Bombay High Court Upholds Constitutional Validity Of Goa Cess Act

The Bombay High Court recently upheld the Goa Rural Improvement and Welfare Cess Act, 2000 (Goa Cess Act). The Act imposes cess on carriers transporting scheduled materials including coal, coke, sand, debris, garbage, packaged water, mineral ore etc. in Goa.A division bench of Justice GS Kulkarni and Justice BP Deshpande sitting at Goa appreciated the state government for enacting legislation to address environmental damage arising from transportation of harmful materials.“We thus appreciate the endeavour of the Government of Goa in its awakening at the right time albeit on the call of “we the people”, to have the enactment in question framed, as far as back in the year 2000 although implemented in the year 2006, so as to create a robust infrastructure to cater to the damage and ill-effects being created on the environment by mass transportation of the kind of materials as listed in the Schedule to the Goa Cess Act, as also to set up facilities in the interest of the health and welfare of persons living in rural areas”, the court stated.The court dismissed writ petitions filed by eight companies involved in transporting mineral ores into Goa from other states. The petitioners claimed that the Act and the Rules under it impose an unconstitutional cess and impede the free trade and movement of goods between states.The court highlighted the problem of dust pollution associated with material transportation, and the ongoing struggle of governments to effectively manage it. It referred to a recent order on Mumbai air pollution issuing directions to ensure metal sheets around construction sites, continuous water sprinkling, and prevention of construction debris transportation.The court accepted the state's argument that materials listed in the Act's schedule cause pollution and emphasized the state's responsibility to balance economic interests and development with the preservation of natural resources and environmental protection. It held that the state had legislative power to enact laws addressing adverse effects on health caused by human activities.Challenge under Articles 301, 303, and 304Petitioners argued that the Act violated Article 301 (freedom of trade, commerce and intercourse) by impeding the free movement of goods between states. They argued that the Act doesn't fall under the exceptions of Article 304(a) and Article 304(b) as it is not levied on goods produced in Goa, and the restrictions imposed are not reasonable and in public interest.The court noted that the Goa Cess Act is enacted to generate additional revenue for the improvement of infrastructure and health, aiming to promote the welfare of people in rural areas affected by materials such as plastics, garbage dumping, and spillage. Thus, the Act is related to entries 6 and 66 of the State List, covering public health and sanitation, and providing a pecuniary charge to meet public needs, the court said.The court deemed the cess on carriers transporting materials specified in Schedule I of the Act legitimate for addressing environmental concerns. As the cess is on carriers and not goods, the court opined that the Act does not impose any tax discriminating between the goods imported and goods manufactured in Goa. It also does not impose any restriction on the freedom of trade, commerce or intercourse within Goa, the court held.Challenge under Article 14Petitioners alleged discrimination, stating that the Act differentiated between locally mined ore (on which royalties were paid) and ore transported into Goa (on which no royalties were paid), as the latter is subjected to higher levy.The court rejected this claim, emphasizing that the classification was rational and based on intelligible differentia, addressing the environmental impact of transportation. It noted that the petitioners, who mine ores in Karnataka and transport it into Goa, used Goa's rural infrastructure for transportation, and the levy did not violate Article 14.The court further pointed out that fixation of rates of cess is within the domain of the rule making power of the authority and unless it is proved that the rates as fixed are unconscionable and/or are patently arbitrary, the court cannot the rates. Further, fixing of rates is a matter of expertise and it is completely within the powers of the rule making authority to fix the rates.Challenge Based on GST LawsPetitioners asserted that the Goa Cess Act was subsumed in the GST laws. The court refuted this, highlighting the distinct nature of the cess under the Goa Cess Act and its specific objectives related to rural welfare. The court rejected the argument that transportation under the Act constituted a supply under GST laws. The court pointed out that the GST Council did not recommend subsuming the Goa Cess Act into GST laws.ConclusionThe court concluded that the Act was aligned with societal needs, facilitating effective infrastructure development that would serve both commercial interests and the health and welfare of the ...

Bombay High Court Upholds Constitutional Validity Of Goa Cess Act

Amisha Shrivastava

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