Introduction:

In a significant ruling, the Himachal Pradesh High Court addressed the legality of the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023, declaring it unconstitutional. The case involved power generation companies challenging the levy of water cess by the state government on hydropower generation, asserting that it exceeded the state’s legislative competence and violated their vested rights. The court examined the arguments presented by both parties to determine the constitutional validity of the legislation.

Arguments:

The power generation companies argued that the levy of water cess on hydropower generation exceeded the state government’s legislative competence, especially concerning projects built over inter-state rivers with the Union Government’s sanction. They contended that the imposition of the cess infringed upon their vested rights and was illegal. Conversely, the state government asserted its legislative competence under List-II of the Constitution, contending that the cess was imposed on water usage and not electricity generation.

Court’s Judgment:

The Himachal Pradesh High Court, consisting of Justice Tarlok Singh Chauhan and Justice Satyen Vaidya, declared the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023, unconstitutional. The court found that the Act lacked legislative policy or guidance, delegating power to fix cess rates without proper framework, rendering it unconstitutional. Additionally, it quashed the associated rules and provisions applied retrospectively to existing projects, deeming them ultra vires the Constitution.