VIIthSchedule ("S") of the Constitution.
(v) The Act could not have been enacted under E 17, L II of S VII, which is a general entry and not a taxing entry.
(vi) Power to tax cannot be derived from a general legislative entry.
(vii) The tax in question cannot derive its competence from E 48 and E 49 of L II, which relate to land. Such tax can be imposed on the twin test, namely, (i) that such tax is directly imposed on lands and buildings and (ii) that it bears a definite relation to it.
(viii) In the instant case, the tax in question is not directly imposed on the land, hence, the Act could not be enacted under E 48 and 49 of L II.
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(ix) The State Legislature is also not competent to legislate the Act under E 45, L II. It only relates to land revenue i.e. a share of the sovereign from the produce of the land.
(x) The imposition of tax by the State Government is violative of Article 300A of the Constitution.
(xi) The Act levies tax on generation of electricity which is merely named as water tax. The State Legislature is not competent to enact on the subject. It falls within the Union List.
5. The Union of India has filed counter affidavit in SPA No. 149 of 2021 and has questioned the competence of State Legislature in enacting the Act. A few paragraphs of the counter affidavit need reproduction. They are as follows:-
"4. That the powers to levy taxes/duties are specifically stated in the VII Schedule. List- II of the VII Schedule lists the powers of levying of taxes/duties by the States 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.
5. 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 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.
6. 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 not enumerated in the Concurrent List of State List.
(2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists."
A reading of the above Article manifests, that the Constitution of India envisaged that in respect of any matter which is not enumerated in the State List, the Parliament has the exclusive
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power to make any laws in respect of the said matter. The same includes the power of imposing a tax not mentioned in the State List or in the concurrent List. This ground is further cemented by the provisions of entry 97 List I (Union List) Schedule VII - "Any other matter not enumerated in List II or List III including any tax not mentioned either of those Lists).
7. That no item provided either in the State List or the Concurrent List, is pertaining to taxation or taxes on usage of water or otherwise, therefore the State Government of Uttarakhand does not have the Legislative competence or mandate to make or frame any laws pertaining to imposition of taxes on the water drawn for the purposes of generation of electricity in the State of Uttarakhand. Hence the provisions of Chapters 3 to 5 seeking to levy and impose Water Tax on generation of electricity are unconstitutional. Hence enactment of the said Act and its consequent promulgation and notification is contrary to the provisions of Article 245, 246 and 286 of the Constitution of India, besides other Articles of the Constitution of India mentioned first hereinabove.
8. That the State of Uttarakhand has imposed taxes/duties on generation of electricity under the guise of levying a cess on the use of water for generating electricity. However, though the State may call it a water Tax/cess, it is actually a tax on the generation of electricity - the tax is to be collected ultimately from the consumers of electricity who may happen to be residents in other State.
15. That Hydro Power Projects do not consume water to produce electricity. Electricity is generated by directing the flow of water through a turbine which generates electricity - on the same principle as electricity from wind projects where wind is utilized to turn the turbine to produce electricity. Therefore, there is no rationale for levy of 'water cess' or "air cess".
22. That Ld. Single bench failed to appreciate that the Height of the Head is directly proportional to the number of units of Electricity generated, since higher the Head, more the units of Electricity generated. If that be so, the tax levied by the State, in PITH & SUBSTANCE, is a tax on Generation of Electricity and not on Use of Water as sought to be made out. Hence, it is clearly beyond the legislative competence of the State.
23. That Ld. Single bench failed to appreciate that even though the nomenclature used to name a levy is not determinative of the real character or nature of the levy, going by the above, the present, in pith and substance, is clearly a
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tax on generation of electricity, even though it is called a tax on use of water, in the absence of any other indicator, confines within the measure of tax and determine the nature of the tax itself. Thus, the levy under the Act is on non-consumptive use of water for the purpose of generation of electricity. In other words, Entry 45 of List II pertains to land revenue and Entry 49 pertains to tax on land and buildings and both cannot be used for the purpose of deriving legitimacy by the State to impose a tax on non-consumptive use of water."
6. In order to systematic understanding of the arguments and deliberations, this Court is going to formulate questions that arise in these matters and thereafter deliberate and decide them. Arguments have been made by many counsel1appeared for the parties. Many of the arguments, despite being careful, were overlapping and repetitive, in essence. Therefore, this Court instead of indicating separate arguments advanced by each of the counsel, proposes to collate the arguments under various heads and discuss them at appropriate place.
KEY CHALLENGES
7. The Act has been challenged on various grounds. The main grounds for challenge are as follows:-
(i) The central theme of the Act is that the tax is levied on generation of electricity. It is on electricity generation. It is not a water tax.
(ii) The State Legislature is not competent to legislate the Act.
(iii) In the Act, there is no taxing provision. Tax has been imposed by a notification dated 07.11.2015 by the Secretary to the Government of Uttarakhand. It is an executive act. It is not a tax levied by a statute. The act of levying of tax is an excessive delegation by the
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State Legislature. The principle of promissory estoppel would apply in the instant case, therefore, the State would be stopped to charge such a tax.
CONSTITUTIONAL PROVISIONS
8. During the course of arguments, various constitutional provisions have been referred to by the learned counsel for the parties. Some of the provisions may be quoted at this stage so as to better appreciate the arguments. Part XI of the Constitution deals with relations between the Union and the States. Chapter I of it is with regard to legislative relations. The power of legislation has been given mainly under Article 245 and 246 of the Constitution. They read as follows:-
"245. Extent of laws made by Parliament and by the Legislatures of States.—(1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State.
(2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation."
"246. Subject-matter of laws made by Parliament and by the Legislatures of States.—(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the
"Union List").
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the "Concurrent List").
(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part
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thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the
"State List").
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List."
9. Reference has also been made to Articles 246A, 248, 265 and 366 (28) of the Constitution. They read as follows:-
"246A. Special provision with respect to goods and services tax.—(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.
Explanation.—The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council."
"248. Residuary powers of legislation.—(1) Subject to article 246A, Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List.
(2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists."
"265. Taxes not to be imposed save by authority of law.—No tax shall be levied or collected except by authority of law."
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"366. Definitions.—In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say- …………………………………………………………………………………
…………………………………………………………………………………
………………………………………………………………………………..
(28) "taxation" includes the imposition of any tax or impost, whether general or local or special, and "tax" shall be construed accordingly;"
10. Article 246 of the Constitution confers the competence on the Parliament and the State Legislatures to make laws. The fields on which the Parliament and the State Legislatures may enact laws have been separately given under the three Lists given in VIIthSchedule. The VIIthSchedule of the Constitution defines the field of legislation. Various entries of List I and List II of VIIthSchedule have been referred to during the course of arguments. A few of them needs mention at this stage.
"Seventh Schedule
List I - Union List Entry 56 : Regulation and development of inter-State rivers and river valleys to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest.
Entry 97: Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.
Seventh Schedule
List II - State List Entry 17 : Water, that is to say, water supplies, irrigation and canals, drainage and embankments, water
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storage and water power subject to the provisions of entry 56 of List I.
Entry 18: Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization.
Entry 45: Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues.
Entry 49: Taxes on lands and buildings.
Entry 50: Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.
Entry 53: Taxes on the consumption or sale of electricity. Entry 66: Fees in respect of any of the matters in this List, but not including fees taken in any court."
11. The instant matter requires interpretation of constitutional provisions and scope of various entries of the VIIthSchedule. Therefore, on behalf of both the parties, reference has been made to the principles governing the interpretation of the Constitution. It would be apt to begin with the arguments made on interpretation of the Constitution.
INTERPRETATION OF THE CONSTITUTION
12. Learned counsel appearing for the appellants would submit that in order to enable the State Legislature to levy any tax, the field of legislation should be explicitly defined in view of Articles 246 & 248(2) of the Constitution. The taxing entry should be distinct. Learned counsel would also raise the following points on this aspect:-
(i) Initially, State took shelter under E 17 L II of S VII as a source of legislation, but it has further been expanded and
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now support of E 45, 49, 50, L II of S VII have been collectively taken by the State as a source for enacting the Act.
(ii) While examining the validity of enactment, verbal Gymnastics should be avoided.
(iii) The field of Legislation is given under S VII in three lists. The entries in these lists are under two categories - (i) General Entries and (ii) Taxing Entries.
(iv) In S VII, L 1 of the Constitution of India, E 1 to 81 are General Entries whereas E 82 to 92 are Taxing Entries. Similarly, in L II of S VII, E 1 to 44 are General Entries and E 45 to 66 are Taxing Entries.
(v) E 17 L II of S VII is not a taxing entry. It is a regulatory entry, which is subject to the provision of E 56 of L I.
(vi) Even if the Governor accords its assent, it cannot validate any enactment unless State has legislative competence to enact such law.
(vii) Article 265 of the Constitution categorically mandates that no tax shall be levied or collected except by the authority of law. In the instant case, State had no authority for enacting the Act.
(viii) In case there is no distinct and explicit taxing Entry, the residuary power of legislation lies with the Union in view of E 97 L I of S VII.
(ix) The Constitution has opted to treat water as separate from land, minerals, even forests therefore, by way of interpretation, we cannot read into an entry, which is not clearly provided.
(x) It is not permissible for the courts to nullify, destroy or distort the reasonably clear meaning of any part of the Constitution. There is no room for pedantic hair-splitting in the selection of words.
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13. In support of his contention, on behalf of the appellants, reliance has been placed on the principle of law as laid down in the cases of M.P.V. Sundaramier2, Hoechst Pharmaceuticals Ltd.3, Kesoram Industries4, Jalkal Vibhag5, Godfrey Philips India Ltd.6, M.P. Cement Manufacturers' Association7, India Cement Ltd.8, Kartar Singh9, Harbhajan Singh Dhillon10, Rajendra Diwan11, State of Karnataka12, Association of Natural Gas13and State of Meghalaya14.
14. On the other hand, learned Counsel appearing for the State of Uttarakhand would submit that while interpreting a statute, there shall be presumption of validity of a statute made by the State Legislature. The Courts will presume every state of affairs that help in sustaining the statute. He would submit the following points on this aspect:-
(i) No provision of the constitutional statute should be read in isolation. It has to be construed as a whole with each part throwing light on the meaning of the other. The literal or textual interpretation has to give way to liberal, purposive, pragmatic and value oriented contextual interpretation.
(ii) A liberal construction should be put upon the statutory provision so as to uphold them.
(iii) A statute is designed to be workable and the interpretation should be so made so as to secure the
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object. It should not be so interpreted so as to nullify other provisions.
(iv) Words used in the Constitution that confer legislative power must receive most liberal construction and if they are words of wide amplitude, they must be interpreted widely.
(v) Parliamentary legislation has supremacy under Article 246(1) and (2). While maintaining such supremacy, the federalistic feature has to be respected. The power of the State in the matter of legislation cannot be whittled down.
(vi) Our Constitution is federal and therefore an interpretation that preserves and promotes the federal structure rather than diluting it, should be adopted.
(vii) In order to interpret the Constitution, keeping in view its volume, one method that may be adopted would be to use the Constitution as composed of constitutional topographical space. Within such topographical space, it may be expected that each provision is intimately related to, assigning meaning from and transforming the meaning of other provisions of that topographical space.
15. In support of his contentions, learned Counsel has placed reliance on the principle of law as laid down in the cases of Bihar Distillery Ltd.15; East India Cotton Mfg. Co. Ltd.16; New Delhi
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Municipal Committee17; State of Karnataka18; Deepal Girishbhai Soni19; State (NCT of Delhi)20; Hindustan Bulk Carriers21; GVK Industries Ltd.22; Indian Aluminium Co.23; ITC Ltd.24; Kesoram Industries25, Ahmedabad Municipal Corporation26; Jindal Stainless Limited27and M. Hakeem28.
16. The Constitution of any nation reflects the expression of the masses in general. The Indian Constitution is not an exception to it. It is a product of long drawn freedom struggle. It is a result of politics. Not politics of power, but perhaps politics of participation of each individual in the nation building. It is a document for creation of the future of the nation. It is a document so sacrosanct so as to ensure governance of a nation. It is supreme law. Statutes are different than the constitutional law. Statutes are made by the organ created by the Constitution. Each and every statute must be in conformity with the Constitution, which is the highest law.
17. Insofar as the Indian Constitution is concerned, a heterogeneous society was to be woven with a common thread. Diversities were immense. Geographical and demographic set ups were different in abundance. The Preamble of the Constitution sets out the task ahead. Justice, liberty and freedom were to be ensured. The question is - should the Constitution be interpreted keeping in view the thought process of its maker?
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18. In the case of Supreme Court Advocates on Record Association29, the Hon'ble Supreme Court observed that the Constitution should not be confined only to the interpretation which the framers, with the conditions and outlook of their time would have placed upon them. In paras 16 and 17, the Hon'ble Supreme Court observed as hereunder:-
"16. The proposition that the provisions of the Constitution must be confined only to the interpretation which the Framers, with the conditions and outlook of their time would have placed upon them is not acceptable and is liable to be rejected for more than one reason — firstly, some of the current issues could not have been foreseen; secondly, others would not have been discussed and thirdly, still others may be left over as controversial issues, i.e. termed as deferred issues with conflicting intentions. Beyond these reasons, it is not easy or possible to decipher as to what were the factors that influenced the mind of the Framers at the time of framing the Constitution when it is juxtaposed to the present time. The inevitable truth is that law is not static and immutable but ever increasingly dynamic and grows with the ongoing passage of time.
17. So it falls upon the superior courts in a large measure the responsibility of exploring the ability and potential capacity of the Constitution with a proper diagnostic insight of a new legal concept and making this flexible instrument serve the needs of the people of this great nation without sacrificing its essential features and basic principles which lie at the root of Indian democracy. However, in this process, our main objective should be to make the Constitution quite understandable by stripping away the mystique and enigma that permeates and surrounds it and by clearly focussing on the reality of the working of the constitutional system and scheme so as to make the justice delivery system more effective and resilient. Although frequent overruling of decisions will make the law uncertain and later decisions unpredictable and this Court would not normally like to reopen the issues which are concluded, it is by now well settled by a line of judicial pronouncements that it is emphatically the province and essential duty of the superior courts to reew or reconsider their earlier decisions, if so warranted under compelling circumstances and even to overrule any questionable decision, either fully or partly, if it had been erroneously held and that no decision enjoys absolute immunity from judicial review or reconsideration on a fresh outlook of the constitutional or legal interpretation and in the light of the development of innovative ideas, principles and perception grown
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along with the passage of time. This power squarely and directly falls within the rubric of judicial review or reconsideration."
19. The Constitution is an organic document. It has to serve the society for eternity. The limit and scope of the Constitution has been interpreted in the case of Burah30, the Hon'ble High Court had observed that "The established Courts of Justice, when a question arises whether the prescribed limits have been exceeded, must of necessity determine that question; and the only way in which they can properly do so, is by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted. If what has been done is legislation within the general scope of the affirmative words which give the power, and if it violates no express condition or restriction by which that power is limited (in which category would, of course, be included any Act of the Imperial Parliament at variance with it), it is not for any Court of Justice to inquire further, or to enlarge constructively those conditions and restrictions."
20. The role of constitutional courts in the matter of interpretation of Constitution has been discussed by the Federal Court of India in Re: The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, (XIV of 1938)31. The Hon'ble Court observed that a Constitution must be construed keeping in view that it is a living and organic document. It was observed that "A Federal Court will not strengthen, but only derogate from, its position, if it seeks to do anything but declare the law; but it may rightly reflect that a Constitution of Government is a living and organic thing, which of all instruments has the greatest claim to be construed ut res magis valeat quam pereat. (It is better that it should live, than it should perish.)"
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21. In the case of Ashok Kumar Gupta32, the Hon'ble Court observed as hereunder:-
"51. Therefore, it is but the duty of the Court to supply vitality, blood and flesh, to balance the competing rights by interpreting the principles, to the language or the words contained in the living and organic Constitution, broadly and liberally. The judicial function of the Court, thereby, is to build up, by judicial statesmanship and judicial review, smooth social change under rule of law with a continuity of the past to meet the dominant needs and aspirations of the present. This Court, as sentinel on the qui vive, has been invested with more freedom, in the interpretation of the Constitution than in the interpretation of other laws. This Court, therefore, is not bound to accept an interpretation which retards the progress or impedes social integration; it adopts such interpretation which would bring about the ideals set down in the Preamble of the Constitution aided by Part III and Part IV — a truism meaningful and a living reality to all sections of the society as a whole by making available the rights to social justice and economic empowerment to the weaker sections, and by preventing injustice to them. Protective discrimination is an armour to realise distributive justice. Keeping the above perspective in the backdrop of our consideration, let us broach whether the rights of the employees belonging to the general (sic reserved) category are violative of Article 14; inconsistent with and derogatory to the right to equality and are void ab initio."
22. In the case of Special Reference No. 01 of 200233, the Hon'ble Supreme Court discussed the concept while interpreting the Constitution. The Hon'ble Court observed "A constitutional court like this Court is a nice balance of jurisdiction and it declares the law as contained in the Constitution but in doing so it rightly reflects
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that the Constitution is a living and organic thing which of all instruments has the greatest claim to be construed broadly and liberally"....... "In the interpretation of a constitutional document words are but the framework of concepts and concepts may change more than words themselves. The significance of the change of the concepts themselves is vital and the constitutional issues are not solved by a mere appeal to the meaning of words without an acceptance of the line of their growth. It is aptly said that the intention of the Constitution is rather to outline principles than to engrave details".
23. The rule of contemporanea expositiomay not be applicable in the matter of interpretation of Constitution. In the case of Jamshed N. Guzdar34, the Hon'ble Supreme Court observed that "We are afraid, when it comes to interpretation of the Constitution, it is not permissible to place reliance on contemporanea expositio to the extent urged. Interpretation of the Constitution is the sole prerogative of the constitutional courts and the stand taken by the executive in a particular case cannot determine the true interpretation of the Constitution".
24. The needs of changing times and responsiveness have to be reflected while interpreting the Constitution. In the case of Navtej Singh Johar35, the Hon'ble Supreme Court on that aspect held that "A democratic Constitution like ours is an organic and breathing document with senses which are very much alive to its surroundings, for it has been created in such a manner that it can adapt to the needs and developments taking place in the society.".
The Hon'ble Supreme Court also referred to a case law in Saurabh Chaudri36, wherein the Hon'ble Supreme Court has observed that
"....Our Constitution is organic in nature. Being a living organ, it is
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ongoing and with the passage of time, law must change. Horizons of constitutional law are expanding." In para 95 of the judgment, the Hon'ble Supreme Court further outlined the role of the Constitutional Courts in interpreting the Constitution, particularly in realising the evolving nature of this living document. The Hon'ble Supreme Court observed as hereunder:-
"95. Thus, we are required to keep in view the dynamic concepts inherent in the Constitution that have the potential to enable and urge the constitutional courts to beam with expansionism that really grows to adapt to the ever-changing circumstances without losing the identity of the Constitution. The idea of identity of the individual and the constitutional legitimacy behind the same is of immense significance. Therefore, in this context, the duty of the constitutional courts gets accentuated. We emphasise on the role of the constitutional courts in realising the evolving nature of this living instrument. Through its dynamic and purposive interpretative approach, the judiciary must strive to breathe life into the Constitution and not render the document a collection of mere dead letters. The following observations made in Ashok Kumar Gupta v. State of U.P. [Ashok Kumar Gupta v. State of U.P., (1997) 5 SCC 201 : 1997 SCC (L&S) 1299] further throw light on this role of the courts : (SCC p. 244, para 51)
"51. Therefore, it is but the duty of the Court to supply vitality, blood and flesh, to balance the competing rights by interpreting the principles, to the language or the words contained in the living and organic Constitution, broadly and liberally."
REGULATORY AND TAXING ENTRIES
25. The scheme of Entries in VIIthSchedule of the Constitution has a pattern. The entries are under two categories, namely, regulatory entries and taxing entries. In the case of M.P.V. Sundararamier37, the Hon'ble Supreme Court on this aspect, held as follows:-
"51. In List I, Entries 1 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
30
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. Turning to List II, Entries 1 to 44 form one group mentioning the subjects on which the States could legislate. Entries 45 to 63 in that List form another group, and they deal with taxes. Entry 18, for example, is "Land" and Entry 45 is "Land revenue". Entry 23 is "Regulation of mines" and Entry 50 is
"Taxes on mineral rights". The above analysis — and it is not exhaustive of the Entries in the Lists — leads to the inference that taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a distinct matter for purposes of legislative competence. And this distinction is also manifest in the language of Article 248, clauses (1) and (2) and of Entry 97 in List I of the Constitution. Construing Entry 42 in the light of the above scheme, it is difficult to resist the conclusion that the power of Parliament to legislate on inter- State trade and commerce under Entry 42 does not include a power to impose a tax on sales in the course of such trade and commerce."
(emphasis supplied)
26. The principle that Taxing Entries and Regulatory Entries are separate has further been reiterated by the Hon'ble Supreme Court
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in the cases of Hoechst Pharmaceuticals Ltd.38, Kesoram Industries39, Jalkal Vibhag40, Jindal Stainless Ltd.41and Synthetics and Chemicals Ltd.42.
TAX UNDER AUTHORITY OF LAW
27. The tax may not be levied unless it was so authorized by law. Article 265 of the Constitution unequivocally sets out the principle that "no tax shall be levied or collected except by authority of law."
In the case of State of Meghalaya43, the Hon'ble Supreme Court observed that "there is nothing like an implied power to tax. The source of power which does not specifically speak of taxation cannot be so interpretated by expanding its width as to include therein the power to tax, by implication or by necessary inference". The Hon'ble Supreme Court categorically held that "the power to tax is not an incidental power. Although legislative power includes incidental and subsidiary power under a particular Entry dealing with a particular subject, the power to impose a tax is not such a power which could be implied under our Constitution."
28. In the case of Kesoram Industries44, in para 104, the Hon'ble Supreme Court observed that " There is nothing like an implied power to tax. The source of power which does not specifically speak of taxation cannot be so interpreted by expanding its width as to include therein the power to tax by implication or by necessary inference."
29. Overlapping between two Entries in the VIIthSchedule should be avoided. In the case of Godfrey Philips India Ltd.45,the Hon'ble Supreme Court held that " taxing entries must be construed
32
with clarity and precision so as to maintain such exclusivity, and a construction of a taxation entry which may lead to overlapping must be eschewed. If the taxing power is within a particular legislative field, it would follow that other fields in the legislative lists must be construed to exclude this field so that there is no possibility of legislative trespass".
