The Kerala High Court has set aside a 2009 government order imposing a cess on industries extracting river water for their use.

Justice N Nagaresh passed the verdict while allowing writ petitions filed by FACT, Kochi, MRF Limited, Kottayam, and Sree Sakthi Paper Mills, Kochi, against enhancement of cess on river water.

The court observed that Article 265 of the Constitution of India provides that no tax shall be levied or collected except by the authority of law. Tax, duty, cess, or fee were levied by the State government to raise revenue. In fact, each expression denoted different kinds of “imposts” depending on the purpose for which they were levied.

This power could be exercised in any of its manifestations only under any law authorising levy and collection of tax as envisaged under Article 265.

‘State can regulate use’

The court noted that section 3 of the Kerala Irrigation and Water Conservation Act, 2003 provided that the State government was entitled to conserve and regulate the use of such watercourses and water in all such water courses.

As power was conferred on the State government to regulate watercourses for the purpose of irrigation and water conservation, the government would be perfectly within its powers to regulate or curb lifting of water from such watercourses for industrial purposes, as unrestricted usage of water for industrial purposes could adversely affect the availability of sufficient quantity of water for irrigation purpose.

‘No statutory power’

However, “the impost of tax/cess/fee/rate” stands on a different footing. The executive could not levy tax. To support a tax, legislative sanction was essential. It cannot be levied and collected in the absence of any legislative sanction, by exercise of executive power of the State under Article 162. A statutory source of power was lacking in the present case, the court observed.

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