Alaknanda Hydro Power Co. Ltd. Vs State Of Uttarakhand & Others (Uttarakhand High Court)
The Uttarakhand State Government levied tax vide the Uttarakhand Water Tax on Electricity Generation Act, 2012, on hydro power generating companies through river water in the state. The power generating companies aggrieved from the levy of tax challenged the constitutional validity and vires of the aforesaid legislation vide writ petitions.
The primary contention of the counsels appearing on behalf of the power companies was the state legislature lacks in the jurisdiction to legislate on the subject matter and passed the aforesaid tax legislation within Schedule VII of the Constitution of India. The other contention raised was pertaining to the calculation of the tax liability by the Commission for water usage for production of electricity.
The Hon’ble Court while upholding the constitutional validity of the legislation, held that the assessment of the tax liability is provisional in nature and disputes pertaining to the same should have been brought before the Commission constituted under the legislation in question, however, the petitioners preferred the present writ petition. The Hon’ble Court while dismissing the writ petition upheld the provisional assessment order and the notice issued therein against the power generating companies.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Since identical issue of fact and law is involved in the aforementioned writ petitions, therefore, they are being decided by this common judgment for the sake of brevity and convenience.
2) Writ Petition no. 1500 (M/S) of 2016 shall be the leading case.
3) Petitioners in the present batch of petitions are power generating companies, engaged in production of electricity by utilizing the river water. The petitioner, Alaknanda Hydro Power Company Ltd. (AHPCL) seeks to assail the constitutional validity and vires of the Uttarakhand Water Tax on Electricity Generation Act, 2012 (hereinafter referred to as ‘the Act’), inter alia, on the following grounds:
(i) The enactment, promulgation and notification of the said Act being in violation of the provisions of Articles 200, 246, 248, 256, 285, 288(2) and 300A of the Constitution of India.
(ii) The enactment, promulgation and notification of the said Act being in violation of the provision of Entry 97 of List I of the Seventh Schedule of the Constitution of India.
(iii) The enactment, promulgation and notification of the said Act being in violation of the provisions of Entry 17 of List II of the Seventh Schedule of the Constitution of India.
(iv) The consideration of and the assent given for the enactment and the notification of the said Act being in violation of Article 200 and 288(2) of the Constitution of India having been accorded the consent by the Governor of the State of Uttarakhand, without obtaining the consent of the President of India.
(v) The fixation of the rates of water tax in terms of the provisions of Chapter 5 of the said Act by means of a notification issued by respondent no. 1 to 5 being in violation of Article 288(2) of the Constitution of India as that the said Act was promulgated without obtaining consent from the President of India, in violation of mandatory provisions under the Article 288(2) of the Constitution of India, wherein it is obligatory on part of the State Legislature, in case of fixation of any rates and other incidents of such tax by means of rules or orders to be made under the law by any authority, the law shall provide for the previous consent of the President being obtained to the making of any such rule or order. The rates of Water Tax having not received the previous consent of the President.
(vi) The enactment, promulgation and notification of the said Act imposing Water Tax violating the fundamental rights of the petitioner of carry on its trade and business under Article 19(1)(g) of the Constitution of India.
(vii) The enactment, promulgation and notification of the said Act, being arbitrary, manifesting arbitrariness in State action and being exercise of the colourable powers of the respondent State of Uttarakhand, thus violating the fundamental rights of the petitioner under Articles 14 and 19(1)(g) of the Constitution of India.
4) The genesis of the present controversy from where it arises is that in the year 1981, a Project named Srinagar Hydro Electric Project, having capacity of 330 MW was conceptualized by the then Govt. of U.P. The project development was entrusted to the Irrigation department of erstwhile Government of Uttar Pradesh and was planned to be developed with the World Bank funds. It is stated that due to inordinate delay caused by the Govt. of U.P. in developing the project, the World Bank withdrew the funding and due to paucity of funds, the Govt. of U.P. decided to entrust the Project to private parties for development. TATA Power Corporation Ltd. (TATA/TPCL) took over the Project development works, which could not succeed in making progress with the Project development and ultimately, in the year 2005, GVK Group of Hyderabad took over and entrusted with the Project development work. Prior to that, when Duncans North Hydro Power Co. Ltd. (Duncans) [Now known as Alaknanda Hydro Power Company Ltd.] was entrusted the Project, an MoU and an Implementation Agreement (IA) dated 27.08.1998 was entered into between the parties. Earlier, the erstwhile State of U.P. and the Duncans entered into a Water Usage Agreement dated 28.08.1998 in order to facilitate Duncans to use the water from the Alaknanda River for generating power from the Project. In the meantime, in the year 2000, the State of Uttarakhand came into existence. After bifurcation of erstwhile State of U.P., the benefits to be emanated from the Project were conceptualized to be shared between the State of U.P., State of Uttarakhand and the Alaknanda Hydro Power Company Limited (AHPCL); and to give effect to the understanding between the said three parties, existing IA was amended and restated as Restated Implementation Agreement (RIA). The petitioner AHPCL, Govt. of U.P. and Govt. of Uttarakhand amended the IA and had entered into the restated Implementation Agreement on 10.02.2006 (RIA) to depict in clear terms, the rights and obligations of each party, including but not limited to the aspect of 12% power to be supplied by the petitioner to the Govt. of Uttarakhand for free of cost and as a ‘Royalty’ for using the Alaknanda River water by the Project which is situated in the State of Uttarakhand.
