TMI Blog2024 (3) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. Nature and event of taxation under the impugned Act - HELD THAT:- The power to tax is on generation of electricity and user of water is only incidental. The user of water is not being taxed and it is only the user of water for generation of electricity , who is being taxed. Therefore, it is a tax on generation of electricity. If it was the quantum of water used, then the height from which the water would fall as a measure to determine the rate of cess would be wholly irrelevant. It is evidently clear from the aforesaid notification dated 16.02.2023 that the quantification is not based on the use of water, but is based on the height from which the water falls. The use of water in fact does not go by the text of the impugned Act. It is generation of electricity that is the bone and water drawn is only the flesh . The taxable event is hydropower generation and not the usage of water because if there is no generation, then there is no tax . Moreover, if the cess was on usage of water , then how could the height, at which the water falls on the turbine, be made the taxable event? It is settled principle of law that standard adopted as a measure of levy, although not determinative, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under the purview of taxing mineral rights - even Entry 50 of List-II cannot be held to countenance the States taxation on water drawl for generation of electricity. Competence to promulgate whether can be traced to Entry 45 of List-II - HELD THAT:- The State's competence to promulgate the impugned Act cannot be traced to Entry 49 of List-II. Therefore, Rekchand's case [ 1997 (5) TMI 441 - SUPREME COURT ] is not applicable in the present case and the State's competence cannot be traced to Entry 45 of List-II - in Rekchand case, the levy was imposed on drawl of flowing water by artificial contrivance for industrial purpose. The rates of such levy were specified under Resolution. It was on account of the definition of land under the Transfer of Property Act, 1882, which included right to water flowing therefrom, the said levy was sustained by the Hon'ble Supreme Court under Entry 45, List-II. Competence to promulgate whether can be traced to Entries 17 18 read with 66 of List-II as a tax - HELD THAT:- The State has relied on Entries 17 18 of List-II to demonstrate its competence to have legislated the Impugned Act. In this regard, it is a settled principle of law th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification dated 26.08.2023, whereby the tariff structure on water cess was fixed on the basis of Head . However, even the said notification failed to prescribe the measure of tax and instead proceeded to prescribe tariff rate without any indication or measure on which such tariff rate will be applied. Moreover, measure of tax being vague, based upon the assessment or water drawn, which would form the basis of the tax imposed is also vague and fraught with lack of adequate guidelines, as is evident from the combined reading of Section 12 with Section 17 of the impugned Legislation. The preamble of the impugned Act merely states that it is an act to levy water cess on hydropower generation in the State of Himachal Pradesh, the Statement of Objects and reasons merely states that the objective of the impugned Act is revenue generation. Therefore, on account of having delegated power to fix rates of impugned levy to Government of Himachal Pradesh without any legislative policy or guidance, the impugned Act is unconstitutional - point is accordingly answered in favour of the petitioners. Promissory Estoppel - HELD THAT:- The question of promissory estoppel has been rendered academic an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Pvt. Ltd., M/s. Kanchanjunga Power Company Pvt. Ltd., Tissa Hydro Power Pvt. Ltd., I.A. Hydro Energy Pvt. Ltd., Rajpur Hydro Power Plant Ltd., M/s Goodwill Energy Enterprises, Himachal Sorang Power Pvt. Ltd., M/s Greenko Budhil Hydro Power Pvt. Ltd. M/s Luni Power Company Pvt. Ltd., Punjab State Power Corporation Ltd., GMR Bajoli Holi Hydro Power Pvt. Ltd. Anr., Prodigy Hydro Power Pvt. Ltd. Versus State of H.P. ors. For the petitioner(s): Mr. Tushar Mehta, Sr. Advocate (through VC) with Mr. Vijay Kumar Arora and Mr. Avneesh Arputtham, Advocates, for the petitioner in CWP No. 2916 of 2023. Ms. Shalini Thakur and Dr. Seema Jain (through VC) Advocates for the petitioners in CWP Nos. 2262 and 2263 and Ms. Shalini Thakur, Advocate, for the petitioner in CWP No. 2721 of 2023. Mr. S. Ganesh, Sr. Advocate (through VC) and Mr. Rajnish Maniktala, Senior Advocate with Mr. Naresh Kumar Verma, Advocate, for the petitioner (s) in CWP Nos. 2277, 2600, 3246, 3247, 3249, 3300, 4105 and 4111 of 2023. Mr. Vikas Chauhan, Mr. Vishwajeet Tyagi, Mr. Tarun Johri and Mr. Sarthak Mehta, Advocates, for the petitioner(s) in CWP Nos.2739, 2917 and 2918 of 2023. Mr. K.D. Shreedhar, Senior Advocate with Mr. