The High Court of Bombay at Goa (“Court”)in its order dated 14 September, 2023 upheld the constitutional validity of the Goa Cess on Products and Substances Causing Pollution (Green Cess) Act, 2013 (“Goa Green Cess Act”or “Impugned Act”) and rejected arguments made by businesses that were handling coal, other potentially dangerous chemicals, and petroleum products in violation of the legislation.[1]
The constitutionality of the Goa Green Cess Act had been challenged by businesses including South West Port Limited, a subsidiary of Jindal South West, Vedanta Limited, Goa Carbon Limited and Zuari Agro Chemicals Limited (“Petitioners”).
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The Petitioners argued that “environment” and “environmental pollution” are the primary objectives of the law and the nature of this fee. They added that “environment” is a distinct area of law that isn’t listed on any of the three lists in the Seventh Schedule of the Constitution pertaining to the division of power between the Central and the State Government. The Petitioners argued that “environment” falls under the residuary entry and that only the Parliament of Indiahas the authority to legislate on the subject. Petitioners also contended that the State lacked the legislative authority to enact the Impugned Act and therefore it was ultra vires, unconstitutional and null and void.
The Court observed that the entries in the legislative lists are not sources of legislative authority, but rather are topics or legislative fields, and that the entries in the State list cannot be narrowly or pedantically interpreted. They must be interpreted liberally and generously.
The Court also observed that they found it difficult to accept the argument that the statute is not a legislation with regard to the entries in the Seventh Schedule pertaining to public health, sanitation, water, land and gas. The Green Cess Act was enacted to provide for the imposition and collection of cess on products and substances, including hazardous substances, whose handling, consumption, utilisation, combustion, movement, or transportation contribute to environmental pollution.
The Court noted that based on the preamble to the ImpugnedAct, it appears that the objective and purpose of the ImpugnedActis to increase the State’s revenue for carbon footprint reduction programmes and initiatives. The ImpugnedActprovides for the levy and collection of cess on the products and substances, including hazardous substances, which, upon their handling, consumption, utilisation, combustion, movement, or transportation, cause pollution in the State of Goa. This is being done in accordance with the “polluter-pays principle,” as well as the measures to reduce the carbon footprint left by such activities and matters related thereto.
The terms used in the Impugned Act pertain to areas such as public health, sanitation, water, land, and gas, especially since these terms must be interpreted broadly and not narrowly. The State promotes public health and sanitation by reducing carbon footprints or otherwise disincentivizing polluting activities. The Court also noted that the cess was mainly imposed on companies handling coal and chemicals such as naphtha used as a raw material to manufacture fertilisers. The contention that such measures benefit only the members of the public and not the Petitioners cannot be accepted. The responsibility for reducing the carbon footprint or combating the deleterious effects of such increase, is primarily on the Petitioners. Therefore, if the State imposes a cess or a fee upon the Petitioners for taking measures to reduce the carbon footprint or to deal with the deleterious effects of its increase, the Petitioners cannot say that they receive no benefits.
The Court rejected the Petitioners’ argument that despite the fact that their activities contribute to the rise in the carbon footprint, the measures taken by the State to prevent the increase of the carbon footprint or to combat the negative effects of such increase of the carbon footprint confer no particular benefit to the Petitioners. The Court observed that lower emissions and carbon footprintswould increase the acceptability of such activities and reduce the petitioners’ primary liability and obligation to take measures or resolve claims based on the polluter-pays principle.
The upholding of the Goa Green Cess Act may pave the way for more such legislations in other states in India thus ensuring that the companies work towards reducing their emissions and thus their carbon footprints. The development may also facilitate collective action by Indian companies, not just in Goa but also outside to work towards their sustainable goals and help India in achieving its net zero target. Needless to mention, such legislations may also be challenged by companies in courts and may face resistance from industry bodies as it might be seen as an additional financial burden by many companies.
Footnote
[1] South Port Limited vs State of Goa and connected matters, Writ Petition No.475 of 2014 & Ors.
This article was originally published in Mondaq on 6 October 2023 Co-written by: Nawneet Vibhaw, Partner; Saurabh Sharma, Associate. Click here for original article
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Contributed by: Nawneet Vibhaw, Partner; Saurabh Sharma, Associate
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