PRESUMPTION OF VALIDITY
30. There is always a presumption of validity in favour of the Statute. When it comes to interpretation of validity of a statute, the Court should lean in favour of a statute. In the case of Bihar Distillery46,the Hon'ble Supreme Court observed that "The court should not approach the enactment with a view to pick holes or to search for defects of drafting, much less inexactitude of language employed. Indeed, any such defects of drafting should be ironed out as part of the attempt to sustain the validity/constitutionality of the enactment." The Hon'ble Supreme Court observed that "The approach of the court, while examining the challenge to the constitutionality of an enactment, is to start with the presumption of constitutionality. The court should try to sustain its validity to the extent possible."This principle has been followed by the Hon'ble Supreme Court in the case of M.P. Cement Manufacturers' Association47.Although in the case of M.P. Cement Manufacturers' Association48, the Hon'ble Supreme Court also cautioned that this does not mean that in this process of leaning, the court must perform "verbal gymnastics to overcome a patent lack of legislative competence."
WIDE INTERPRETATION
31. The Constitution of a country governs every organisation of it. It is cumulative aspiration of the masses, as stated hereinbefore.
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It cannot be interpreted in a very pedantic manner or in a narrow sense. It has to be grown with the passage of time. In the case of State of Karnataka49,the Hon'ble Supreme Court observed that "a broad and liberal construction in keeping with the purposes of a Constitution must be given preference over adherence to too literal an interpretation". The Hon'ble Supreme Court further observed " In particular, the plenitude of power to legislate, indicated by a legislative entry, has to be given as wide and liberal an interpretation as is reasonably possible".
32. The Constitutional provision should be given wide interpretation. It has further been reiterated in the cases of State of Meghalaya50, India Cement Ltd.51,Kartar Singh52, Jalkal Vibhag53Rajendra Diwan54, State (N.C.T. of Delhi)55, M/s Ujagar Prints56, Indian Aluminium Company57.
33. In the case of Association of Natural Gas58,the Hon'ble Supreme Court held that "The rules relating to distribution of powers are to be gathered from the various provisions contained in Part XI and the legislative heads mentioned in the three lists of the Schedule. The legislative power of both Union and State Legislatures are given in precise terms. Entries in the lists are themselves not powers of legislation, but fields of legislation. However, an Entry in one list cannot be so interpreted as to make it cancel or obliterate another entry or make another entry meaningless".
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34. In the case of State of Karnataka59,the Hon'ble Supreme Court also cautioned the courts that the judicial interpretation should not render any provision redundant. The Hon'ble Supreme Court observed that "The dynamic needs of the nation, which a Constitution must fulfil, leave no room for merely pedantic hairsplitting play with words or semantic quibblings. This, however, does not mean that the Courts, acting under the guise of a judicial power, which certainly extends to even making the Constitution, in the sense that they may supplement it in those parts of it where the letter of the Constitution is silent or may leave room for its development by either ordinary legislation or judicial interpretation, can actually nullify, defeat, or distort the reasonably clear meaning of any part of the Constitution in order to give expression to some theories of their own about the broad or basic scheme of the Constitution".
35. The Hon'ble Supreme Court has laid down various rules for interpretation of a statue or the Constitution. Some of them are cited as hereunder:-
(i) It is well settled rule of interpretation that no word or Section shall be construed in isolation, but that the statute should be read as a whole, each part throwing light on the meaning of others. (East India Cotton Manufacturing Co. Ltd.60,New Delhi Municipal Committee61, Deepal Girishbhai Soni62, Hindustan Bulk Carriers and GVK Industries63.
(ii) The judiciary must interpret the Constitution having regard to sprit and further by adopting a method of purposive interpretation. (ITC Ltd. Case64).
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(iii) In interpreting the provision of the Constitution, particularly the legislative Entry, a broad, liberal and extensive interpretation is to be preferred has a meaning, which is always inclusive. (Ahmedabad Municipal Corpn.65)
(iv) Being a living and dynamic document, the Constitution ought to receive an equally dynamic and pragmatic interpretation that harmonizes and balances competing aims and objectives and promotes attainment of national goals and objectives.(Jindal Stainless66).
(v) "it is a constitution we are expounding" - and the Constitution is a living document governing the lives of millions of people, which is required to be interpreted in a flexible evolutionary manner to provide for the demands and compulsions of changing times and needs. (M. Hakeem67).
36. If a subject does not fall in any of the Entries in Schedule VII, in such a situation, E 97 of L I empowers the Parliament to legislate on it, including power to taxation. On this aspect in the case of H.S. Dhillon68,the Hon'ble Supreme Court discussed as hereunder:-
"21. It seems to us that the function of Article 246(1), read with Entries 1-96, List I, is to give positive power to Parliament to legislate in respect of these entries. Object is not to debar Parliament from legislating on a matter, even if other provisions of the Constitution enable it to do so. Accordingly we do not interpret the words "any other matter" occurring in Entry 97, List I, to mean a topic mentioned by way of exclusion. These words really refer to the matters contained in each of the Entries 1 to 96. The words "any other matter" had to be used because Entry 97, List I follows Entries 1-96, List I. It is true that the field of legislation is demarcated by Entries 1-96, List I, but demarcation does not mean that if Entry 97,
36
List I confers additional powers, we should refuse to give effect to it. At any rate, whatever doubt there may be on the interpretation of Entry 97, List I is removed by the wide terms of Article 248. It is framed in the widest possible terms. On its terms the only question to be asked is: Is the matter sought to be legislated or included in List II or in List III or is the tax sought to be levied mentioned in List II or in List III: No question has to be asked about List I. If the answer is in the negative then it follows that Parliament has power to make laws with respect to that matter or tax."
(emphasis supplied)
LEGISLATIVE COMPETENCE
37. At the very outset, it may be stated that there is no dispute between the parties that the State Legislature is not competent to impose tax on electricity generation. On behalf of the appellants, reference has been made to the case of Bharti Airtel Ltd.69In this case, the Hon'ble Gauhati High Court while referring to earlier judgments on the subject held that the State Legislature has no competence to tax on generation of electricity. In the instant case, according to the State, the tax is on "drawal of water" and not on generation of electricity. Whereas, it is the case of the appellants that the tax in the instant case is on generation of electricity. This aspect will be examined in the later part of the judgment.
38. Learned counsel for the appellants would submit that the State Legislature is not competent to enact the Act. It is argued that in order to impose the tax, there should be specific taxing entry, but as such, there is no such entry in L-II or L-III of S-VII. It is argued that in the impugned judgment, in addition to E17 of L-II, other entries have been referred to so as to validate the Act. But, it is argued that E17 of L-II is not a taxing entry. It is a general entry. Therefore, the Act
37
cannot be enacted at the strength of E17. On behalf of the appellants, the following submissions have also been made:-
(i) The impugned judgment does not give any reasoning as to how the Act can be traced to E45 and E49 of L-
II. Therefore, in the absence of any reasoning on this aspect, the judgment is not sustainable.
(ii) Water cannot be treated as mineral. In the impugned judgment, the learned Single Judge has wrongly relied on the principles of law, as laid down in the case of Ichchapur70. It is argued that in the case of Ichchapur71, the word "Mineral" was interpreted in the context of the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 ("the 1962 Act"). No universal declaration was made in the case of Ichchapur72 that water in all situations may be termed as Mineral.
(iii) A judgment has to be read under the factual context, in which it is delivered. In support of his contention, learned counsel placed reliance on the principles of law, as laid down in the cases of Commissioner of Income Tax73and Ashwani Kumar Singh74.
39. In the case of Commissioner of Income Tax75, the Hon'ble Supreme Court, inter alia, held that, " It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context
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of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings."
40. In the case of Ashwani Kumar76also, the Hon'ble Supreme Court reiterated the principles and held that,
"Observations of courts are not to be read as Euclid's theorems nor as provisions of the statute. These observations must be read in the context in which they appear. Judgments of courts are not to be construed as statutes."
41. Learned counsel for the Union of India would submit that the State Legislature is not competent to enact the Act. He would submit that the State has no competence to impose tax on generation of electricity; State has termed it as water tax, but in essence, it is a tax on generation of electricity. It is argued that Article 288 also prohibits imposition of such tax; such tax may only be imposed by the Union Legislature. He would also submit that, in fact, the Ministry of Power, Government of India has made a communication to all the Chief Secretaries of the State Governments and Union Territories on 25.04.2023 informing
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that tax on generation of electricity is illegal and unconstitutional.
42. The communication made by the Director, Ministry of Power, Government of India dated 25.04.2023 addressed to the Chief Secretaries of the State Governments/UTs has been rendered at the time of hearing. It reads as follows:-
" File No. 15/27/2023-Hydel-II (MoP) Government of India
Ministry of Power
Shram Shakti Bhawan, Rafi Marg, New Delhi, Dated 25th April, 2023 To
The Chief Secretaries - All the State Governments & UTs Subject: Imposition of Water Tax/Cess by various State Government on HEPs - reg
Sir, It has come to the notice of the Government of India (GoI) that some State Governments have imposed taxes/duties on generation of electricity. This is illegal and unconstitutional. Any tax/duty on generation of electricity, which encompasses all types of generation viz. Thermal, Hydro, Wind, Solar, Nuclear, etc. is illegal and unconstitutional. The Constitutional provisions are as follows:
(i) The powers to levy taxes / duties are specifically stated in the VII Schedule. List - II of the VII Schedule lists the power of levying of taxes / duties by the State 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.
(ii) Entry-53 of List-II (State List) authorizes the State 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
40
State has the power to levy taxes/duties on residents of other States.
(iii) Some States have imposed taxes / duties on generation of electricity under the guise of levying a cess 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 consumer of electricity who may happen to be residents of 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) Article-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 electricity. Electricity is generated by directing the flow of water through a turbine which generates electricity - on the same principle as electricity from wind projects where wind is utilized to turn the turbine to produce electricity. Therefore, there is no rationale for levy of "water cess" or "air cess".
(viii) The levy of water cess is against the provisions of the Constitution. Entry-17 of List-II, does not authorize the State to levy any tax or duty on water.
2. In light of the above constitutional provisions, no taxes/duties may be levied by any State under any guise on generation of electricity and if any
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taxes/duties have been so levied, it may be promptly withdrawn.
This has the approval of the Hon'ble Union Minister of Power and New & Renewable Energy."
43. Learned Counsel for the State would submit that a communication from the Ministry of Power, Government of India may not guide the State Legislature in the matter of making laws. It is argued that the State Legislature is competent to impose the water tax under the Act.
44. Learned Counsel for the State would further submit that State Legislature is competent to enact the Act under E45, E49 and E50 of LII of SVII. He would submit that if the tax can reasonably be held to be within taxing entry, that is enough. The tax can have reasonable nexus and no more.
45. In support of his contention, learned Counsel for the State would refer to the principles of law, as laid down in the case of Goodricke Group Ltd.77.
46. In the case of GoodrickeGroup Ltd.78, the Hon'ble Supreme Court referred to the judgment in the case of Ajoy Kumar Mukherjee79and observed that, "if a tax can reasonably be held to be a tax on land it will come within Entry 49."
47. The impugned judgment has been challenged on multiple grounds. It has been argued that in the impugned judgment, at one place, the Court has observed that the general entry and taxing entry are separate in Schedule VII, but at some
42
other place, in the same impugned judgment, the Act has been validated at the strength of E 17 L II of S VII.
48. It is true that in the impugned judgment, it has been observed that "a tax cannot be levied under a general entry"
(para 26, line 6). In para 56 of the impugned judgment, it has also been observed that "It is to be borne in mind that tax is a separate matter from general regulatory entries. Regulatory entries are not for taxation". But, it is also equally true that in contrast to these observations, which have been made in para 26 and 56 of the impugned judgment, the impugned judgment also validates the Act at the strength of E 17 L II of S VII (Para 75 of the impugned judgment at page 62 (internal)*:
49. As observed hereinbefore, the law is well-settled that the Regulatory Entries and Taxing Entries are separate. The Act may not be validated at the strength of any Regulatory Entry. To that extent, the observation that has been made in the impugned judgment, with regard to validation of the Act under E 17 L II of S VII may not be upheld.
___________________________________________________
* "A plain reading of Article 200 of the Constitution would depict that as the matter relates to Entry 17 of List II under which States are empowered to make laws, thus after the approval of Bill by the State legislature, the Hon'ble Governor has accorded assent to the aforesaid Bill using the discretionary powers under this Article."
43
50. The taxing Entry should be clear and distinct and tax cannot be imposed by implication. There is nothing like an implied power to tax. The impugned judgment at various places derives the competence of the State Legislature on the basis of implication**.
51. The Court now proceeds to examine the competence of State Legislature in enacting the Act. First of all, it will be examined as to whether the Act can be enacted under E49 L-II of S-VII.
ENTRY 49 OF LIST II
52. E49 L-II of S-VII is as follows:-
"49. Taxes on lands and buildings."
53. Learned Counsel for the State would submit that the word "land" in E18 L II of S VII is restrictive entry qualified by the phrase "that is to say". It makes it limited and exhaustive. On the other hand, the word "land" in E49 is unlimited, and, therefore, it has to be read widely and liberally. He would submit that the water would directly or indirectly reasonably fall under it being part of the land. He would also raise the following points in his submission:-
(i) Tax to be on land need not be directly on land and that it does not cease to be tax on land in the absence of direct nexus.
______________________________________________
** In para 41 of the impugned judgment, the Court records that since Entry 54 of List I of the Seventh Schedule to the Constitution is a regulatory entry and not a taxing entry, therefore, the said entry cannot restrict the power of the State to tax
"land or mineral" under Entries 49 and 50 of List II. But, by reading entries in List I of S II, the competence of State Legislature may not be derived to impose tax. Similarly, in para 76, the Court has observed in the impugned judgment that "there is no prohibition in the Constitution that the State legislature cannot enact any law for imposition of tax on water…..No fault can be attached to the Act in question." The competence of Legislature in enacting any statute can be derived by positive competence of a Legislature. By indicative implication, Legislature's competence may not be derived.
44
(ii) The words "on use of water supply on land or building" is tax on land.
(iii) The water tax in the instant case is on the use of water on "land" to generate electricity, and, therefore, falls reasonably as a tax on land.
54. In support of his contention, learned Counsel for the State has placed reliance on the principles of law, as laid down in the cases of M/s Pyare Lal Malhotra80; Bombay Tyre International Ltd.81; Castrol India Ltd.82; The Electric Telegraph Company83; Kandukuri Balasurya Prasadha Rao84; Province of Madras85; Cinderella Rockerfellas Limited86; Raza Buland Sugar Co. Ltd.87; Anant Mills Co. Ltd.88; K.S. Ardhnareeswarar Gounder89; Kendriya Nagrik Samiti90and State of Kansas91.
55. Learned counsel for the appellants would submit that E49 LII of SVII has nothing to do with the water tax. The State Legislature has no competence to enact water tax under this entry. It is the case of the appellants that E49 LII of SVII is property centric. The tax under E49 LII is not a personal tax, but a tax on property and there is no connection to land or building, so far as the Act is concerned.
56. In support of this argument, on behalf of the appellants, reliance has been placed on the principles of law, as
45
laid down in the cases of Jalkal Vibhag92, Kerala State Beverages Manufacturing and Marketing Corporation Limited93and D.H. Nazareth94.
57. In order to examine the competence of State Legislature under E49 LII of SVII, as argued on behalf of the State, it has to be seen as to whether water is part of land so as to empower the State Legislature to enact the Act under E49. The second part of analysis would be as to whether the tax is on the use of water on land to generate electricity. In other words, what is to be seen is as to whether water is included in the word
"land" so as to empower State Legislature to impose the tax under E49 and/or whether the tax is on the use of water on land (the electric generation plant affixed to land, therefore forms land).
58. E18 L II of S VII is with regard to land, but it is qualified with the phrase "that is to say". This entry is as follows:-
"18. Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization."
59. It is being argued that the word land, as used in E18 LII of SVII is restrictive, as enumerated in E18, but the word
"land" in E49 is not such restrictive.
60. In the cases of M/s Pyare Lal Malhotra95, Bombay Tyre96and Castrol India Ltd.97, the Hon'ble Supreme Court interpreted the phrase "that is to say".
92 Supra note 5
93 Kerala State Beverages Manufacturing and Marketing Corporation Limited v. Assistant Commissioner of Income Tax Circle, (2022) 4 SCC 240
94 Second Gift Tax Officer v. D.H. Nazareth, (1970) 1 SCC 749
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61. In the case of M/s Pyare LalMalhotra98, the Hon'ble Supreme Court while referring to the dictionary meaning of the phrase "that is to say", held that "the expression "that is to say" is employed to make clear and fix the meaning of what is to be explained or defined. Such words are not used, as a rule, to amplify a meaning while removing a possible doubt for which purpose the word "includes" is generally employed." Referring to the judgment in the case of Megh Raj99, the Hon'ble Supreme Court observed that, "We think that the precise meaning of the word "that is to say" must vary with the context." These principles have been reiterated in the case of Castrol India100.
62. In the case of Bombay Tyre101, the Hon'ble Supreme Court observed that, "the phrase "that is to say", says Stroud's Judicial Dictionary (Fourth Edn., Vol. 5, p. 2753) is the commencement of an ancillary clause which explains the meaning of the principal clause. It has the following properties: (1) it must not be contrary to the principal clause; (2) it must neither increase nor diminish it;
(3) but where the principal clause is general in terms it may restrict it", and reference has been made
to Stuckeley v. Butler [ Hob 171] and Harrington v. Pole [ Dy 77b, p 1, 38] .
63. Admittedly, in E18 LII of SVII, the word "land" is qualified with the phrase "that is to say", on the other hand, in E49 LII of SVII, there is no such restrictions on the words lands
95 Supra note 80
96 Supra note 81
97 Supra note 82
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and buildings. The question is as to whether the word land, as used in E49 of LII includes water in it?
64. In the case of the Electric Telegraph102, the Electric Telegraph Company had laid a line as follows. In the open parts of the railways, wooden posts or standards, of an average diameter of 7 inches were firmly fixed by being let into the ground of the railways, at intervals of about 30 yards apart and from post to post continuous wires of telegraph wires were hung or suspended at the top; but along the raise viaduct, the wires were connected together in a long wooden box or cover, which were fixed to the parapet of the via duct in one continuous length, by means of iron old pasts driven into the joints of brick work forming the parapet, with the exception of 188 yards at that end of the railways in the respondents township. The telegraph was placed entirely upon the property belonging to the railway company. The telegraph company was not owner or occupier of the property. The question was as to whether the telegraph company is liable to be rated? In that context, it was held that "land extends upwards as well as downwards, and whether the wires and posts are fixed above or below the surface, they occupy a portion of land". It was observed that the telegraph company had the exclusive occupation of the soil, when not interfered with by the railways.
65. In the same case, an observation of Lord Coke has been referred to as follows., "and lastly, Earth has in law a great extent upwards, not only of water, as hath been said, but all other things even up to heaven, and for eujus est sulum, ejus est usque ad colum".
48
66. The observation has been made with regard to the liability of the telegraph company while laying the electric telegraph line. The observation that has been made in the case of the Electric Telegraph Company103cannot support the case of the State that the word land, as used in E49, includes water.
67. In the case of Anant Mills Company104, the question was with regard to assessment of property tax of large premises like textile mills and factories. The property tax, in that context, comprises (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 E49 LII of SVII to enact a law for levying tax in respect of area occupied by the underground supply lines. It was argued that the word land denotes the surface of land and not the underground strata. The Hon'ble Supreme Court did not accept this argument and observed the word land includes not only the face of the Earth, but everything under or over it, and has in its legal significance an indefinite extent upwards and downwards giving rise to the maxim eujus est sulum, ejus est usque ad colum".
68. In the case of Anant Mills105, the Hon'ble Supreme Court has, in fact, referred to the judgment in the case of the Electric Telegraph Company106. The similar principle has further been followed in the case of Ahmadabad Municipal Corporation107.
69. In the case of Kandukuri Balasurya Prasadha Rao108,the issue involved was with regard to right to take water. Certain water cesses were imposed under the Madras Act (7 of
49
1865) as amended in the year 1900. The question was with regard to the right of the Government to levy these cesses. Under the provisions, by which cess was imposed, there were two provisos. The first for the protection of zamindars, inamdars, or any other description of land holder not holding under Ryotwari settlement. Under the first proviso, where a Zamindar, inamdar or other land holder not holding under Ryotwari settlement is, by virtue of engagement with the government, entitle to irrigation, free of separate charge, no cess was to be imposed for that water supply to the extent of this right and no more. An observation was made in this judgment that, "The cess under the Act is leviable on the land which is irrigated. It is therefore in the nature of a land tax, and by sec. 2 is recoverable in the same manner as arrears of land revenue." Under those circumstances, the Court, in the case of Kandukuri Balasurya Prasadha Rao109held that the appellants were not liable to pay cess.
70. In the case of Kandukuri Balasurya Prasadha Rao110, the aspect was different. It was related to the rights of the appellants of that case, to have free water qua the cess. The Court has not ruled that the water is land. Although, as stated, an observation has been made, in that case, that cess was leviable on the land, which is irrigated, hence, a land tax.
71. In the case of Lady of Dolours Convent111also, the issue was with regard to irrigation cess and the question was, can it be assessed on the lands, which are held free from land tax under the agreement. In that case also, an observation has been made that a charge for water supplied for the purpose of cultivation is a charge on the land.
50
72. In the case of K.S. Ardanareeswara Gounder112,local cess surcharge was levied under Section 116 of the Tamil Nadu Panchayats Act, 1958. It was challenged on the ground that no tax can be levied on the water supplied by the Government and that only a fee can be levied under E66 of L-II. In the case of K.S. Ardanareeswara Gounder113, the principles of law, as laid down in the case of Lady of Dolours Convent114been referred to. The Court noted that, "The term 'land revenue' has been defined under the Explanation to include water cess for purpose of Ss. 115 and 116. Under S. 115, the levy is only on land, but the measure of tax is based on the land revenue payable on it. " While referring to the definition of the meaning of the term of land revenue, as defined under the Act, the Court observed that, "Even assuming that water cess is not land tax as alleged by the petitioner, it is still a revenue due on the land, and, therefore, it has to be taken as land revenue."