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 in CWP No. 2855 of 2023 and respondent No. 6 in CWP No. 2869 of 2023. JUSTICE TARLOK SINGH CHAUHAN Since, somewhat identical issues of fact and law are involved in these batch of writ petitions, therefore, they have been decided by this common judgment. Case of the Petitioner(s): 1.1. The petitioners are power generation companies engaged in the production of the electricity by using river water. They own, operate and maintain the hydropower projects. The petitioners after entering into agreements with the Government of Himachal Pradesh are running the projects. The petitioners seek to assail the legislative competence, the constitutional validity and the vires of the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023 (hereinafter to be referred to as the Act ), inter alia, on the following grounds: (i) The State lacks legislative competence/power as per Article 265 of the Constitution of India. (ii) The legislative powers of the Union Government or the State Government have been so demarcated and specified by way of Seventh Schedule under List-I known as Union List, List-II known as State List, List-III known as Concurrent List. Thus, the State Government has legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same be promptly withdrawn. (viii) Section 10 of the Act and Rule 7 of Himachal Pradesh Water Cess from Hydro Power Generation Rules, 2023 (for short the Rules ) have impact of taking away the rights that have been crystallized or vested on the petitioners. The impugned Act has a retrospective effect. Even though, the Legislature is entitled to make an enactment with retrospective effect, but it cannot take away the rights that have already been vested in the petitioners. (ix) The provisions of the Act go to show that two conditions are required to be fulfilled for levy of cess. One is that water is drawn from the source and another is that drawl of such water is for generation of electricity. If one of the conditions is lacking, the levy of cess is not attracted. So, in pith and substance levy of cess is on generation of electricity. The State lacks the competence to levy cess or tax on generation of electricity because this field is reserved for Parliament under entries No. 84 and 97 of List-I of Seventh Schedule. This colourable exercise of power by the State is unconstitutional. (x) The impugned Act is also bad in law as it is violative of Article 300A of Constitution o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mere drawl of water but the drawl of water for the generation of electricity. (xxi) The Act is unconstitutional since the charging section does not lay down any guidelines, limitations or safeguards. Therefore, such legislative architecture suffers from the vice of the excessive delegation and thereby violative of Article 14 plainly and is thus void. (xxii) Since, there is no provision providing for an opportunity of personal hearing, thereby the Act not only violates the principles of natural justice but is violative and ultra vires of the Article 14 of the Constitution of India. (xxiii) The impugned Act is otherwise illegal as Section 30 thereof is in contradiction to Section 28. (xxiv) The Act otherwise is liable to be struck down in absence of there being any provision for having a judicial member when admittedly the power to determine the cess has been assigned or given to a Commission exercising quasi judicial functions. (xxv) The impugned Act of the State is also contrary to the principles of promissory estoppel as at the time of investment of thousand of crores of rupees in the setting up of the Hydro Power Projects in the State of Himachal Pradesh, the implication upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10(2) of the Act for the water usage/water drawn w.e.f. 10.3.2023. Most of the projects have been commissioned since long back and debt servicing period of these projects have been completed as such there will be no impact on the viability of project due to levying of water cess. 2.7. The Act does not violate Article 300A of the Constitution of India. The petitioners have no absolute and exclusive right over the water use for generation of the hydropower. The provisions of the agreements signed between the Government of Himachal Pradesh and Hydropower Projects allow it to build, own, operate maintain the projects, therefore, the petitioners cannot claim exclusive and absolute right on water. 2.8. The Act does not violate rights of the petitioners under Articles 14, 19 and even 300A of the Constitution of India. 2.9. The Act levies cess on usage of water (non-consumptive use) on hydropower projects and is not in violation of Articles 200 and 288(2) of the Constitution of India, rather it is in conformity with the provisions as laid down under entries No. 17, 18, 45, 48, 49 and 50 of List-II of Seventh Schedule. 2.10. The State Government is absolutely competent to legislate charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislation (1) 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. 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 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 numerated in List II or III including any tax not mentioned either of those lists). 6. 