sc47 Union Of India vs Mohit Mineral Pvt Ltd on 3 October, 2018

Supreme Court of India

Union Of India vs Mohit Mineral Pvt Ltd on 3 October, 2018

1. uthor: A Bhushan
2. ench: A Bhushan, A Sikri

1

REPORTABL

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 10177 Of 2018

(arising out of SLP(C)No.25415 of 2017)

UNION OF INDIA & ANR. …APPELLANT(S)

VERSUS

MOHIT MINERAL PVT. LTD. …RESPONDENT(S)

WITH

TRANSFERRED CASE (C) NO.9 OF 2018

MOHIT MINERAL PVT. LTD. … PETITIONER(S)

VERSUS

UNION OF INDIA AND ORS. … RESPONDENT(S)

WITH

CIVIL APPEAL NO. 10179 Of 2018

(arising out of SLP(C)No.7708 of 2018)

UNION OF INDIA & ANR. …APPELLANT(S)

VERSUS

MOHIT MINERAL PVT. LTD. …RESPONDENT(S)

J U D G M E N T

ASHOK BHUSHAN,J.

Leave granted.

Signature Not Verified

2. Digitally signed by ASHWANI KUMAR The validity of the Goods and Services Tax (Compensation Date: 2018.10.03 16:22:40 IST Reason:

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to States) Act, 2017 enacted by Parliament as well as the Goods and Services Tax Compensation Cess Rules, 2017, the Rules framed by the Central Government in exercise of p o w e r u n d e r S e c t i o n 1 1 o f t h e G o o d s a n d S e r v i c e T a x ( C o m p e n s a t i o n to States) Act, 2017 are under challenge in these cases.

• C i v i l A p p e a l a r i s i n g o u t o f S L P ( C ) N o . 2 5 4 1 5 o f 2 0 1 7 h a s been filed by the Union of India challenging ad interim order dated 25.08.2017 passed by the Division Bench of the Delhi High Court in Writ Petition (C) No.7459 of 2017 (Mohit Mi n e r a l P v t . L t d . v s . U n i o n o f I n d i a a n d a n o t h e r ) . I n t h e w r i t pe t i t i o n v a l i d i t y o f t h e G o o d s a n d S e r v i c e s T a x ( C o m p e n s a t i o n to States) Act, 2017 as well as Rules framed thereunder were under challenge. The Division Bench passed a partial ad interim order providing that additional levy on the stocks of coal on wh i c h w r i t p e t i t i o n e r h a d a l r e a d y p a i d C l e a n E n e r g y Cess in terms of Finance Act, 2010, he shall not be required to make any further payment. However, on stocks of coal on which no Clean Energy Cess under the Finance Act, 2 0 1 0 w a s p a i d a n y p a y m e n t i n t e r m s o f t h e i m p u g n e d A c t w o u l d b e subject to the result of the writ petition.

• T h i s C o u r t i s s u e d n o t i c e i n t h e S L P o n 2 2 . 0 9 . 2 0 1 7 a n d stayed impugned order passed by the High Court.

• C i v i l A p p e a l a r i s i n g o u t o f S L P ( C ) N o . 7 7 0 8 o f 2 0 1 8 h a s been filed by Union of India challenging interim order dated 08.09.2017 passed by the Division Bench of the Delhi High Court in Writ Petition (C) No.7965 of 2017 (Hind Energy and Coal Be n e f i c a t i o n ( I n d i a ) L t d . v s . U n i o n o f I n d i a a n d another). The Division Bench of the High Court passed interim order dated 08.09.2017 almost in the similar manner as was passed on 25.08.2017. This Court passed an order on 16.01.2018, while hearing SLP(C)No.25415 of 2017 filed against interim order dated 25.08.2017, on oral request of Attorney General, which was also joined by the learned counsel a p p e a r i n g f o r t h e r e s p o n d e n t s −w r i t p e t i t i o n e r s , t r a n s f e r r e d Writ Petition ( C ) No . 7459 of 2017 to this Court to be heard along with SLP ( C ) No . 25415 of 2017 . T r a nsferred Case ( C ) No . 9 of 2 018 ( Mohit Mineral Pvt . Ltd . vs . Union of India and another ) has been registered on transfer of Writ Petition (C)No.7459 of 2017 to this Court.

• T h e decision in Transferred Case ( C ) No . 9 of 2018 by which Writ Petition ( C ) No . 7459 of 2018 is to be heard by this Court shall dispose of the transferred writ petiti o n as well as both the civil appeals. With the consent of the learned counsel for the parties, we have proceeded to hear the writ petition finally.

Facts in the Writ Petition (C) No.7459 of 2017

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7. Mohit Mineral Pvt. Ltd. (hereinafter referred to as the ‘writ petitioner’) is a Company incorporated under the Companies Act which is a trader of imported and Indian coal. The writ petitioner imports coal from Indonesia, South Africa and also purchases coal from Indian mines. The Finance Act, 2010 with effect from 01.07.2010 levied Clean Energy Ce s s w h i c h w a s i n t h e n a t u r e o f a d u t y o f e x c i s e o n t h e p r o d u c t i o n of c o a l a n d w a s b e i n g c o l l e c t e d a t t h e t i m e o f r e m o v a l o f r a w coal, raw lignite and raw peat from the mine to the factory. The Constitution (One Hundred and

Twenty−Second Amendment) Bill, 2014 was introduced in the Lok Sabha to seek amendment in th e C o n s t i t u t i o n , i n t e r a l i a , p r o v i d i n g f o r s u b s u m i n g o f va r i o u s i n d i r e c t t a x e s a n d C e n t r a l a n d S t a t e s s u r c h a r g e s a n d cesses so far as they relate to supply of goods and services both on inter−State and intra−State. The Constitution (One Hundred and First Amendment) Act, 2016 was passed to levy goods and services tax. Section 18 of the Amendment Act enabled the Parliament to levy a cess for five years to compensate the States for the loss of revenue on account of GST. On 12.04.2017, Parliament enacted three Acts, namely, (1) The Central Goods and Services Tax Act, 2017; (2) The Integrated Goods and Services Tax Act, 2017; and (3) The Goods and Services Tax (Compensation to States) Act, 2017 (hereinafter referred to as Compensation to States Act, 2017). On 04.05.2017, the axation Laws (Amendment) Act, 2017 was enacted, whereunder, several cesses including Clean Energy Cess was repealed. The writ petitioner submitted a representation to the GST Council seeking set off of Clean En e r g y C e s s a g a i n s t G S T C o m p e n s a t i o n C e s s . W r i t P e t i t i o n ( C ) N o . 7 4 5 9 o f 2 0 1 7 w a s f i l e d b y M o h i t M i n e r a l s P v t . L t d . i n D e l h i High Court praying for following reliefs:

” I t i s t h e r e f o r e , m o s t r e s p e c t f u l l y p r a y e d t h a t

this Hon’ble High Court be pleased to:

A ) i s s u e a W r i t o f c e r t i o r a r i / m a n d a m u s o r a n y

ot h e r a p p r o p r i a t e W r i t / o r d e r / d i r e c t i o n a g a i n s t t h e

Re s p o n d e n t s b y q u a s h i n g i m p u g n e d G o o d s a n d S e r v i c e s

Tax (Compensation to States) Act, 2017 by declaring that same lack legislative competency and unconstitutional;

• i s s u e a W r i t o f c e r t i o r a r i / m a n d a m u s o r a n y other appropriate Writ/order/direction against the Respondents by quashing impugned the Goods and Services Tax Compensation Rules, 2017 under the impugned legislation are illegal and unconstitutional;

• i s s u e a W r i t o f c e r t i o r a r i / m a n d a m u s o r a n y other appropriate Writ/order/direction against the Respondents by quashing impugned Notification No.1/2017 & 2/2017 −Compensation Cess (Rate), dated 28.06.2017 issued by the Respondent No.1 under the impugned legislation, are

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illegal and unconstitutional;

D ) i s s u e a W r i t o f c e r t i o r a r i / m a n d a m u s o r a n y

other appropriate Writ/order/direction against the Respondent No.2 by declaring

that the Respondent No.2 has no power under Article 279A of Constitution of India to make any recommendation, whatsoever, for levy

and collection of cess as envisaged and levied under the impugned Goods and

Se r v i c e s T a x ( C o m p e n s a t i o n t o S t a t e s ) A c t , 2 0 1 7 o r framing of Rules and issuance of Notification under the said impugned legislation;

E ) i s s u e s u c h o t h e r w r i t / o r d e r / d i r e c t i o n t o t h e Respondent No.2 to place before this Hon’ble Court the records of the recommendation given and all decision taken in respect of levy and collection of cess as envisaged and levied under the impugned Goods and Services Tax (Compensation to States) Act, 2017, framing of Rules and issuance of Notification under the said impugned legislation; F) issue such other writ/order/direction and further orders as the Hon’ble Court may deem just and proper in the facts and circumstances of the case.