73. The interpretation that has been made in the case of K.S. Ardanareeswara Gounder115,is under the provisions of the Act in question, wherein, the term land revenue included cess. No general principle, as such, has been laid down in that case.
74. In the case of Raza Buland Sugar Co. Ltd.116,a municipal board decided to impose water tax on the annual values of the land and building. It was challenged, inter alia, on the ground that the imposition of tax was beyond the competence of the board. The Court held that, in fact, it was not a tax on water, instead, it was a tax on land and building because it provided that tax shall not be imposed on land
51
exclusively used for agricultural purposes. If the water tax was not at all on the land or building, it was held that it was unnecessary to provide for exemption of agricultural land from the tax.
75. In the case of Kendriya Nagrik Samiti117, also, challenge was made to water tax and sewage tax under the U.P. Water Supply and Sewage Act 1975. The challenge was made on the ground of legislative competence. It was argued that with regard to water, there is only one Entry 17 in LII, but it is not an entry relating to tax and under the Residuary Entry 66, only fee can be levied and no tax can be imposed. The Court held that, in fact, the subject matter of water tax was not water. The water tax, as also sewage tax, is levied in the assessed annual value of the premises. It is in reality a tax on land and building, though called water tax. The Court had followed the principles of law, as laid down in the case of Raza Buland Sugar Co. Ltd.118
76. In the case of Union of State of Kansas119, the issue was with regard to the right to regulate the flow of water by way of Regulations. In that context, the Court referred to the earlier judgment, wherein it was observed "the right to flowing water is now well settled to be a right incident to property in the land; it is a right publici juris, of such character that, whilst it is common and equal to all through whose land it runs, and no one can obstruct or divert it, yet, as one of the beneficial gifts of Providence, each proprietor has a right to a just and reasonable use of it, as it passes through his land; and so long as it is not wholly obstructed or diverted, or no larger appropriation of the water running through it is made
52
than a just and reasonable use, it cannot be said to be wrongful or injurious to a proprietor lower down".
77. In the case of Cinderella Rockerfellas Limited120, the question was with regard to rate of hereditament. It was rateable in view of Section 64(1) of the Local Government Finance Act, 1988 ("the 1988 Act"). The definition of hereditament was given under Section 115(1) of the General Rate Act, 1967. In view of Section 64(4) of the 1988 Act, a hereditament may consist of lands also. Land as such was not defined under the 1988 Act, but by virtue of Section 5 of the First Schedule to the Interpretation Act, 1978, the land in an Act of Parliament passed after 1978 includes land covered by water. In this judgment, this proposition was upheld that "the expression "land" is wide enough to include water lying on the surface of the earth, so that the lake in the present case is capable of being part of the hereditament, if it satisfies the other tests of rateability……….".
78. This Court will deal in quite detail about the nature of the tax under the Act, but, it may be noted that in this case also, this Court did not held that the word land, as used in E49 of LII includes water.
79. It has been the case of the appellants that the impugned tax cannot be enacted under E49 of L II. It has been argued that the tax under E49 of LII is property centric. Reliance has been made to the judgment in the case of Jalkal Vibhag121.
80. In Para 44 of the judgment in the case of Jalkal Vibhag122,the Hon'ble Supreme Court referred to the judgment
53
in the case of H.S. Dhillon123and quoted with approval as follows:-
"74. The requisites of a tax under Entry 49, List II, may be summarised thus:
(1) It must be a tax on units, that is lands and buildings separately as units.
(2) The tax cannot be a tax on totality, i.e., it is not a composite tax on the value of all lands and buildings.
(3) The tax is not concerned with the division of interest in the building or land. In other words, it is not concerned whether one person owns or occupies it or two or more persons own or occupy it."
81. In the case of Kerala State Beverages124, reference is made to the judgment in the case of Jalkal Vibhag125in respect of "fee" and "tax".
82. In the case of D.H. Nazareth126, the High Court of Mysore had observed that Parliament had no power to legislate with regard to taxes on gift of land and buildings. While allowing the appeals, the Hon'ble Supreme Court discussed the concept of
"Pith and Substance" of an Act and held as follows:-
"9. The Constitution divides the topics of legislation into three broad categories: (a) entries enabling laws to be made, (b) entries enabling taxes to be imposed, and (c) entries enabling fees and stamp duties to be collected. It is not intended that every entry gives a right to levy a tax. The taxes are separately mentioned and in fact contain the whole of the power of taxation. Unless a tax is specifically mentioned it cannot be imposed except by Parliament in the exercise of its residuary powers already mentioned. Therefore, Entry 18 of the State List does not confer additional power of taxation. At the most fees can be levied in respect of the items mentioned in that entry, vide Entry 66 of the same list. Nor is it possible to read a clear
54
cut division of agricultural land in favour of the States although the intention is to put land in most of its aspects in the State List. But, however, vide that entry, it cannot still authorise a tax not expressly mentioned. Therefore, either the pith and substance of the Gift Tax Act falls within Entry 49 of State List or it does not. If it does, then Parliament will have no power to levy the tax even under the residuary powers. If it does not, then Parliament must undoubtedly possess that power under Article 248 and Entry 97 of the Union List.
10. The pith and substance of Gift Tax Act is to place the tax on the gift of property which may include land and buildings. It is not a tax imposed directly upon lands and buildings but is a tax upon the value of the total gifts made in an year which is above the exempted limit. There is no tax upon lands or buildings as units of taxation. Indeed the lands and buildings are valued to find out the total amount of the gift and what is taxed is the gift. The value of the lands and buildings is only the measure of the value of the gift. A gift tax is thus not a tax on lands and buildings as such (which is a tax resting upon general ownership of lands and buildings) but is a levy upon a particular use, which is transmission of title by gift. The two are not the same thing and the incidence of the tax is not the same. Since Entry 49 of the State List contemplates a tax directly levied by reason of the general ownership of lands and buildings, it cannot include the gift tax as levied by Parliament. There being no other entry which covers a gift tax, the residuary powers of Parliament could be exercised to enact a law. The appeals must, therefore, be allowed but there shall be no order about costs throughout. The Appeal 666 of 1967, however, abates as the sole respondent died."
83. An entry in SVII has to be given widest amplitude. This is the rule of interpretation of the Constitution. But, at the same time, the entry should not be extended to the extent that it may change the entire scheme of field of legislation, as given under three Lists of S VII. If we look at LII of SVII alone, land and water have distinctly been used. E 17 L II of S-VII deals with water, whereas, E18 L II of S VII deals with land. These both entries are qualified with the phrase, "that is to say". Land and water have been distinctly used in S VII. If for the sake of argument it is accepted that everything above and below land
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shall include in the word land, then there would have been no necessity to distinctly use the word water under E17 of L II, and there would have been no need to use the words gas and gas works under E25 of L II. Therefore, I am of the view that the word land in E49 of L II may not be given such an interpretation so as to include the word water in it. It cannot be said that because the word land in E49 L II of S VII includes water, therefore, State can legislate the Act.
84. There is another aspect of the matter. It has been argued on behalf of the State that the impugned tax is on the use of water on land to generate electricity. Therefore, falls reasonably as a tax on land.
85. In fact, it has been argued by learned Counsel for the State that the water that is drawn from the sourcefalls on the land or on generator attached to the land to generate electricity. Therefore, in pith and substance, the tax is in respect of water/land and to put it distinctly, it is the tax on drawal and use of water on land. This requires little more deliberations while exploring the nature of the impugned tax. It will be discussed at a later stage of the judgment.
ENTRY 45 OF LIST II
86. E45 L-II of S-VII reads as follows:-
"45. Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues."
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87. It has been argued on behalf of the State that the State Legislature is competent to enact the Act under E 45 of L
II. It is argued that the tax that has been imposed under the Act, may also be termed as land revenue. In support of his contentions learned Counsel has placed reliance on the principle of law as laid down in the cases of R.S. Rekhchand127, and K.S. Ardanareeswara Gounder128.
88. In the case of R.S. Rekhchand,129the Hon'ble Supreme Court posed a question in para 78 of the judgment as follows:-
"whether the appellant has a natural right to use water from the flowing river and whether the water used by it is exigible to land cess?"
89. In the case of R.S. Rekhchand130, State Legislature levied cess on use of flowing water from a river under the Maharashtra Land Revenue Code 1966. The challenge was made on the ground that the Government is devoid of power to levy tax on the use of water. Referring to the judgment in the cases of Lady of Dolours Convent131,Kandukuri Balasurya Prasadha Rao132and Raza Buland Sugar Co. Ltd.133,the Court held that,
"the legislative Entry 45 of List II of the Seventh Schedule of the Constitution brings within the ambit power of the legislature under Article 246 to levy cess on use of the water even from flowing river. Therefore, Section 70 of the Code
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comes within Entry 45 of List II of the Seventh Schedule to the Constitution."
90. While deciding the R.S. Rekhchand134,the Hon'ble Supreme Court has taken note of Section 20 & 70 of the Maharshtra Land Revenue Code, 1966 and observed that "It is seen that Section 20 of the Code clearly includes flowing water, as investing title thereof in the State as integral part of the land. The definition of "land" includes the right to the water flowing therefrom as in the definition in the Transfer of Property Act".
91. In the case of R.S. Rekhchand135, the Hon'ble Supreme Court did not rule that land would include water for the purpose of E 45 of L II. It cannot be said that the word land in E 45 of L II include water, therefore the State can legislate the Act. E 45 of L II does not give competence to the State Legislature to enact the Act.
92. Another related question to it is as to whether the use of water on land or on the generator attached to the land to generate electricity may be said to be land revenue under E 45 of L II. In fact, this discussion may not be complete untilthe "pith and substance" or "true nature and character" of the Act is ascertained. Therefore, the discussion will be further made, while discussing the "pith and substance" of the Act.
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ENTRY 50 OF LIST II
93. Learned Counsel for the State would submit that State Legislature is competent to impose the tax under E50 of LII. He would refer to thejudgment in the Ichchapur case136to argue that in the case of Ichchapur137, the Hon'ble Supreme Court has categorically held that even the chemical composition of water makes it mineral and it has been held that water is mineral. Therefore, the Act gets validity by virtue of E50 LII of
SVII.
94. Entry 50, L II of S VII is as follows:-
"50. Taxes on mineral rights subject to nay limitations imposed by Parliament by law relating to mineral development."
95. On the other hand, learned counsel for the appellants would submit that E 50 L II of S VII deals with tax on mineral rights subject to any implication relating to mineral development. Scheme of the Act reflects that the tax is imposed on "drawal of water" for the purposes of electricity generation. The tax is on the water itself. It has nothing to do with the mineral rights, which means it is a tax on mineral itself. The following points have also been raised on this aspect by the learned counsel for the appellants:-
(i) Assuming but not accepting that water itself is a mineral for the purposes of E 50 of L II, it has nothing to do with the mineral rights.
(ii) Even otherwise E 50 L II of S VII is subject to any limitation imposed by Parliament by law relating to mineral development. Therefore, in view of the Mines and Minerals (Development and Regulation)
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Act, 1957 ("MMDR Act"), the imposition of tax on mineral rights is already under purview of the MMDR Act.
(iii) In L I and L II of S VII, water and minerals have been separately used. Therefore, no extraneous tools of interpretation can be applied to get the Parliamentary intent. Non-corresponding Entry of E 17 in taxing Entries is not accidental but a definite intent of the Constitution to use the actual corresponding E 17 beyond the legislative competence of the State legislature.
(iv) Water is not a mineral; both are separate.
(v) E 25 L II of S VII relates to gas and gas works, but it is not mineral. The Constitution has made categorical difference between water and mineral.
(vi) The mines and mineral cannot be read together. If water is read in E 50 L II of S VII then there is no corresponding regulatory entry in L II of S VII. The regulatory entry of the subject is in E 56 L I ofS
VII. If water is read under E 50 L II of S VII, it would be in violation to the Constitution. Water would fall under E 97 L I of S VII which is a residuary entry.
(vii) If E 50 L II of S VII includes water, it would make Article 288 (2) redundant, which requires that the Legislature may by law impose any tax in respect of water or electricity, etc. only after President has assented to it. Therefore, it is argued that E 50 L II of S VII is not related to water.
(viii) Every tax entry relates to a general entry. For example, E 50 L II of S VII relates to E 23 of it; E
45 L II of S VII relates to E 18 of it. But, E 17 L II
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of S VII does not relate to any taxation entry. Tax on water cannot be levied by the State.
96. The learned counsel for the appellants would also submit that the judgment in the case of Ichchapur138has been passed under the provisions of the 1962 Act and in the context of the 1962 Act, the Court had held that water is mineral. It has no universal declaration that water is mineral, therefore, cannot be taxed by the State Legislature under E50 LII of SVII.
97. In the case of Ichchapur139, the Oil and Natural Gas Commission (ONGC) had notified certain land under Section 3(2) of the 1962 Act and laid pipelines for transporting petroleum from one place or another. Since the gas processing plant of ONGC could not run smoothly due to paucity of water, ONGC decided to draw water from alternative source through their own pipelines, which they thought they would lay down underneath the land, of which the right of user, had already vested in them. Accordingly, a notice was issued for laying the pipeline for carrying water. The owners of the land objected to it on the ground that the proposed lines were not being laid for transporting petroleum or any other mineral, but for transporting water, which was not permissible under the 1962 Act. In the 1962 Act, the definition of Minerals is given under Section 2(ba). According to it, "Minerals have the meaning assigned to them in the Mines Act 1952, and include mineral oils and stowing sand but do not include petroleum."
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98. The Hon'ble Supreme Court discussed the provisions of the 1962 Act as well as the definition of mineral under that Act. After discussing the law on the subject, the Hon'ble Supreme Court observed in Para 28 as hereunder:-
"28. If the question is examined in this background, it would be noticed that the definition of "mineral" which has been bodily lifted from the Mines Act, 1952 and has been placed in the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 was deliberately introduced by Amending Act No. 13 of 1977 so that while carrying petroleum through the pipelines, any other minerals may also be carried through it. If, therefore, water is treated as a "mineral" it would be permissible for the ONGC to carry it through any other pipeline without any further notification or declaration under Section 3 or 6 of the Act. This interpretation which is in consonance with the scientific definition of a "mineral", serves the purpose of the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962. The contention of the learned counsel for the appellant that "water"
should be understood in the same sense in which it is understood by a common man cannot, therefore, be accepted. This Act is an Act of Parliament intended to deal with the particular technology and the commodities involved therein. We are, therefore, of the view that in this Act, "water" has been used in both the senses, namely, that (i) it is a mineral; and (ii) the most common, readily and freely available substance on earth."
(emphasis supplied)
99. The above observation of the Hon'ble Supreme Court makes it abundantly clear that the Hon'ble Supreme Court construed the word water as mineral in view of the provisions of 1962 Act. A universal declaration has not been made that water is mineral. Therefore, it cannot be said that the State can impose tax on water under E50 of LII.
100. On behalf of the appellants, it is also argued that E 50 of L II empowers the State Government to impose tax on mineral rights and not on mineral. It is argued that if for the sake of argument water may be read as mineral for the purposes
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of E 50 of L II, even then State Government cannot impose tax on it because tax may be imposed under E 50 of L II on mineral rights and not on minerals. In support of this contention, reliance is placed on the judgment in the case of Hingir Rampur Coal Co. Ltd.140In the case of Hingir Rampur Coal Co. Ltd.141, Hon'ble Mr. Justice K.N. Wanchoo in the dissenting opinion held that "Therefore, taxes on mineral rights must be different from duties of excise which are taxes on minerals produced. The difference can be understood if one sees that before minerals are extracted and become liable to duties of excise somebody has got to work the mines. The usual method of working them is for the owner of the mine to grant mining leases to those who have got the capital to work the mines. There should therefore be no difficulty in holding that taxes on mineral rights are taxes on the right to extract minerals and not taxes on the minerals actually extracted. Thus tax on mineral rights would be confined, for example, to taxes on leases of mineral rights and on premium or royalty for that. Taxes on such premium and royalty would be taxes on mineral rights while taxes on the minerals actually extracted would be duties of excise. It is said that there may be cases where the owner himself extracts minerals and does not give any right of extraction to somebody else and that in such cases in the absence of mining leases or sub-leases there would be no way of levying tax on mineral rights. It is enough to say that these cases also, rare though they are, present no difficulty. ………………………………………….. There can be no doubt
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therefore that taxes on mineral rights are taxes of this nature and not taxes on minerals actually produced. Therefore the present cess is not a tax on mineral rights; it is a tax on the minerals actually produced and can be no different in pith and substance from a tax on goods produced which comes under Item 84 of List I, as duty of excise. The present levy therefore under Section 4 of the Act cannot be justified as a tax on mineral rights".It has been reiterated in the case of India Cement142.
101. It has already been held that water is not included in mineralfor the purposes of E 50 of L II. Further, E 50 of L II relates to mineral rights and not to mineral. Therefore, the State Legislature cannot impose water tax under E 50 L II of S VII.
102. It has also been argued on behalf of the appellants that reliance on the judgment in the case of Ichchapur143has wrongly been made in the impugned judgment.
103. Paragraphs 42, 43 and 44 of the impugned judgment deal with the arguments on behalf of the State with regard to applicability of Entries 48 and 49 in enacting the Act. In para 42 of the impugned judgment, while arguing on this aspect, reference has been made to the case of Ichchapur144. In para 43 of the impugned judgment, the principles of law as laid down in the case of Ichchapur145has been quoted. Thereafter the impugned judgment, in para 44, records that "In view of the above proposition of law it an (sic : can) safely be presumed
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that as "water" is covered under the definition of mineral, therefore, the State can derive legislative competence to levy tax on water from Entry 49 of List II of the Seventh Schedule to the Constitution of India".
104. On behalf of the State, reliance has been placed on the case of Ichchapur146to argue that water is also a mineral in view of the law laid down in the case of Ichchapur147, therefore, State Legislature is competent to tax on water.
105. The reliance in the case of Ichchapur148has been made qua E 50 L II of S VII. This reliance is not from E 49 L II of S VII. It has already been held that in the case of Ichchapur149, the Court has not laid down the law that in all contingencies water is a mineral. Therefore, the observation that has been made in the impugned judgment, on the competence of the State Legislature to enact the Act under E 49 L II of S VII may also not be upheld.
ARTICLE 288
106. Learned counsel for the appellants would submit that the State Legislature cannot enact the Act under Article 288 of the Constitution. Article 288 of the Constitution relates to inter- State rivers. Bhagirathi is not an inter-State river, it is an intra- State river. A law under Article 288 of the Constitution can be made by the State Legislature only with the consent of the President. In the instant case, such consent has not been
65
accorded. Learned counsel would also raise the following points on this aspect.
(i) Article 288 cannot be stretched out of proportion to usurp Union's residuary taxation power under Article 248 read with E 97 L I qua water tax because taxation entries ought to be construed with clarity and precision so as to maintain exclusive demarcation between the Union and the State.
(ii) In order to construe Union's power to impose tax, the only question that is to be asked is whether the tax sought to be imposed is mentioned under L II or L III. If the answer is negative, then only the Union has power to legislate on the subject. There is no entry under L II or L III, which confers the subject of water taxation on State. Therefore, the subject vests with the Union.
(iii) Article 288 does not confer any power to impose taxes by the State Legislation, which is otherwise not provided in the State List and that the power under Article 288 is only limited power to lift the prohibition to tax the exempted entities and to bring them within the framework of taxation, subject to the State law getting Presidential assent.
(iv) Article 288 applies only to such entities, which are clearly defined under this Article.
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(v) The domain of Article 288 cannot be extended beyond the exempted entities clearly and exhaustively defined in Article 288 itself and the applicability of Article 288 cannot be extended to any other entity merely because the heading of Article 288 uses the expression "in certain cases."
(vi) The expression "in certain cases" limits the applicability of Article 288 to the extent mentioned in Article 288(1).
(vii) Article 288 contains a constitutional limitation on the power of State insofar as imposition of a tax in respect of water or electricity, etc. is concerned.
107. In support of this contention, reliance has been placed on Chhotabhai Jethabhai Patel150; Ravindra151; Agra Brick Kiln Owners Assn.152; National Thermal Power Corpn. Ltd.153and Jindal Stainless Limited154.
108. In the case of Chhotabhai Jethabhai Patel155, the Hon'ble Supreme Court discussed the aspect of taxation in para 31 of the judgment and observed that "Before adverting to the decisions on which reliance was placed for this position two things might be pointed out : (1) that Article 265 merely enacts that all taxation — the imposition, levy and
67
collection shall be by law; and (2) that the Article beyond excluding purely executive action does not by itself lay down any criterion for determining the validity of such a law to justify any contention that the criteria laid down exclude others to be found elsewhere in the Constitution for laws in general".
109. Clause (2) of Article 288 of the Constitution permits the State Legislature to impose such tax as is mentioned in Clause (1) of it. The words "such tax" have been argued on behalf of the appellants. In the case of Ravindra156, in para 43, the Hon'ble Supreme Court discussed the meaning of word "such"
from dictionaries and observed that "Webster defines "such" as
"having the particular quality or character specified; certain; representing the object as already particularised in terms which are not mentioned". In New Webster's Dictionary and Thesaurus, meaning of "such" is given as "of a kind previously or about to be mentioned or implied; of the same quality as something just mentioned (used to avoid the repetition of one word twice in a sentence); of a degree or quantity stated or implicit; the same as something just mentioned (used to avoid repetition of one word twice in a sentence); that part of something just stated or about to be stated". Thus, generally speaking, the use of the word
"such" as an adjective prefixed to a noun is indicative of the draftsman's intention that he is assigning the same meaning or characteristic to the noun as has been previously indicated or that he is referring to something which has been said before".
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110. In the case of Agra Brick Kiln157also, under a statutory provision, the meaning of words "such tax" has been interpreted. In para 9 of the judgment, the Hon'ble Supreme Court observed that "It is plain that "such tax" in this proviso, relates to any tax under Section 172 and saves all species or classes of taxes and does not merely preserve the quantum or rate of such tax.It is typology, not the amount that is saved".
111. In the case of National Thermal Power Corporation158, the Hon'ble Supreme Court discussed the scope of Article 288 of the Constitution. In para 33 of the Judgment, the Hon'ble Supreme Court observed as follows:-
"33. On behalf of the States of A.P. and M.P., it was submitted that the subject of electricity has been specifically dealt with by Articles 287 and 288 of the Constitution and by implication the articles, other than Articles 287 and 288, should be read as not dealing with electricity. This submission is stated only to be rejected. These articles make some provisions for electricity and water or electricity in the special context dealt with by those articles and do not exclude applicability of other articles where electricity has been dealt with as goods."