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 Himachal Pradesh 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 Himachal Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water of these rivers for electricity generation is in violation of provisions of the Constitution of India. Question arising for determination: 4.1. In order to better appreciate the arguments and deliberations, this Court deems it fit to formulate points that arise for consideration in these petitions and thereafter deliberate and decide them. The arguments have been addressed by the respective counsel(s) appearing for the parties, some of which are overlapping and repetitive in essence. 4.2. From the pleadings of the parties and arguments that have been addressed in detail, some of the key challenges may be noted and shall henceforth be referred to as points for consideration: 1. It is misnomer that the tax is levied on water, whereas it is on generation of electricity, and therefore, not a water tax. 2. The State Legislature is not competent to legislate the Act. 3. In the Act, there is no taxing provision. Tax has been imposed by way of notifications by the concerned Secretary to the Government of Himachal Pradesh. 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 State Legislature. 4. The principle of prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 17 of List-II is of no avail as tax entry has to be specific in any one of the lists and cannot be inferred. Under this provision the State can only regulate the water but cannot tax it; for it is not a taxing entry. The State cannot even fall back on entry No. 51 as it does not pertain to nor does it contain a reference to electricity . 5.6. Now, as regards entry No. 38 of list-III, which is the concurrent list, the State can only regulate electricity, but cannot tax it. For this, there has to a specific provision contained in the Constitution itself. The State can also not be permitted to fall back on entry No. 47, as there has to be quid pro quo for being termed as a fee not a tax . 5.7. In order to buttress his arguments, further the learned Counsel has then referred to and placed reliance on the letter dated 25.04.2023 issued by the Union of India and has vehemently argued that the State is not competent to impose water tax and cess. The relevant portion of the letter reads as under:- It has come to the notice of the Government of India (Gol) that some State Governments have imposed taxes/duties on generation of electricity. This is illegal and unconstitutional. Any tax/du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 taxes / duties have been so levied, it may be promptly This has the approval of the Hon'ble Union Minister of Power and New Renewable Energy . 5.8. It is next urged by the learned Senior Counsel that before executing the projects, the projects have entered into power purchase agreements (PPAs), under which they are otherwise obliged to give 12% electricity free of cost to the State Government and 1% towards rehabilitation making them liable to give 13% of the electricity so generated free of cost to the State Government, therefore, the State Government is estopped from levying such tax. Arguments of Dr. Abhishek Manu Singhvi, learned Senior Advocate for some of the petitioners: 6.1. Learned Senior Advocate, apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as being unconstitutional by referring to Section 15 urging that since this provision of law delegates the power to determine the rate of tax to the State Government without laying down any guidelines, limitation or safeguards, therefore, such legislative architecture suffers from the vice of excessive delegation and is thereby violative of Article 14 and is plainly void. 8.2. He further argues that the impugned Act fails to clearly lay down one of the critical components of taxing statute i.e. measure of tax and it is trite in law that in order to levy a tax so as to make both operative and valid, four essential components must be provided in the enacting statute creating the tax/impost, i.e.: (i) the taxable event attracting the levy; (ii) the person on whom the levy is imposed and who is obliged to pay the tax; (iii) the rate at which the tax is imposed; and (iv) the measure or value to which the rate will be applied for computing the tax liability. Whereas in the instant cases, though three of essential components can be identified within the statute i.e. taxable event , the person liable to pay tax , and the rate of tax , however, the impugned Act fails to identify the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amendment of Entry-84, now the generation of electricity can only be taxed under Entry-97 i.e. conferring residual powers upon the Parliament under List I of Seventh Schedule and in order to buttress their arguments, they have placed strong reliance on the judgment of the Hon ble Supreme Court in M.P. Cement Manufacturers Association vs. State of Madhya Pradesh (2004) 2 SCC 249 which judgment in turn has been followed by the High Court of Jammu and Kashmir in National Hydroelectric Power Corporation Limited vs. State of Jammu and Kashmir 2005 (2) JKJ 5 and by the Guahati