Shimla, May 22
The Supreme Court has stayed a directive from the Himachal Pradesh High Court that required the State government to refund water cess levied on hydropower generation companies in the state. This stay was issued in the case [State of Himachal Pradesh and ors vs NHPC Ltd and anr].
The High Court had previously quashed the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023. This Act was introduced by the Himachal Pradesh government to increase revenue by imposing a water cess on hydropower generation. At the time of its enactment, the state had 172 operational hydropower projects. However, the Act faced significant opposition from power generation companies, leading to 39 petitions challenging its validity.
In March, the Himachal Pradesh High Court ruled that the Act effectively imposed a tax on electricity generation rather than solely on water usage, which the state does not have the authority to do. Consequently, the Act was quashed, and the court ordered the state to refund the collected cess to the power companies.
The Himachal Pradesh government challenged this decision in the Supreme Court. On May 17, a Bench comprising Chief Justice of India DY Chandrachud and Justices JB Pardiwala and Manoj Misra decided not to stay the High Court’s decision to quash the Act. However, they issued a notice on the state’s appeal and stayed the directive to refund the water cess collected, pending further orders.
The main contention from the power companies was that the state lacked the legislative authority to enact such a law. The state’s defense was based on the premise that water is a subject under the state’s jurisdiction as per Entry 17 of List-II, giving it the legislative competence. However, the Union government supported the power companies’ stance.
The order stated, “Issue notice, returnable on 11 July 2024. The direction in the impugned judgments and orders for refund of the cess collected shall remain stayed pending further orders,” stated the court order.
The state was represented by Senior Advocates Dinesh Dwivedi, Anup Rattan, Kapil Sibal, and others. The power companies were represented by a team including Senior Advocate Dr. Aditya Sondhi, Solicitor General Tushar Mehta, and Senior Advocates Dama Seshadri Naidu and Devashish Bharuka.
The case is set for further hearing in July, where the Supreme Court will continue to deliberate on the state’s appeal against the High Court’s decision.
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