112. The interpretation of Article 288 of the Constitution has further been made by the Hon'ble Supreme Court in the case of and Jindal Stainless159as follows:-
"25.6. Article 287 places a constitutional limitation on the State's legislative power to enact laws insofar as imposition of tax on consumption or sale of electricity consumed by the Government of India or sold to the Government of India for consumption by the Government or for consumption of the
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construction, maintenance or operation of any railway by the Government of India or a rail company, etc. Similarly, Article 288 contains a constitutional limitation on the power of the State insofar as imposition of a tax in respect of any water or electricity stored, generated, consumed, distributed or sold by any authority established by any existing law or any law made by Parliament is concerned."
113. While arguing on the competence of State Legislature under Article 288 of the Constitution, Mr. Arijit Prasad, would submit that Article 288 does not give independent legislative power to impose tax for generation of electricity. He would submit that Article 288 has to be read harmoniously with Article 245 and 246. If the State cannot show legislative competence under L II, it cannot fill that lacuna by referring to Article 288. In support of his contention, learned counsel has placed reliance on the principle of law as laid down in the case of National Thermal Power Corpn. Ltd.160.
114. Arguments made in a particular appeal have been noted at this stage because there is a contradictory argument on this point made by Mr. Saurabh Kirpal. Learned counsel would submit that Article 288 (1) is a saving clause, whereas under Article 288(2), the State has been enabled to legislate so as to impose any such tax as mentioned in clause (1), subject to certain conditions as laid down under Article 288(2). This Court would refer to those arguments at a later stage.
115. Learned Counsel for the State would submit that Article 288 of the Constitution admits the existence of power in the State to impose a tax "in respect of water". If Entries 45 - 63
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of L II do not recognize the competence of the State to impose tax
"in respect of water" or consumption or use of water drawn then there would have been no occasion to grant an exemption from it under Article 288. Learned Counsel would also raise the following points in his submission:-
(i) Article 288 also grants exemptions from tax in
"certain cases", but the petitioners/appellants do not fall in any of the categories of those
"certain cases" as referred to in Article 288.
(ii) The tax on "consumption or sale of electricity"
is within the State jurisdiction under E 53 of L II. Therefore, there was a need for exemption under Article 287. Similarly, learned counsel would submit that, in continuation, Article 288 grants exemption from State Taxation "in respect of water or electricity in certain cases".
(iii) Word "consumption" is very wide and also includes non-consumption use.
(iv) Article 288(2) recognizes power in the State to impose any such tax in respect of water or electricity. The words "such tax" implies tax "in respect of water" as in Article 288(1).
(v) If Entries 45-63 of L III do not authorize the State to impose tax "in respect of water" on consumption or use of water drawn then why grant exemption from it under Article 288(1) &
(2) to certain entities created by an Act of Parliament.
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(vi) The assent of the President is needed only when such tax is imposed on an authority established by law for the specified activities. The appellants are not such authorities.
116. In support of his contentions, learned Counsel has referred to the principles of law as laid down in the cases of Burmah Shell161; Delhi Electric Supply undertaking162; V.M. Salgaoncar163; Damodar Valley Corporation164; Southern Petrochemical Industries Co. Ltd.165; Chunilal Rameshwar Lal166 and Vijay Chand Jain167.
117. In the case of Delhi Electric Supply Undertaking168, water was used for cooling the turbines and other equipments in thermal generating industries. The Hon'ble Supreme Court upheld the conclusion of the appellate authority, which had held that "supply of water was measured by the meters which were installed at the entry of the factory. On that basis the water which entered the factory was taken to be consumed.
118. Reference has also been made to Major Law Lexicon Vol. III of P. Ramnath Ayyar, in which while referring to the case
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of Burmah Shell169, it is observed that for consumption it is not necessary that the community must be destroyed or used.
119. In the case of Burmah Shell170, the Hon'ble Supreme Court, inter alia, observed that "so long as the goods have been brought into the local area for consumption in that sense, no matter by whom, they satisfy the requirements of the Boroughs Act and octroi is payable. Added to the word
"consumption" is the word "use" also."
120. In the case of V.M. Salgaoncar171, the Hon'ble Supreme Court interpreted the word "consumption" and observed "The word "consumption" may involve in the narrow sense using the article to such an extent as to reach the stage of its non-existence. But the word "consumption" in fiscal law need not be confined to such a narrow meaning. It has a wider meaning in which any sort of utilization of the commodity would as well amount to consumption of the article, albeit that article retaining (sic retains) its identity even after its use."
121. In the case of Damodar Valley Corporation172, a question was raised with regard to immunity from payment of tax under Article 288 of the Constitution of India. In that case a levy of duty on the sales and consumption of electrical energy in the State of Bihar was imposed by way of an amendment in the Bihar Electricity Duty Act, 1948, but the Amendment Act had
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not received the assent of the President before its publication. The Hon'ble Supreme Court observed as hereunder:-
"9. What is required by clause (2) of Article 288 is that the law made by the State Legislature for imposing, or authorising the imposition of tax mentioned in clause (1) shall have effect only if after having been reserved for the consideration of the President it receives his assent. Another requirement of that clause is that if such law provides for the fixation of the rates and other incidents of such tax by means of Rules or orders to be made under the law by any authority, the law shall provide for the previous consent of the President being obtained to the making of any such Rule or order. It is, however, not the effect of that clause that even if the abovementioned two requirements are satisfied, the provisions which merely deal with the mode and manner of the payment of the aforesaid tax should also receive the assent of the President and that in the absence of such assent, the provisions dealing with the incidence of tax, which have received the assent of the President, would remain unenforceable. "
122. In the case of Southern Petrochemical Industries Co. Ltd.173, the Hon'ble Supreme Court referred to the principle of law as laid down in the case of Damodar Valley Corporation174.
123. In the case of Chunilal Rameshwarlal175, the Hon'ble Supreme Court observed that " the expression "in respect of" is of wider connotation than the word "in" or "on"."In the case of Vijay Chand Jain176also, the Hon'ble Supreme Court observed that "The words "in respect of" admit of a wide connotation."
124. The question is as to whether competence of the State Legislature may be derived from Article 288 of the Constitution?
Essentially, what is being argued on behalf of the State is that
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Article 288 gives exemption from taxation by State in respect of water and electricity, therefore, it pre-supposes the power to legislate by the State Legislature.
125. A few principles of interpretation need reiteration. They are that power to tax may not be inferred; it cannot implied; it has to be distinct, clear. It is also settled law that while interpreting any Entry, wide interpretation should be given, but in any case, there should be a legislative entry enabling the Legislature, either Union or the State to enact a particular Act.
126. Article 288 of the Constitution reads as follows:-
"288. Exemption from taxation by States in respect of water or electricity in certain cases.—
(1) Save in so far as the President may by order otherwise provide, no law of a State in force immediately before the commencement of this Constitution shall impose, or authorise the imposition of, a tax in respect of any water or electricity stored, generated, consumed, distributed or sold by any authority established by any existing law or any law made by Parliament for regulating or developing any inter-State river or river-valley.
Explanation.—The expression "law of a State in force"
in this clause shall include a law of a State passed or made before the commencement of this Constitution and not previously repealed, notwithstanding that it or parts of it may not be then in operation either at all or in particular areas.
(2) The Legislature of a State may by law impose, or authorise the imposition of, any such tax as is mentioned in clause (1), but no such law shall have any effect unless it has, after having been reserved for the consideration of the President, received his assent; and if any such law provides for the fixation of the rates and other incidents of such tax by means of rules or orders to be made under the law by any authority, the law shall provide for the previous consent of the President being obtained to the making of any such rule or order."
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127. The Constitution should be interpreted in a dynamic manner; it is living organ. In the case of GVK Industries177,the Hon'ble Supreme Court also referred to the techniques of interpretation by using the words "topographical space". The Hon'ble Court observed as hereunder :-
"38. Our Constitution is both long and also an intricate matrix of meanings, purposes and structures. It is only by locating a particular constitutional provision under consideration within that constitutional matrix could one hope to be able to discern its true meaning, purport and ambit. As Prof. Laurence Tribe points out:
"To understand the Constitution as a legal text, it is essential to recognize the … sort of text it is: a constitutive text that purports, in the name of the people…, to bring into being a number of distinct but inter-related institutions and practices, at once legal and political, and to define the rules governing those institutions and practices."
(See Reflections on Free-Form Method in Constitutional Interpretation. [108 Harv L Rev 1221, 1235 (1995)] )
39. It has been repeatedly appreciated by this Court that our Constitution is one of the most carefully drafted ones, where every situation conceivable, within the vast experience, expertise and knowledge of our framers, was considered, deliberated upon, and appropriate features and text chosen to enable the organs of the State in discharging their roles. While indeed dynamic interpretation is necessary, if the meaning necessary to fit the changed circumstances could be found in the text itself, we would always be better served by treading a path as close as possible to the text, by gathering the plain ordinary meaning, and by sweeping our vision and comprehension across the entire document to see whether that meaning is validated by the constitutional values and scheme."
128. Further in the case of GVK Industries178, the Hon'ble Supreme Court observed that "However, it can also be appreciated that given the complexity and the length of our Constitution, the above task would be gargantuan. One method that may be adopted would be to view the
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Constitution as composed of constitutional topological spaces."
129. Learned Counsel for the State would submit that Article 288 of the Constitution finds place under Part XII of the Constitution, which deals with "Finance, Property, Contracts and Suits". Under Chapter I, under sub-heading "Miscellaneous Financial Provision", Article 288 is amongst the provisions relating to exemptions. It is argued that Article 288 has to be read in the light of its topographical space in the Constitution.
130. In Part XII, Chapter I, under the Miscellaneous Financial Provisions of the Constitution, there are provisions from Articles 282 to 290-A. These are miscellaneous provisions. In order to appreciate the arguments, the exemption clause may require a little more scrutiny.
131. Article 285 relates to exemption of property of the Union from State taxation; Article 287 relates to exemption from taxes on electricity; Article 289 relates to exemption of property and income of a State from Union taxation. E 53 L II of S VII deals with taxes on consumption or sale of electricity, but Article 287 is an exemption to it. Article 289 in general terms exempts the property and income of a State from Union taxation. In between, Article 288 deals with exemption from taxation by States in respect of water or electricity in certain cases. It is true that Article 288 is between such two Articles, which really deal with exemptions.
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132. It is settled law that the Head Note of an Article may not be the sole factor for determining the true intent and character and pith and substance of an Article. Clause (1) of Article 288 of the Constitution, in fact, is a saving clause. Any State law in force immediately before commencement of the Constitution, which imposes tax as specified in the sub clause may not be applicable unless the President may by an order otherwise provides. It clearly means that if there existed any State law immediately before commencement of the Constitution, which imposes and authorizes the imposition of tax in respect of water and electricity stored, generated, consumed, distributed or sold by any authority established by any existing law or any law made by Parliament for regulating or developing any inter-State river or river-valley, such law shall not come into force unless the President by order otherwise provides. It is not an exemption clause as such. Clause (1) of Article 288 does not pre-suppose that the State Legislature has legislative competence to make law with regard to inter-State river or river-valley or with regard to electricity or water. It makes provision for law in force on that subject, which were applicable just before commencement of the Constitution.
133. Clause (2) of Article 288 is definitely an enabling provision. It empowers the State Legislature to impose or authorize the imposition of any such tax as mentioned in Clause
(1) of Article 288 but it is subject to various conditions, one of which is that such law shall have any effect only if it has been reserved for consideration of the President and has received the consent.
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134. The argument is that since Article 288 of the Constitution provides for exemption, it may be inferred that there is legislative competence on the subject to make law with the State Legislature.
135. The law is well-settled that the legislative competence may not be implied or inferred to.
136. In the instant case, the Act has not been reserved for consideration of the President and it has not received the assent of the President. Even otherwise, Article 288 relates to various entities as specified in Clause (1) of Article 288 of the Constitution. The appellants or any of them do not fall in that category of entities as specified under Article 288(1) of the Constitution.
137. It cannot also be said that the State's power to impose tax has been restricted under Article 288 with regard to certain entities, therefore, with regard to other entities the State Legislature is competent to legislate. As stated, legislative competence should be clear, precise and distinct.
138. Clause (1) of Article 288 is a saving clause. The first two lines before the word "but" appearing in the second line of Clause (2) of Article 288 enables the State Legislature to levy such tax as mentioned in Clause (1) of Article 288, but subject to conditions which are enumerated after the word "but" appearing in line 2 of Clause (2). In view thereof, it cannot be said that the State Legislature may enact the Act under Article 288.
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139. In the impugned judgment, it has been concluded that the argument regarding violation of Articles 200 and 288 of the Constitution by the State are misconceived. While referring such finding, in para 75 of the impugned judgment, it is recorded that "The bill passed by the State legislature under Entry 17 of List II has been accorded assent by the Hon'ble Governor of Uttarakhand under Article 200 of the Constitution before the bill took the shape of an Act. Furthermore, Article 163(2) of the Constitution stipulates - if any question arises whether any matter is or is not a matter as respects which the Governor is by or under this Constitution required to act in his discretion, the decision of the Governor in his discretion shall be final, and the validity of anything done by the Governor shall not be called in question on the ground that he ought to or ought not have acted in his discretion". In para 75 of the impugned judgment, it has also been recorded that "So far as another contention of learned Senior Counsel appearing for the petitioner THDC that in view of provision contained in Article 288(2) of the Constitution of India the legislature of a State can impose any such tax only if the law has received the assent of the President of India is concerned, it is apparent that the Act is not in violation of Article 288(2) of the Constitution, rather the same is in conformity with the provisions contained under Entry 17 of List II of the Seventh Schedule to the Constitution of India".
140. Merely because an Act gets approval of the Governor, it cannot be said that the competence of the State Legislature in
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enacting such Act may not be questioned. The law is well-settled that under certain parameters, an Act may be questioned qua the competence of the legislature in enacting such Act. This Court has already held that merely by reading Article 288, which admittedly does not apply in the instant case, the State Legislature may not derive competence to enact the Act. Therefore, this Court is of the view that the observations that have been made on this aspect in the impugned judgment, as quoted hereinbefore, may also not be upheld.
NATURE OF TAX
141. Learned counsel for the appellants would submit that the tax imposed by the Act is on electricity generation. The central theme of the Act is that tax is levied on "generation of electricity". The incident is water drawn for electricity generation. What the State could not have done directly, it tried to do indirectly. It is argued that in order to levy such tax, there should have been a separate entry on "drawal of water for electricity generation".
142. Learned counsel for the appellants would also submit that while interpreting the different entries, in S-VII, it is the duty of the Court to find out its true intent and purpose.
143. In support of his contention, learned counsel placed reliance on the principle of law as laid down in the cases of India Cement Ltd.179; Kartar Singh180; State of Meghalaya181,
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Association of Natural Gas182;Bill to Amend Section 20 of the Sea Customs Act183; Govind Saran Ganga Saran184, Godfrey Phillips India Ltd.185, M.P. Cement Manufacturers'
Association186,Federation of Hotel and Restaurant Association187, Drive-in Enterprises188, Prafulla Kumar Mukherjee189, Raza Buland Sugar Co. Ltd.190, K.C. Gajapati Narayan Deo191, R.M.D.C. (Mysore) (P) Ltd.192and Hari Krishna Bhargav193.
144. Learned Counsel for the State would submit that the incident of tax in the Act is the drawal of water for use in electricity generation only. He would submit that it is a tax clearly "in respect of water", precisely on "drawal and use of water to commercially generate electricity" i.e. the nature of this tax. He would also submit that there is an inherent connect between land and water. Water flows on the land and is attached to the earth. In the instant case, it is argued that the water falls on the land or on the generator attached to the land to generate electricity, therefore, in pith and substance, the tax is in respect of water/land or it is a tax on drawal or use of water for generation of electricity.
145. In support of his contention, learned Counsel has placed reliance on the judgments in the case of Indian
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Aluminium Co.194,Municipal Council, Kota195and TVS Motor Company Ltd.196
146. In fact, in the case of TVS Motor Company Limited197, the Hon'ble Supreme Court has followed the principle of law as laid down in the case of Govind Saran Ganga Saran198.
147. What is the true nature and character of the Act?
Such question generally arises when legislative competence is challenged. The concept is not new. The question is, is it really a tax on drawal of water for electricity generation only? Or is it a tax on electricity generation?
148. Long back, in the case of Russel199, an Act of Parliament of Canada was challenged on the ground of legislative competence. While making the discussion, it was observed that,
"the true nature and character of the legislature in the particular instance under discussion must always be determined, in order to ascertain the class of subject to which it really belongs."In the case of Barger200, the High Court of Australia referred to the earlier judgments and observed that,
"in considering the validity of laws of this kind, we must look at the substance and not the form. If the statute is good in substance, the Court will regard the substance and hold the law to be valid, whatever the form may be."
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149. In the case of Muttuswami Goundan201, the Hon'ble Federal Court observed that "Hence the rule which has been evolved by the Judicial Committee whereby the impugned statute is examined to ascertain its "pith and substance", or its "true nature and character", for the purpose of determining whether it is legislation with respect to matters in this list or in that:"
150. The case of Prafulla Kumar Mukherjee202is another case in which the test of pith and substance has been applied while examining the legislative competence. It would be apt to discuss the facts of this case in a little detail. The validity of Bengal Money Landers Act 1941 was in question, which had limited the amount recoverable by money lenders on his loans or principal and interests and prohibited the payment of sums larger than those permitted by the Act. The matter pertaining to cheques, bills of exchange, promissory notes and "other like instruments" was in the list of Federal Legislature in the Government of India Act, 1935, under E38. E27 in the Provincial Legislative List was with regard to "to make laws with respect to
"trade and commerce within the Province………..; money lending and money lenders." The Federal Court had held that in so far as the Act effected promissory notes, it trespassed into the federal legislature field and was therefore ultra vires.
151. Finally, the privy council held that the transactions in questions are in pith and substance money lending transactions. It was observed that, "To take a promissory note as security
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for a loan is the common practice of money lenders, and if a legislature cannot limit the liability of a borrower in respect of a promissory note given by him it cannot in any real sense deal with money lending.…… In truth, however, the substance is money lending and the promissory note is but the instrument for securing the loan."
152. The similar principles have been followed in the cases of India Cement Ltd.203, Kartar Singh204,Federation of Hotel205, State of Meghalaya206,Association of Natural Gas207and Raza Buland Sugar Co. Ltd.208
153. In the case of M.P. Cement Manufacturers' Association209, the Hon'ble Supreme Court referred to the judgment in the case of Mathuram Agrawal210, wherein it was held that "The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language".
154. In the case of Drive-in Enterprises211,the facts were as follows:- A drive-in-theatre is a cinema with an open air theatre into which admissions were given to persons desiring to watch film while sitting in their vehicle taken inside the theatre.
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Rs. three were for auditorium and an additional ticket of Rs. two was to be charged from the persons, who wanted to view the film from their vehicle. The State, in addition to charging entertainment tax on the persons being entertained, levied entertainment tax on admission of cars inside the theatre. It was challenged. Various factors were considered by the Hon'ble Supreme Court in the case. The Hon'ble Supreme Court also observed that the nomenclature of levy is not conclusive for determining its true character. It was held that, "The real nature and character of the impugned levy is not on the admission of cars or motor vehicles, but the levy is on the person entertained who takes the car inside the theatre and watches the film while sitting in his car. We are, therefore, of the view that in pith and substance the levy is on the person who is entertained. Whatever be the nomenclature of levy, in substance, the levy under heading "admission of vehicle" is a levy on entertainment and not on admission of vehicle inside the drive-in-theatre. ."
155. In the case of Gajapati Narayan Deo212, the Hon'ble Supreme Court observed as hereunder:-
"11. It may be made clear at the outset that the doctrine of colourable legislation does not involve any question of bona fides or mala fides on the part of the legislature. The whole doctrine resolves itself into the question of competency of a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power [ Cooley, Constitutional Limitations, Vol. 1, 379.] . A distinction,
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however, exists between a legislature which is legally omnipotent like the British Parliament and the laws promulgated by which could not be challenged on the ground of incompetence, and a legislature which enjoys only a limited or a qualified jurisdiction. If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case has or has not, in respect to the subject-matter of the statute or in the method of enacting it, transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguised, covert and indirect and it is to this latter class of cases that the expression "colourable legislation" has been applied in certain judicial pronouncements. The idea conveyed by the expression is that although apparently a legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be a mere pretence or disguise. As was said by Duff, J. in Attorney General for Ontario v. Reciprocal Insurers [Attorney General for Ontario v. Reciprocal Insurers, 1924 AC 328 at p. 337 (PC)] : (AC p. 337)
"… where the law-making authority is of a limited or qualified character, obviously it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what is that the legislature is really doing."
156. The Hon'ble Supreme Court further observed that "it is the substance of the Act that is material and not merely the form or outward appearance, and if the subject-matter in substance is something which is beyond the powers of that legislature to legislate upon, the form in which the law is clothed would not save it from condemnation". This principle has also been followed in the cases of R.M.D.C. (Mysore) (P) Ltd.213and Hari Krishna Bhargav214.
157. In the instant case also, the pith and substance of the Act is to be determined. Its true nature and character is to be
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ascertained. On behalf of the appellants, it is argued that that the character of the imposition known by its nature, it is the first of the component of a tax. Thereafter, the clear indication of the person, on whom the levy is imposed and who is obliged to pay the tax; the rate and the measure of the tax are its other components. It is also argued that generally tax is composed of two elements, namely, person, thing or activity on which the tax is imposed and incident of the tax. It is the case of the appellants that in the instant case, though tax is termed as on drawal of water for generation of electricity, but, in essence, the incident is generation of electricity. Therefore, in pith and substance, this is a tax on electricity generation.
158. In support of his contention, reference has been made to the judgment in the case of Govind Saran GangaSaran215, Godfrey Phillips216and Bill to Amend Section 20 of Sea Customs Act, 1878217.
159. In the case of Govind Saran Ganga Saran218,in Para 6, the Hon'ble Supreme Court observed as hereunder:-
"6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in
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the legislative scheme defining any of those components of the levy will be fatal to its validity."
