Bombay High Court upholds Constitutional validity of Goa Green Cess Act

The Bombay High Court at Goa last week upheld the Constitutional validity of the Goa Cess on Products and Substances Causing Pollution (Green Cess) Act [South Port Limited & Anr. v. State of Goa & Anr. and connected matters]..The Act was challenged by several manufacturing companies including Vedanta Ltd claiming that State government lacked legislative competence to bring such an Act into force.The challenge was on two grounds:- the Act relates to the field of 'environment' or 'environmental pollution' which fell under List III (residuary entry) under the Constitution of India.- imposition of cess was not as a 'fee' but as 'tax'. .A division bench of Justices MS Sonak and Bharat P Deshpande held that the Goa Cess Act was constitutionally valid. It reasoned that the cess collected by the State government under this Act was in the nature of 'fees' which was used by the State to reduce or prevent an increase in the deleterious effects of the carbon footprints left due to the activities of the companies."The responsibility for reducing the carbon footprint or, in any case, combating the deleterious effects of such increase, is primarily on the petitioners (companies). Therefore, if the State levies a cess or a fee upon the petitioners for taking measures to reduce the carbon footprint or to deal with the deleterious effects of its increase, the petitioners cannot say that they receive no benefits," the Court observed. .Senior advocate Darius Khambata appearing for one of the petitioner companies argued that the field of legislation for “environment” did not appear in any of the three lists in the schedule of the Constitution of India.In light of this, it would fall within the residuary entry which implied that the State had no legislative competence to enact the law.The division bench, however, concluded that the levy under the Act was to augment the State’s revenue by having programmes and schemes to reduce the carbon footprint by invoking the “polluter pays principle” as a justification for the levy.The Court also opined that if the carbon footprint left behind by the companies is reduced, then this would not only lead to more acceptability of the individual company activity but also reduce their liability to do the same."Reduction of the carbon footprint would not only lend greater acceptability to such activities but would also reduce the primary liability of the petitioners and responsibility to take measures or settle claims based on the principle of polluter pays principle," the Court said.The Court also could not agree with the broad contention that the field of “environment” or “environmental pollution”, necessarily fell within the residuary entry just because it was not expressly mentioned in the State or Concurrent List..Khambata also argued that a 'green cess' imposed under the Act was a tax levied without authority. He submitted that no benefit was provided by the Act even to the class of which the Petitioners formed a part.However, the Court did not agree with this argument either. It noted that the benefit that the State government was extending to the companies was not in the nature of any general service. In fact, it was a service that was being extended to a distinct group or class."The State's affidavit refers to the measures that it is required to take and it takes to reduce the carbon footprint. This is not a case where the benefits that the companies receive are relatable to the general service provided to the members of the public. Instead, this is a case where benefits are provided to the Petitioners or to a distinct group or a class of which the Petitioners are a part. Therefore, the levy cannot be questioned based on the tax versus fee argument," the Court ruled..Khambata along with Senior Advocate SS Kantak and advocates Ninad Laud, Nitesh Jain, Abhijit Gosavi, Athnain Naik, Mr Guruprasad Naik, Krupa Naik and Darshan P Gosavi appeared for the companies. Advocate General DJ Pangam along with additional government pleader Deep Shirodkar appeared for the State.[Read Order]