J&K High Court strikes down water tax on hydel projects, quashes notices to firms

The High Court of Jammu & Kashmir and Ladakh has ruled that the government is unable to impose a tax on water usage for hydropower generation in the Union Territory. The court struck down sections of the Jammu and Kashmir Water Resources (Regulation and Management) Act, 2010, arguing that the legislation exceeded the legislative authority of the former State of J&K.

Consequently, the provisions of the Act are deemed void and unenforceable. The court dismissed demand notices issued to three firms - Mass N Ergy Private Limited, Magpie Hydel Construction Operation Industries, and Choudhary Power Projects Private Limited. The division bench of Justices Rajnesh Oswal and Sanjay Dhar had earlier reserved judgment after reviewing a writ petition challenging the Act and the rules passed by the J&K legislature.

The petitioners contended that the legislation sought to levy charges on water usage for electricity generation, which surpassed the State Legislature's authority. The court emphasized that water usage and electricity generation are intrinsically linked, concluding that the Act's provisions essentially taxed electricity generation rather than the use of water.

The court clarified that Entry 17 of List-II in the Indian Constitution, which pertains to water, does not grant the State the power to impose taxes on water.