Srinagar: In a major legal setback for the Union territory administration, the High Court of Jammu and Kashmir and Ladakh has struck down provisions of the Jammu and Kashmir Water Resources (Regulation and Management) Act, 2010, to the extent that they impose water usage charges on hydro power projects.
A division bench comprising Justices Rajnesh Oswal and Sanjay Dhar ruled that levying water usage charges on independent power producers amounted to imposing an impermissible tax on the generation of electricity, which falls outside the legislative competence of the UT legislature.
The court allowed a batch of writ petitions filed by independent power producers, including Mass N Energy Pvt Ltd, Magpie Hydel Construction Operation Industries Pvt Ltd, and Choudhary Power Projects Pvt Ltd, and quashed all consequential demand notices issued by the government from 2010 onwards.
The companies were represented by senior advocate Pranav Kohli (Jammu), advocate Shariq J Reyaz and others, while the state’s case was argued by senior additional advocate general A R Malik and deputy solicitor general T M Shamsi.
Addressing the core legal issues, the bench held that while the state or UT legislature possesses regulatory powers over water under Entry 17 of List II of the Constitution, it lacks the legislative competence to levy a tax on electricity generation.
Analysing the pricing mechanism, which calculated charges based on head-height and turbine propulsion rather than the physical quantum of water consumed, the court concluded that the levy, in pith and substance, is a tax on electricity generation rather than a regulatory fee for water usage.
The court also rejected the administration’s contention that the 2010 Act was saved and given parliamentary backing via the Jammu and Kashmir Reorganisation Act, 2019.
Citing Supreme Court precedents, the bench ruled that a statute deemed unconstitutional and void ab initio at its inception cannot be legitimised by subsequent parliamentary adoption.
The court declared the offending provisions ultra vires the Constitution and restrained the respondent from imposing any future taxes on electricity generation under the guise of water usage charges.
“The impugned enactment, to the extent it imposes water usage charges upon the petitioners, is held to be ultra vires the Constitution and is struck down to the said extent,” the high court said.
The administration’s order “appears to be an attempt in desperation” to save the impugned legislation, it added.
“If we have a look at the provisions of the Jammu and Kashmir Reorganisation Act, it becomes clear that what is being provided under the said Act is saving of certain state enactments and repeal of certain others,” the court said in its 50-page order.