8. The Division Bench of the Delhi High Court passed ad interim order on 25.08.2017. In the interim order dated 25.08.2017, the Division Bench observed that there is a prima fa c i e c a s e m a d e o u t b y t h e w r i t p e t i t i o n e r r e g a r d i n g l a c k o f le g i s l a t i v e c o m p e t e n c e o f P a r l i a m e n t t o e n a c t C o m p e n s a t i o n t o States Act, 2017. In paragraphs 8, 9, 13 and 14 of the interim order following was observed:

8 . T h e C o u r t s e e s p r i m a f a c i e m e r i t i n t h e

co n t e n t i o n o f t h e P e t i t i o n e r , b a s e d o n t h e h i s t o r y

of t h e a b o l i t i o n o f t h e C l e a n E n e r g y C e s s a n d t h e introduction of the GST regime, that the power of Parliament to enact the impugned Act cannot be traced to Section 18 of the COI 101st Amendment Act. There is therefore a prima facie case made out as regards the legislative competence of the Parliament to enact the impugned Act.

9 . A n o t h e r a s p e c t o f t h e m a t t e r i s t h a t S e c t i o n 8

o f t h e i m p u g n e d A c t c o n t e m p l a t e s l e v y o f ” a c e s s o n s u c h i n t r a − State supplies of goods or services or both”, the same that is provided in Section 9 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) and such “inter−State supply of goods and services or both” as provided for in Section 5 of th e I n t e g r a t e d G o o d s a n d S e r v i c e s T a x A c t , 2 0 1 7 ( ‘ I G S T A c t ‘ ) . T h e r e f o r e , i t i s c l e a r t h a t c e s s i s be i n g l e v i e d o n t h e s a m e t a x a b l e e v e n t t h a t i s t h e su b j e c t m a t t e r o f t h e l e v y u n d e r t h e C G S T a n d I G S T Acts, viz., supply of goods and services.

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… … …

1 3 . T h e C o u r t , a t t h i s s t a g e , i s o f t h e v i e w t h a t ,

t h e P e t i t i o n e r h a s m a d e o u t a p r i m a f a c i e c a s e f o r

pa r t i a l a d i n t e r i m r e l i e f s u b j e c t t o c o n d i t i o n s . A s

f a r a s t h e a d d i t i o n a l l e v y o n t h e s t o c k s o f c o a l o n

wh i c h i t h a s a l r e a d y p a i d t h e C l e a n E n e r g y C e s s i n

te r m s o f F A A c t , 2 0 1 0 , t h e P e t i t i o n e r s h o u l d n o t b e

re q u i r e d t o m a k e a n y f u r t h e r p a y m e n t . H o w e v e r , o n

st o c k s o f c o a l o n w h i c h n o C l e a n E n e r g y C e s s u n d e r

t h e F A , 2 0 1 0 w a s p a i d , a n y p a y m e n t m a d e i n t e r m s o f

th e i m p u g n e d A c t w o u l d b e s u b j e c t t o t h e r e s u l t o f

this petition. It is ordered accordingly.

1 4 . I t i s m a d e c l e a r t h a t , i n t h e e v e n t o f t h e

Pe t i t i o n e r s u c c e e d i n g i n t h e p r e s e n t p e t i t i o n , t h e

Pe t i t i o n e r w o u l d b e e n t i t l e d t o a r e f u n d o f a m o u n t s

of Clean Energy Cess paid under the Act and on such terms as the Court may determine in the final order.

• On 08.09.2017, another interim order was passed in Writ Petition (C) No. 7965 of 2017.

1. We have heard Shri J.K. Mittal, learned counsel appearing for the writ petitioner and Shri K.K. Venugopal learned Attorney General appearing for the Union of India.

1. Shri J.K. Mittal learned counsel for the writ petitioner submits that the Constitution (One Hundred and First Amendment) Act, 2016 was enacted by the Parliament with the intent to c o n s o l i d a t e n u m b e r o f i n d i r e c t t a x e s w h i c h w e r e levied by the Union and States with the intention to reduce the Goods and Services Tax ( G S T ) b y g i v i n g c o n c u r r i n g t a x i n g power to Union and States for levying GST on every transaction of supply of goods or services both. There was a clear objective of the aforesaid constitutional amendment that with the in t r o d u c t i o n o f G o o d s a n d S e r v i c e s T a x , n o t o n l y t h e in d i r e c t t a x e s b u t t h e c e s s e s a n d s u r c h a r g e s l e v i e d o n g o o d s and services shall also be subsumed in it.

1. B y T a x a t i o n L a w s ( A m e n d me n t ) A c t , 2 0 1 7 v a r i ou s e n a c t men t s levying various types of cesses were repealed including Clean Energy Cess/Clean Environment Cess which was levied and collected on coal.

1. The Compensation to States Act, 2017 is repugnant to and transgress the mandate of the Constitution (One Hundred and First Amendment) Act, 2016. It was the Parliament’s conscious decision to abolish with effect from 01.07.2017 all cesses including cess levied on coal as per mandate of the Constitution (One Hundred and First Amendment) Act, 2016. The

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i m p u g n e d l e g i s l a t i o n i s c o l o u r a b l e l e g i s l a t i o n w h i c h l a c k s legislative competence. No power could be traced in Section 18 to the Constitution (One H u n d r e d a n d F i r s t A m e n d m e n t ) A c t , 2 0 1 6 t o a m e n d C o m p e n s a t i o n t o S t a t e s A c t , 2 0 1 7 . S e c t i o n 1 8 o f the Constitution (One Hundred and First Amendment) Act, 2016 does not empower the P a r l i a m e n t t o l e v y c e s s a n d t a x a s i t provides Parliament to make any law to provide compensation to the States for loss of revenue

arising on account of implementation of GST for a period of 5 years. The impugned legislation i s a c o l o u r a b l e l e g i s l a t i o n w h i c h l a c k s legislative competence so far as collection of levy on cess is concerned.

1. T h e i m p u g n e d l e g i s l a t i o n d e f e a t t h e v e r y o b j e c t i v e o f t h e Constitution (One Hundred and First Amendment) Act, 2016. On the very same transaction there cannot be two levies, one under Central GST Act and another under impugned legislation as i t w o u l d a m o u n t t o d o u b l e t a x a t i o n a s l e v i e d o n t h e s a m e taxable event and same subject. Thus, there is an overlapping in law which is not permissible.

1. T h e w r i t p e t i t i o n e r s u f f e r e d c e s s o f R s . 4 0 0 p e r t o n o n th e c o a l a n d u n d e r t h e i m p u g n e d l e g i s l a t i o n t h e U n i o n i s a g a i n le v y i n g a n d c o l l e c t i n g c e s s a t t h e r a t e o f R s . 4 0 0 p e r t o n o n th e s t o c k l y i n g w i t h t h e p e t i t i o n e r a s o n 3 0 . 0 6 . 2 0 1 7 j u s t o n ev e o f t h e d a y w h e n a l l l e g i s l a t i o n r e l a t e d t o G S T i n c l u d i n g impugned legislation was introduced, whereas on the same stock of coal, cess was already levied and collected under the provisions of Chapter VII of Finance Act, 2010. Thus, it am o u n t s t o d o u b l e c o l l e c t i o n o f t a x a t t h e s a m e r a t e o n t h e s a m e s t o c k . E v e n i f t h e i m p u g n e d l e g i s l a t i o n i s f o u n d t o b e wi t h i n l e g i s l a t i v e c o m p e t e n c y , t h e p e t i t i o n e r m a y b e p e r m i t t e d to set off the cess of Rs.7.68 crores which was already paid on the stock lying with the petitioner on 30.06.2017. Levy under impugned legislation is tax and not a cess, hence, not permissible in law.

1. Shri K.K. Venugopal, learned Attorney General submits that cess is nothing but a special kind of tax. If the legislature is competent to levy the main tax, i.e. GST under Ar t i c l e 2 4 6 A o f t h e C o n s t i t u t i o n , t h e n l e g i s l a t i v e c o m p e te n c e o f l e v y i n g t h e c e s s f l o w s f r o m t h e very sam e p o w er to le v y t h e t a x it s elf . Th e p h rase used in A r t ic l e 246A with respect t o has w i de imp l i cation and will allow levy of cess also . Power to levy a cess , in any case , can be traced back to Article 270 of the Constitu t i on . However , Entry 97 of List I of Seventh S chedule to the Constitution grants a residuary power to levy a t ax to the Union . The Clean Energy Cess which was imposed by the Finance Act, 2010 and GST Compensation Cess are levied on entirely different transactions and both are for entirely different purpose. The Clean Energy Cess was in the nature of a duty of excise on the production of coal and was being

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c o l l e c t e d a t t h e t i m e o f r e m o v a l o f r a w c o a l , r a w l i g n i t e a n d raw peat from the mine to the factory whereas GST Compensation Cess is imposed on inter− State and intra −State supply of specified goods and services. The Clean Energy Cess was levied and collected for the purposes of financing and promoting clean energy initiatives, funding research in the area of clean energy, for any other purpose relating thereto whereas G S T C o m p e n s a t i o n C e s s i s c o l l e c t e d t o p r o v i d e f o r c o m p e n s a t i o n t o t h e S t a t e s f o r t h e l o s s o f r e v e n u e a r i s i n g o n a c c o u n t o f implementation of the goods and services tax.