160. In the case of Godfrey Phillips219, in Para 47, the Hon'ble Supreme Court observed that, "Classically, a tax is seen as composed of two elements : the person, thing or activity on which the tax is imposed and the incidence of tax." The Hon'ble Supreme Court further observed that, "Under the three lists of the Seventh Schedule to the Indian Constitution a taxation entry in a legislative list may be with respect to an object or an event or may be with respect to both………… Hence, where the entry describes an object of tax, all taxable events pertaining to the object are within that field of legislation unless the event is specifically provided for elsewhere under a different legislative head. "
161. In the case of Sea Customs Act220, the Hon'ble Supreme Court observed that, "duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. We may in this connection contrast Sales Tax which is also imposed with reference to goods sold, where the taxable event is the act of sale."
162. In the case of Indian Aluminium Co.221, the Hon'ble Supreme Court held that, "when legislative competence is challenged the controversy must be resolved as far as possible in favour of the legislative body putting the most
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liberal construction." It was held that the Court, in such situation is required to look at the substance of the legislation. In the case of Municipal Council, Kota222, also, the Hon'ble Supreme Court discussed the principle of true nature test and held that nomenclature used or chosen to christen the levy is not much relevant to determine the real factor or nature of the levy. What really has to be seen is the pith and substance or the real nature and character of the levy.
163. In order to ascertain the true nature and character or pith and substance of the Act, it would be apt to look at the provisions of the Act.
164. The Act is named as the Uttarakhand Water Tax on Electricity Generation Act, 2012. It is "to levy water tax on electricity generation in State of Uttarakhand." A few Sections of the Act are as follows:-
"2. Definition. - In these rules, unless there is anything repugnant in the subject or context:-
(a) ……………….
(b) ………………. [(2)(B) ……………………………
(c) ………………………
(d) ……………………………..
(e) ……………………………..
(f) "User" means any person, group of persons, local body, Government Department, company, corporation, society etc. drawing water or any other authority authorized under chapter - II of the Act to avail the facility to draw water from any source for generation of electricity;
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(g) "Water" means 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, spring;
(h) "Water Source" means a river and its tributes, stream, nallah, canal, spring, pond, lake, water course or any other source from which water is drawn to generate electricity;
(i) "Water Tax" means the rate levied or charged for water drawn for generation of electricity and fixed under this Act.
3. General. - For the purpose of this Act, every water source in the State is, and shall remain, the property of the Government and any proprietary ownership, or any riparian or usage right, on such wale; resources vested in any individual, group of individuals or any other body, corporation, company, society or community shall, from the date of commencement of the Act, be deemed to have been terminated and vested with the Government. However, for rivers of interstate nature and rivers under the ambit of international treaties, the ownership right of Uttarakhand Government shall be limited to non-consumptive use of water.
(2) No person, group of persons, Government department, local authority, corporation, company, society or any other body
shall draw water from any source for electricity generation
except in accordance with the provisions of the Act.
4. Installation of Scheme for usage of water. - No person, group of persons, Government department local authority, corporation, company society or any other body, by whatever name called (hereinafter in this Chapter will be called the "user"),
shall install a Scheme requiring usage of water (non consumptive use) of any water source for generating electricity except without being registered under the Commission in accordance with the provisions provided hereinafter in this Chapter.
5. Submission of Sanctioned Scheme for usage of water by the user. - Any user intending to install a Scheme requiring usage of water (non consumptive use) for the purpose of generation of electricity shall submit Detailed Project Report of the scheme, .duly sanctioned by authority competent to do so in this behalf to the Commission accompanied by such fee and charges as may be fixed by the Commission for registration.
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12. Duties obligations and responsibilities of the Registered user. - (1) The registered user shall be liable to pay water tax for the water drawn for electricity generation as per the provisions of the Act.
(2) Where any user has constructed a Hydropower scheme, for purpose of generation of electricity, prior to the commencement of the Act, such user shall, within a period of six month from the date of commencement of the Act, apply for registration under the Act and the Commission shall pass an order to register the user within a period of six months from the date of receipt of application in accordance with the provisions of the Act.
14. Assessment of water drawn by user. - (1) The Commission shall install or cause to be installed flow measuring device within, the premises of Scheme or at such other place where the Commission deems fit for purposes of measuring the
water drawn for electricity generation or may adopt any indirect method for assessment of water drawn by the user.
(2) ……………………………..
17. Fixation of water tax. - The user shall be liable to pay the Water Tax under the Act 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 tax fixed under this section from time to time in the manner it deems fit.
19. Procedure for assessment. - (1) The assessment of water drawn by the user for electricity generation and computation of water tax there of shall be carried out by the Commission."
165. If the name, per se, is looked at, according to the Act, it is water tax on electricity generation. The question is, is it tax on drawal of water for generation of electricity, as argued by learned Counsel for the State, or as to whether in "pith and substance", it is tax on generation of electricity.
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166. In the case of M.P. Cement Manufacturers' Association223, the Hon'ble Supreme Court has categorically held that the intention of the legislature in a taxing statute is gathered from the language of the provision, particularly when the language is plain and unambiguous. The language of the Act makes it abundantly clear that it is a tax on electricity generation. It is settled law that mere nomenclature may not be the sole factor for determining the true nature of the Act; nomenclature alone may not be a determining factor to ascertain
"pith and substance" of an Act while examining the legislative competence. It is also settled legal position that measure of tax is not sole factor to determine the nature of tax. The fixation of tax may be done under Section 17 of the Act. It may be done on such rate, as the Government by notification may fix on this behalf. The fixation has been done by way of notification dated 07.11.2015. It reads as follows:-
"Uttarakhand Government Irrigation Section -2 No. 2883/II-2015/01 (50)/2011 Dehradun : Dated 7 November, 2015
Notification
Governor, Uttarakhand by using his power on Power Generation in Uttarakhand, as per Section 17 (1) of Water Cess Act, 2012 (Uttarakhand Act No. 09 No. 2013) has readily acknowledge to impose water cess on the hydel projects which are established in Uttarakhand State except 5 MW or below capacity projects from the date of publication of this Notification which is as follows:
| Sl. No. | Head available for power generation | Prescribed water tax |
| 1. | Upto 30.00 M | 02 paisa/CUM |
| 2. | 31.00 to 60.00 M | 05 paisa/CUM |
| 3. | 61.00 to 90.00 M | 07 paisa/CUM |
| 4. | 90.00 and above | 10 paisa/CUM |
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2. The above Water Cess will be effective for upcoming three year from the date of implementation."
NAME OF THE ACT
167. The name of the Act is not sole factor to determine the pith and substance of the Act,the contents; true nature and character of the Act or its "pith and substance" has to be seen.
168. The name of the Act suggests that it is a tax on electricity generation. It reads as "the Uttarakhand Water Tax on
Electricity Generation Act, 2012". Now the question is whether the true nature and character of the Act is different than what is suggested by its name?
TAXABLE EVENT
169. The components, which entered into the concept of tax is elaborated in the case of Govind Saran Ganga Sharan224 and TVS Motor Company Limited225that the first amongst them is "the character of the imposition known by its nature, which prescribes the "taxable event attracting the levy".
170. In the case of Godfrey Phillips India Ltd.226also this has been held by the Hon'ble Supreme Court that in addition to the person, thing or activity on which the tax is imposed, the incident of tax is another component of it.
171. In the instant case, it has to be seen as to what is the taxable event. On behalf of the State, it is argued
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that it is the drawal of water, whereas on behalf of the appellants, it is being argued that it is not merely on drawal of water but drawal of water for electricity generation.
172. Tax by the Act is imposed on a user, who is defined under Section 2(f) of the Act. There is a restraining Section also under the Act, which makes provision for its functioning or its necessary compliance.
173. Section 2 (f) of the Act has already been quoted hereinbefore. According to it, user means a person, who draws water from any source for generation of electricity. It means, mere drawal of water does not make a person liable to pay tax under the Act. A user is under liability to pay the tax only if he draws water from any source for generation of electricity.
174. It has further been clarified by Section 3(2) of the Act. It has also been quoted hereinbefore. It poses a restriction that no person, group of person, etc. shall draw water from any source for electricity generation except in accordance with the provisions of the Act.
175. Tax is imposed under Section 17 of the Act. It is on the user. As stated, user is a person, who draws water for generation of electricity. Therefore, the taxable event in the Scheme of the Act is not mere drawal of water. It is drawal of water for generation of electricity. If merely water is drawn from any source, the Act does not impose any tax. But, if drawal of water is for generation of electricity, it is taxable event.
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MEASURE OF TAX
176. On behalf of the State, it is argued that the tax is not imposed on electricity units generated. Instead, it is measured by the volume of the water used for the purpose. On behalf of the appellants, it is argued that by virtue of the notification dated 07.11.2015, for different heights, different rates of water tax are imposed. It suggests that it is a tax on generation of electricity.
177. The settled law need not be reiterated that nature of tax and its measure are quite distinct. The measure of tax per se does not ascertain the nature of tax. The similar principle would definitely apply in the instant case also.
178. The measure of tax definitely is as per cubic meter water used but it depends on the height available for power generation. Higher the height, more is the tax per cubic meter water. Had it been tax on mere drawal of water, there would have been no necessity to correspond the use of water with the height available for power generation. While examining the taxable event and the person i.e. the user, who is liable to pay the tax under the Act, it has already been held that mere drawal of water is not taxable. Only such drawal of water is taxable, which is drawn for generation of electricity.
179. The name of the Act, the taxable event, the user and the measure of the tax all suggest that definitely the tax in the instant case is on electricity generation. The measure of the tax is though on volume of water used, but the rate increases with the height of the head. The form, in which the measurement is
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clothed, is definitely an exercise of colourable legislation. But, what the notification dated07.11.2015 had tried to hide is visible with more flash of lights. The measurement of tax also confirms that it is tax on electricity generation. Therefore, this Court concludes that in pith and substance, it is tax on generation of electricity. It is not on use of water on land. It is on use of water for generation of electricity.
180. On behalf of the State, it is argued that the State Legislature is competent to legislate the Act under E 45 and 49 of L II of S VII. It was argued that the water drawn from the source falls on the land or on generator attached to the land to generate electricity, therefore, in pith and substance, the tax is in respect of water/land and it is a tax on drawal and use of water on land. In connection with E 45, it was argued that since the water falls on land or on the generator attached to land to generate electricity, it is land revenue.
181. While making discussion on these two arguments, this Court had then observed that it is a question related to pith and substance and true nature and character of the Act. Now, this Court has held that in the instant case, the water drawn from the source though falls on generator attached to land, but it is not use of water on land and it is also not land revenue for the simple reason because it is not only fall of water on land, but it is use of water for electricity generation that makes a taxable event. The pith and substance of the Act is water tax for generation of electricity. Therefore, the State Legislature is not competent to levy the tax under E 45 and 49 L II of S VII.
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EXCESSIVE LEGISLATION -PROMISSORY ESTOPPEL
182. The tax has also been challenged on the ground that it is bad due to excessive delegation and by the doctrine of promissory estoppel. Learned counsel for the appellants would submit that in the Act, there is no taxing provision; tax has been imposed by a notification dated 07.11.2015 by the State Government. Learned counsel for the appellants would also raise the following points in their submissions:-
(i) Levy of tax by notification is not a legislative act. It is an executive act. As per the notification, if the head of water fall is higher, the amount of tax levied is also higher. It makes the intention to enact the Act much clear. The notification dated 07.11.2015 is fraud on power.
(ii) The appellants under an agreement raised the project. A promise was made by the State to the petitioners that the State will not charge on water used for the project and in lieu thereof the appellants had agreed to give 12% of the electricity to the State. It is a sovereign guarantee. The State is under a contractual obligation. The State cannot go beyond it.
(iii) By a notification dated 07.11.2015 issued under the Act, tax has been imposed. It is not a tax levied by a statute, but a tax levied by a statutory notification, which is an excessive delegation by the State Legislature. In this case, the doctrine of promissory estoppel would
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apply, thereby the State would be stopped to charge such a tax.
(iv) The incident of tax is a notification. It is the delegation of an unlimited power.
(v) The fixation of water rates is arbitrary, as there is no nexus with incidence of tax. The incidence of tax has co-relation with the height from which the water falls. The greater the height, the greater the amount of tax, which is arbitrary.
(vi) Notification dated 07.11.2015 is not reasonable. It hits Wednesbury's Principle of reasonableness.
(vii) In the impugned judgment, it has wrongly been held that promissory estoppel would not apply in such case.
(viii) 12% of the deliverable energy is to be provided to the State free of cost.
(ix) There is no overriding public interest in favour of the State of Uttarakhand to resile from its promise made under the agreement.
183. In support of these arguments, reliance has been made on the principle of law as laid down in the cases of Devi Dass Gopal Krishnan227; Veega Holidays228; Motilal Padampat229; Chattanatha Karyalar230andShanmuga Oil Mills231.
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184. Learned Counsel for the State would submit that the tax is validly imposed; the delegation for fixing rates under the Act is not excessive delegation; Section 17 and 18 of the Act do not confer an unguided or unlimited discretion to fix the rate for drawal and usage of water; the "Policy for Harnessing Renewable Energy Sources in Uttarakhand with Private Sector/Community Participation" dated 29.01.2008 broadly classifies the Renewal Energy ("RE") Sources into two categories i.e. Upto 25 MW and other RE projects; it also classifies Hydroprojects, Further classification has been made as Micro Projects with capacity upto 100 KW, Mini Projects with capacity above 100 KW and upto 5 MW and Small Projects with capacity above 5 MW and upto 25 MW. He would also raise the following points in his submissions:-
(i) The provisions of the Act, in fact, are manifestation of the public policy, therefore, there is enough regulatory policy for balancing
"rates on tax" with the objective of preserving and conserving the State's most valuable property.
(ii) The essential legislative function has not been delegated. The Act provides the policy and only leaving it to the executive to fix the tax at such rates. The words "such rates" are dynamic words used to enable the Government to meet different situation.
(iii) Power to fix rates, etc. may be delegated to the State Government.
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(iv) The tax on drawal of water has been imposed under a Policy, which has a larger public interest of promoting, preserving and conserving water in public interest.
(v) The purpose of the Act coupled with the policy background, which is binding on the State, offers enough guidance. The power is not unlimited unless State intends to spell doom for its Policy and waste the private investments in the State.
(vi) Even if a maximum tax is not prescribed under the Act, it also does not make the delegation invalid. Section 17 and 45 of the Act prescribe the guidance for fixing the rates. Mere absence of maximum rate is of no consequence as it hardly provides guidance for rate fixation.
(vii) There are four categories of user of water i.e. micro, mini, small and those beyond 25 MW. All the four categories use different quantity of water based on the height of the water head from where the water falls. The result would depend upon the height of water heads. It has to be measured and evaluated and the
Government has the experts and the data, therefore, discretion has been given to fix different rates for different category of user.
(viii) No one has questioned the reasonableness of the rates fixed for the different categories created under policies of 2003 and 2008 and
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therefore the argument with regard to excessive delegation has no force at all.
(ix) The tax also includes price for parting of privilege by the owner Government. This is not a usual tax but it also includes return for the consideration for parting with property. The property has to be assessed and valued before any rate can be fixed. The quantity of water used would also be relevant. All these value assessments can best be made by the Government and not the legislature.
(x) It is not a case of promissory estoppel.
(xi) There is no concept of sovereign guarantee in the Constitution. There is no sovereign in the democracy and rule of law is supreme, which is governed by the written Constitution.
(xii) The Restated Implementation Agreement filed in SPA No. 137 of 2017, Alaknanda Hydro Power Co. Ltd. v. State of Uttarakhand and others does not prohibit the State Legislature from levying a tax on drawal of water for generation of electricity.
(xiii) If the State Government has entered into an agreement, it does not bar the Legislature from imposing tax.
185. In support of his submissions, learned Counsel for the State has placed reliance on the principles of law, as laid
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down in the cases of Quarry Owners' Association232, Pandit Banarsi Das Bhanot233, Municipal Corporation of Delhi234, M/s Hiralal Rattanlal235, Sita Ram Bishambhar Dayal236, Sashi Prasad Barooah237, M.K. Papiah238, Liberty Cinema239, Ashok Leyland Ltd.240, Devi Dass Gopal Krishnan241, Keshavlal Khemchand242, TVS Motor Company243and Gwalior Rayon244.
186. Essentially, two points have been raised on behalf of the appellants, namely, (i) the tax has been imposed by a statutory notification purportedly having been issued under Section 17 of the Act, which delegates the power to impose tax on the Executive, without any guidance. Therefore, Section 17 of the Act is bad because it is vitiated by excessive delegation; and
(ii) demand of tax is bad. State had already promised that no tax would be imposed on use of water and based on that promise, the projects have been established. Therefore, now the tax cannot be demanded. It is bad because of the doctrine of promissory estoppel. Two concepts are to be discussed, i.e. excessive delegation of legislative power and doctrine of promissory estoppel.
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EXCESSIVE DELEGATION
187. Essentially, the legislature is entrusted with the task of making laws, but, with the growing activities of the State or penetration of State activities in almost every sphere of life, it has been an accepted phenomenon that certain acts under the statute are delegated to the executive so that the statute may become operational. The minor details are left to be worked out by the Executive, which, at times, may require collection of data, studies, etc.
188. In the case of Pandit Banarsi Das245, the issue relating to delegation was discussed. In the case of Pandit Banarsi Das246, the provisions of the Central Provinces and Berar Sales Act 21 of 1947 ("the 1947 Act") found discussion. Section 6 of the 1947 Act is as follows:-
"6. (1) No tax shall be payable under this Act on the sale of goods specified in the second column of Schedule II, subject to the conditions and exceptions, if any, set out in the corresponding entry in the third column thereof.
(2) The State Government may, after giving by notification not less than one month's notice of their intention so to do, by a notification after the expiry of the period of notice mentioned in the first notification amend either Schedule, and thereupon such Schedule shall be deemed to be amended accordingly."
189. In Schedule of the 1947 Act, as originally enacted at item 33, the entry was "Goods sold to or by the State Government". Subsequently, it was amended by the State Government under Section 6(2) of the 1947 Act with the words
"Goods sold by the State Government". The appellants in that case, who were earlier exempted in respect of the goods sold to the government, was kept out from that ambit of exemption. A
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challenge was made on the ground that it was not open to the government in exercise of the authority delegated to it, under Section 6(2) of the 1947 Act to modify or alter what the legislature had enacted. The Hon'ble Supreme Court discussed the law on the subject. In Para 6(2), the Hon'ble Supreme Court observed as hereunder:-
"(2) We have next to consider the contention that the notification dated September 18, 1950, is bad as constituting an unconstitutional delegationof legislative power. In the view which we have expressed above that there is in a works contract no sale of materials as such, it might seem academic to enter into a discussion of this question; but as there may be building contracts in which it is possible to spell out agreements for the sale of materials as distinct from contracts for work and labour, it becomes necessary to express our decision thereon. Mr Chatterjee appearing for the appellant in Civil Appeal No. 253 of 1955 contends that the notification in question is ultra vires, because it is a matter of policy whether exemption should be granted under the Act or not, and a decision on that question must be taken only by the legislature, and cannot be left to the determination of an outside authority. While a power to execute a law, it was argued, could be delegated to the executive, the power to make it must be exercised by the legislature itself, and reliance was placed on the observations in Hampton JR & Co. v. United States, 276 US 394 : 72 L. Ed. 624 at 629, Panama Refining Co. v. Ryan, 293 US 388 : 79 L. Ed. 446 at 458, and Schechter v. United States, 295 US 495 : 79 L.Ed. 1570, as supporting this position. It was also contended that the grant of a power to an outside authority to repeal or modify a provision in a statute passed by the legislature was unconstitutional, and that, in consequence, the impugned notification was bad in that, in reversal of the policy laid down by the legislature in Act 16 of 1949 that sales to Government should be excluded from the operation of the Act, it withdrew the exemption which had been granted thereunder. And the observations in In re The Delhi Laws Act, 1912 etc., 1951 SCC 568 : (1951) SCR 747 at 787, 982, 984, and the decision in Rajnarain Singh v. Chairman, Patna Administration Committee, Patna [(1955) 1 SCR 290] were strongly relied on as establishing this contention. Mr N.C. Chatterjee particularly relied on the following observations of Bose, J., at p. 301 in Rajnarain Singh case:
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"In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature. Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in the former case, but this much is clear from the opinions set out above; it cannot include a change of policy."
190. It may be noted that in the case of Pandit Banarsi Das247, the Hon'ble Supreme Court also discussed the principles of law, as laid down in the case of Powell248, in which case, the power to impose tax was conferred on a Governor. When it was challenged, the Privy Council held that, "The legislature has not parted with its perfect control over the Governor, and has the power, of course, at any moment, of withdrawing or altering the power which they have entrusted to him."
191. In the case of Powell249, when the issue of excessive delegation was discussed, the control of legislature was considered one of the factors in support of such delegation.
192. In the case of Liberty Cinema250, license fee under the Calcutta Municipal Act, 1951, was enhanced based on a resolution of the Corporation and fee was to be assessed at rates prescribed per show according to the sanctioned sitting capacity of the Cinema House. In that case, the Hon'ble Supreme Court observed that, "the fixing of a rate of tax was not of the essence of legislative power, that the fixing of rates might be left to a non-legislative body and that when it was so left to such a body, the Legislature must provide guidance for such fixation."
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193. The principles of law, as laid down in the case of Liberty Cinema251, have further been referred to in the case of Devi Dass252. In the case of Devi Dass253, the statutory provisions and its amendment were related to East Punjab General Sales Tax Act, 1948; a challenge was made to that Act on the ground that it conferred essentially legislative power on the provincial Government. In para 8, 9 & 10 of the judgment, the provisions of the Act and the issue has been discussed as follows:-
"8. We shall now proceed to consider the points seriatim. The provisions relevant to the first two points read thus:
"East Punjab General Sales Tax Act, 1948 Act 46 of 1948
5. Subject to the provisions of this Act, there shall be levied on the taxable turnover every year of a dealer a tax at such rates as the Provincial Government may by notification direct.
East Punjab General Sales Tax (Second Amendment) Act, 1952 Act 19 of 1952.
2. Amendment of Section 5 of Punjab Act 46 of 1948.— In sub-section (1) of Section 5 of the East Punjab General Sales Tax Act, 1948, after the word "rates" the following words shall be inserted and shall be deemed always to have been so inserted, namely, 'not exceeding two pice in a rupee."
