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Jammu & Kashmir HC strikes down water tax on hydropower projects

By · Via Times of India · Published by Everything Blog

In short

The court quashed outstanding financial demand notices that had been issued against 13 independent power producers operating in the region. Energy companies successfully challenged the April 2019 rates set by the Water Resources Regulatory Authority by demonstrating the metrics targeted power output instead of consumed volume. While the government argued the measures were vital to conserve water under the National Water Policy, the bench held that the former state legislature lacked the competence to enact such a tax. Furthermore, the judges concluded that later parliamentary adoption under reorganization statutes cannot legitimize an unconstitutional act.

Key points

  • The court ruled that the former state legislature exceeded its legislative competence whe…: The court ruled that the former state legislature exceeded its legislative competence when enacting the 2010 Water Resources Act.
  • Subsequent adoption under the Jammu and Kashmir Reorganisation Act cannot validate legisl…: Subsequent adoption under the Jammu and Kashmir Reorganisation Act cannot validate legislation that was unconstitutional at enactment.
  • The regional administration is permanently barred from levying taxes on electricity gener…: The regional administration is permanently barred from levying taxes on electricity generation through the guise of water usage fees.

Sources checked by our analysis pipeline: 1

SRINAGAR: In a setback to J&K govt, the high court (HC) of Jammu & Kashmir and Ladakh Thursday struck down the 2010 Water Resources Act, ruling that water usage charges levied on hydropower projects amounted to a tax on electricity generation, a subject beyond the erstwhile state legislature’s powers.A division bench of Justices Sanjay Dhar and Rajnesh Oswal quashed demand notices issued to 13 independent power producers and restrained J&K govt from imposing any tax on electricity generation under the guise of water usage charges or any other levy.

The producers had challenged the law, arguing that charges fixed by Water Resources Regulatory Authority on April 2, 2019, were linked to the height from which water drove turbines rather than the volume consumed, effectively taxing power generation.Govt defended the levy, citing its authority to regulate water storage and use, National Water Policy and the need to conserve J&K’s water resources.Rejecting its arguments, HC held that the legislation exceeded the erstwhile state’s legislative competence when enacted. It also dismissed J&K govt’s contention that the law’s subsequent adoption under Jammu & Kashmir…

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