1. The High Court committed an error in prima facie holding that credit of Clean Energy Cess should be allowed to be utilised for paying GST Compensation Cess. The provision of cr e d i t a n d f l o w o f c r e d i t i s a p u r e l y p o l i c y d e c i s i o n o f t h e E x e c u t i v e . T h e P a r l i a m e n t d o e s n o t l a c k l e g i s l a t i v e c o m p e t e n c e to e n a c t C o m p e n s a t i o n t o S t a t e s A c t , 2 0 1 7 n o r t h e l e g i s l a t i o n ca n b e s a i d t o b e c o l o u r a b l e l e g i s l a t i o n . T h e C o m p e n s a t i o n t o S t a t e s A c t , 2 0 1 7 i n n o m a n n e r t r a n s g r e s s e d C o n s t i t u t i o n ( O n e Hundred and First Amendment) Act, 2016.

1. Learned counsel for both the parties have placed reliance on various judgments of this Court in support of their respective submissions which shall be referred to while considering the submissions in detail.

1. From the submissions of the learned counsel for the parties and pleadings following issues arise for consideration:

• W h e t h e r t h e C o m p e n s a t i o n t o S t a t e s A c t , 2 0 1 7 i s beyond the legislative competence of Parliament?

• W h e t h e r C o m p e n s a t i o n t o S t a t e s A c t , 2 0 1 7 v i o l a t e s Constitution (One Hundred and First Amendment) Act, 2016 and is against the objective of Constitution (One Hundred and First Amendment) Act, 2016?

• Whether the Compensation to States Act, 2017 is a colourable legislation?

• W h e t h e r l e v y o f C o m p e n s a t i o n t o S t a t e s C e s s a n d G S T

on the same taxing event is permissible in law?

(5) Whether on the basis of Clean Energy Cess paid by the petitioner till 30th June,

2017, the petitioner is entitled for set off in payment of Compensation

to States Cess?

2 0 . W e h a v e c o n s i d e r e d t h e s u b m i s s i o n s o f l e a r n e d c o u n s e l f o r the parties and have perused the records.

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• F i r s t , w e n e e d t o n o t i c e r e l e v a n t c o n s t i t u t i o n a l provisions and the Parliamentary enactments relevant for the issues raised in these cases.

• P a r t X I I o f t h e C o n s t i t u t i o n d e a l s w i t h F i n a n c e . A r t i c l e 265 provides that no tax shall be levied or collected except by authority of law. Article 366 contains definitions. Article 366(26A) defines services as services means anything other than goods. Whereas Article 366 (29A) contains an inclusive definition of tax on the sale or purchase of goods. A Bill was introduced in the Lok Sabha namely, the Constitution (One Hundred and Twenty −Second Amendment) Bill, 2014 on 19.12.2014 proposing constitutional amendments to introduce the goods and services tax for conferring co n c u r r e n t t a x i n g p o w e r s o n t h e U n i o n a s w e l l a s th e S t a t e s i n c l u d i n g U n i o n t e r r i t o r y w i t h L e g i s l a t u r e t o m a k e la w s f o r l e v y i n g g o o d s a n d s e r v i c e s t a x o n e v e r y t r a n s a c t i o n of supply of goods or services or both. Statement of Objects and Reasons of the Bill are as follows:− STATEMENT OF OBJECTS AND REASONS The Constitution is proposed to be amended to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods an d s e r v i c e s t a x o n e v e r y t r a n s a c t i o n o f s u p p l y o f goods or services or both. The goods and services tax shall replace a number of indirect taxes being l e v i e d b y t h e U n i o n a n d t h e S t a t e G o v e r n m e n t s a n d i s i n t e n d e d t o r e m o v e c a s c a d i n g e f f e c t o f t a x e s a n d p r o v i d e f o r a c o m m o n n a t i o n a l m a r k e t f o r g o o d s a n d services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax.

2. The proposed Bill, which seeks further to amend the Constitution, inter alia, provides for

• subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services;

• subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, Taxes on lottery, betting and gambling; and State cesses and surcharges in so far as they relate to supply of goods and services;

• dispensing with the concept of declared goods of special importance under the Constitution;

• levy of Integrated Goods and Services Tax on inter−State transactions of goods and services;

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• levy of an additional tax on supply of goods, not exceeding one per cent. in the course of inter − State trade or commerce to be collected by the Government of India for a period of two years, and assigned to the States from where the supply originates;

• conferring concurrent power upon Parliament and the State Legislatures to make laws governing goods and services tax;

• coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council.

• compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years;

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2 3 . T h e C o n s t i t u t i o n ( O n e H u n d r e d a n d F i r s t A m e n d m e n t ) A c t , 20 1 6 d a t e d 0 8 . 0 9 . 2 0 1 6 w a s p a s s e d t o a m e n d t h e C o n s t i t u t i o n o f India. By Constitution (One Hundred and First Amendment) Act, 2016, new Articles 246A, 269A and 279A were inserted. Amendments were also made in Articles 248, 249, 250, 268, 269, 270, 271, 286, 366 and 368. Article 268A was omitted. Amendments were also made in Seventh Schedule of the Constitution in List I and List II. Article 246A and 269A as inserted by Constitution (One Hundred and First Amendment) Act, 2016 is as follows: − “246A. Special provision with respect to goods and services tax. −−(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Le g i s l a t u r e o f e v e r y S t a t e , h a v e p o w e r t o m a k e l a w s w i t h r e s p e c t t o goods and services tax imposed by the Union or by such State.

(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter−State trade or commerce Explanation.The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council..

269A. Levy and Collection of goods and services tax in course of inter −State trade or commerce. −− ( 1 ) G o o d s a n d s e r v i c e s t a x o n s u p p l i e s i n t h e c o u r s e o f i n t e r − State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Explanation.For the purposes of this clause, supply of goods, or of services, or both in t h e c o u r s e o f i m p o r t i n t o t h e t e r r i t o r y o f I n d i a s h a l l be deemed to be supply of goods, or of services, or both in the course of inter−State trade or

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commerce.

• T h e a m o u n t a p p o r t i o n e d t o a S t a t e u n d e r c l a u s e (1) shall not form part of the Consolidated Fund of India.

• Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India.

• W h e r e a n a m o u n t c o l l e c t e d a s t a x l e v i e d b y a State under article 246A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of the State.

• Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter − State trade or commerce..

24. Article 270 of the constitution as amended by the above Amendment Act is as follows: − 270.Taxes levied and distributed between the Union and the States.−(1) All taxes and duties referred to in the Union List, except the duties and taxes referred to in Articles 268, 26 9 a n d 2 6 9 A , r e s p e c t i v e l y , s u r c h a r g e o n t a x e s a n d d u t i e s r e f e r r e d t o i n A r t i c l e 2 7 1 a n d a n y c e s s l e v i e d f o r s p e c i f i c p u r p o s e s u n d e r a n y l a w m a d e b y P a r l i a m e n t shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2).

… … … …

2 5 . S e c t i o n 1 8 a n d S e c t i o n 1 9 o f t h e C o n s t i t u t i o n ( O n e Hundred and First Amendment) Act, 2016 is also relevant, which are to the following effect: − 18. Compensation to States for loss of revenue on account of introduction of goods and services tax. −−Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years.

19. Transitional provisions.−− Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately be f o r e t h e c o m m e n c e m e n t o f t h i s A c t , w h i c h i s i n c o n s i s t e n t with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.

26. At this stage, it is also relevant to notice that in the Constitution (One Hundred and Twenty −Second Amendment) Bill, 2014, Clause 18 contain a provision for arrangement

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f o r a s s i g n m e n t o f a d d i t i o n a l t a x o n s u p p l y o f g o o d s t o S t a t e s f o r two years or such other period recommended by Council, which was to the following effect: −18. Arrangement for assignment of additional tax on supply of goods to States for two years or such other period recommended by Council (1) An additional tax on supply of goods, not e x c e e d i n g o n e p e r c e n t . i n t h e c o u r s e o f i n t e r −S t a t e t r a d e o r commerce shall, notwithstanding anything contained in clause (1) of article 269A, be levied an d c o l l e c t e d b y t h e G o v e r n m e n t o f I n d i a f o r a p e r i o d of two years or such other period as the Goods and Services Tax Council may recommend, and

such tax shall be assigned to the States in the manner provided in clause (2).

• The net proceeds of additional tax on supply of goods in any financial year, except the pr o c e e d s a t t r i b u t a b l e t o t h e U n i o n t e r r i t o r i e s , s h a l l n o t form part of the Consolidated Fund of India and be deemed to have been assigned to the States from where the supply originates.

• T h e G o v e r n m e n t o f I n d i a m a y , w h e r e i t c o n s i d e r s necessary in the public interest, exempt such goods from the levy of tax under clause (1).

• Parliament may, by law, formulate the principles for determining the place of origin from where supply of goods take place in the course of inter−State trade or commerce.

2 7 . C l a u s e 1 9 c o n t a i n c o m p e n s a t i o n t o S t a t e s f o r l o s s o f revenue on account of introduction of goods and services tax. Clause 19 of the Bill is as follows: −

19. Compensation to States for loss of revenue on account of introduction of goods and services tax. −−Parliament may, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on ac c o u n t o f i m p l e m e n t a t i o n o f t h e g o o d s a n d s e r v i c e s t a x f o r such period which may extend to five years.

