2026-VIL-431-UTR
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VAT High Court Cases

The Uttarakhand Water Tax on Electricity Generation Act, 2012 - Competence of State Legislature to impose Tax on Electricity Generation – Challenge to the Constitutional validity and vires of "The Uttarakhand Water Tax on Electricity Generation Act, 2012" imposing a tax on the drawal of water for generation of electricity - Whether the State Legislature has the legislative competence to enact the Act which, in pith and substance, imposes a tax on the generation of electricity – HELD - The nature of the tax imposed by the Act is a tax on the generation of electricity, and not a tax on the drawal or use of water for electricity generation. Taxation is a distinct matter and there is a clear distinction between general subjects of legislation and taxation. The power to tax cannot be deduced from a general legislative entry as an ancillary power. The State Legislature does not have the power to levy a tax on the generation of electricity as there is no entry in List II of the Seventh Schedule which empowers the State Legislature to do so. The delegation of power to the State Government to fix the rates of tax under the Act without any guidelines is excessive delegation and, therefore, the Act is ultra vires the Constitution – The Uttarakhand Water Tax on Electricity Generation Act, 2012 is ultra vires the Constitution and struck down - The reference is answered accordingly - Excessive Delegation - The appellants also challenged the Act on the ground that it involves excessive delegation of power to the State Government to fix the rates of the water tax. The Court agreed with the conclusion of brother Ravindra Maithani, J. that Section 17 of the Act, which empowers the State Government to fix the rates of the water tax, makes excessive delegation of power without any policy guidelines, and is therefore, bad in law - Doctrine of Promissory Estoppel - The appellants contended that the State is promissorily estopped from levying the water tax in the light of the respective agreements entered into with the State. The Court held that there can be no promissory estoppel against the legislature in the exercise of its legislative functions, and the competence and power of the State Legislature to enact legislation, including for the purpose of taxation, cannot be interdicted on the plea of promissory estoppel.
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