High Court in Bharti Airtel Limited vs. State of Assam 2016 (4) Guahati Law Times 781. Arguments of Dr. Seema Jain, Advocate: 12.1. Learned counsel for the petitioner, apart from adopting the arguments of all the aforesaid counsel(s) for the petitioner(s), has separately addressed the arguments to contend that the State has no legislative competence to enact the law as there is no entry in the State List which may empower the State to impose a tax/cess on generation of electricity. Arguments of Mr. Tarun Johri, Advocate: 13.1. In addition to adopting the arguments of the aforesaid learned counsel(s) for the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is covered under entry land being in and over the land. 4. The Act also falls within purview of entry 50 of List II, as the water is mineral and the State has right over the water flowing or stored within its jurisdiction, which right includes right to tax or impose tax. 5. The water being in and over the land, the income/revenue generated from water is the land revenue of the State under entry 45 of List II. 6. The mode of calculation will not determine the nature of the cess. 7. There are no structural defects qua delegation of power etc in statute so as to declare the Act as ultra vires to its provisions/constitution of India. 8. Lastly, the public interest would prevail over the private/individual interest. Arguments of Mr. Dushyant Dave, learned Senior Advocate on behalf of the State of Himachal Pradesh: 16.1. On 13.12.2023, Mr. Dushyant Dave, learned Senior Advocate, appeared on behalf of the State and made additional arguments that: (1) Even as per the pleadings of the petitioner(s), the water being consumed for generation of electricity belongs to the State of Himachal Pradesh and the fact that the water belongs to the State and the consumption of water is in Himachal Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked by the State as cess can be taxed as also a fee and going by the latest trend in law, even for a fee, there is no co-relationship required to be established. (10) He thereafter invited our attention to the reply filed on behalf of the State to contend that the resources of the State are very limited because the State has its natural limitation, therefore, the State must be allowed to exploit its natural resources, for which the State not only has the constitutional powers but also has a duty to exploit water resources. Any other interpretation would be a narrow interpretation. (11) According to him, the people of the State are the stakeholders and shareholders of the natural resources and the impugned legislation is of a paramount public importance. (12) The mere fact that the hydropower would become more expensive, is no ground to test its constitutional validity, more particularly, when the rise in power would be passed on to the consumers. (13) It is more than settled that the financial burden would be of no excuse much less a ground to strike down a valid piece of legislation. (14) The Constitution framers gave two rights to the State, i.e. one under Article 45 of the Const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khchand Mohota Spinning Weaving Mills Ltd. vs. State of Maharashtra, 1997 (6) SCC 12 10. W. B. vs. Kesoram Industries Ltd. Ors. 2004 (10) SCC 201 11. Government (NCT of Delhi) vs. Union of India Anr. 2018 (8) SCC 501. 16.3. According to Mr. Dave, the object of the Act is to levy tax on the water drawn and consumed and in support of such contention, placed reliance on the judgment of Hon'ble Supreme Court in Khyerbari Tea Co. Ltd. Anr. vs. The State of Assam 1964 (5) SCR 975. 16.4. He would then contend that legislature can levy tax and then prescribe machinery for the same. The tax collected from the producers does not mean that it is a tax on producers and for this purpose has placed reliance on the Judgment of the Hon'ble Supreme Court in The Anant Mills Co. Ltd. vs. State of Gujarat and Ors 1975 (2) SCC 175., The Government of Andhra Paradesh and Anr. vs. Hindustan Machine Tools Ltd. 1975 (2) SCC 274 and M/s Hoechst Pharmaceuticals Ltd. Ors. vs. State of Bihar Ors. 1983 (4) SCC 45. 16.5. He relied upon the judgment of the Hon'ble Supreme Court in Ichchapur Industrial Coop. Society Ltd. vs. Competent Authority, ONGC and Anr. 1997 (2) SCC 42 to canvass that water is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this rider that in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put to the words so that the same may have effect in their widest amplitude. 19. In Calcutta Gas Co.( (Proprietary) Ltd. vs. State of W.B. 1962 Supp. (3) SCR 1 the Constitution Bench of the Hon ble Supreme Court observed that it may now be taken as well settled that every attempt should be made to harmonize the apparently conflicting entries not only of different Lists but also of the same List and to reject that construction which will rob one of the entries of its entire content and make it nugatory. 