28. It is, however, to be noticed that Constitution (One Hundred and Twenty − S e c o n d A m e n d m e n t ) B i l l , 2 0 1 4 w a s p a s s e d b u t Cl a u s e 1 8 o f t h e B i l l w a s n o t i n c o r p o r a t e d a n d C l a u s e 1 9 f o u n d place as Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016. After the aforesaid Constitution Amendment, Parliament enacted Central Goods and Services Tax Act, 2017 (Act No.12 of 2017 dated 12.04.2017) to make a provision for levy and collection of tax on intra State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. On the same day, another enactment n a m e ly ‘ The I ntegrated Go o ds and Services Tax Act , 2017 ‘ ( Act No . 13 of 2017 dated 12.04.2017) was enacted to make a provision for levy and collection of tax on inter− State supply of goods or services or both by the Central Government and for matters c o nnected therewith or incidental thereto . Another enactment namely ‘ The

U n i o n T e r r i t o r y G o o d s a n d S e r v i c e s T a x A c t , 2017 ‘ ( Act No . 14 of 2017 ) was passed on the same day to make a provision for levy and collection of tax on intra−State supply of goods or services or

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b o t h b y t h e U n i o n t e r r i t o r i e s a n d f o r m a t t e r s c o n n e c t e d t h e r e w i t h o r i n c i d e n t a l t h e r e t o . T h e F o u r t h P a r l i a m e n t a r y e n a c t m e n t , w h i c h is subject matter of challenge in the present case was also enacted on the same day, i.e. 12.04.2017, namely ‘The Goods and Services Tax (Compensation to States) Act, 2017’ (Act NO. 15 of 2017) to provide for compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax in pursuance of the provisions

of the Constitution (One Hundred and First Amendment) Act, 2016. As the Preamble indicate (Compensation to States) Act, 2017 was enacted in pursuance of the provisions of the

Co n s t i t u t i o n ( O n e H u n d r e d a n d F i r s t A m e n d m e n t ) A c t , 2 0 1 6 . S e c t i o n 8 o f t h e C o m p e n s a t i o n t o S t a t e s

Act, 2017 provides for levy and collection of Cess, which is as follows:−

8. Levy and collection of cess. −−(1) There shall be levied a cess on such intra −State supplies of goods or services or both, as provided for in section 9 of the Central Goods and Services Tax Act, and such inter−State supplies of goods or services or both a s p r o v i d e d f o r i n s e c t i o n 5 o f t h e Integrated Goods and Services Tax Act, and c o l l e c t e d i n s u c h m a n n e r a s m a y b e prescribed, on the recommendations of the Co unci l, fo r the pu rpos es of pr ovid ing co mpen sati on to the Sta tes for loss of revenue arising on account of implementation of the goods and services tax with effect from the date from which the provisions of the Central Goods and Services Tax Act is brought into force, for a period of five years or for such period as may be prescribed on the recommendations of the Council:

Prov ided that no such ce ss sha ll be leviable on supplies made by a taxable person who has decided to opt for composition levy under section 10 of the Central Goods and Services Tax Act.

(2) The cess shall be levied on such supplies of goods and services as are specified in column (2) of the Schedule, on the basis of value, quantity or on such basis at such rate not exceeding the rate set forth in the corresponding entry in column (4) of ,the Schedule, as the Central Government may, on th e re comm enda tion s of the Counc il,

by notification in the Official Gazette, specify:

Provided that where the cess is chargeable on any supply of goods or services or both with reference to their value, for e a c h s u c h s u p p l y t h e v a l u e s h a l l b e determined under section 15 of the Central Goods and Services Tax Act for all intra − State and inter−State supplies of goods or services or both:

Provided further that the cess on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975), at the point when duties of customs are levied on the said goods under section 12 of

the Customs Act, 1962 (52 of 1 9 62 ) , on a v a lu e d e te r m in e d un d er t he Customs Tariff Act, 1975.

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29. Section 12(1) empowers the Central Government to make rules for carrying out the provisions of the Act on the recommendation of the Council. The Council is defined in Section 2(e) of the Act as “Council means the Goods and Services Tax Council constituted under the provision of Article 279A of the Constitution”. The Schedule of the Act read with Section 8 contains description of supply of goods or services in column 2; Tariff

item, heading, sub −heading, Chapter or supply of goods or services, as the case may be, in column 3 and the maximum rate at which goods and services tax c ompensation

cess may be collected in column 4. The Central Government, in exercise of p o w e r u n d e r S e c t i o n 1 2 , h a s f r a m e d t h e r u l e s n a m e l y ” T h e Central Goods and Services Tax Rules, 2017″.

• Parliament enacted the Taxation Laws (Amendment) Act, 2017 dated 04.05.2017 to amend the Customs Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act, 1944, the Central Sales Tax Act, 1956, the Finance Act, 2001 and the Finance Act, 2005 and to repeal certain enactments.

• B y T a x a t i o n L a w s ( A m e n d m e n t ) A c t , 2 0 1 7 , t h e F i n a n c e A c t , 2 0 1 0 , C h a p t e r V I I h a s b e e n r e p e a l e d . T h e F i n a n c e A c t , 2 0 1 0 , Chapter VII provided for levy of Clean Energy Cess, which stood repealed.

• We now proceed to consider the issues as noted above. Whether the Compensation to States Act, 2017 is beyond the legislative competence of Parliament? (Issue No.1)

• T h e p e t i t i o n e r s h a v e c h a l l e n g e d t h e l e g i s l a t i v e co m p e t e n c e o f P a r l i a m e n t t o e n a c t C o m p e n s a t i o n t o s t a t e s A c t , 2 0 1 7 . The petitioners submits that impugned legislation has transgressed the limits of its power granted under the Constitution. It is contended that although the impugned le g i s l a t i o n i s d e s c r i b e d a s f o r p u r p o s e o f g i v i n g c o m p e n s a t i o n to S t a t e s b y C e n t r e s t o S t a t e s f o r l o s s o f r e v e n u e b u t i n f a c t it i m p o s e t a x ( t e r m e d a s c e s s ) , h e n c e i n p i t h a n d s u b s t a n c e the legislation does not belong to the subject falling within the limits of its power but is outside it.

• Part XI of the Constitution deals with the relation between the Union and the States, Chapter I of which deals with Legislative Relations. Article 245 deals with Distribution of Legislative Powers. The Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in Seventh Schedule of the Constitution. The Parliament, and subject to Clause(1) of Article 246, the Legislature of

a State also have power to make laws with respect to any of the matters enumerated in L i s t I I I o f t h e S e v e n t h S c h e d u l e . A r t i c l e 2 48 d e als wit h

residuary power of Legislation in following manner:−Article 248 Residuary powers of legislation−− ( 1 ) S u b jec t t o a rticle 246A , P arlia m ent has ex c lusi v e power to make any law with respect to a matter not enumerated in the Concurrent List or State List. ( 2 ) S u c h power shall include the power of making any law imposing a tax not mentioned in either of those Lists.

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3 5 . A r t i c l e 2 4 6 A a s n o t i c e d a b o v e p r o v i d e s t h a t notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause(2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. In the present case, we are concerned with

a cess imposed by Compensation to States Act, 2017. The Act by Section 8 levies and authorizes collection of cess. We need to first examine nature of cess. Cess has been defined in Blacks Law Dictionary, Tenth Edition as An assessment or tax.

36. P. Ramanatha Aiyar, Advanced Law Lexicon, 3 rd Edition defines cess as follows:−Cess is An assessment tax; levy; specifically:

(a) A rate or local tax.(b) In Scotland, the land tax. (c) in India, a tax for a special object; as, a r o a d c e s s . ( W e b s t e r ) T h e w o r d c e s s i s u s e d i n I r e l a n d a n d i s s t i l l i n use in India although the word rate has replaced it in England. It means a tax and is generally used when the levy is for some special administrative expense which the name (health cess, ed u c a t i o n c e s s , r o a d c e s s , e t c . ) i n d i c a t e s . W h e n l e v i e d a s an increment to an existing tax, the name matters not for the validity of the cess must be judged of in the same way as the validity of the tax to which is an increment. Guruswamy and Co. v. St a t e o f M y s o r e , A I R 1 9 6 7 S C 1 5 1 2 , p e r d i s s e n t i n g j u d g e a n d India Cement Ltd. v. State of T.N., AIR 1990 SC 85. The word cess means a tax and is generally used when the levy is for some special administrative expense which the name (health cess, education cess, road cess, etc.) indicates. Shinde Brothers v. Hy. Commissioner, Raichur, AIR 1967 SC 1512, 1525.