The High Court of Punjab held that Section 5 of the Act was void as it gave an unlimited power to the executive to levy sales tax at a rate which it thought fit. But it held that the amendment of Section 5 by the Punjab Act 19 of 1952 cured the defect in the said Act and had the effect of giving a new life to it.
9. The first question, therefore, is whether Section 5 of the East Punjab General Sales Tax Act, 1948 (46 of 1948), as it originally stood, was void, and the second question is, if the said section was void, whether the amendment could give life to it.
10. The law on the subject is fairly well settled, though difficulties are met in its application to each case. In Corporation of Calcutta v. Liberty Cinema [(1965) 2 SCR
477] on which Mr Ganapati Iyer relied relates to a levy imposed on cinema houses under the Calcutta Municipal Act (33 of 1951). There, the majority held that the levy therein was a tax, that the fixing of a rate of tax was not of the essence of legislative power, that the fixing of rates might be left to a non- legislative body and that when it was so left to such a body, the Legislature must provide guidance for such fixation. The
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majority held in that case that such a guidance was found in the monetary needs of the Municipality for discharging the functions entrusted to it under the Act. Sarkar J, speaking for the majority said thus:
"It (the Municipal Corporation) has to perform various statutory functions. It is often given power to decide when and in what manner the functions are to be performed. For all this it needs money and its needs will vary from time to time, with the prevailing exigencies. Its power to collect tax, however, is necessarily limited by the expenses required to discharge those functions. It has, therefore, where rates have not been specified in the statute, to fix such rates as may be necessary to meet its needs. That, we think, would be sufficient guidance to make the exercise of its power to fix the rates valid."
If this decision is an authority for the position that the Legislature can delegate its power to a statutory authority to levy taxes and fix the rates in regard thereto, it is equally an authority for the position that the said statute to be valid must give a guidance to the said authority for fixing the said rates and that guidance cannot be judged by sterotyped rules but would depend upon the provisions of a particular Act. To that extent this judgment is binding on us. But we cannot go further and hold, as the learned counsel for the respondents asked us to do, that whenever a statute defines, the purpose or purposes for which a statutory authority constituted and empowers it to levy a tax that statute necessarily contains a guidance to fix the rates; it depends upon the provisions of each statute."
194. In the case of Municipal Corporation of Delhi254, the principles of law, as laid down in the cases of Pandit Banarsi Das255and Devi Dass256have been followed. And after reviewing the law on the subject, the Hon'ble Supreme Court observed that, "A review of these authorities therefore leads to the conclusion that so far as this Court is concerned the principle is well established that essential legislative function consists of the determination of the legislative
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policy and its formulation as a binding rule of conduct and cannot be delegated by the legislature. Nor is there any unlimited right of delegation inherent in the legislative power itself. ………………………………..Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere. What guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal including its preamble. Further it appears to us that the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation."
195. In the case of Sita Ram257, Hiralal Rattanlal258, M.K. Papiah259, Sashi Prasad260and Gwalior Rayon261also, the earlier judgments on the subject were discussed.
196. In the cases of Sita Ram262and Hiralal Rattanlal263, the Hon'ble Supreme Court also laid emphasis on the body on which the power has been so delegated. In the case of Sita Ram264, in Para 5 of the judgment, the Hon'ble Supreme Court observed that, " In a Cabinet form of Government, the Executive is expected to reflect the views of the legislatures. In fact of most matters it gives the lead to the Legislature. "
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197. In the case of Hiralal Rattanlal265, the Hon'ble Supreme Court observed that, "it has given power to the executive, a high authority and which is presumed to command the majority support in the Legislature, to select for special treatment dealings in certain class of goods. "
198. In the case of M.K. Papiah266, the provisions of Mysore Excise Act, 1965 ("1965 Act"), and particularly, Section 22 of it was discussed, which provided for levy of excise duty at such rate or rates as the Government may prescribe. The rates were so prescribed. It was challenged on the ground that Section 22 of the 1965 Act delegates the power to fix the rates of excise duty to the government by making rules and since no guidance has been furnished to the Government by the 1965 Act for fixing the rate, there was abdication of essential legislative functions. Under 1965 Act, rule making power was given under Section 71 of it. Sub-section (4) of Section 71 of the 1965 Act provides as follows:-
"Every rule made under this section shall be laid as soon as may be after it is made, before each House of the State Legislature while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if before the expiry of the session in which it is so laid or the session immediately following, both Houses agree in making any modification in the rule (it?) shall thereafter have effect only in such modified form or be of no effect, as the case may be; so however that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule."
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199. In the case of M.K. Papiah267, the principles, which were discussed in the case of Powell268have further been discussed, i.e. legislative control over delegated legislation. It was observed that, "the rules that were to be made under Section 71(4) of the 1965 Act were to be laid before State Legislature". The Hon'ble Supreme Court discussed the English law on the subject and in Para 24, it was observed that, "the power to fix the rate of excise duty conferred on the government by Section 22 of the Act is valid. " In fact, the question of legislative control, while determining the contours of excessive delegation has also been discussed in the case of Kerala State Electricity Board269.
200. On the question of legislative control, in the case of Kerala State Electricity Board270, the Hon'ble Supreme Court observed that the rules were made beyond the power conferred. It cannot be held valid merely on the ground that these rules are subject to modification or annulment. In the case of Kerala State Electricity Board271, the Hon'ble Supreme Court observed that,
"We are, therefore, of opinion that the correct view is that notwithstanding the subordinate legislation being laid on the table of the House of Parliament or the State Legislature and being subject to such modification, annulment or amendment as they may make, the subordinate legislation cannot be said to be valid unless it is within the scope of the Rule-making power provided in the statute."
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201. In the case of Gwalior Rayon272, the Hon'ble Supreme Court, in that case found that "In this connection we are of the view that a clear legislative policy can be found in the provisions of Section 8(2)(b) of the Act." In Para 4 of the judgment, the Hon'ble Supreme Court further discussed the Policy laid down in the Act involved in the case. The Hon'ble Supreme Court further, in para 12 of the judgment observed that, "It would appear from the above that the view taken by this Court in a long chain of authorities is that the Legislature in conferring power upon another authority to make subordinate or ancillary legislation must lay down policy, principle or standard for the guidance of the authority concerned".
202. In the case of Gwalior Rayon273, the Hon'ble Supreme Court did not approve the argument that if the legislator can repeal an enactment, it retains enough control over the authority making the subordinate legislation and, as such, it is not necessary for the Legislature to lay down legislative policy, standard or guidelines in the statute. In Para 26 of the judgment, the Hon'ble Supreme Court observed as hereunder:-
"26. We are also unable to subscribe to the view that if the Legislature can repeal an enactment, as it normally can, it retains enough control over the authority making the subordinate legislation and, as such, it is not necessary for the Legislature to lay down legislative policy, standard or guidelines in the statute. The acceptance of this view would lead to startling results. Supposing the Parliament tomorrow enacts that as the crime situation in the country has deteriorated, criminal law to be enforced in the country from a particular date would be such as is framed by an officer mentioned in the enactment. Can it be said that there has been no excessive delegation of legislative power even though the Parliament omits to lay down in the statute any guideline or legislative policy for the making of
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such criminal law? The vice of such an enactment cannot, in our opinion, be ignored or lost sight of on the ground that if the Parliament does not approve the law made by the officer concerned, it can repeal the enactment by which that officer was authorised to make the law."
203. It may be noted that in the case of M.K. Papiah274, the question of legislative control was considered as a determining factor in assessing the excessiveness of delegated legislation. In fact, the issue was slightly different in the case of M.K. Papiah275. There, the rules were to be formulated and to be placed before State legislature. It was not mere legislative control, but something beyond that.
204. In the case of Ashok Leyland276, the Hon'ble Supreme Court discussed the expression "for the purpose of this Act" and held that "this expression would ordinarily mean "for the purpose of all the provisions of the Act."
205. In the case of Keshavlal Khemchand277, the Hon'ble Supreme Court summarised the law as follows:-
"51. An examination of the above authorities, in our view leads to the following inferences:
51.1. The proposition that essential legislative functions cannot be delegated does not appear to be such a clearly settled proposition and requires a further examination which exercise is not undertaken by the counsel appearing in the matter. We leave it open for debate in a more appropriate case on a future date. For the present, we confine to the examination of the question:
'Whether defining every expression used in an enactment is an essential legislative function or not?'
51.2. All the judgments examined above recognise that there is a need for some amount of delegated legislation in the modern world.
51.3. If the parent enactment enunciates the legislative policy with sufficient clarity, delegation of the power to make subordinate
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legislation to carry out the purpose of the parent enactment is permissible.
51.4. Whether the policy of the legislature is sufficiently clear to guide the delegate depends upon the scheme and the provisions of the parent Act.
51.5. The nature of the body to whom the power is delegated is also a relevant factor in determining "whether there is sufficient guidance in the matter of delegation"."
206. In the case of Veega Holidays278, the appellant company therein was running an "amusement park". A demand for entertainment tax was made from the appellant company in that case. The contention of the appellant company was that the tax was not legally leviable. The case related to the Kerala Local Authorities Entertainment Act, 1961 relating to imposition and collection of taxes on amusement and other entertainments in the State of Kerala. This Act was amended in the year 1975. According to the definition of "entertainment", it included exhibition performance, amusement, game, etc. Section 3 of it empowered the local authority to levy a tax. Pursuant to it, the Panchayat concerned had promulgated bylaws and made a specific provision to fix the rate of tax. The exhibitions were brought under the umbrella of levy of entertainment tax. When the levy of tax was challenged, initially the challenge was not upheld. In intra-Court appeal, the Court quoted as follows:-
"36. In view of the above, it is held that:—
1. The provisions of a taxing statute have to be strictly construed. A person cannot be taxed unless the provision clearly provides for it. The words of the statute have to be given their true and natural meaning. The Authority cannot add to the words. It cannot impose a levy by reading an implication into the plain words of the provision. There is no room for intendment. The words of the statute cannot be strained. Strict letter of law has to be seen.
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2. Entertainment is an expression of very wide amplitude. A Court entertains a petition. A hotel entertains a guest. A banquet, a sumptuous feast, is an entertainment of eating and drinking. Section 2(4) really takes within its ambit different kinds of entertainment viz. exhibition, performance, amusement, game, sport or race.
3. Section 3 contains only an enabling provision. It embodies a 'permissive power'. It does not impose a mandatory duty on the 'authority' to charge tax on every form of entertainment at a specific rate. The Local Authority can impose Tax by a Resolution or by framing a Bye-law. The Statute gives the local Authority an option. It may levy tax or it may not. It can also choose the items to be subjected to the levy.
4. Even the respondent-panchayat had interpreted Section 3 as an enabling provision. It had framed Bye-laws under Section
12. Under the Bye-law, only 'exhibitions', which had an element of entertainment, were subjected to the levy of tax. Other activities were not brought within the mischief of the Bye-law.
5. In view of the above conclusions we find that the learned single Judge had erred in taking the view that Section 3 was a charging Section and that the Panchayat was entitled to recover the tax from the appellants."
207. In the case of TVS Motor279, validity of certain provisions of Tamil, T.N. Value Added Tax Act, 2006 were put to challenge. In that case, the principles of law, as laid down in the case of Govind Saran Ganga Saran280were referred to.
208. The law has been well settled on the question of excessive delegated legislation in the decisions that have been cited hereinabove and in many other cases, which have not been cited. Delegation is necessity of time due to complexity of life and situations. A naked delegation of power to the executive by the legislation is not acceptable. There should be guidelines to the Executive while making the delegations. Preamble of an Act, statement of objects and reasons of the Act may also be
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considered to be the guidelines. In the case of M.K. Papiah281the preamble of the Act involved, in that case, referred to the policy of the Act, which had twin policies, namely, to raise revenue and to discourage consumption of liquor by making the price of liquor sufficiently high.
209. In the case of M.K. Papiah282, while observing that preamble of an Act may give guidance for fixing the rates, the Hon'ble Supreme Court has also observed that, "The legislative control over delegated legislation may take many forms."
210. Similarly, in the case of Quarry Owners' Association283, the Hon'ble Supreme Court observed that the preamble, statement of objects and reasons, and various other provisions may lay down the policy and fixation of rate may be correlated with the purpose of the Act. In Para 38 of the judgment, the Hon'ble Supreme Court observed as follows:-
"38. This case clearly lays down that fixation of the policy under an Act, in the matter of taxation is itself a guidance to a delegatee, which is also to be found in the present case, when its Preamble, Statement of Objects and Reasons and various other provisions clearly lay down the policy when it refers the same to be for the development and regulation of mines and minerals. The fixation of rate thus has to correlate with the purpose of the Act and not beyond it."
211. In the case of Chattanatha Karyalar284, the Hon'ble Madras High Court interpreted the scope of delegation by the Legislature to the executive. The Hon'ble Court observed "But this is not to say that the Legislature cannot delegate its powers at all. Before it can validly do so, it must indicate its
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policy, the principles and limits subject to which alone it can ask the Executive to carry out its purpose by making appropriate rules. Any delegation by the Legislature of its power in disregard of these requisites will be in excess of its competence and will be invalid."
212. In the case of Shanmuga Oil Mills285, the Hon'ble Madras High Court discussed the scope of delegated legislation while tracing its origin. The Hon'ble Court quoted with approval from the judgment in the case of Field and Co.286as follows:-
"The Legislature cannot delegate its power to make a law, but it can make a law to delegate a power to determine some fact or state of things upon which the law makes or intends to make its own action depend. There are many things upon which wise and useful legislation must depend, which cannot be known to the law making power, and, must therefore be subject of enquiry and determination outside the hall of Legislature".
213. In the case of Shanmuoga Oil Mills287, the Hon'ble Court further observed as hereunder:-
"But the discretion should not be so wide that it is impossible to discern its limits. There must instead be definite boundaries within which the powers of the administrative authority are exercisable. Delegation should cot be so indefinite as to amount to an abdication of the legislative function."
214. The Hon'ble Madras High Court also cautioned that
"in our view and so far as we can ascertain from the authorities, this does not detract even by a jot from the valid and binding principle that the limits to a delegated power, particularly one like a taxing power, must be
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generally discernible, even if not in minute particulars, in the act of delegation itself. Where this is not the case, the delegation would appear to be plainly unconstitutional since the Legislature is abdicating an essential function. Since this tax would not be included in the Consolidated Fund of the State, the argument applies with greater force to the present facts".
215. Learned Counsel for the State would submit that notification dated 07.11.2015, has been issued for fixing "such rates" under Section 17 of the Act and such rate is the rate, which is envisaged under the provisions of the Act. He would submit that the State of Uttarakhand has also laid down the policy for harnessing renewable energy sources, etc. in the year 2008, which categorises hydro-power projects also under different categories and the rates have been fixed accordingly.
216. It is not the case of collecting fees by the municipality. The tax that has been imposed is termed as water tax on electricity generation. Various provisions of the Act have already been quoted hereinbefore. It is water tax on electricity generation. The name, per se, does not suggest anything. Tax is imposed on user, who is defined under Section 2(f) of the Act; it is he, who draws water from any source for generation of electricity. Water Tax has been defined under Section 2(i) of the Act, which means the rate levied or the charge for water drawn for generation of electricity. Section 17 of the Act reads as follows:-
"17. Fixation of water tax. - The user shall be liable to pay the Water Tax under the Act at such rates as the Government may by notification fix in this behalf.
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(2) The State Government may review increase, decrease or vary the rates of the Water tax fixed under this section from time to time in the manner it deems fit."
217. A bare perusal of Section 17 of the Act makes it abundantly clear that it delegates the power to impose tax on the Government at such rate, as the Government may, by notification, fix on this behalf "such rates", as used under Section 17 of the Act, in no manner, is co-related with any policy guideline of the Act. "Such rates" relates to rates that may be fixed by the government. But, how to fix it?
218. Is the tax imposed just to generate revenue? If so, does it mean that the rates should increase with the increasing volume of water? And if it is so, the notification does not suggest so because, according to the notification, the same amount of water may be taxed differently based on height of the head. If the tax is to be collected commensurate with the generation of electricity, as the Act suggests, and as this Court has held that in "pith and substance", the tax is on generation of electricity, in that eventuality, the tax should have been imposed corresponding to the units of electricity generated, but it is not so.
219. Even if the State of Uttarakhand had formulated any Energy Policy in 2008, it cannot be taken as guidelines for imposing tax under Section17 of the Act, because the policy or guidelines is not included in the Act. Any extraneous material may definitely be foreign for imposing the tax. Anything beyond
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the provisions of the Act may not form guidelines to the Government for fixing rate.
220. If the policy of the Act is to collect revenue on drawl of power, then another question arises as to why no tax has been imposed on the hydro power projects, which are up to 5MW?
Why the hydro power project generating electricity upto 5MW have been exempted? There is nothing in the policy of 2008 as well as in the Act exempting such group of users.
221. In fact, the reading of the Act, as a whole, does not give any guidelines for imposing tax under Section 17 of the Act. The delegation of imposing tax on the Executive by Section 17 of the Act is without any guidelines. It is naked delegation of power to the State Authority. It is excessive delegation. Therefore, for this reason alone, Section 17 of the Act is void.
PROMISSORY ESTOPPEL
222. It is the case of the appellants that the projects were established under an agreement with the State of Uttarakhand, under which 12 per cent of electricity is to be given to the State of Uttarakhand free of cost. Based on such assurance, the projects were established, and the State had promised not to impose any tax. Therefore, now, State cannot impose any tax. They are stopped from doing so with the help of doctrine of Promissory Estoppel. In Special Appeal No.137 of 2021, which arises out from WP (M/S) No. 279 of 2020, the Restated Implementation Agreement ("RIA") was executed between AHPCL,
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Government of U.P. and Uttarakhand on 10.02.2006. The two clauses of it are important to be quoted. They are clause 4.0, which relates to grant of rights to the company and clauses 13.0 and 13.1, which deal with water use rights. They are as follows:-
"4.0 Grant of Rights to the Company:- the GOU and GOUP hereby agree, within their respective purviews, to grant to the Company the right to establish, own, operate and maintain the Project and to generate and sell electricity from the Project for an initial period of thirty (30) years from the Date of Commercial Operation of the last Unit to enter operation, which period may be extended for a further period of twenty (20) years on such terms and conditions as may be mutually agree to between parties concerned. After the expiry of the period (s) or on the termination of the RIA or any other circumstances leading to withdrawing of the Company from developing/operating the Project, Government of Uttaranchal shall have the first option to purchase all the assets and works of the Company/UPPCL. In case of dispute in the matter between the GOUP?GOU/UPPCL, the matter shall be referred to Ministry of Power, GOI and the decision of GOI shall be final and binding on the GOUP/GOU/UPPCL. In the case of dispute between the Company and the other Party(ies), the matter shall be referred to arbitration in accordance with paragraph 24 of
RIA.
13.0 Water Use Rights
13.1 The GOU hereby grants to the Company the right, free of any and all charges during the term to utilize the water of Alaknanda river for the project and to generate electric energy at the Site and for such reasonable purposes directly related and necessary for the generation of electricity in accordance with the conditions of this RIA and for the project subject to the compliance of the conditions of environmental clearance. Such a right was earlier available to the Company under the then signed Water Use Agreement (WUA), which now stands substituted by the provisions of this RIA. GOU shall not impose any taxes, duties, levies or charge of any kind on electricity generated by this project during the term of this Restated implementation Agreement (RIA)."
223. The question is as to whether the clause 13.1, as quoted hereinabove, stops the State of Uttarakhand to demand water tax from the appellants?
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224. The law on promissory estoppel has been summed up quite in detail by the Hon'ble Supreme Court in the case of M/s Motilal Padampat288. The Hon'ble Supreme Court traced the history of promissory estoppel in this law right from the judgment in the case of Hughes289. The Hon'ble Supreme Court has observed that, "the basis of this doctrine is the inter position of equity. Equity has always, true to fall, stepped in to mitigate the rigors of State law." The Hon'ble Supreme Court also considered that initially, the words "promissory estoppels", "equitable estoppels", "quasi estoppels" and "new estoppels" were evolved to avoid injustice; the relationship between the parties was found to be one of the essential factors to attract the doctrine of promissory estoppel. The law, which subsequently evolved that contract between the parties was not necessary, but mere pre-existing relationship was enough to evoke the principles of promissory estoppel. It was also observed that initially promissory estoppel could only be a shield and not a sword and its evolution has also been discussed. The Hon'ble Supreme Court also discussed the American judgments and the defence of the government that it was executive necessity; the question of representation; change of position, etc.
225. In the case of M/s Motilal Padampat290, the State of U.P. had once decided to give exemption from sale tax for a period of three years to all new industrial units, but, subsequently, the Government had rescinded the decision of allowing concession. In a challenge to such rescission, on the
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question of executive necessity, the Hon'ble Supreme Court observed:-
"19. When we turn to the Indian law on the subject it is heartening to find that in India not only has the doctrine of promissory estoppel been adopted in its fullness but it has been recognized as affording a cause of action to the person to whom the promise is made. The requirement of consideration has not been allowed to stand in the way of enforcement of such promise. The doctrine of promissory estoppel has also been applied against the Government and the defence based on executive necessity has been categorically negatived. It is remarkable that as far back as 1880, long before the doctrine of promissory estoppel was formulated by Denning, J., in England, a Division Bench of two English Judges in the Calcutta High Court applied the doctrine of promissory estoppel and recognised a cause of action founded upon it in the Ganges Manufacturing Co. v. Sourujmull, (1880) ILR 5 Cal 669 : 5 CLR 533. The doctrine of promissory estoppel was also applied against the Government in a case subsequently decided by the Bombay High Court in Municipal Corporation of Bombay v. Secretary of State, (1905) ILR 29 Bom 580 : 7 Bom LR 27.".
226. In Para 24 of the judgment, the Hon'ble Supreme Court further observed that, "The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Everyone is subject to the law as fully and completely as any other and the Government is no
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exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned : the former is equally bound as the latter".