20. In Raja Jagannath Baksh Singh vs. State of U.P. (1963) 1 SCR 220, the Constitution Bench of the Hon ble Supreme Court held that while interpreting the words used in the Constitution, it is an elementary cardinal rule of interpretation that the words used in the Constitution which confer legislative power must receive the most liberal construction and if they are the words of wide amplitude, they must be interpreted so as to give effect to that amplitude. It would be out of place to put a narrow or restricted construction on words of wide amplitud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess on hydropower generation will be imposed based on consumption of water and head available in the project, which is considered difference in the level at entry and exit of water conductor system. At present 172 hydropower projects, with installed capacity of 10,991 MW, have been commissioned in the State. In order to deal with the situation of serious financial constraints in the State, it has been decided to make the provision to create additional financial resources by imposing water cess on hydropower generation. Since, the Himachal Pradesh Legislative Assembly was not in session and the issue to create alternate revenue resources of the State could not be prolonged, hence, keeping in view of the urgency and importance of the matter, the Governor, Himachal Pradesh, by invoking powers under clause (1) of article 213 of the Constitution of India promulgated the Himachal Pradesh Water Cess on Hydropower Generation Ordinance, 2023 (Ordinance No. 2 of 2023) on 15.02.2023 which was published in Rajpatra (e-Gazette) on the same day. Now, this Ordinance is required to be replaced by a regular enactment. This Bill seeks to replace the aforesaid ordinance with some modifications. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act, apply for registration and the Commission shall pass an order to register the user within a period of one month from the date of receipt of application in accordance with the provisions of this Act. (3) If the user as mentioned in sub-section (2) fails to apply for registration within time stipulated therein, the Commission shall forthwith impose water cess without registration on the basis of data of water usage provided by the Directorate of Energy, Himachal Pradesh from the date of commencement of this Act alongwith suitable penalty which may extend to rupees ten lakh and in case of prolonged default with additional fine which may extend to rupees five thousand for every day. (4) Every registered user shall be under an obligation to ensure the safety of the life and property of inhabitants of the area by the operation of the scheme. (5) Every registered user shall be bound to allow the Commission or any other officer authorised by the Commission to have an access at any time to the scheme for their satisfaction with regard to compliance of the provisions of this Act. 29. Section 12 provides for assessment of water drawn by the user, which reads as under:- 12. Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides for its recovery. Under Section 17 based on such assessment of water drawn by the user, computation on water cess is carried out. 35. It is more than settled that taxation under the List to the Seventh Schedule to the Constitution may with respect to an object or an event or may be with respect to both. 36. From the Preamble as also the various provisions of the impugned Act extracted above, it would be evidently clear that the impugned levy has not been imposed on water but on a single inextricable event that is water drawn for hydropower generation . 37. Why we observe so is because there can be no electricity generation by a hydropower project without drawl of water. In absence of generation of electricity, no levy/cess is imposed. 38. What would further be noticed from the impugned Act is that it maintains complete silence on the measure of levy. 39. The tariff of the water cess has been set out in the notification dated 16.02.2023, which is extracted below: Government of Himachal Pradesh Jal Shakti Vibhag No. JSV-B(A)3-1/2022 Dated Shimla-171002, the 16/02/2023. Notification The Governor, Himachal Pradesh, in exercise of powers vested in him under Section 17 (1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed alongwith and in the light of other relevant circumstances, the method adopted by the legislature would be relevant in determining the character of the impost. To be regarded as valid basis, the measure of the levy must maintain a nexus with the essential character, as held by the Hon'ble Supreme Court in State of West Bengal v. Kesoram Industries Ltd. (2004) 10 SCC 201. It shall be relevant to extract the relevant observations as contained in paras 33 and 38, which read as under:- We now proceed to enter a deeper dimension in the field of tax legislation by considering the problem of devising the measure of taxation. This aspect has been dealt with in detail in Union of India and Ors. v. Bombay Tyre International Ltd.,. Tracing the principles from the leading authority of Re.: a reference under the Government of Ireland Act 1920 and Section 3 of the Finance Act (Northern Ireland) 1934, (1936) A.C. 352, passing through Ralla Ram v. Province of East Punjab, 1948 FCR 207 , and treading through the law as it has developed through judicial pronouncements one after the ether, this Court has made subtle observations therein. It has been long recognized that the measure employed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of electricity as against water and, therefore, it is a misnomer that tax is levied on water and not generation of electricity , and is, therefore, not a water tax. This point is answered accordingly in favour of the petitioners. Point No. 2. 