3 7 . T h i s C o u r t h a d c o n s i d e r e d t h e e x p r e s s i o n c e s s i n S h i n d e Br o t h e r s E t c . V s . D e p u t y C o m m i s s i o n e r , R a i c h u r & O t h e r s E t c . , A I R 1 9 6 7 S C 1 5 1 2 , Justice M. Hidyatullah, as he then was in his dissenting opinion has defined the cess (no co n t r a r y o p i n i o n w a s e x p r e s s e d b y m a j o r i t y i n t h a t r e g a r d ) i n paragraph 39, which is to the following effect: −39. Now the health cess is first assailed on the ground that there is no entry health cess as such in the legislative entries. The word cess is used in Ir e l a n d a n d i s s t i l l i n u s e i n I n d i a a l t h o u g h the word rate has replaced it in England. It means a tax and is generally used when the levy is

fo r s o m e s p e c i a l a d m i n i s t r a t i v e e x p e n s e w h i c h t h e n a m e (health cess, education cess, road cess etc.) indi−cates. When levied as an increment to an existing tax, the name matters not for the validity of the cess must be judged of in the same way as the va − lidity of the tax to which it is an increment. By Schedule A(1) read with Section 3 of the Act, it is collected as an additional levy with a tax, which, as described in Schedule A, is undoubtedly one within the powers of the State Legislature and has been so even prior to the Constitution

3 8 . I n t he Co n s titut i on Be n ch ju d gmen t of t his Cou r t in Ind i a C ement Ltd . & Others Vs . S t ate of Tamil N adu & Others , ( 1 9 9 0 ) 1 S CC 12 , the above definition given by Hidayatuallah , J . w as q u o t e d w i t h a p p r o v a l i n P a r a 1 9 , w h i c h i s q u o t e d a s b e l o w : −= 1 9 . Here, we are concerned with cess on royalty. One can have an idea as to what cess is, from the

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o b s e r v a t i o n s o f H i d a y a t u l l a h , J . , a s t h e l e a r n e d C h i e f J u s t i c e t h e n w a s , i n G u r u s w a m y & C o . v . S t a t e of Mysore9 where at page 571, the learned Judge ob−served :

The word cess is used in Ireland and is still in use in India although the word rate has replaced it in England. It means a tax and is generally used when the levy is for some special administrative expense which the name (health cess, education cess, road cess etc.) indicates. When levied as an increment to an existing tax, the name matters not for the validity of the cess must be judged of in the same way as the validity of the tax to which it is an increment.

• The meaning of cess as noticed above was again reiterated by a Two Judge Bench judgment of this Court in Vijayalashmi Rice Mill & Others Vs. Commercial Tax Officers, Palakol & Others, (2006) 6 SCC 763, in paragraph 13, following has been laid down: −13. Hence ordinarily a cess is also a tax, but is a special kind of tax. Generally tax raises rev − e n u e w h i c h c a n b e u s e d g e n e r a l l y f o r a n y p u r p o s e b y the State. For instance, the income tax or excise tax or sales tax are taxes which generate revenue which can be utilised by the Union or the State Governments for any purpose e.g. for payment of salary to the members of the armed forces or civil servants, police, etc. or for de v e l o p m e n t p r o −g r a m m e s , e t c . H o w e v e r , c e s s i s a t a x w h i c h g e n e r − ates revenue which is utilised for a specific pur−pose. For instance, health cess raises revenue which is utilised for health purposes e.g. building hospitals, giving medicines to the poor, etc. Simi − larly, education cess raises revenue which is used for building schools or other educational pur−poses.

• T h e e x p r e s s i o n c e s s a s h e l d a b o v e m e a n s a t a x l e v i e d fo r s o m e s p e c i a l p u r p o s e , w h i c h m a y b e l e v i e d a s a n i n c r e m e n t to a n e x i s t i n g t a x . T h e S c h e m e o f C o m p e n s a t i o n t o S t a t e s A c t , 20 1 7 a s n o t i c e d a b o v e i n d i c a t e t h a t t h e c e s s i s w i t h r e s p e c t to g o o d s a n d s e r v i c e s t a x . T h e r e a r e m o r e t h a n o n e r e a s o n t o up h o l d t h e l e g i s l a t i v e c o m p e t e n c e o f P a r l i a m e n t t o e n a c t t h e Co m p e n s a t i o n t o S t a t e s A c t , 2 0 1 7 . C o n s t i t u t i o n B e n c h o f t h i s Co u r t i n U n i o n o f I n d i a V s . H a r b h a j a n S i n g h D h i l l o n , ( 1 9 7 1 ) 2 S C C 7 7 9 held that only question to be asked while examining the legislative competence of Parliament w i t h r e g a r d t o a p a r t i c u l a r e n a c t m e n t i s : I s t h e m a t t e r s o u g h t t o b e l e g i s l a t e d or i n c l u d e d i n L i s t I I o r i n L i s t I I I o r i s t h e t a x s o u g h t t o be l e v i e d m e n t i o n e d i n L i s t I I o r i n L i s t II I . In Par a 2 1 , the Constitution Bench laid down following: −21. It seems to us that the function of Article 246(1), read with Entries 1−96, List I, is to give positive power to Parliament to legislate in re− spect o f these entries . Obj e ct is no t to d e bar Par− liament from legislating on a matter, even if other provisions of the Constitution enable it to do so. Accordingly we do not interpret the words any other matter occurring in Entry 97, L i st I , to mean a topic mentioned by way of exclusion . These words really refer to the matters contained in each of the Entries 1 to 96. The words any other mat−

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ter had to be used because Entry 97, List I fol−lows Entries 1−96, List I. It is true that the f i e l d o f l e g i s l a t i o n i s d e m a r c a t e d b y E n t r i e s 1 −9 6 , List I, but demarcation does not mean that if Entry 97, List I confers additional powers, we s h o u l d r e f u s e t o g i v e e f f e c t t o i t . A t a n y r a t e , w h a t e v e r doubt there may be on the interpretation of Entry 97, List I is removed by the wide terms of Article

248. It is framed in the widest possible terms. On its terms the only question to be asked is: Is the matter sought to be legislated or included in List II or in List III or is the tax sought to be levied me n t i o n e d i n L i s t I I o r i n L i s t I I I : N o q u e s t i o n has to be asked about List I. If the answer is in the negative then it follows that Parliament has power to make laws with respect to that matter or tax.

• W h e n w e p o s e t h e a b o v e q u e s t i o n i n c o n t e x t o f i m p u g n e d legislation, i.e. Compensation to States Act, 2017, we do not find any entry in List II or List III of Seventh Schedule, which may refer to levying of cess in question. Article 248 read with A r t i c l e s 2 4 6 a n d 2 4 6 A c l e a r l y i n d i c a t e t h a t r e s i d u a r y p o w e r o f l e g i s l a t i o n i s w i t h t h e P a r l i a m e n t . I n t h e present case, we may notice that no contention has been raised before us that the subject matter of legislation was within the competence of State Legislature, and that the Parliament had no competence to legislate. Applying the H.S. Dhillons test (supra), we do not find any lack of legislative competence in the Parliament.

• L e a r n e d c o u n s e l f o r t h e p e t i t i o n e r r e l i e d o n t w o de c i s i o n s o f t h i s C o u r t n a m e l y H o e c h s t P h a r m a c e u t i c a l s L t d . & O t h e r s V s . S t a t e o f B i h a r & O t h e r s , ( 1 9 8 3 ) 4 S C C 4 5 a n d M . P . V . Su n d a r a r a m i e r & C o . V s . S t a t e o f A . P . & O t h e r s , A I R 1 9 5 8 S C 468 to contend that taxation is a distinct matter for purposes of legislative competence and the power to tax cannot be deduced from a general legislative entry as an ancillary power. He submits that State Compensation Cess being not covered by any taxing entry, the legislation is beyond the competence of Parliament. We may first notice the proposition, which has been laid down by this court in Hoechst Pharmaceuticals Ltd. (supra). This Court in the above case had occasion to examine Bihar Finance Act, 1981, by which surcharge was levied on certain dealers selling essential commodities such as drugs. Challenge to the legislative competence of the State was raised. In the above context, this Court had observed that taxation is considered to be a distinct matter for purposes of legislative competence. In paragraphs 74, 75 and 76, following was laid down: − 74. It is equally well settled that the various entries in the three Lists are not powers of leg − islation, but fields of legislation. The power to legislate is given by Article 246 and other Arti − cles of the Constitution. Taxation is considered to be a distinct matter for purposes of le g i s l a t i v e c o m p e t e n c e . H e n c e , t h e p o w e r t o t a x c a n n o t b e d e − duced from a general legislative entry as an ancil −lary power. Further, the element of tax do e s n o t d i r e c t l y f l o w f r o m t h e p o w e r t o r e g u l a t e t r a d e o r commerce in, and the production, supply and distri −bution of essential commodities under En t r y 3 3 o f L i s t I I I , a l t h o u g h t h e l i a b i l i t y t o p a y t a x m a y b e

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a matter incidental to the Centres power of price control.

75. Legislative relations between the Union and the States inter se with reference to the th r e e L i s t s i n S c h e d u l e V I I c a n n o t b e u n d e r s t o o d f u l l y without examining the general features disclosed by the entries contained in those Lists: Seervai

in his Constitutional Law of India, 3rd Edn., Vol. 1 at pp. 81−82. A scrutiny of Lists I and II of the S e v e n t h S c h e d u l e w o u l d s h o w t h a t t h e r e i s n o o v e r − l a p p i n g a n y w h e r e i n t h e t a x i n g p o w e r a n d t h e C o n − stitution gives independent sources of taxation to the Union and the States. Following the scheme of t h e G o v e r n m e n t o f I n d i a A c t , 1 9 3 5 , t h e C o n s t i t u t i o n h a s m a d e t h e t a x i n g p o w e r o f t h e U n i o n a n d o f t h e States mutually exclusive and thus avoided the dif −ficulties which have arisen in some other Federal Constitutions from overlapping powers of taxation.