227. Reference may be made to the judgment in the case of Kasinka Trading291. In that case, under the Customs Act, 1962, a notification was issued in public interest giving exemption to certain articles up to 31.03.1981. This notification was issued on 15.03.1979. In fact, it was so issued under Section 25 of the Customs Act 1962. But, before expiry of the time fixed in the notification, i.e. 31.03.1981, the withdrawal notification dated 16.10.1980 was issued. It was challenged invoking the doctrine of promissory estoppel on the ground that the central government could not have withdrawn the exemption notification before 31.03.1981, because relying on the exemption notification, the appellants had placed orders for the imports of PVC resin on the understanding that the PVC resin was totally exempted from customs duty. The Hon'ble Supreme Court discussed the law on the point. In Para 13, the Hon'ble Supreme Court observed as hereunder:-
"13. The ambit, scope and amplitude of the doctrine of promissory estoppel has been evolved in this country over the last quarter of a century through successive decisions of this Court starting with Union of India v. Indo-Afghan Agencies Ltd., (1968) 2 SCR 366 : AIR 1968 SC 718. Reference in this connection may be made with advantage to Century Spg. & Mfg. Co.
Ltd. v. Ulhasnagar Municipal Council, (1970) 1 SCC 582 : (1970) 3 SCR 854; Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.(1979) 2 SCC 409 : 1979 SCC (Tax) 144 : (1979) 2 SCR 641; Jit Ram Shiv Kumar v. State of Haryana (1981) 1 SCC 11 :
(1980) 3 SCR 689; Union of India v. Godfrey Philips India Ltd.(1985) 4 SCC 369 : 1986 SCC (Tax) 11; Indian Express
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Newspapers (Bom) (P) Ltd. v. Union of India (1985) 1 SCC 641 :
1985 SCC (Tax) 121; Pournami Oil Mills v. State of Kerala, 1986 Supp SCC 728 : 1987 SCC (Tax) 134; Shri Bakul Oil Industries v. State of Gujarat, (1987) 1 SCC 31 : 1987 SCC (Tax) 74 : (1987) 1 SCR 185; Asstt. CCT v. Dharmendra Trading Co., (1988) 3 SCC 570 : 1988 SCC (Tax) 432; Amrit Banaspati Co. Ltd. v. State of Punjab, (1992) 2 SCC 411 and Union of India v. Hindustan Development Corpn., (1993) 3 SCC 499 : JT (1993) 3 SC 15 In Godfrey Philips India Ltd., (1985) 4 SCC 369 :
1986 SCC (Tax) 11 this Court opined: (SCC p. 388, para 13)
"We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it."
228. Referring to the various factors involved by invoking the principles of promissory estoppel, the Hon'ble Supreme Court observed, " Notification No. 66 of 1979 in our opinion, was not designed or issued to induce the appellants to import PVC resin. Admittedly, the said notification was not even intended as an incentive for import. The notification on the plain language of it was conceived and issued on the Central Government "being satisfied that it is necessary in the public interest so to do". Strictly speaking, therefore, the notification cannot be said to have extended any 'representation' much less a 'promise' to a party getting the benefit of it to enable it to invoke the doctrine of promissory estoppel against the State. It would bear repetition that in order to invoke the doctrine of promissory estoppel, it is
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necessary that the promise which is sought to be enforced must be shown to be an unequivocal promise to the other party intended to create a legal relationship and that it was acted upon as such by the party to whom the same was made. A notification issued under Section 25 of the Act cannot be said to be holding out of any such unequivocal promise by the Government". The Hon'ble Supreme Court held that in that case, the doctrine of promissory estoppel had no application.
229. In the case of Manuelsons Hotels292, the principles have been further discussed by the Hon'ble Supreme Court while referring to a judgment of Australian High Court. The Hon'ble Supreme Court quoted with approval in Para 19 as follows:-
"19. In fact, we must never forget that the doctrine of promissory estoppel is a doctrine whose foundation is that an unconscionable departure by one party from the subject-matter of an assumption which may be of fact or law, present or future, and which has been adopted by the other party as the basis of some course of conduct, act or omission, should not be allowed to pass muster. And the relief to be given in cases involving the doctrine of promissory estoppels contains a degree of flexibility which would ultimately render justice to the aggrieved party. The entire basis of this doctrine has been well put in a judgment of the Australian High Court in Commonwealth of Australia v. Verwayen, (1990) 170 CLR 394 (Aust)] , by Deane, J. in the following words:
"1. While the ordinary operation of estoppel by conduct is between parties to litigation, it is a doctrine of substantive law, the factual ingredients of which fall to be pleaded and resolved like other factual issues in a case. The persons who may be bound by or who may take the benefit of such an estoppel extend beyond the immediate parties to it, to their privies, whether by blood, by estate or by contract. That being so, an estoppel by conduct can be the origin of primary rights of property and of contract.
2. The central principle of the doctrine is that the law will not permit an unconscionable—or, more accurately, unconscientious—departure by one party from the subject-
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matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation.
3. Since an estoppel will not arise unless the party claiming the benefit of it has adopted the assumption as the basis of action or inaction and thereby placed himself in a position of significant disadvantage if departure from the assumption be permitted, the resolution of an issue of estoppel by conduct will involve an examination of the relevant belief, actions and position of that party.
4. The question whether such a departure would be unconscionable relates to the conduct of the allegedly estopped party in all the circumstances. That party must have played such a part in the adoption of, or persistence in, the assumption that he would be guilty of unjust and oppressive conduct if he were now to depart from it. The cases indicate four main, but not exhaustive, categories in which an affirmative answer to that question may be justified, namely, where that party:
(a) has induced the assumption by express or implied representation;
(b) has entered into contractual or other material relations with the other party on the conventional basis of the assumption;
(c) has exercised against the other party rights which would exist only if the assumption were correct;
(d) knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so. Ultimately, however, the question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted. In cases falling within Category (a), a critical consideration will commonly be that the allegedly estopped party knew or intended or clearly ought to have known that the other party would be induced by his conduct to adopt, and act on the basis of, the assumption. Particularly in cases falling within Category (b), actual belief in the correctness of the fact or state of affairs assumed may not be necessary. Obviously, the facts of a particular case may be such that it falls within more than one of the above categories.
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5. The assumption may be of fact or law, present or future. That is to say, it may be about the present or future existence of a fact or state of affairs (including the state of the law or the existence of a legal right, interest or relationship or the content of future conduct).
6. The doctrine should be seen as a unified one which operates consistently in both law and equity. In that regard,
"equitable estoppel" should not be seen as a separate or distinct doctrine which operates only in equity or as restricted to certain defined categories (e.g. acquiescence, encouragement, promissory estoppel or proprietary estoppel).
7. Estoppel by conduct does not of itself constitute an independent cause of action. The assumed fact or state of affairs (which one party is estopped from denying) may be relied upon defensively or it may be used aggressively as the factual foundation of an action arising under ordinary principles with the entitlement to ultimate relief being determined on the basis of the existence of that fact or state of affairs. In some cases, the estoppel may operate to fashion an assumed state of affairs which will found relief (under ordinary principles) which gives effect to the assumption itself (e.g. where the defendant in an action for a declaration of trust is estopped from denying the existence of the trust).
8. The recognition of estoppel by conduct as a doctrine operating consistently in law and equity and the prevalence of equity in a Judicature Act system combine to give the whole doctrine a degree of flexibility which it might lack if it were an exclusively common law doctrine. In particular, the prima facie entitlement to relief based upon the assumed state of affairs will be qualified in a case where such relief would exceed what could be justified by the requirements of good conscience and would be unjust to the estopped party. In such a case, relief framed on the basis of the assumed state of affairs represents the outer limits within which the relief appropriate to do justice between the parties should be framed."
230. In the instant case, initial Implementation Agreement, Restated Implementation Agreement or Power Purchase Agreements, as the case may be, were entered between the appellants and the State Government. There has been a contract between them. The State Government had made representation. The representation was that 12 per cent of deliverable energy will
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be given to the State Government by the appellants and the State Government shall not levy any water tax. The appellants acted upon the representation that was made by the State Government. The appellants established and started operating the projects.
231. It would be apt to reproduce the clauses in the agreement in each case, which prescribes for term of the agreement, the exemption clause. It is as follows:-
(i) SPA No. 149 of 2021, THDC India Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 187 of
2016):
Implementation Agreement or revised Implementation Agreement or Restated Implementation Agreement not filed.
In Ground Z of the Special Appeal, it is recorded that 12% free supply of electricity is being given as royalty in lieu of use of natural resources.
(ii) SPA No. 131 of 2021, M/s National Hydro Power Corporation v. State of Uttarakhand and others (arises out of WPMS No. 272 of 2016):
Implementation Agreement or revised
Implementation Agreement or Restated Implementation Agreement not filed.
A communication dated 01.11.1990 of the Ministry of Energy, Government of India has been filed as Annexure 11 to the writ petition, which provides that 12% of power from the energy generated would be supplied free of cost to the concerned State.
Annexure 20, a communication dated 13.01.2016, is a communication of the appellant post demand of water tax by which it was informed that since the appellant had been giving 12% electricity free of cost, additional water tax may not be imposed on them.
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In Ground AA and BB of the appeal, the appellant also refers that 12% of the power generated is being given to the State of Uttarakhand as per power sharing formula of the Central Government.
(iii) SPA No. 134 of 2021, M/s Jaiprakash Power Venture Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 123 of 2017):
Term :
AND WHEREAS the parties to the Agreement had agreed that the Erstwhile Company shall establish, operate and maintain the project at its cost for an initial period of thirty years from the date of commissioning of the project, extendable for a further period of twenty years, on such terms and conditions as may be mutually settled.
Exemption Clause:
Clause 25(a)
The Government of Uttar Pradesh, Government of Uttaranchal, Uttar Pradesh Power Corporation and the Company hereto recognize that :
Vishnuprayag Hydro Electric Project being a run of the river scheme, shall utilize the flowing water of the river to generate electricity. Such right to utilize water available upstream of the Project are granted by Government of Uttaranchal for non-consumptive use only without charging any royalty, duty, cess or levy of the kind of such use of water.
Clause 38. The Govt. of Uttaranchal shall not impose any new taxes, duties, levies or charges of any kind on the electricity generated by this project during the term of this Amended Implementation Agreement.
(iv) SPA No. 136 of 2021, Alaknanda Hydro Power Co. Ltd.
v. State of Uttarakhand and others (arises out of WPMS No. 1500 of 2016):
Term :
7.1 Term. This Agreement shall become effective upon execution and delivery by the Parties and shall remain valid for an initial period of thirty years from the Commercial Operations Date of
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the last Unit to enter operation, which period shall automatically be extended for a further period of twenty (20) years upon the extension of the PPA the "Term").
Exemption Clause:
Clause 13.0 Water Use Rights
13.1 The GOU hereby grants to the Company the right, free of any and all charges during the term to utilize the water of Alaknanda river for the project and to generate electric energy at the Site and for such reasonable purposes directly related and necessary for the generation of electricity in accordance with the conditions of this RIA and for the project subject to the compliance of the conditions of environmental clearance. Such a right was earlier available to the Company under the then signed Water Use Agreement (WUA), which now stands substituted by the provisions of this RIA. GOU shall not impose any taxes, duties, levies or charge of any kind on electricity generated by this project during the term of this Restated implementation Agreement (RIA)
18.4 Payment of Water Use Charge - The Parties agree that the Company shall have no payment liability for use of water. GOU will not charge for the use of water under this RIA at any time during the tenure of the RIA.
(v) SPA No. 137 of 2021, Alaknanda Hydro Power Co. Ltd.
v. State of Uttarakhand and others (arises out of WPMS No. 279 of 2020):
Term:
7.1 Term: This Agreement shall become effective upon execution and delivery by the Parties and shall remain valid for the period mentioned in Article 4.00 above.
(Article 4.0 establishes the relationship with regard to the project from an initial period of thirty (30) years from the Commercial Operations Date of the last Unit to enter operation, which period shall automatically be extended for a further period of twenty (20) years upon the extension of the PPA (the "Term").
Exemption Clause:
Clause 13.0 Water Use Rights
13.1 The GOU hereby grants to the Company the right, free of any and all charges during the term to utilize the water of Alaknanda river for the project and to generate electric energy at the Site and for such reasonable purposes directly related and necessary for the generation of electricity in accordance with the conditions of this RIA
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and for the project subject to the compliance of the conditions of environmental clearance. Such a right was earlier available to the Company under the then signed Water Use Agreement (WUA), which now stands substituted by the provisions of this RIA. GOU shall not impose any taxes, duties, levies or charge of any kind on electricity generated by this project during the term of this Restated implementation Agreement (RIA)
18.4 Payment of Water Use Charge - The Parties agree that the Company shall have no payment liability for use of water. GOU will not charge for the use of water under this RIA at any time during the tenure of the RIA.
(vi) SPA No. 139 of 2021, M/s Swasti Power Pvt. Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 641 of 2017):
Term:
2.2 Agreement Period The Agreement shall remain in force up to a period of forty (40) years from the Effective Date (Agreement Period), unless terminated earlier in accordance with the provisions of this Agreement.
Exemption Clause:
Clause 5.2.10 Levies, Taxes and Charges
No entry tax will be levied by the Government on the power generation, transmission equipment and building material for the project.
(vii) SPA No. 140 of 2021, Alaknanda Hydro Power Company Ltd. (AHPCL) v. State of Uttarakhand and others(arises out of WPMS No. 631 of 2017):
Term:
AND WHEREAS the parties thereto had agreed that the Company shall establish, own, operate and maintain the project at its own cost for an initial period of thirty (30) years from the date of Commercial Operation of the last Unit. This period is extendable for a further period of twenty (20) years, on such terms and conditions as may be mutually agreed to between the parties concerned.
Exemption Clause:
Clause 13.0 Water Use Rights
13.1 The GOU hereby grants to the Company the right, free of any and all charges during the term to utilize the water of Alaknanda river for the project and to generate electric energy at the Site and for
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such reasonable purposes directly related and necessary for the generation of electricity in accordance with the conditions of this RIA and for the project subject to the compliance of the conditions of environmental clearance. Such a right was earlier available to the Company under the then signed Water Use Agreement (WUA), which now stands substituted by the provisions of this RIA. GOU shall not impose any taxes, duties, levies or charge of any kind on electricity generated by this project during the term of this Restated implementation Agreement (RIA)
18.4 Payment of Water Use Charge - The Parties agree that the Company shall have no payment liability for use of water. GOU will not charge for the use of water under this RIA at any time during the tenure of the RIA.
(viii) SPA No. 141 of 2021, M/s Alaknanda Hydro Power Co. Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 2396 of 2019):
Term:
7.1 Term: This Agreement shall become effective upon execution and delivery by the Parties and shall remain valid for the period mentioned in Article 4.00 above.
(Article 4.0 establishes the relationship with regard to the project from an initial period of thirty (30) years from the Commercial Operations Date of the last Unit to enter operation, which period shall automatically be extended for a further period of twenty (20) years upon the extension of the PPA (the "Term")
Exemption Clause:
Clause 13.0 Water Use Rights
13.1 The GOU hereby grants to the Company the right, free of any and all charges during the term to utilize the water of Alaknanda river for the project and to generate electric energy at the Site and for such reasonable purposes directly related and necessary for the generation of electricity in accordance with the conditions of this RIA and for the project subject to the compliance of the conditions of environmental clearance. Such a right was earlier available to the Company under the then signed Water Use Agreement (WUA), which now stands substituted by the provisions of this RIA. GOU shall not impose any taxes, duties, levies or charge of any kind on electricity generated by this project during the term of this Restated implementation Agreement (RIA)
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18.4 Payment of Water Use Charge - The Parties agree that the Company shall have no payment liability for use of water. GOU will not charge for the use of water under this RIA at any time during the tenure of the RIA.
(ix) SPA No. 142 of 2021, M/s Swasti Power Pvt. Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 2074 of 2016):
Term:
2.2 Agreement Period The Agreement shall remain in force up to a period of forty (40) years from the Effective Date (Agreement Period), unless terminated earlier in accordance with the provisions of this Agreement.
Exemption Clause:
Clause 5.2.10 Levies, Taxes and Charges
No entry tax will be levied by the Government on the power generation, transmission equipment and building material for the project.
(x) SPA No. 143 of 2021, Alaknanda Hydro Power Co. Ltd.
v. State of Uttarakhand and others (arises out of WPMS No. 3603 of 2019):
Term:
7.1 Term: This Agreement shall become effective upon execution and delivery by the Parties and shall remain valid for the period mentioned in Article 4.00 above.
(Article 4.0 establishes the relationship with regard to the project from an initial period of thirty (30) years from the Commercial Operations Date of the last Unit to enter operation, which period shall automatically be extended for a further period of twenty (20) years upon the extension of the PPA (the "Term")
Exemption Clause:
13.1 The GOU hereby grants to the Company the right, free of any and all charges during the term to utilize the water of Alaknanda river for the project and to generate electric energy at the Site and for such reasonable purposes directly related and necessary for the generation of electricity in accordance with the conditions of this RIA and for the project subject to the compliance of the conditions of environmental clearance. Such a right was earlier available to the Company under the then signed Water Use Agreement (WUA), which
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now stands substituted by the provisions of this RIA. GOU shall not impose any taxes, duties, levies or charge of any kind on electricity generated by this project during the term of this Restated implementation Agreement (RIA)
18.4 Payment of Water Use Charge - The Parties agree that the Company shall have no payment liability for use of water. GOU will not charge for the use of water under this RIA at any time during the tenure of the RIA.
(xi) SPA No. 363 of 2021, M/s Bhilangana Hydro Power Ltd. v. State of Uttarakhand and others (arises out of WPMS No. 3084 of 2016):
Term:
2.2 Agreement Period The Agreement shall remain in force up to a period of forty (40) years from the Effective Date (Agreement Period), unless terminated earlier in accordance with the provisions of this Agreement.
Exemption Clause:
5.2.10 Levies, Taxes and Charges
No entry tax will be levied by the Government on the power generation, transmission equipment and building material for the project.
(xii) SPA No. 367 of 2021, Uttar Pradesh Power Corporation Limited v. State of Uttarakhand and others (arises out of WPMS No. 123 of 2017):
Term:
AND WHEREAS the parties to the Agreement had agreed that the Erstwhile Company shall establish, operate and maintain the project at its cost for an initial period of thirty years from the date of commissioning of the project, extendable for a further period of twenty years, on such terms and conditions as may be mutually settled/
Exemption Clause:
Clause 25(a)
The Government of Uttar Pradesh, Government of Uttaranchal, Uttar Pradesh Power Corporation and the Company hereto recognize that :
Vishnuprayag Hydro Electric Project being a run of the river scheme, shall utilize the flowing water of the river to generate electricity. Such right to utilize water available upstream of the Project are granted by
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Government of Uttaranchal for non-consumptive use only without charging any royalty, duty, cess or levy of the kind of such use of water.
Clause 38. The Govt. of Uttaranchal shall not impose any new taxes, duties, levies or charges of any kind on the electricity generated by this project during the term of this Amended Implementation Agreement.
(xiii) WPMS No. 1739 of 2021, Renew Jal Urja Private Limited v. State of Uttarakhand and others :
Term:
2.2 Agreement Period The agreement shall remain in force up to a period of forty five (45) years from the Date of issue of "Letter of Award" for the project unless terminated earlier in accordance with the provisions of this Agreement.
Exemption Clause:
5.2.10 Levies, Taxes and Charges
No entry tax will be levied by the Government on the power generation, transmission equipment and building material for the Project.
232. The exemption clause in the agreement entered into between the State Government and the appellants reveals that there are two kind of exemption clause. Firstly, the exemption clause, which is in Special Appeal No. 137 of 2021 (arising out of WP (M/S) No. 279 of 2020), which inter alia, provides that the Government of Uttarakhand shall not impose any taxes, duties, levies or charges, of any kind on electricity generated by the Project during the term of the agreement. Second kind of exemption clause may be found as entered into between the parties in SPA No. 139 of 2021 (Arising out of WP (M/S) No. 641 of 2017), which reads as "No entry tax will be levied by the Government on the power generation, transmission equipment and building material for the project".
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233. Admittedly, all the appellants under the agreement are giving 12 per cent of the electricity, free of cost to the State of Uttarakhand.
234. It has been argued on behalf of the State of Uttarakhand that the RIA filed in SPA No. 137 of 2021 does not prohibit the State Legislature from levying a tax. Clause 13.0 of the RIA entered into between the parties in SPA No. 137 of 2021, as quoted hereinabove, categorically reveals that by it the Government of Uttarakhand had promised not to impose any taxes, duties, levies or charges of any kind on electricity generated by the project during the term of existence of the RIA.
235. It has already been held under the Heading of Excessive Delegation that by virtue of Section 17 of the Act, the delegation of imposing tax on the executive is without any guidelines. Therefore, Section 17 of the Act is void. The tax has been imposed by a Notification dated 07.11.2015. It is an executive act. In view of it, if clause 13 of the RIA entered into between the parties in SPA No. 137 of 2021 is read, it proves in abundance that, in fact, the State had promised and represented the appellant in that case that no tax shall be levied on electricity generation. Any departure from this promise may be termed as unconscionable departure.
236. Instant is not a case that any policy decision was taken by the State Government pursuant to which the appellants did establish their power projects. Instead, as stated, in the instant case, the State Government had entered into agreements
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with the appellants. There have been contractual relationship between the appellants and the State Government. Now, suddenly, the State Government may not be permitted to make a departure from the stand, which it had taken while entering into an agreement with the appellants. The demand notices of the tax, as made by the State Government, pursuant to the Notification dated 07.11.2015 are definitely a departure to the promise that was made by the State Government, while entering into an agreement with the appellants. This is unconscionable departure. It is a case in which the doctrine of promissory estoppel applies.
237. Since the State of Uttarakhand is bound to exempt the appellants from payment of any water tax for the period for which the agreement is in force, during that period, no demand of water tax could be made. It is barred by the doctrine of promissory estoppel.
238. During the period, the agreement between the appellants and the State of Uttarakhand is in existence, the appellants are not liable to pay any tax demanded by the State Government pursuant to the Notification dated 07.11.2015.
239. In the impugned judgment, in paragraphs 69 and 70, observation has been made with regard to applicability of promissory estoppel. In para 70, the impugned judgment records
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that "the doctrine of estoppel is not available against the government in exercise of legislative, sovereign or executive power". In view of the settled legal position, this observation may not be termed as in consonance with law. Therefore, that finding may also not be upheld.
TAX OR FEE
240. Is it a tax or can it be upheld as a fee?
241. The learned Counsel appearing for the State would submit that the State is the owner of all its resources. Water sources are vested in the State; they are Government property, therefore, the tax as imposed may also be validated as a fee because there is no generic difference between tax and fee. He would submit the following arguments in his submission:-
(i) Levy or impost can be justified either as tax or a fee or as both because there is no generic difference between tax and fee. There is no principle that a law has to relate only to one Entry or a source. A law can be made by the State simultaneously utilizing more than one legislative Entries. A tax law can, likewise, also be justified on the basis of more than one Entry including a non-taxing Entry, or a general Entry.
