2023 (9) TMI 1082 - BOMBAY HIGH COURT

Constitutional validity of The Goa Cess on Products and Substances Causing Pollution (Green Cess) Act, 2013 - Tax (Cess) versus Fee - Concurrent power of Central Government and State Government to legislate - whether the impugned Act, in pith and substance, relates to the fields enumerated in Entries 6, 14, 17, 18, 21 and 25 of List II, Seventh Schedule to the Constitution or whether the same relates to the field of “environment” or “environmental pollution”, which, according to the petitioners, is not covered by any of the fields in Lists II and III, Seventh Schedule to the Constitution but falls exclusively within the residuary Entry i.e. Entry 97 of List I of the Seventh Schedule to the Constitution?

HELD THAT:- Since the levy and the object of the levy is to augment resources to reduce the carbon footprint generated by the petitioners involved in handling etc. specified products and substances, the impugned Act has a direct nexus with subjects like public health, sanitation, water, gas or land. Greater effective means to combat increased carbon footprint or even disincentivising increased carbon footprint would clearly promote public health. The entries in the State list cannot be narrowly or pedantically construed. They have to be liberally and generously construed. Upon their meaningful construction, it would be difficult to agree with the Petitioner’s argument that in pith and substance, the impugned Act is an enactment not “with respect to” the entries in the State List.

The Constitution Bench in State of West Bengal V/s. Kesoram Industries Ltd. & Ors. [2004 (1) TMI 71 - SUPREME COURT], held that ample authority is available for the concept that under Entry 49 in List II the land remains a land without regard to the use to which it is being subjected. It is open for the Legislature to ignore the nature of the user and tax the land. At the same time, it is also permissible to identify, for the purpose of classification, the land by reference to its user.

In pith and substance, the impugned Act imposes a levy upon the handling or consumption or utilization or combustion or movement or transportation of certain products and substances, including hazardous substances, which upon their handling or consumption or utilization or combustion or movement or transportation causes pollution of the lithosphere, atmosphere, biosphere, hydrosphere and other environmental resources of the State of Goa.

Environment of Environment Pollution - Fields relatable exclusively to Residuary Entry 97, Union List? - HELD THAT:- The Court held that in a Federal Constitution like ours where there is a division of legislative subjects, but the residuary power is vested in Parliament, such residuary power cannot be so expansively interpreted, as to whittle down the power of the State legislature. The Court held that that might affect and jeopardize the very federal principle. The federal nature of the Constitution demands that an interpretation which would allow the exercise of legislative power by Parliament pursuant to the residuary powers vested in it to trench upon State legislation and which would thereby destroy or belittle state autonomy must be rejected.

Therefore, unless a clear case of the all-important field or subject of environment or environmental pollution being left out from the entries in the lists is made out, it would be quite unsafe to read this field or subject in the residuary entry. This would not be the appropriate manner of construing the legislative entries. Such a manner of interpretation would run counter to several decisions of the Hon’ble Supreme Court on the question of interpretation of such entries.

Is the impugned act a hybrid legislation? - HELD THAT:- There is no warrant for the broad proposition that all issues relatable to “air pollution” necessarily fall within the residuary Entry 97 of List I. In any case, since the impugned Act is aimed at augmenting the State’s revenues for having programmes and schemes to reduce the carbon footprint or since the impugned Act imposes a levy on the handling or consumption or, utilization or combustion or, movement or transportation of products and substance, which upon their handling, etc. causes pollution of the lithosphere, atmosphere, biosphere, hydrosphere and other environmental resources of the State of Goa, the same legitimately relates to the domain covered by Entry 6, 14, 17, 18, 21 and 25, particularly since these entries have to be construed liberally and broadly and not pedantically.

Once any legislation is found to substantially relate to the entries in the State or Concurrent lists, even some incidental or marginal overlap is of no consequence. In any case, once a field or subject is found to be reasonably related to the entries in the State or Concurrent lists, the Courts must be slow to place such fields or subjects in the residuary entry 97 of the Union list. “Residuary” typically means what is left out.

Clean Energy Cess - HELD THAT:- The clean energy cess, which is nothing but an excise duty, was imposed by the Parliament because the subject of “environment” or “environmental pollution” relates to the residuary Entry 97 of List I. Instead, it is clear that the levy is an excise duty and in 2010, the Parliament had legislative competence to impose such excise duty or a cess which is nothing but an increment on the excise duty. Since the petitioners point out that such levy covered imported goods as well, the levy could also be said to relate to Entry 83 of List I dealing with duties of customs, including export duties.

In any case, what is important is that the clean energy cess imposed by the Finance Act of 2010 can neither be cited as an instance where the Parliament legislated on the subject of “environment” or “environmental pollution” by relying on residuary Entry 97 in List I nor can it be said that the finance Act 2010 to the extent it imposes clean energy cess covers the field relating to the subject matter of the impugned Act.

Double Taxation - HELD THAT:- In AVINDER SINGH VERSUS STATE OF PUNJAB [1978 (9) TMI 171 - SUPREME COURT] the Hon’ble Supreme Court rejected the feeble plea that the levy was bad because of the vice of the double taxation or that the impost was unreasonable because there were heavy prior levies. The Court held that some of these contentions hardly merit consideration but have been mentioned out of courtesy to the counsel. The Court pointed out that there was nothing in Article 265 of the Constitution from which one could spin out the constitutional vice called double taxation.

Arguments based on Article 253, EPA, Air Pollution Act, NGT Act and Occupied Field - HELD THAT:- Several Constitution Bench of the Hon’ble Supreme Court have held that where more than one interpretation is possible or plausible, the interpretation that favours federalism of power and the supremacy of the State within its own sphere must be preferred, and the one that derogates from the same must be eschewed. For all the above reasons, it is found difficult to agree with the Petitioner’s arguments based upon Article 253 and the three Parliamentary legislations.

The Tax versus Fee argument - HELD THAT:- The learned Advocate General did contend that the State is entitled to defend the impugned Act on the basis that the levy was a tax relatable to Entry 49 List Il, Seventh Schedule to the Constitution. He cited some decisions in support of this contention. However, now that it is concluded that the levy imposed by the impugned Act is a fee and that the State had sufficient legislative competence to enact the impugned Act, it is not proposed to examine the issue as to whether the impugned levy can be justified as a "tax" relatable to Entry 49 List Il, Seventh Schedule to the Constitution.

Petition dismissed.