7 6 . I t w o u l d t h e r e f o r e a p p e a r t h a t t h e r e i s a d i s t i n c t i o n m a d e b e t w e e n g e n e r a l s u b j e c t s o f l e g i s − lation and taxation. The general subjects of legis −lation arc dealt with in one group of entries and po w e r o f t a x a t i o n i n a s e p a r a t e g r o u p . I n M . P . V . Sundararamier & Co. v. State of A.P.43 this court dealt with the scheme of the separation of taxation powers between the Union and the States by mutually exclusive lists. In List I, Entries 1 to 81 d e a l w i t h g e n e r a l s u b j e c t s o f l e g i s l a t i o n ; E n t r i e s 8 2 t o 9 2 − A deal with taxes. In List II, Entries 1 to 44 deal with general subjects of legislation; Entries 45 to 63 deal with taxes. This mutual exclusiveness is also brought out by the fact that in List III, the Concurrent Legislative List, there is no entry relating to a tax, but it only contains an entry relating to levy of fees in respect of matters given in that list other than court − f e e s . T h u s , i n o u r C o n s t i t u t i o n , a c o n f l i c t o f t h e t a x i n g p o w e r o f the Union and of the States cannot arise. That be −ing so, it is difficult to comprehend the submis − sion that there can be intrusion by a law made by Parliament under Entry 33 of List III into a for − bi d d e n f i e l d v i z . t h e S t a t e s e x c l u s i v e p o w e r t o make a law with respect to the levy and imposition of a tax on sale or purchase of goods relatable to Entry 54 of List II of the Seventh Schedule. It follows that the two laws viz. sub − s e c t i o n ( 3 ) o f S e c t i o n 5 o f t h e A c t a n d p a r a 2 1 o f t h e C o n t r o l O r − d e r i s s u e d b y t h e C e n t r a l G o v e r n m e n t u n d e r s u b −s e c − tion (1) of Section 3 of the Essential Commodities Act, operate on two separate and distinct f i e l d s a n d b o t h a r e c a p a b l e o f b e i n g o b e y e d . T h e r e i s n o question of any clash between the two laws and the question of repugnancy does not come into play.

43. Levy of surcharge was upheld referring to Entry 52 of List II of Seventh Schedule. Following was laid down in paragraph 90:−90. The decision in Fernandez case, AIR 1957 SC 657 is therefore clearly an authority for the proposition that the S t a t e L e g i s l a t u r e n o t w i t h −s t a n d i n g A r t i c l e 2 8 6 o f t h e C o n s t i t u t i o n w h i l e m a k − ing a law under Entry 54 of List II of the Seventh Schedule can, for purposes of the registration of a dealer and submission of returns of sales tax, in−clude the transactions covered by Article

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2 8 6 o f t h e C o n s t i t u t i o n . T h a t b e i n g s o , t h e c o n s t i t u t i o n a l v a l i d i t y o f s u b − section (1) of Section 5 of the Act which provides for the classification of dealers whose gross

turnover during a year exceeds Rs 5 lakhs for the purpose of levy of surcharge, in ad−dition to the tax payable by him, is not assail −able. So long as sales in the course of inter−State trade and commerce or sales outside the State and sales in the course of import into, or export out of the territory of India are not taxed, there is nothing to prevent the State Legislature while mak − ing a law for the levy of a surcharge under Entry 54 of List II of the Seventh Schedule to take into account the total turnover of the dealer within the State and provide, as has been done by sub − section (1) of Section 5 of the Act, that if the gross turnover of such dealer exceeds Rs 5 l a k h s i n a y e a r , h e s h a l l , i n a d d i t i o n t o t h e t a x , a l s o p a y a s u r c h a r g e a t s u c h r a t e n o t e x c e e d i n g 1 0 p e r c e n t u m of the tax as may be provided. The liability to pay a surcharge is not on the gross turnover including the transactions covered by Article 286 but is only on inside sales and the surcharge is sought to be levied on dealers who have a position of economic superiority

• In M.P.V. Sundararamier (supra) this Court also laid down that the tax cannot be levied under general entry. The present is a case where cess in question is levied in respect of g o o d s a n d s e r v i c e s t a x , t h e d e f i n i t i o n o f c e s s a s g i v e n i n Compensation to States Act, 2017 in Section 2(c) states cess means the goods and services tax compensation cess levied under section 8. The judgment of this Court relied by pe t i t i o n e r i n H o e c h s t P h a r m a c e u t i c a l s L t d . ( s u p r a ) a n d M . P . V . Sundararamier (supra) is not applicable to the present case.

• Entry 97 of List I also lead to the same conclusion, for reference, which is quoted as below:− 97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.

• Article 270 of the Constitution, both as it existed prior to Constitution (One Hundred and First Amendment) Act, 2016 and subsequent to Constitution (One Hundred and First A m e n d m e n t ) A c t , 2 0 1 6 u s e s t h e e x p r e s s i o n a n y c e s s l e v i e d f o r sp e c i f i c p u r p o s e s u n d e r a n y l a w m a d e b y P a r l i a m e n t . A r t i c l e 2 7 0 ( 1 ) a s e x i s t e d p r i o r t o C o n s t i t u t i o n ( O n e H u n d r e d a n d F i r s t Amendment) Act, 2016, is as follows: −Art.270.(1) All taxes and duties referred to in the Union list, except the duties and taxes referred to in Arts. 268, 268A and 269 respectively, surcharge on taxes and duties referred to in Art. 271 and any cess levied for s p e c i f i c p u r p o s e s u n d e r a n y l a w m a d e b y P a r l i a m e n t shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2).

• After Constitution (One Hundred and First Amendment) Act, 2016, as per Article 270, Parliament can levy cess for a specific purpose under a law made by it. Article 270, thus, sp e c i f i c a l l y e m p o w e r s P a r l i a m e n t t o l e v y a n y c e s s b y l a w . L a s t l y , S e c t i o n 1 8 o f t h e C o n s t i t u t i o n ( O n e H u n d r e d a n d F i r s t Amendment) Act, 2016 expressly empowers Parliament shall, by law on the recommendation of

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the Goods and Services Tax Council, provide for compensation to the states for loss of revenue arising on account of implementation of the goods and services tax. When Constitution

provision empowers the Parliament to provide for Compensation to the States for loss of revenue by law, the expression law used therein is of wide import which includes levy of any cess for the above purpose. We, thus, do not find any merit in the submission of the learned counsel for the petitioner that Parliament has no legislative competence to enact the Compensation to States Act, 2017.

Answer to Issue No.1 is,thus, as follows: The Compensation to States Act, 2017 is not beyond the legislative competence of the Parliament. Issue No.2 and Issue No.3

• W e n o w c o m e t o I s s u e N o . 2 a n d I s s u e N o . 3 , w h i c h , being interconnected, are taken up together.

• The next attack on Compensation to States Act, 2017 is on the ground that the Act transgresses the mandate of Constitution (One Hundred and First Amendment) Act, 2016. It is su b m i t t e d t h a t C o n s t i t u t i o n ( O n e H u n d r e d a n d F i r s t Amendment) Act, 2016 does not permit levy of cess on supply of goods or services on which Goods and Services Tax has been levied. Elaborating the submission, it is contended that the cl e a r o b j e c t i v e o f C o n s t i t u t i o n ( O n e H u n d r e d a n d F i r s t Amendment) Act, 2016 was to subsume various Central and States Taxes, Central and States surcharges and cesses, so far as, they relate to supply of goods and services. When all taxes, su r c h a r g e s a n d c e s s e s w e r e s u b s u m e d i n b y G o o d s a n d S e r v i c e s Tax, imposition of compensation to States cess clearly falls foul to the Constitution (One Hundred and First Amendment) Act, 2016. The Statements of Objects and Reasons of Constitution (One Hundred and Twenty −Second Amendment) Bill, 2014, as noticed above, was to subsume various Central Indirect Taxes and levy of Service Tax, Additional Customs Duty, Special Additional Duty of Customs, Central Surcharges and Cesses so far as they relate to the supply of goods and services.

• One of the objectives as noticed in Statements of Objects and Reasons was conferring concurrent taxing powers upon Parliament and the State Legislature to make laws for levying goods and services tax. Article 246A sub −article(1) empowers the Parliament to make laws with respect to goods and services tax. The word with respect to is word of e x p a n s i o n . S i m i l a r e x p r e s s i o n s n a m e l y , p e r t a i n i n g t o , i n re l a t i o n t o c a m e t o b e c o n s i d e r e d b e f o r e t h i s C o u r t i n M / s . Do y p a c k S y s t e m s P v t . L t d . V s . U n i o n o f I n d i a & O t h e r s , ( 1 9 8 8 ) 2 S C C 2 9 9 , w h e r e t h i s C o u r t h e l d t h a t t h e a b o v e e x p r e s s i o n s

are used in the expansive sense. Following has been laid down in paragraphs 48 and 49: −48.The expressions pertaining to, in relation to and arising out of, used in the deeming provision, are used in the expansive sense, as per decisions of courts, meanings found in standard dictionaries, and the principles of broad and liberal interpretation in consonance with Article 39(b) and (c) of the Constitution.

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4 9 . T h e w o r d s a r i s i n g o u t o f h a v e b e e n u s e d i n the sense that it comprises purchase of shares and lands from income arising out of the K a n p u r u n d e r t a k i n g . W e a r e o f t h e o p i n i o n t h a t t h e w o r d s pertaining to and in relation to have the same wide meaning and have been used interchangeably for a m o n g o t h e r r e a s o n s , w h i c h m a y i n c l u d e a v o i d a n c e o f repetition of the same phrase in the same clause or sentence, a method followed in good drafting. The word pertain is synonymous with the word relate, see Corpus Juris Secundum, Volume 17, page 693.

