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After allegations of price cartel and the export of large-scale iron ore to China, steel companies are now facing the new challenge of Green Cess levied by Goa and Gujarat.
The one-of-its-kind cess will not only push up the cost for steel companies but also put a spoke in the ambitious ‘Make in India’ plan of the Central government and could lead to large scale cheap imports from China.
The Goa government has enacted “The Goa Cess on Products and substances causing pollution (Green Cess) Act 2013” and levied Green Cess on industries using or transportation of Coal, Coke and other similar substances causing pollution. The levy would be 0.5 per cent of the sale value.
Many low-grade iron ore miners in Goa including JSW Steel subsidiary South West Ports, Vedanta, Goa Carbon and Zuari Agro Chemicals had challenged the legislative competence of Goa government to enact the Goa Cess in the High Court of Bombay, Goa Bench.
Late last month the High Court upheld the constitutional validity of the Green Cess Act. Following this, the petitioners have moved the Supreme Court.
A similar green cess by the Gujarat government has also been challenged in the Apex Court which has clubbed the petitions from both states for a combined hearing.
Meanwhile, JSW Steel has made a provision of ₹389 crore for the Goa cess from 2013 till this September.
Jayant Acharya, Joint Managing Director, JSW Steel told businessline that any kind of cess or taxes of this kind inflates the cost and ultimately becomes counter-productive for Make in India.
“We are already paying cess on coal and electricity duty etc and adding another cess to this entire thing does not make sense to us because it is making the cost of manufacturing in India more expensive. I am sure the courts will look at it and then take a view,” he said.
“We need to look at it on a holistic basis and see whether it is really impacting the country and I think there needs to be some rules and regulations provided on this asset,” he added.
The petitioners in High Court argued the nature of the levy and the primary object of the law is environment and environmental pollution, which does not feature on any of the three lists in the Constitution’s Seventh Schedule related to the division of power between the Union and states.
However, the Court said that “entries in the legislative lists are not sources of the legislative power but are merely topics or fields of legislation and that they must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense.”
The bench of Justices MS Sonak and Bharat Deshpande said they find it difficult to accept the argument that the law is not legislation with respect to the entries relating to public health, sanitation, water, land and gas as referred to in the state list of Seventh Schedule.
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