JSW Energy moves SC challenging Goa's Green Cess Act, cites legislative incompetence of state

JSW Energy on Monday moved the Supreme Court challenging the legislative competence of the Goa state legislature to enact the Green Cess Act and the Green Cess Rules that impose liability on it for payment of the Green Cess.

Alleging that Section 4 of the Green Cess is “manifestly arbitrary,” JSW Energy has predominantly raised the issue whether ‘environment’ can fall within the legislative competence of the State.

A Bench led by Justice BV Nagarathna refused to entertain the appeal in the present form, but asked the company to move a writ petition within a week under Article 32 challenging the validity of the Goa cess laws and the assessment notices issued to it under the Act. The apex court also directed that no coercive action shall be taken against JSW Energy on assessment notice issued by the state for three weeks.

Challenging the constitutional validity of the Goa Cess on Products and Substances Causing Pollution (Green Cess) Act, 2013, and the Goa Cess on Products and Substances Causing Pollution (Green Cess) (Functions and Duties of the Competent Authority, Assessment, Levy and Collection of Cess) Rules, 2014, JSW Energy cited the SC judgment in the case, Reliance Industries vs Gujarat, JSW Energy to that held that ‘environment’ does not fall within the State’s legislative competence and an environment-centric levy by a State cannot relate to ‘public health’ in Entry 6 of List II of the Seventh Schedule to the Constitution.

Senior counsel NK Kaul and counsel Ninad Laud, appearing for JSW Energy, argued that the assessment notices issued to it were similar to those previously issued to its other group companies - JSW Steel and South West Port (SWPL) inasmuch as they seek to impose liability for the payment of the green cess regarding the same consignment. The green cess on them cannot be levied twice over on the same consignment of products or substances. They further argued that the apex court had already stayed the assessment notice against its group firms.

The company undertakes similar transactions with SWPL as JSW Steel does, and imports coal through Mormugoa Port, where it is handled by SWPL, the appeal said, adding that similar to JSW Steel, JSW Energy is an importer and SWPL acts as its cargo handler. Therefore, the petitioner (JSW Energy) is similarly placed as JSW Steel, which is its group company. …the State has already issued assessment notices to its group companies – SWPL and JSW Steel. The petitioner has also been issued similar assessment notices. Consequently, the petitioner would be saddled with an unwarranted liability to pay the levy under the impugned Green Cess Act, despite the fact that validity of the Green Cess itself is pending consideration before the SC,” the appeal filed by Trilegal, a law firm, stated.

The Bombay High Court had in September 2023 dismissed a petition by SWPL challenging the state government's levy of cess. Various appeals, including one filed by SWPL, JSW Steel and others are pending before the SC against the assessment notices issued to them.

The HC had held that Parliament lacked the legislative competence to legislate on ‘environment’ and ‘environmental pollution’ under its residuary powers provided in Entry 97 of List I of the Seventh Schedule or Article 248 of the Constitution and its power to legislate on these subjects, even for implementing an international treaty or convention under Article 253 of the Constitution, does not divest states of their legislative competence to enact laws on the same subject.

This approach disregards the essence of the substantial connection test of the ‘pith and substance’ doctrine can lead to divergent approaches and standards being applied by different states in regulating ‘environment,’ JSW Energy stated.