• L e a r n e d c o u n s e l f o r t h e p e t i t i o n e r h a s p l a c e d r e l i a n c e o n judgment of this Court in Dewan Chand Builders and Contractors Vs. Union of India and Others, (2012) 1 SCC 101. The Parliament had enacted Building and Other Construction W o r k e r s ( R e g u l a t i o n o f E m p l o y m e n t a n d C o n d i t i o n s o f S e r v i c e ) A c t , 1 9 9 6 a n d B u i l d i n g a n d O t h e r C o n s t r u c t i o n W o r k e r s W e l f a r e C e s s A c t , 1 9 9 6 . T h e c o n s t i t u t i o n a l v a l i d i t y a n d c o m p e t e n c e o f Parliament was challenged before the Delhi High Court. Delhi High Court upheld the validity of Building and Other Construction Workers (Regulation of Employment and Conditions of S e r v i c e ) C e n t r a l R u l e s , 1 9 9 8 h o l d i n g t h e l e v y u n d e r t h e impugned enactment as a fee referable to Entry 97 of List I of Seventh Schedule of the Constitution. Be f o r e t h i s C o u r t , i t w a s c o n t e n d e d t h a t c e s s i n q u e s t i o n w a s a t a x a n d n o t a c e s s si n c e n o e l e m e n t o f q u i d p r o q u o e x i s t s a n d i f i t i s a t a x , th e n i t i s a t a x o n l a n d s a n d b u i l d i n g s f a l l i n g w i t h i n t h e am b i t o f S c h e d u l e V I I L i s t I I E n t r y 4 9 . A r g u m e n t w a s n o t i c e d in paragraph 23 to the following effect: − 23. It is evident from the contentions raised on b e h a l f o f t h e a p p e l l a n t t h a t t h e r e i s a t w o −p r o n g e d attack on the legislative competence of Parliament to enact the Cess Act: (i) it is a tax and not a cess because no element of quid pro quo exists between the payer of the cess and the beneficiary, and (ii) if it is a tax then it is a tax on lands and buildings falling within the ambit of S c h e d u l e V I I L i s t I I E n t r y 4 9 ( t h e S t a t e L i s t ) , ousting the legislative competence of Parliament.

• T h i s C o u r t n o t i c e d t he d i s t i n cti o n between fee and tax and referred to earlier judgments including judgment of this C o urt in Commissioner , Hindu Religious Endowments , Madras Vs . S r i L a k shmindra Thirtha Swamiar of Sri Shirur Mutt , AIR 1954 SC 282 .

T h i s C o u r t u p h e l d t h e c e s s a s f e e a n d n o t t a x . I n parag r a ph 31 , reasons for upholding levy as fee has been given by this Court, which is to the following effect:−31. There is no doubt in our mind that the Statement of Objects and Reasons of the Cess Act, clearly spells out the essential purpose the enact− ment seeks to achieve i.e. to augment the Welfare Fund under the BOCW Act. The levy of cess on the cost of construction incurred by the employers on the building and other construction works is for ensuring sufficient funds for the Welfare Boards to u n d e r t a k e s o c i a l s e c u r i t y s c h e m e s a n d w e l f a r e m e a − sures for building and other construction workers. The fund, so collected, is directed to

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s p e c i f i c e n d s s p e l t o u t i n t h e B O C W A c t . T h e r e f o r e , a p p l y i n g the principle laid down in the aforesaid decisions of this Court, it is clear that the said levy is a fee and not tax. The said fund is set apart and appropriated specifically for the performance of specified purpose; it is not merged in the public revenues for the benefit of the general public and as such the nexus between the cess and the purpose for which it is levied gets established, satisfying t h e e l e m e n t o f q u i d p r o q u o i n t h e s c h e m e . W i t h these features of the Cess Act in view, the subject levy has to be construed as fee and not a tax. Thus, we uphold and affirm the finding of the High Court on the issue.

• T h e a b o v e j u d g m e n t h a s n o a p p l i c a t i o n i n t h e f a c t s o f t h e c a s e . T h e c a s e o f t h e U n i o n i s n o t t h a t c e s s i s a f e e . R a t h e r co n t e n t i o n i s t h a t i t i s i n c r e m e n t t o t h e g o o d s a n d s e r v i c e s t a x . We h a v i n g a l r e a d y h e l d t h a t S t a t e c o m p e n s a t i o n c e s s i s with respect to goods and services tax, it is a tax.

• L e a r n e d c o u n s e l f o r t h e p e t i t i o n e r h a s f u r t h e r r e l i e d o n ce r t a i n d e c i s i o n s o n d i s t i n c t i o n b e t w e e n t a x a n d f e e . B u t t h e le v y o f c e s s , i n t h e p r e s e n t c a s e , n o t e v e n c l a i m e d a s f e e , i t is n o t n e c e s s a r y t o r e f e r t o a b o v e c a s e s w h i c h r e i t e r a t e t h e well established principles emanating from Commissioner, Hindu Religious Endowments, Madras

Vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (supra).

• T h e e x p r e s s i o n u s e d i n A r t i c l e 2 4 6 A i s p o w e r t o m a k e laws with respect to goods and services tax. The power to make law, thus, is not general power related to a general entry rather it specifically relates to goods and services t a x . W h e n e x p r e s s p o w e r i s t h e r e t o m a k e l a w r e g a r d i n g g o o d s and services tax, we fail to comprehend that how such power shall not include power to levy cess on goods and services tax. True, that Constitution (One Hundred and First Amendment) Act, 2016 was passed to subsume various taxes, surcharges and cesses into one tax but the constitutional provision does not indicate that henceforth no surcharge or cess shall be levied.

• L e a r n e d c o u n s e l f o r t h e p e t i t i o n e r h a s r e f e r r e d t o Section 18 of the Constitution (One Hundred and Twenty−Second Amendment) Bill, 2014, where an additional tax on supply of goods not exceeding one per cent was contemplated, which did not find place in Constitution (One Hundred and First Amendment) Act, 2016. He submits that the additional tax, which was proposed by the Constitution (One Hundred a n d T w e n t y −S e c o n d A m e n d m e n t ) B i l l , 2 0 1 4 w a s n o t a l l o w e d t o f i n d pl a c e i n C o n s t i t u t i o n ( O n e H u n d r e d a n d F i r s t A m e n d m e n t ) A c t , 2 0 1 6 , i t i s t o b e a c c e p t e d t h a t C o n s t i t u t i o n A m e n d m e n t d i d n o t co n t e m p l a t e l e v y o f a d d i t i o n a l t a x o n s e r v i c e s a n d g o o d s t a x . Th e a b o v e s u b m i s s i o n i n s o fa r a s no t cont i n u i n g an ad d i t i on a l tax on supply of goods in the Constitution (One Hundred and First Amendment) Act is concerned, the submission of the learned counsel for the petitioner is correct that additional

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t a x , w h i c h w a s c o n t e m p l a t e d b y C l a u s e 1 8 o f t h e B i l l d i d n o t f i n d p l a c e i n C o n s t i t u t i o n A m e n d m e n t A c t . F u r t h e r , C l a u s e 1 9 of the Bill find place as Section 18 of the Constitution (One Hundred and First Amendment) Act,

2016. Thus, power of Parliament to make law providing for compensation to the States for loss of revenue was expressly included by constitutional provision.

• Further, the Preamble of Compensation to States Act, 2017 expressly mentions the Act to provide for compensation to the States for the loss of revenue arising on account of im p l e m e n t a t i o n o f t h e g o o d s a n d s e r v i c e s T a x i n pursuance of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016. Thus, the Compensation to States Act, 2017 has been enacted under the express Constitution (One Hundred and First Amendment) Act, 2016. We, thus, also do not find any force in the submission of the learned counsel for the petitioner that Compensation to States Act, 2017 transgresses the Constitution (One Hundred and First Amendment) Act, 2016.

• D u e t o a b o v e r e a s o n s , w e d o n o t f i n d a n y s u b s t a n c e i n t h e submission of the petitioner that Compensation to States Act, 2017 is a colourable legislation. We having held that Parliament has full legislative competence to enact the Act and the Act having been enacted to implement the Constitution (One Hundred and First Amendment) Act and the object being clearly to fulfill the Constitution (One Hundred and First Amendment) Acts objective, we reject the submission of the petitioner that C o m p e n s a t i o n t o S t a t e s A c t , 2 0 1 7 i s a colourable legislation. We, thus, answer Issue No.2 and Issue No. 3 in following manner:−Ans. 2 − The Compensation to States Act, 2017 does not violate Constitution (One Hundred and First Amendment) Act, 2016 nor is against the objective of Constitution (One Hundred and First Amendment) Act, 2016.

Ans.3 −The Compensation to States Act is not a colourable legislation.