(ii) Water and the water sources are vested in the State. They are Government property. When water is allowed to be drawn by the user from the water source, it is a kind of privilege given
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to use Government property and in the instant case, it is for earning profits by generating electricity. Therefore, a charge upon user can always be imposed, which can be justified by conjoint reading of E 17 and E 66 of L II. The State can levy a reasonable fee or charge for parting with this privilege.
242. In support of his contention, learned Counsel has placed reliance on the principles of law as laid down in the cases of Sheopat Rai293, R.C. Jain294, Krishi Upaj Mandi Samiti295, Mcdowell and Company Limited296, P.R. Srirumulu297, Har Shankar298, Devans Modern Breweries Ltd.299
243. In the case of Sheopat Rai300, the Hon'ble Supreme Court discussed the concept of fee, cess, duty and tax and observed as hereunder:-
"28. ……….. Thus, neither the 'licence fee' nor 'fixed fee' realisable from a private party for granting the privilege or right to sell or vend foreign liquor to such party can fall within the ambit of the subject 'fee' in the entry to List II of the Seventh Schedule to the Constitution. Then, the 'licence fee' or the 'fixed fee' under consideration, cannot be regarded as 'tax' since the characteristics of tax, namely, its levy being compulsive in nature, its burden being common, it being payable according to the varying abilities of the person to be charged, are wholly absent in both of them. As 'duty' or 'cess' stand on the same footing as 'tax', the 'licence fee' or 'fixed fee' under consideration, cannot be regarded either as 'duty' or 'cess'. ……….. The observations of Chandrachud, J. (as he then
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was), who rendered the judgment on behalf of the Constitution Bench of this Court in Har Shankar case [(1975) 1 SCC 737 :
AIR 1975 SC 1121] which fully support our view of what is 'licence fee' and what is 'fixed fee' under the U.P. Excise Law, depict the correct legal position, thus : (SCC pp. 759-60, para
56)
"The distinction which the Constitution makes for legislative purposes between a 'tax' and a 'fee' and the characteristics of these two as also of 'excise duty' are well known. 'A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not a payment for services rendered'. A fee is a charge for special services rendered to individuals by some governmental agency and such a charge has an element in it of a quid pro quo [AIR 1954 SC 282 : 1954 SCR 1005] ……"
244. In the case of R.C. Jain301, the Hon'ble Supreme Court, inter alia, observed that "taxation is to be understood not in any fine and narrow sense as to include only those compulsory exactions of money imposed for public purpose and requiring no consideration to sustain it, but in a broad generic sense as to also include fees levied essentially for services rendered."
245. In the case of Mcdowell302, the Hon'ble Supreme Court further discussed the concept of tax, duty, cess and fee and observed as hereunder:-
"22. Under Article 366(28) "Taxation" has been defined to include the imposition of any tax or impost whether general or local or special and tax shall be construed accordingly. "Impost" means compulsory levy. The well-known and well-settled characteristic of
"tax" in its wider sense includes all imposts. Imposts in the context have following characteristics:
(i) The power to tax is an incident of sovereignty.
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(ii) "Law" in the context of Article 265 means an Act of legislature and cannot comprise an executive order or rule without express statutory authority.
(iii) The term "tax" under Article 265 read with Article 366(28) includes imposts of every kind viz. tax, duty, cess or fees.
(iv) As an incident of sovereignty and in the nature of compulsory exaction, a liability founded on principle of contract cannot be a "tax" in its technical sense as an impost, general, local or special."
246. In the case of Krishi Upaj Mandi Samiti303, the Hon'ble Supreme Court observed as hereunder:-
"9. ………… The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of the common burden while a fee is a payment for a special benefit or privilege. Fees confer a special capacity although the special advantage is secondary to the primary motive of regulation in the public interest. Public interest seems to be at the basis of all impositions but in a fee it is some special benefit which the individual receives. The special benefit accruing to the individual is the reason for payment in the case of fees. In the case of a tax, the particular advantage if it exists at all, is an incidental result of State action. A fee is a sort of return or consideration for services rendered and hence it is primarily necessary that the levy of fee should on the face of the legislative provision be correlated to the expenses incurred by Government in rendering the services…."
247. In the case of P.R. Sriramulu304also, the Hon'ble Supreme Court discussed the concept of fee and tax and followed the earlier principles of law on the subject.
248. In the case of Har Shankar305, the Hon'ble Supreme Court further discussed the concept of tax and fee and observed that ""A tax is a compulsory exaction of money by public
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authority for public purposes enforceable by law and is not a payment for services rendered"………….. A fee is a charge for special services rendered to individuals by some governmental agency and such a charge has an element in it of a quid pro quo".
249. In the case of Devans Modern Breweries306, the State Legislature had imposed tax on import of potable liquor manufactured in the State. It was put to challenge, inter alia, on the ground that the State Legislature had no power to levy such tax. The Hon'ble Supreme Court in that case followed the principle of law as laid down in the case of Har Shankar307and Sheopat Rai308with regard to the rights of State in this regard as well as the concept of licence fee.
250. On the other hand, learned counsel for the appellants would submit that on ownership, tax or fee cannot be levied. For share in the property, royalty is taken, which the appellants have already paid. Learned counsel for the appellants would submit that tax is a compulsory exposition, whereas in the matter of fee, there is an element of quid pro quo. A statute imposing tax cannot be read down as a statute imposing fee; however, blurred the line between tax and fee may be, it is argued that, still the element of quid pro quo remains in the matter of imposition of a fee.
251. Learned counsel for the appellants would submit that the Act cannot be upheld holding that let it be treated as a statute imposing fee. The concepts of fee, cess, tax and royalty
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are different. In support of their contention, learned counsel have placed reliance on the principle of law as laid down in the cases of D.K. Trivedi309; Inderjeet Singh Sial310; Indsil Hydropower and Manganese Limited311; Jindal Stainless Ltd.312 Jalkal Vibhag313; Kerala State Beverages314; Mohd. Yasin315; State of Meghalaya316; Southern Pharmaceuticals and Chemicals317;Kewal Krishan Puri318; Hingir Rampur Coal Ltd.319; Subramaniyan Swami320; Om Prakash Agarwal321andDevan Chand Builders & Contractors322.
252. Taxation as stated has been defined under Article 366(28) of the Constitution, which includes imposition of any tax or impost, whether general or local or special and tax shall be construed accordingly.
253. Royalty, tax or fee acts under different sphere. In the case of D.K. Trivedi323, the Hon'ble Supreme Court in respect of mining lease defined as to what the royalty is? The Hon'ble Supreme Court observed as hereunder:-
"39. In a mining lease the consideration usually moving from the lessee to the lessor is the rent for the area leased (often called surface rent), dead rent and royalty. Since the mining lease confers upon the lessee the right not merely to enjoy the property as under an ordinary lease but also to extract minerals from the land and to appropriate them for his own use or benefit, in addition to the usual rent for the area
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demised, the lessee is required to pay a certain amount in respect of the minerals extracted proportionate to the quantity so extracted. Such payment is called "royalty". It may, however, be that the mine is not worked properly so as not to yield enough return to the lessor in the shape of royalty. In order to ensure for the lessor a regular income, whether the mine is worked or not, a fixed amount is provided to be paid to him by the lessee. This is called "dead rent.""
254. In the case of Inderjeet Singh Sial324, the Hon'ble Supreme Court very clearly observed that "In its primary and natural sense 'royalty', in the legal world, is known as the equivalent or translation of jura regalia or jura regia. Royal rights and prerogatives of a sovereign are covered thereunder. In its secondary sense the word 'royalty' would signify, as in mining leases, that part of the reddendum, variable though, payable in cash or kind, for rights and privileges obtained. It is found in the clause of the deed by which the grantor reserves something to himself out of that which he grants".
255. Similarly in the case of Indsil Hydropower and Manganese Limited325, the Hon'ble Supreme Court defined the expression "royalty" as follows:-
"56. Thus, the expression "royalty" has consistently been construed to be compensation paid for rights and privileges enjoyed by the grantee and normally has its genesis in the agreement entered into between the grantor and the grantee. As against tax which is imposed under a statutory power without reference to any special benefit to be conferred on the payer of the tax, the royalty would be in terms of the agreement between the parties and normally has direct relationship with the benefit or privilege conferred upon the grantee."
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256. Distinction between royalty and tax is quite remarkable. On the one hand, tax is imposed under statutory power without reference to any special benefit, on the other hand, royalty has been construed to compensation paid for rights and privileges enjoyed by the grantee.
257. The argument advanced on behalf of the State is that the Act may be validated terming it as imposing fee instead of tax. This argument has been made on the ground that after all all the water sources are Government property and if the appellants use the water for electricity generation, imposition of fee is valid. This arguments goes against the term of the royalty as such. The compensation for rights and privileges in the instant case, use of water, is royalty. It cannot be termed as fee. Fee has different connotation, as has been held in various cases as cited on behalf of the State and as quoted hereinbefore. It has essentially an element of quid pro quo.
258. The difference between tax and fee has been very substantially expressed by the Hon'ble Supreme Court in the case of Lakshmindra Thirtha Swamiar326, In para 47 of the judgment, the Hon'ble Supreme Court observed as hereunder:-
"47. As regards the distinction between a tax and a fee, it is argued in the first place on behalf of the respondent that a fee is something voluntary which a person has got to pay if he wants certain services from the Government; but there is no obligation on his part to seek such services and if he does not want the services, he can avoid the obligation. The example given is of a licence fee. If a man wants a licence that is entirely his own choice and then only he has to pay the fees, but not otherwise. We think that a careful examination will reveal that the element of compulsion or coerciveness is present in all kinds of imposition, though in different degrees and that it is
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not totally absent in fees. This, therefore, cannot be made the sole or even a material criterion for distinguishing a tax from fees. It is difficult, we think, to conceive of a tax except, it be something like a poll tax, the incidence of which falls on all persons within a State. The house tax has to be paid only by those who own houses, the land tax by those who possess lands, municipal taxes or rates will fall on those who have properties within a municipality. Persons, who do not have houses, lands or properties within municipalities, would not have to pay these taxes, but nevertheless these impositions come within the category of taxes and nobody can say that it is the choice of these people to own lands or houses or specified kinds of properties, so that there is no compulsion on them to pay taxes at all. Compulsion lies in the fact that payment is enforceable by law against a man in spite of his unwillingness or want of consent; and this element is present in taxes as well as in fees. Of course, in some cases whether a man would come within the category of a service receiver may be a matter of his choice, but that by itself would not constitute a major test which can be taken as the criterion of this species of imposition. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege. Fees confer a special capacity, although the special advantage, as for example in the case of registration fees for documents or marriage licences, is secondary to the primary motive of regulation in the public interest [ Vide Findlay Shirras on Science of Public Finance, Vol. I, p. 202] . Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives. As Seligman says, it is the special benefit accruing to the individual which is the reason for payment in the case of fees; in the case of a tax, the particular advantage if it exists at all is an incidental result of State action [ Vide Seligman's Essays on Taxation, p. 408] ."
259. This principle has further been followed in the case of Mohd. Yasin327, Jindal Stainless Ltd.328, Jalkal Vibhag329, Kewal Krishan Puri330, Hingir Rampur Coal Ltd.331, Om Prakash
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Agarwal332, Devan Chand Builders & Contractors333and Southern Pharmaceuticals & Chemicals334.
260. In the case of Jalkal Vibhag335, the Hon'ble Supreme Court observed in para 60 of the judgment that "In view of this consistent line of authority, it emerges that the practical and even constitutional, distinction between a tax and fee has been weathered down. As in the case of a tax, a fee may also involve a compulsory exaction. A fee may involve an element of compulsion and its proceeds may form a part of the Consolidated Fund. Similarly, the element of a quid pro quo is not necessarily absent in the case of every tax".
261. In the case of Kerala State Beverages336, the Hon'ble Supreme Court in para 41 observed that the case of Jalkal Vibhag337, in fact, maintains and does not take away the basic constitutional distinction between fee and tax.
262. In the case of State of Meghalaya338, the Hon'ble Supreme Court, in para 153, observed that "The distinction between the power to levy fees and the power to levy a tax is well known ….".
263. In the case of Subramanian Swami339, the Hon'ble Supreme Court discussed the provision of reading down the provision of a statute. It was held that such reading down the
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provisions of a statute cannot be resorted to when the meaning thereof is plain and unambiguous. In para 61 of the judgment, the Hon'ble Supreme Court observed as hereunder:-
"61. Reading down the provisions of a statute cannot be resorted to when the meaning thereof is plain and unambiguous and the legislative intent is clear. The fundamental principle of the
"reading down" doctrine can be summarised as follows. Courts must read the legislation literally in the first instance. If on such reading and understanding the vice of unconstitutionality is attracted, the courts must explore whether there has been an unintended legislative omission. If such an intendment can be reasonably implied without undertaking what, unmistakably, would be a legislative exercise, the Act may be read down to save it from unconstitutionality. The above is a fairly well-established and well-accepted principle of interpretation which having been reiterated by this Court time and again would obviate the necessity of any recall of the huge number of precedents available except, perhaps, the view of Sawant, J. (majority view) in DTC v. Mazdoor Congress [1991 Supp (1) SCC 600 : 1991 SCC (L&S) 1213] which succinctly sums up the position is, therefore, extracted below: (SCC pp. 728-29, para 255)
"255. It is thus clear that the doctrine of reading down or of recasting the statute can be applied in limited situations. It is essentially used, firstly, for saving a statute from being struck down on account of its unconstitutionality. It is an extension of the principle that when two interpretations are possible—one rendering it constitutional and the other making it unconstitutional, the former should be preferred. The unconstitutionality may spring from either the incompetence of the legislature to enact the statute or from its violation of any of the provisions of the Constitution. The second situation which summons its aid is where the provisions of the statute are vague and ambiguous and it is possible to gather the intentions of the legislature from the object of the statute, the context in which the provision occurs and the purpose for which it is made. However, when the provision is cast in a definite and unambiguous language and its intention is clear, it is not permissible either to mend or bend it even if such recasting is in accord with good reason and conscience. In such circumstances, it is not possible for the court to remake the statute. Its only duty is to strike it down and leave it to the legislature if it so desires, to amend it. What is further, if the remaking of the statute by the courts is to lead to its distortion that course is to be scrupulously avoided. One of the situations further where the doctrine can never be called into play is
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where the statute requires extensive additions and deletions. Not only is it no part of the court's duty to undertake such exercise, but it is beyond its jurisdiction to do so."
264. In the case of Ind-Swift Laboratories Ltd.340, the Hon'ble Supreme Court discussed the scope of reading down a provision of statute. The Hon'ble Court observed that " A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal". The law has further been discussed by the Hon'ble Supreme Court as follows:-
"19. This Court has repeatedly laid down that in the garb of reading down a provision it is not open to read words and expressions not found in the provision/statute and thus venture into a kind of judicial legislation. It is also held by this Court that the rule of reading down is to be used for the limited purpose of making a particular provision workable and to bring it in harmony with other provisions of the statute. In this connection we may appropriately refer to the decision of this Court in Calcutta Gujarati Education Society v. Calcutta Municipal Corpn. [(2003) 10 SCC 533] in which reference was made at SCC para 35 to the following observations of this Court in B.R. Enterprises v. State of U.P. [(1999) 9 SCC 700] :
(SCC pp. 764-66, para 81)
"81. … It is also well settled that first attempt should be made by the courts to uphold the charged provision and not to invalidate it merely because one of the possible interpretations leads to such a result, howsoever attractive it may be. Thus, where there are two possible interpretations, one invalidating the law and the other upholding, the latter should be adopted. For this, the courts have been endeavouring, sometimes to give restrictive or expansive meaning keeping in view the nature of legislation, may be beneficial, penal or fiscal, etc. Cumulatively it is to subserve the object of the legislation. The old golden rule is of respecting the wisdom of the legislature that they are aware of the law and would never have intended for an invalid legislation. This also keeps courts within their track
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and checks individual zeal of going wayward. Yet in spite of this, if the impugned legislation cannot be saved the courts shall not hesitate to strike it down. Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear to be in defiance of the Constitution. These interpretations spring out because of concern of the courts to salvage a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are not static but dynamic. This infuses fertility in the field of interpretation. This equally helps to save an Act but also the cause of attack on the Act. Here the courts have to play a cautious role of weeding out the wild from the crop, of course, without infringing the Constitution. For doing this, the courts have taken help from the Preamble, Objects, the scheme of the Act, its historical background, the purpose for enacting such a provision, the mischief, if any which existed, which is sought to be eliminated. … This principle of reading down, however, will not be available where the plain and literal meaning from a bare reading of any impugned provisions clearly shows that it confers arbitrary, uncanalised or unbridled power."
265. On behalf of the appellants, it has also been argued that fee is collected for a purpose; for services rendered. In the instant case, it is not even shown as to where the fee is to be collected, how it has to be utilized? Even the Act uses the words fee and tax separately.
266. State, in fact, has made an attempt to validate the Act by arguing that it may be validated treating it a statute imposing a fee. Despite less distinction between tax and fee, still fee has an element of quid pro quo; some services rendered reasonably may be connected with the fee imposed. It may be specific services or services rendered in general. Even if it is shown that the fee imposed is related to some services rendered to the
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grantee, the Court may, in view of the settled legal position, not evaluate the genuineness for imposing such fee in terms of calculating the expenses that may be incurred in providing the services and/or the amount that may be collected.
267. In the instant case, the Act simplicitor imposes water tax on electricity generation. It does not speak of any fund where the tax may be deposited. The Act does not speak of any services in lieu whereof the tax is imposed. In fact, the Act uses the word fee, as well. According to Section 5 of the Act, while submitting a detailed project report, the user has to pay such fee or charges as may be fixed by the Commission for registration. Similarly, under Section 7 of the Act, for registration also, fee is to be paid. In fact, Section 7(b) of the Act uses both words i.e. fee and water tax. Section 7 of the Act reads as follows.
"7. Information to the User Prohibition on. - After the scheme is accepted by the Commission under section 6, the Commission shall register the scheme and inform the user to -
(a) Execute an agreement in such a form and manner with the Commission as may be prescribed; and
(b) Pay such fee and water Tax as fixed under chapter 4 of this Act."
268. A Commission is established under the Act. Section 13 of the Act makes it obligatory for the user to pay such fee and the charges, as the Commission may fix for undertaking service activities. Section 13 reads as follows:-
"13. Control and safety provisions. - (1) The Commission may, by notice in writing given to the user require him to :-
(a) Cause periodic inspection carried out by an expert, to the satisfaction of the Commission and in accordance with the procedure and at such intervals, as the Commission may specify, for the Scheme;
(2) The user shall pay such fee and such other charges as the State Water Commission may fix in this behalf, to the State Water Commission for under taking the following activities :-
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(a) Periodical inspection of the scheme by the Commission or any other officer or expert empowered in the behalf;
(b) Any other activity performed or caused to be performed by the Commission under this section in relation to the scheme of the user."
269. A bare reading of Section 13 of the Act makes it abundantly clear that a fee under sub-section (2) of it, is to be paid by the user in respect of the activities as enumerated under sub-section (2) of Section 13. It is not tax, it is fee. The Commission is established under section 20 of the Act. As stated, the Commission may charge fee and other charges for certain activities, which are also specified. How this amount of fee or charges shall be utilized? How will it be maintained?
Section 37 of the Act makes provision with regard to the fund named as Commission Fund. It shall consist of grants and loans, fees, etc. and the fund would be utilized for the activities as specified under sub-section (2) of Section 37. Section 37 of the Act reads as follows:-
"37. (1) There shall be a fund constituted to be called the Commission fund and that shall be credited thereto, -
(a) any grants and loans made to the Commission by the Government;
(b) all fees received by the Commission under the Act;
(c) all sums received by the Commission from such other sources as may be decided upon by the Government.
(2) The Government may prescribe the manner of utilizing the fund for meeting the expenses."
270. The tax that has been imposed under the Act is not part of the fund constituted under Section 37 of the Act. The tax that has been imposed by the Act has no co-relation with any service rendered to the user. The Act imposes a tax.
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271. This Court can by no stretch of imagination read the tax as fee in the Act. The tax, as imposed under the Act has no attribute of fee. It is simplicitor a tax, which this Court has held the State Legislature is not competent to impose.
272. As held in the case of Subramanian Swami341, the reading down or recasting the statute can be applied in limited situations, namely, (i) for saving a statute for being struck down on account of interpretation and (ii) situation which summons its aid is where the provisions of the statute are vague and ambiguous. In the instant case, both these situations do not apply. This Court has already held that the State Legislature has no competence to impose the tax. The nature of tax that has been imposed, as held, has no attribute of fee. There is no question of any interpretation of any clause of the Act. The Act is not ambiguous while imposing tax. It is clear and in unequivocal terms imposes tax.
273. This Court cannot remake or recast the statute. This Court cannot read the Act as one imposing fee. Therefore, it cannot be said that the Act may be validated as reading the tax as fee.
CONCLUSION IN NUTSHELL
274. To sum up, the conclusions in nutshell are as follows:-
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274.1 The "true nature and character" or "pith and substance" of the Act is that it levied tax on the generation of electricity.
274.2 The State Legislature is not competent to legislate the Act. Therefore, the Act is ultra vires the Constitution.
274.3 Section 17 of the Act makes excessive delegation of power for fixing rates by the State Government. It delegates such power without any policy guidelines. It is a naked delegation. Therefore, Section 17 of the Act is void.
274.4 The demand of tax made pursuant to the Notification dated 07.11.2015 is barred by the doctrine of promissory estoppel.
274.5 This Court cannot remake or recast the statute. The Act imposes tax, which the State Legislature is not competent to enact.
274.6 The Act cannot be read as the one imposing fee.
275. In view of the foregoing conclusion, all the Special Appeals and the Writ Petitions deserve to be allowed. The Act is to be struck down.
276. All the Special Appeals are allowed. Consequently, all the Writ Petitions are allowed.
155
277. The impugned judgment dated 12.02.2021 is set aside.
278. The Uttarakhand Water Tax on Electricity Generation Act, 2012 is struck down as ultra vires the Constitution.
(Ravindra Maithani, J.)
25.10.2023
Avneet/