44. At the outset, it is necessary to observe that normally it is the 'pith and substance' of the taxing legislation which assumes significance not to the question of bonafides or malafides but in examining the competence of the legislature because the State, while promulgating a statute, might purport to act within limits of its powers, yet in substance and in reality, it may be transgressing these powers, the transgression being veiled by what appears, on proper examination, to be a mere pretense or a disguise. Pith and Substance 45. In determining whether an enactment is a legislation with respect to the given power, what is relevant is whether in its pith and substance , it is law upon the subject matter in question. Therefore, it is necessary here to subject the impugned Act to the test of pith and substance to ascertain its true intent and character, which is relevant in determining as to which list it would fall under and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(g) of the impugned Act, user is defined to mean any person, group of persons, local body, government department, company, corporation, society or anybody, by whichever name called drawing water from any source for generation of hydropower . Therefore, the tax is on persons (whether natural or juristic) and not on lands or buildings as units. Therefore, in such circumstances, the reliance placed by the State on the judgment in Anant Mills (supra) is clearly misplaced. 50. Even otherwise the expression Land cannot be logically interpreted to mean everything above and below it, as that would cover everything on the earth and subsume all other Entries in Seventh Schedule, as there are Entries in List-I and List-II, dealing with the subject on, above or below land. Some of the entries in List-I, which are connected to the land and buildings and which will be rendered otiose by the State Government wide interpretation are: I Entry 7. Industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war ii Entry 22. Railways. iii Entry 23. Highways declared by or under law made by Parliament to be national highways. iv. Entry 24. Shipping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (2019) 20 SCC 143 , the Hon ble Supreme Court held as under:- 50. While the widest amplitude should be given to the language used in one entry, every attempt has to be made to harmonise its contents with those of other entries, so that the latter may not be rendered nugatory. Competence to promulgate the impugned Act whether can be traced to Entry 50 of List-II as contended by the State: 54. Entry 50 of List-II (State List) provides for Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. 55. The State's competence to impose impugned levy cannot be traced to Entry 50 of List-II as contended by it. Activity of non-consumptive drawl of water for generation of hydropower, where the water drawn is allowed to flow back to its source, being a single inextricable event cannot be brought under the purview of taxing mineral rights. 56. The State has placed reliance on the judgment of the Hon'ble Supreme Court in Ichchapur Industrial Coop. Society Ltd. vs. Competent Authority, Oil Natural Gas Commission (1997) 2 SCC 42 , to contend that water is a mineral, therefore, the rights in such mineral can be taxed by it. 57. Adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 515, wherein it was observed as under:- 42. But theoretically 'luxuries' is capable of covering each of the several meanings ascribed to the word. The question is how the word is to be construed in the Constitutional entry. Neither the dictionary meaning nor the meaning ascribed to the word judicially (for the reasons stated) resolve the ambiguity. The solution must be found in the language of the Entry taking into consideration the Constitutional scheme with regard to the imposition of taxes and the collection of revenues. 60. In view of the above discussion, even Entry 50 of List-II cannot be held to countenance the States taxation on water drawl for generation of electricity. Competence to promulgate whether can be traced to Entry 45 of List-II: 61. Entry 45 of List II (State List) provides for 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 . 