Wh e t h e r l e v y o f C o m p e n s a t i o n t o S t a t e s C e s s a n d G S T o n t h e same taxing event is permissible in law? (Issue No.4)

5 9 . T h e p e t i t i o n e r e l a b o r a t i n g h i s c o n t e n t i o n s u b m i t s t h a t a s pe r S e c t i o n 8 o f i m p u g n e d l e g i s l a t i o n t h e r e s h a l l b e l e v i e d a c e s s o n i n t r a − S t a t e s u p p l y o f g o o d s a n d s e r v i c e s a s p r o v i d e d in Section 9 of the CGST Act whereas CGST Act has been enacted to levy tax as provided under

Article 246A of the Constitution. This is also true in respect of the cesses i m p o s e d o n i n t e r −S t a t e s u p p l i e s o f g o o d s a n d s e r v i c e s c o v e r e d b y S e c t i o n 5 o f I G S T A c t , 2 0 1 7 . T h e r e f o r e , o n t h e s a m e v e r y transaction there cannot be two levies, one under CGST Act and another under impugned legislation as it would amount to double taxation as levy is on the same taxable event and same s u b j e c t . T h u s , t h e r e i s a n o v e r l a p p i n g o n l a w w h i c h i s n o t permissible. The petitioner contends that goods and services tax being already imposed by three enactments of 2017 as noticed above imposition of States Compensation Cess is levied

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on the same taxing event and has overlapping effect.

• T h e p r i n c i p l e i s w e l l s e t t l e d t h a t t w o t a x e s / i m p o s t s wh i c h a r e s e p a r a t e a n d d i s t i n c t i m p o s t s a n d o n t w o d i f f e r e n t aspects of a transaction are permissible as in law there is no overlapping.

• A C o n s t i t u t i o n B e n c h o f t h i s C o u r t i n F e d e r a t i o n o f H o t e l & Restaurant Associate of India, Etc. Vs. Union of India and others, (1989) 3 SCC 634, held that a law with respect to a subject might incidentally affect another subject in some way, but that is not the same thing. There might be overlapping but the overlapping must be in law. The fact that there is an overlapping does not detract from the distinctiveness of the aspects. T h e r e f o r e , i f t h e t a x e s a r e s e p a r a t e a n d d i s t i n c t im p o s t s a n d l e v i e d o n t h e d i f f e r e n t a s p e c t s , t h e n t h e r e i s n o overlapping in law. Following was laid down in paragraph 31:

3 1 . I n d e e d , t h e l a w ‘ w i t h r e s p e c t t o ‘ a

su b j e c t m i g h t i n c i d e n t a l l y ‘ a f f e c t ‘ a n o t h e r s u b j e c t

in some way; but that is not the same thing as the law being on the latter

subject. There might be overlapping; but the overlapping must be in law.

The same transaction may involve two or more taxable events in its

different aspects. But the fact that there is an overlapping does not detract from

th e d i s t i n c t i v e n e s s o f t h e a s p e c t s , L o r d

Simonds in Governor General in Council v. Province of Madras [1945] FCR 179

P.C. at 193, in the context of concepts of Duties of Excise and Tax on

Sale of Goods said:

…The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the mo m e n t w h e n t h e e x c i s a b l e a r t i c l e l e a v e s the factory or workshop for the first time on the occasion of its sale….

6 2 . J u s t i c e K r i s h n a I y e r i n A v i n d e r S i n g h a n d o t h e r s V s .

State of Pubjab and others, (1979) 1 SCC 137, laid down that if on the same subject−

m a t t e r t h e l e g i s l a t u r e c h o o s e s t o l e v y

tax twice over there is no inherent invalidity in the fiscal adventure unless there

are some other prohibitions. In the above case Government of Punjab had

i s s u e d a n o t i f i c a t i o n

un d e r S e c t i o n 9 0 ( 4 ) o f t h e P u n j a b M u n i c i p a l C o r p o r a t i o n A c t ,

1976 imposing tax at the rate of Rupee 1 per bottle on Indian made Foreign Liquor

w i t h i n t h e M u n i c i p a l C o r p o r a t i o n o f

Ludhiana. One of the contentions raised was that tax imposed is on sale, hence,

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beyond Government power. In paragraph 4 following was laid down:

” 4 . . . . . . . A f e e b l e p l e a t h a t t h e t a x i s b a d b e c a u s e

of the vice of double taxation and is unreasonable because there are heavy prior

levies was also voiced. Some of these contentions hardly merit consideration,

but have been mentioned out of courtesy to counsel. The last one, for

i n s t a n c e , d e s e r v e t h e l e a s t a t t e n t i o n . T h e r e i s n o t h i n g i n Article 265 of the Constitution from which one can spin out the constitutional

vice called double taxation. (Bad economics may be good law and vice versa).

Dealing with a somewhat similar argument, the Bombay High Court gave

short shrift to it in Wester India Theatres (AIR 1954 Bom 261). Some

un d e s e r v i n g c o n t e n t i o n s d i e h a r d , r a t h e r s u r v i v e after death. The only epitaph we may inscribe is :

R e s t i n p e a c e a n d d o n ‘ t b e r e −b o r n ! I f o n t h e s a m e s u b j e c t −

m a t t e r t h e l e g i s l a t u r e c h o o s e s t o l e v y t a x twice over there is no inherent invalidity in the fiscal adventure save where other

prohibitions exist.

63. Goods and Services Tax imposed under the 2017 Acts as

n o t i c e d a b o v e a n d l e v y o f c e s s o n s u c h i n t r a −S t a t e s u p p l y o f

g o o d s a n d s e r v i c e s o r b o t h a s p r o v i d e d u n d e r S e c t i o n 9 o f t h e

CG S T A c t a n d s u c h s u p p l y o f g o o d s a n d s e r v i c e s o r b o t h a s p a r t

of S e c t i o n 5 o f I G S T A c t i s , t h u s , t w o s e p a r a t e i m p o s t s i n l a w

and are not prohibited by any law so as to declare it invalid.

6 4 . W e , t h u s , d o n o t f i n d a n y s u b s t a n c e i n t h e s u b m i s s i o n that levy of Compensation to States Cess on same taxable event is not permissible.

We, thus, answer Issue No.4 in the following manner: Levy of Compensation to States Cess is an increment to goods and services tax which is permissible in law. Issue No.5

6 5 . T h e l a s t s u b m i s s i o n o f t h e p e t i t i o n e r i s t h a t h e h a v i n g pa i d C l e a n E n e r g y C e s s t i l l 3 0 . 0 6 . 2 0 1 7 o n t h e s t o c k s o f c o a l , he is at least entitled to set off in payment of Compensation to States Cess. As noticed above Clean Energy Cess was imposed under the Finance Act, 2010. The Clean Energy Cess and the States Compensation Cess are collected for wholly different purposes. As per sub−section (3) of Section 83 of the Finance Act, 2010, the Clean Energy Cess was levied and collected for the purposes of financing and promoting clean energy initiatives, funding research in the area of clean energy or for any other purpose relating thereto whereas States Co m p e n s a t i o n C e s s i s c o l l e c t e d t o p r o v i d e f o r co m p e n s a t i o n t o t h e S t a t e s f o r t h e l o s s o f r e ve n ue a r is i ng o n account of implementation of the goods and services tax.

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Union Of India vs Mohit Mineral Pvt Ltd on 3 October, 2018

• T h e d i s t r i b u t i o n b e t w e e n t h e U n i o n a n d S t a t e s o f t h e C l e a n E n e r g y C e s s a n d G S T C o m p e n s a t i o n C e s s s o c o l l e c t e d a r e al s o d i f f e r e n t . U n d e r S e c t i o n 8 3 ( 6 ) o f t h e F i n a n c e A c t , 2 0 1 0 t h e C l e a n E n e r g y C e s s w a s t o b e u s e d f o r t h e p u r p o s e s o f t h e Union and not to be distributed to the States whereas States Compensation Cess has to be wholly distributed amongst the States to compensate the States.

• T h e p e t i t i o n e r ‘ s s u b m i s s i o n t h a t t h e p e t i t i o n e r s h o u l d b e g i v e n t h e c r e d i t t o t h e e x t e n t o f p a y m e n t o f C l e a n E n e r g y C e s s u p t o 3 0 . 0 6 . 2 0 1 7 a l s o c a n n o t b e a c c e p t e d . T h e C l e a n E n e r g y C e s s an d S t a t e s C o m p e n s a t i o n C e s s a r e e n t i r e l y d i f f e r e n t f r o m e a c h other, payment of Clean Energy Cess was for different purpose and has no bearing or connection with States Compensation Cess. Giving credit or set off in the payment is legislative policy which had to be reflected in the legislative scheme. Compensation to States Act, 2017 or Rules framed thereunder does not indicate giving of any credit or set off of the Clean Energy Cess already paid till 30.06.2017. Thus, claim of the petitioner that he is entitled for set off in payment of Compensation to States Cess to the extent he had already paid Clean Energy Cess cannot be accepted.

We, thus, answer Issue No.5 in the following manner: The petitioner is not entitled for any se t o f f o f p a y m e n t s m a d e t o w a r d s C l e a n E n e r g y C e s s i n p a y m e n t o f Compensations to States Cess.

68. In view of the foregoing discussions, we do not find any merit in the writ petition. The writ petition is dismissed. The transferred case is accordingly dismissed. Both the civil

appeals are allowed. Parties shall bear their own costs.

……………………..J.

( A.K. SIKRI ) ……………………..J.

( ASHOK BHUSHAN ) NEW DELHI, OCTOBER 03, 2018.

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