The Narendra Modi government's bid to generate funds to promote clean energy by introducing a Green Cess on every unit of conventional electricity generated in the state has not gone well with major industrial players of the state, who have now challenged the constitutional validity of the government's move in the Gujarat High Court.
Acting on the individual petitions by the companies the High Court has restrained the state government from initiating any proceedings or recover any amounts by way of cess on generation of electricity from the petitioners till June 15, when the next hearing in the matters was scheduled.
Some of the companies who have approached the High Court against Gujarat government's Green Cess include, Essar Power, Nirma Ltd, Reliance Industries, Tata Chemicals Ltd, Arvind Ltd, Phillips Carbon Black Ltd and United Phosphorpus Ltd.
These companies have filed petitions in the High Court in last month and this month, challenging the provisions of the Gujarat Green Cess Act, 2011 and the Gujarat Green Cess Rules, 2011 which became operational from April 1, 2011.
Under the Gujarat Green Cess Act, 2011, Green Cess not exceeding twenty paise per unit was levyed on generation of electricity other than renewable energy for creation of a, fund (Green Envergy Fund) for protecting environment and promoting the generation of electricity through renewable sources in the Stale of Gujarat. This would also include captive electricity generated by captive power plants of companies.
Hearing these separate petitions, the bench of acting Chief Justice Bhaskar Bhattacharya and Justice J B Pardiwala were convinced that the petitioners had made out a strong prima-facie case against the constitutional validity of the Green Cess levyed by the state government.
They have issued notices to the state government on the various petitions and have asked it to file reply to the contentions raised by the petitioners with regard to the constitutional validity of the Gujarat Green Cess Act, 2011 and the Gujarat Green Cess Rules, 2011.
The companies have relied upon 2004 judgement in the case of M P Cement Manufacturers' Association vs State of Madhya Pradesh, wherein it was held that a State was not competent to levy cess as the Parliament had exclusive legislative competence in this respect by virtue of Entry 84 in List I of Schedule 7 of the Constitution of India.
It was also held by the court that electricity was "goods" and that the State would have competence to levy tax on the sale and consumption of electricity but could not levy cess on the production of electricity.