In a setback to the Jammu and Kashmir government, the High Court of Jammu and Kashmir and Ladakh has struck down the levy of water usage charges on hydropower projects. It ruled that the charges were in effect a tax on electricity generation, a subject beyond the legislative powers of the erstwhile J&K State Legislature.
“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,” the Bench said.
The case at a glance
| Item | Detail |
| Court | High Court of Jammu and Kashmir and Ladakh, Division Bench |
| Petitions | 3 writ petitions, all allowed |
| Petitioners | 11 companies allotted independent and small hydropower projects |
| Named petitioners | M/s Mass N Energy Pvt. Ltd.; M/s Magpie Hydel Construction Operation Industries Pvt. Ltd.; M/s Choudhary Power Projects Pvt. Ltd. |
| Law challenged | J&K Water Resources (Regulation and Management) Act, 2010, and its 2011 Rules |
| Provisions used for demands | Sections 120, 130 and 145(1)(d) of the 2010 Act |
| Demands | Water usage charges dating back to 2010 |
| Key precedent | M.P. Cements Manufacturers Association v. State of Madhya Pradesh (Supreme Court) |
| Result | Levy on hydropower struck down as ultra vires; demand notices quashed |
Who argued what
The Union government sided with the petitioners on the central constitutional issue; only the UT government defended the levy.
| Party | Position | Court’s response |
| Hydropower companies (petitioners) | The state legislature had no power to tax electricity generation; relied on the Union’s stand that it could not be done under the label of water usage charges | Accepted |
| UT of Jammu and Kashmir | Entry 17 of the State List lets it regulate the storage and use of water, so the levy is valid | Rejected: regulatory power over water does not include taxing generation |
| UT of Jammu and Kashmir | Adoption under the J&K Reorganisation Act, 2019 gave the law parliamentary legitimacy | Rejected as misconceived: adoption did not make it an Act of Parliament or cure the original defect |
| Union government | The erstwhile state legislature could not impose a tax on electricity generation | Accepted |
“The J&K Reorganization Act would not save the impugned legislation once it is shown that it was beyond the competence of State Legislature at the time it was enacted,” the Bench observed.
What the court ordered
- The 2010 Act, to the extent it imposes water usage charges on the petitioners, is ultra vires the Constitution and struck down.
- The demand notices issued against the companies are quashed.
- The government is restrained from taxing electricity generation, whether as water usage charges or through any other levy.
The ruling holds that the government cannot use its regulatory powers over water to impose a tax outside its legislative jurisdiction.