5) Clause 1.65 of the RIA categorically states that “Water use Agreement’ or WUA means the document, as executed between the then Govt. of U.P. and the Company on 28th August, 1998 whereby the then Govt. of U.P. had granted the rights to the Company to use the water from the Alaknanda River for generation of electric energy for the Project.”
6) Clause 13 of the RIA defines the Water Use Rights and provides that “The Govt. of Uttarakhand hereby grants to the Company the right, free of any and all charges during the Term to utilize the water of Alaknanda river for the project and to generate electric energy at the Site and for such reasonable purposes directly related and necessary for the generation of electricity in accordance with the conditions of this RIA and for the project subject to the compliance of the conditions of environment clearance. Such a right was earlier available to the Company under the then signed Water Use Agreement (WUA) which now stands substituted by the provisions of this RIA, Govt. of Uttarakhand shall not impose any taxes, duties, levies or charge of any kind of electricity generated by this Project during the term of this RIA.
7) It is contended that in view of the aforesaid, no taxes / cess / fee etc. shall be applicable on the water which is exclusively used by the petitioner company for generation of electricity. Further, Clause 17.1 of the RIA dated 10.02.2006, provides as under:
“17.1 Company Obligations: The entire energy generated at the generation terminals of the Project shall be referred to as the “Energy Output”. The difference between the Energy Output and the Auxiliary consumption shall be referred to as the “Saleable Energy.” The Saleable Energy shall be supplied, duly metered by the Company, at 400 KV interconnection Point at 400 KV outlet gantry at Company’s switchyard. Govt. of Uttarakhand shall be entitled to 12% of the Saleable Energy from the Project free of cost. Govt. of U.P. / UPPCL and the Company agree that this 12% free of cost Saleable Energy will be supplied to the Govt. of Uttarakhand by the Company in lieu of the 12% Saleable Energy previously required to be supplied free of cost by the Company to Govt. of U.P. / UPSEB. The GoUP/UPPCL/Company shall facilitate such transfer of 12% Saleable Energy to Govt. of Uttarakhand at 400 KV interconnection points at 400 KV outlet gantry at Company’s switchyard at Srinagar….”.
8) It is stated that though the petitioner has commenced construction of the dam and other Project development works in the year 2005-06, it could complete the works only in the month of April 2015 and had declared commercial operations of its Unit-1 on 23.04.2015; Unit-3 on 10.05.2015 and Units-2 & 4 on 20.06.2015. Thus, until April 2015, the Project has not used any water from the Alaknanda river for generation of power. It is further stated that at the time of inception of the project or at any time prior to the enactment of the Uttarakhand Water Tax on Electricity Generation Act, 2012 (the Act) there was no imposition of any tax or cess on the water drawn by the petitioner that was used either for construction purposes or for power generation. No tax / cess / royalty was imposed on the petitioner at an earlier point in time, plausibly because of the compliance with the RIA terms which contemplates that 12% power generated from the Project would be given free of cost to the State of Uttarakhand as / towards Royalty in lieu of the use of natural resources by the petitioner, viz. the water resources. It is stated that vide impugned Notification dated 07.11.2015 (purportedly under Section 17(1) of said Act) issued by the respondent no. 3, the petitioner was informed about the promulgation of the Act and further informed that the Hydro Power Projects situated in the State of Uttarakhand of more than 5 MW capacity (like petitioner) were liable to pay tax on the water drawn for the purposes of generation of electricity for next three years at the rates as follows:
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