62. In order to support its contention that the State has competence to enact the impugned Act, strong reliance is placed on Entry 45 of List-II and also the judgment of the Hon'ble Supreme Court in R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of this Act.... Section 15 of the Act 2023 pertains to the Fixation of water cess: (1) The user shall be liable to pay the water cess at such rates as the Government may, by notification fix in this behalf. (2) The State Government may review, increase, decrease or vary the rates of the water cess fixed under this section from time to time in the manner it deems fit. B. Resolution B. Notification Sr.No. Non-Agriculture purpose Rate Unit Sr.No. Head Tariff 1. Industrial Purpose (a) Rs. 8/- for the first two years Per 10,000 ctf. Pg water 1. For Hydroelectric Project with head upto 30 mtr Rs. 0.10/m 3 (b) Rs. 10/-for the third and fourth year -do- (c) Rs. 12.50 for the fifth and subsequent year -do- 2. Purpose for the Municipality Rs. 5/- -do- 2. For Hydroelectric Project with head above 30 mtr and upto 60 mtr Rs. 0.25/ m 3 3. Purpose for the Railways Rs. 12.50 -do- 3. For Hydroelectric Project with head above 60 mtr to upto 90 mtr Rs. 0.35/m 3 4. Domestic Use (i.e. for drinking water) Nil 4. For Hydroelectric Project with head above 90 mtr Rs. 0.50/m 3 65. Now, in case the aforesaid comparison is adverted to, it would be noticed that in Rekchand case (supra), the levy wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have legislated the Impugned Act. In this regard, it is a settled principle of law that taxation entries are distinct from general regulatory entries. Entries 1 to 44 in List-II are regulatory, whereas Entries 45 to 63 are taxing entries. Therefore, the legislative competence to impose any tax on water drawn for hydropower generation cannot be imposed by the State by referring to Entries 17 18 of List-II being regulatory entry. 71. Reference in this regard can conveniently be made to the judgment rendered by the Hon'ble Constitutional Bench of the Hon'ble Supreme Court in M.P.V. Sundararamier Co. vs. The State of Andhra Pardesh and another AIR 1958 SC 468 , more particularly para 51 thereof, which reads as under:- 51. In List 1, Entries I to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of Entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. Thus, Entry 22 in List I is Railways , and Entry 89 is Terminal taxes on goods or pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist I, Entries 1 to 81 deal with general subjects of legislation; Entries 82 to 92A deal with taxes. In List 11, Entries 1 to 44 deal with general subjects of legislation; Entries 45 to 63 deal With taxes. This mutual exclusiveness is also brought out by the fact that in List Ill, the Concurrent Legislative List, there is no entry relating to a tax, but it only contains an entry relating to levy of fees in respect of matters given in that list other than court-fees. Thus, in our Constitution, a conflict of the taxing power of the Union and of the States cannot arise. That being so, it is difficult to comprehend the submission that there can be intrusion by a law made by Parliament under Entry 33 of List III into a forbidden field viz. the State s exclusive power to make a law with respect to the levy and imposition of a tax on sale or purchase of goods relatable to Entry 54 of List II of the Seventh Schedule. It follows that the two laws viz. sub-s. (3) of s. 5 of the Act and paragraph 21 of the Control order issued by the Central Government under sub-s. (1) of s. 3 of the Essential Commodities Act, operate on two separate and distinct fields and both are capable of being obeyed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te is incapable of being distinguished from public service. Seen even from this perspective, the impugned levy cannot be termed as Fee . 78. The Scope of State's power to impose a tax on land has to be read in the context of Entry 18, List-II which defines Land as 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. This does not contemplate a river or flowing water as a part of land. Even the principle of leaning in favour of constitutionality of a provision will not be applicable as there is patent lack of legislative competence. 79. The reliance of the State on the judgment of the Hon ble Supreme Court in State of West Bengal vs. Kesoram Industries (2004) 10 SCC 201 is entirely misplaced as the said judgment by Hon ble five-Judge Constitution Bench, to the extent relied upon by the State, has not attained finality, and has been referred to a Constitution Bench of Nine Hon ble Judges of the Supreme Court. 80. Thus, once it is held that the cess sought to be imposed by the impugned Act is not on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the State Government is empowered to review, increase, decrease or vary the rates of water fixed under Section 15 of the impugned Act from time to time in the manner it deems fit. 84. Notably, the power of fixation of rates has been delegated to the Government of Himachal Pradesh i.e., the executive by the State Legislature without any guidance. While fixation of rates can be left to a non-legislative body, the legislature must provide guidance for such fixation as held by the Hon'ble Supreme Court in The Corporation of Calcutta and another vs. Liberty Cinema AIR 1965 SC 1107, more particularly, paras 21 to 26, which read as under:- 21. It was then said that if S. 548 authorised the levy of a tax as distinct from a fee in return for services rendered, it was invalid as it amounted to an illegal delegation of legislative