In a legal saga unfolding in Himachal Pradesh, the Supreme Court recently intervened by staying a directive from the Himachal Pradesh High Court, which ordered the State government to refund water cess collected from hydropower generation companies.
The directive in question was a component of a larger judgment by the Himachal Pradesh High Court, which nullified the Himachal Pradesh Water Cess on Hydropower Generation Act of 2023. While the State government promptly contested this decision before the Supreme Court, the apex court initially declined to suspend the High Court’s ruling on May 17.
However, a recent turn of events saw the Supreme Court issue notices on the State’s appeal and promptly stay the directive demanding the refund of water cess. The order emphasized that the directive for refund shall remain suspended until further deliberations occur, with the next hearing scheduled for July 11, 2024.
The genesis of this legal battle lies in the introduction of The Himachal Pradesh Water Cess on Hydropower Generation Act in 2023, aimed at bolstering the State’s revenue by imposing water cess on hydro power generation. This move, however, triggered significant opposition from power generation companies, leading to 39 petitions filed before the Himachal Pradesh High Court challenging the law’s validity.
The core contention of the power generation companies revolved around the State’s legislative competence to enact such a law. While the State argued that water falls within its jurisdiction as per List-II, Entry 17, the Union government supported the stance of the power generation companies.
In a landmark ruling earlier this year, the Himachal Pradesh High Court deemed the Act as imposing a tax on electricity generation rather than solely on water usage, a prerogative beyond the State’s legislative purview. Consequently, the Act was annulled, and a directive for refunding the collected cess was issued, setting the stage for the ongoing legal battle.
With legal heavyweights from both sides gearing up for a rigorous legal duel, the Supreme Court’s intervention adds a new layer of complexity to the case. Senior advocates and legal teams representing various stakeholders are poised for a rigorous legal tussle as the judicial process unfolds, shaping the contours of law and governance in Himachal Pradesh’s hydroelectric landscape.
