LUCID COLLOIDS LTD Vs. STATE OF RAJASTHAN

JUDGEMENT

(1.) The petitioners have questioned the constitutionality of the provisions of Section 3B of the Rajasthan Electricity (Duty) Act, 1962 imposing water conservation cess on the energy consumed by the consumer or by the person other than supplier generating energy for his own use or consumption at the rate of ten paise per unit. Facts in short are that the Rajasthan Electricity (Duty) Act, 1962 (hereinafter referred to as "the Act of 1962") provides for levy and collection of electricity duty on energy consumed by the consumers at the rates prescribed by the State Government by way of Notification in Official Gazette. The State Government has inserted Section 3B in the Act of 1962 by way of Section 12 of the Rajasthan Finance Act, 2009 providing for levy of cess known as "Water Conservation Cess". The statement of objects and reasons for introduction of cess as given out by the Finance Minister while introducing the Finance Act of 2009 is that there is severe drinking water crisis and conservation of water has become essential Construction of water harvesting structure is necessary. People at large are to be informed, educated and sensitized to initiate and sustain the habit of conserving water in day to day life. Hence, water conservation cess has been proposed to provide financial resources to such activities. The petitioners contend that water is of course a subject matter of State under Entry 17 of List-II of Seventh Schedule of the constitution, but the State is not competent to impose tax under the said Entry. There is no specific Entry or source of power with the State to levy water cess. The fee can be realized under Entry 66 of List-II of Seventh Schedule for which it is necessary that quid pro quo must exist. The amendment is foreign to the powers conferred upon the State under Entry 53 of List-II of Seventh Schedule. The consumption of electricity has nothing to do with the water or its conservation. The cess levied under the provisions of Section 3B of the Act of 1962 is illegal and unconstitutional being violative of Articles 14 and 19(1)(g) of the Constitution. Tax or levy should have some nexus with the subject and in he instant case, as there is no nexus of consumption of electricity with water conservation, the provisions imposing cess are unconstitutional and violative of Article 265 of the Constitution. It is in fact a fee and could be realized only from the persons recipient of services relating to water conservation. It cannot be realized from the persons, who are not seeking any services in respect of conservation of water. They cannot be source of state exchequer.

(2.) It is also contended that it was necessary to consult the State Electricity Regulatory Commission (for short "the Commissioner") constituted under the Power Sector Reforms Act, 1999 (hereinafter referred to as "the Act of 1999") to determine the tariff for electricity in the manner provided in Section 26 of the Act of 1999 along with other matters. Since the Commission has not been consulted, as such, action of imposing water conservation cess is illegal.

(3.) In the reply filed by the respondents No. 2 and 3, it is contended that the State Government is empowered to impose tax and cess. Under Entry 17 of List-II of Seventh Schedule of the Constitution, the water is subject matter of the State. Entry 38 of List-III of Seventh Schedule is for the matters relating to electricity. The State Government has imposed cess on energy consumed by the consumer or by he person other than supplier generating energy for his own use or consumption at the rate of ten paisa per unit. The ground water is pumped out with the help of electricity and therefore, the cess is tax on the consumption of electricity and not on the consumption of water. For the purpose of conservation of water, the water conservation cess has been imposed under Entry 53 of List II of Seventh Schedule. It is not a tax on the consumption of water, but on the energy consumed for the purpose of conserving water. The State Government has legislative competence to impose cess on consumption for the purpose of conserving water, the State Government has legislative competence to impose cess on consumption of electricity with the object of conserving water. There is no violation of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India.