SC stays quashing of Gujarat’s green cess act

Thursday 04 July 2013

Cess of industries using self-generated power to be tabulated, but not recovered

The Supreme Court on July 3 stayed the Gujarat High Court judgement on quashing the Green Cess Act of the Gujarat government. The apex court admitted the state government's plea to levy green cess on every unit of electricity generated though conventional sources in the state.

The Gujarat High Court in March this year had quashed the Act, calling it unconstitutional. According to the Green Cess Act passed in 2011, the Gujarat government would levy a green cess of Rs 0.02 on every unit of energy generated using conventional sources. This applied to both public and private enterprises. Industries generating power for their own captive use too would have to pay this tax. The fund is to be used for the promotion of renewable energy and taking initiatives for protecting the environment.

Is the Act unconstitutional?

The green tax has been opposed by major industrial players in Gujarat who filed petitions in the High Court last year challenging the constitutional validity of the government’s move. The companies who challenged the move included Reliance Industries, Tata Chemicals Ltd, Arvind Ltd, Essar Power, Phillips Carbon Black Ltd, Apollo Tyres, Essar Oil, Birla Cellulosic, and others. The industries reportedly contended that the Act provides for levy and collection of cess on the generation of electricity, which is exclusively the Union subject contained in Entry 84 to List I of the Seventh Schedule of the Constitution. The state government therefore has no competence to enact any law pertaining to such a subject, they claimed.

The state government, however, maintains that public health is a state subject therefore it is empowered to legislate on the subject. It says that the cess is collected from companies generating power in the state of Gujarat. They are causing damage to the environment and thereby injuring public health in the state.

The Supreme Court has reportedly asked the state government to only tabulate the cess of industries which use self-generated power to run their units, but not to recover the dues till pendency of the appeal.


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