Supreme Court stays directive to refund water cess levied on power companies in Himachal Pradesh

The Supreme Court recently stayed a Himachal Pradesh High Court directive requiring the State government to refund water cess levied by it on hydropower generation companies in the State [State of Himachal Pradesh and ors vs NHPC Ltd and anr]..The direction stayed was part of a Himachal Pradesh High Court judgment which quashed the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023. The High Court's judgment has been challenged by the Himachal Pradesh government before the Supreme Court. On May 17, a Bench of Chief Justice of India DY Chandrachud and Justices JB Pardiwala and Manoj Misra refused to stay the High Court's decision to quash the Act. However, the top court issued notice on the State's appeal and stayed the High Court's directive to refund any water cess collected by the State from power companies in Himachal Pradesh. "Issue notice, returnable on 11 July 2024. The direction in the impugned judgments and orders for refund of the cess collected shall remain stayed pending further orders," the order stated. .By way of background, the Himachal government had introduced The Himachal Pradesh Water Cess on Hydropower Generation Act in 2023 with an aim to improve its revenue generation by imposing water cess on hydro power generation.There were 172 hydropower projects in the State when the law was passed by the assembly. However, it faced stiff opposition from the power generation companies.A batch of 39 petitions were later filed before the Himachal Pradesh High Court by power generation companies to challenge the validity of this law. The power generation companies had mainly contended that the State lacked the legislative competence to frame such a law.The State's defence was that since water is a State’s subject matter and comes under Entry 17 of List-II, it has the legislative competence to make such law.The Union government had supported the stand of power generation companies.In March this year, the High Court found that the said Act imposed tax on generation of electricity and not merely on water as a subject or on drawl of water, which the State is not competent to do.Hence, it had quashed the law and ordered refund of the cess amount collected by the State from the power generation companies..State cannot levy Water cess on Hydroelectricity under garb of water usage: Himachal Pradesh High Court.This decision has now been challenged by the Himachal Pradesh government by way of an appeal, which will be heard by the Supreme Court next in July. .Senior Advocates Dinesh Dwivedi, Anup Rattan and Kapil Sibal, Additional Advocate General Vaibhav Srivastava, with Advocates Sugandha Anand, Krishnam Mishra, Aprajita Jamwal, Nishant Singh, Vineeta Tiwari, Puneet Rajta, Shimpy Arman Sharma, Pooja Sushil Sharma, Vineeta Tiwari, and Rajnandini appeared for the State of Himachal Pradesh.Senior Advocate Dr. Aditya Sondhi with Advocate-On-Record Geet Ahuja and Advocates Chaitanya Ahuja, Meghna TM, and Navami Krishnamurthy appeared for Himachal Sorang Power Pvt. Ltd.Solicitor General Tushar Mehta with Advocates Adarsh Tripathi, Vikram Singh Baid, and Ajitesh Garg appeared for the National Hydroelectric Power Corporation (NHPC).Senior Advocate Dama Seshadri Naidu with Advocates Divyakant Lahoti, Mallika Luthra, Shreya Gokel, Praveena Bisht, Vindhya Mehra, Kartik Lahoti, Kumar Vinayakam Gupta, and Shivangi Malhotra appeared for Everest Power.Senior Counsel Devashish Bharuka and Sujit Ghosh appeared for subsidiaries of the the Greenko Budhil Hydro Power Private Limited Group..[Read order]