functions to the Corporation because it left it entirely to the latter to fix the amount of the tax and provided no guidance for that purpose. We wish to point out here that the contention now is that the section is invalid while the contention that we have just dealt with proceeded on the basis that the section was valid as it provided for the levy of a fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a notification. In exercise of this power the Government duly substituted by a notification for item 33 the following: Goods sold by the State Government . The amendment of the schedule by the notification was challenged on the round that s. 6(2) was invalid as it was a delegation of the 492 essential power of legislation to the State Government. Venkatarama Aiyar J. delivering the judgment of the majority of the Court sitting in a Constitution Bench, rejected this contention and after having read what we have earlier set out from the judgment of Bose J. in Rajnarain Singh's case([1955] 1 S. C. R. 290.), observed at p. 435: On these observations, the point for determination is whether the impugned notification relates to what may be said to be an essential feature of the law, and whether it involves any change of policy. Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like. The Act was a statute impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act see p. 291. Here, therefore, a power conferred on the Governor by the Legislature to levy a tax was upheld. It would follow that a power conferred to fix rates of taxes has equally to be upheld. The next case was Syed Mohamed v. State of Madras([1952] 3 S. T. C 367) . There a power to an authority to determine who shall pay the tax was upheld. On the same principle a power to determine at what rate he will have to pay the tax has to be upheld. The last case was Hampton Jr. Co. v. United States([1927] 72 L. ed. 624. 494), in which the power conferred by a statute on the President to make an increase or decrease in the rate of customs duty was upheld. There it was said at p. 630, It is conceded by counsel that Congress may use executive officers in the application and enforcement of a policy declared in law by Congress and authorise such officers in the application of the Congressional declaration to enforce it by regulation equivalent to law. But it is said that this never has been permitted to be done where Congress has exercised the power to levy taxes and fix customs duties. The authorities make no such distinction. The same principle that permits Congress to exercise its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The practice of empowering the executive to make subordinate legislation within a prescribed sphere has evolved out of practical necessity and pragmatic needs of a modern welfare state. At the same time it has to be borne in mind that our Constitution-makers have entrusted the power of legislation to the representatives of the people, so that the said power may be exercised not only in the name of the people but also by the people speaking through their representatives. The rule against excessive delegation of legislative authority flows from and is a necessary postulate of the sovereignty of the people. The rule contemplates that it is not permissible to substitute in the matter of legislative policy the views of individual officers or other authorities, however competent they may be, for that of the popular 'will as expressed by the representatives of the people. As observed on page 224 of Vol. 1 in Cooley's Constitutional Limitations, 8th Ed. One of the settled maxims in constitutional law is, that the power conferred upon the legislature to make laws cannot be delegated by that department to any other body or authority. Where the sovereign power of the State has locat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the user shall be liable to pay water cess at such rates fixed by the Government, it fails to prescribe the value based on which such rates will be applied. 90. Here, we may note that it was in exercise of powers vested under Section 15(2) of the impugned Act that the State Government issued a Notification dated 26.08.2023 (supra), whereby the tariff structure on water cess was fixed on the basis of Head . However, even the said notification failed to prescribe the measure of tax and instead proceeded to prescribe tariff rate without any indication or measure on which such tariff rate will be applied. Moreover, measure of tax being vague, based upon the assessment or water drawn, which would form the basis of the tax imposed is also vague and fraught with lack of adequate guidelines, as is evident from the combined reading of Section 12 with Section 17 of the impugned Legislation (supra). 91. That apart, even the Statement of Objects and Reasons as well as the preamble of the impugned Act does not lend any guidance for the delegate. The preamble of the impugned Act merely states that it is an act to levy water cess on hydropower generation in the State of Himachal Pradesh, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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