# UNION OF INDIA & ANR v. MOHIT MINERAL PVT. LTD

- **Citation:** [2018] 13 S.C.R. 139
- **Court:** Supreme Court of India
- **Decided:** 2018-10-03
- **Case number:** Civil Appeal No. 10177 of 2018
- **Bench:** A. K. Sikri, Ashok Bhushan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-anr-v-mohit-mineral-pvt-ltd-32451
- **Pages:** 37

## Headnote

Goods and Services Tax (Compensation to States) Act, 2017:
Validity of - Held: Is constitutionally valid - Article 270
empowers Parliament to levy any cess by law and s. 18 of the
Constitution (One Hundred and First Amendment) Act, 2016
expressly empowers Parliament shall, by law on the recommendation
of the Goods and Services Tax Council, provide for compensation
to the states for loss of revenue arising on account of implementation
of the goods and services tax and expression law used therein is of
wide import which includes levy of any cess for the above purpose
- Thus, the 2017 Act is not beyond the legislative competence of the
Parliament - Furthermore, the objectives in statements of objects
and reasons of Constitution (One Hundred and First Amendment)
Bill, 2014 was conferring concurrent taxing powers upon Parliament
and the State Legislature to make laws for levying goods and services
tax - Article 246A(1) empowers the Parliament to make laws with
respect to goods and services tax - Power to make law is not general
power related to a general entry rather it specifically relates to
goods and services tax - When express power is there to make law
regarding goods and services tax, it cannot be comprehended that
how such power shall not include power to levy cess on goods and
services tax - Thus, the 2017 Act does not violate Constitution (One
Hundred and First Amendment) Act, 2016 nor is against the objective
of Constitution (One Hundred and First Amendment) Act, 2016 -
2017 Act is not a colourable legislation - Goods and Services Tax
Compensation Cess Rules, 2017 - Constitution of India.
Levy of Compensation to States Cess and GST on the same
taxing event - Permissibility of - Held: Two taxes/imposts which
are separate and distinct imposts and on two different aspects of a
transaction are permissible as in law there is no overlapping - Goods
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[2018] 13 S.C.R. 139
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[2018] 13 S.C.R.
and Services Tax imposed under the 2017 Act and levy of cess on
such intra-State supply of goods and services or both as provided
under the Act and such supply of goods and services or both as
part of the Act are two separate imposts in law and are not prohibited
by any law so as to declare it invalid - Thus, it cannot be said that
levy of Compensation to States Cess on same taxable event is not
permissible - Levy of compensation to States Cess is an increment
to goods and services tax which is permissible in law.
Clean Energy Cess paid by the petitioner on the stocks of
coal till 30.06.2017 - Entitlement to set off the same in payment of
Compensation to States Cess - Held: Clean Energy Cess and the
States Compensation Cess are collected for wholly different purposes
- Clean Energy Cess was levied and collected for the purposes of
financing and promoting clean energy initiatives, funding research
in the area of clean energy whereas States Compensation Cess is
collected to provide for compensation to the States for the loss of
revenue arising on account of implementation of the goods and
services tax - Giving credit or set off in the payment is legislative
policy which had to be reflected in the legislative scheme -
Compensation to States Act, 2017 or Rules framed thereunder does
not indicate giving of any credit or set off of the Clean Energy Cess
already paid till 30.06.2017 - Thus, the petitioner not entitled for
set off in payment of Compensation to States Cess to the extent he
had already paid Clean Energy Cess.
Allowing the appeals and dismissing the transferred cases,
the Court
HELD:
Whether the Compensation to States Act, 2017 is beyond the
legislative competence of Parliament?
1.1 Article 246A provides that "notwithstanding anything
contained in Articles 246 and 254, Parliament, and, subject to
clause(2), the Legislature of every State, have power to make
laws with respect to goods and services tax imposed by the Union
or by such State". In the instant case, the concern is with a cess
impos

## Text

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UNION OF INDIA & ANR.
v.
MOHIT MINERAL PVT. LTD.
(Civil Appeal No. 10177 of 2018)
OCTOBER 03, 2018
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
Goods and Services Tax (Compensation to States) Act, 2017:
Validity of - Held: Is constitutionally valid - Article 270
empowers Parliament to levy any cess by law and s. 18 of the
Constitution (One Hundred and First Amendment) Act, 2016
expressly empowers Parliament shall, by law on the recommendation
of the Goods and Services Tax Council, provide for compensation
to the states for loss of revenue arising on account of implementation
of the goods and services tax and expression law used therein is of
wide import which includes levy of any cess for the above purpose
- Thus, the 2017 Act is not beyond the legislative competence of the
Parliament - Furthermore, the objectives in statements of objects
and reasons of Constitution (One Hundred and First Amendment)
Bill, 2014 was conferring concurrent taxing powers upon Parliament
and the State Legislature to make laws for levying goods and services
tax - Article 246A(1) empowers the Parliament to make laws with
respect to goods and services tax - Power to make law is not general
power related to a general entry rather it specifically relates to
goods and services tax - When express power is there to make law
regarding goods and services tax, it cannot be comprehended that
how such power shall not include power to levy cess on goods and
services tax - Thus, the 2017 Act does not violate Constitution (One
Hundred and First Amendment) Act, 2016 nor is against the objective
of Constitution (One Hundred and First Amendment) Act, 2016 -
2017 Act is not a colourable legislation - Goods and Services Tax
Compensation Cess Rules, 2017 - Constitution of India.
Levy of Compensation to States Cess and GST on the same
taxing event - Permissibility of - Held: Two taxes/imposts which
are separate and distinct imposts and on two different aspects of a
transaction are permissible as in law there is no overlapping - Goods
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[2018] 13 S.C.R. 139
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[2018] 13 S.C.R.
and Services Tax imposed under the 2017 Act and levy of cess on
such intra-State supply of goods and services or both as provided
under the Act and such supply of goods and services or both as
part of the Act are two separate imposts in law and are not prohibited
by any law so as to declare it invalid - Thus, it cannot be said that
levy of Compensation to States Cess on same taxable event is not
permissible - Levy of compensation to States Cess is an increment
to goods and services tax which is permissible in law.
Clean Energy Cess paid by the petitioner on the stocks of
coal till 30.06.2017 - Entitlement to set off the same in payment of
Compensation to States Cess - Held: Clean Energy Cess and the
States Compensation Cess are collected for wholly different purposes
- Clean Energy Cess was levied and collected for the purposes of
financing and promoting clean energy initiatives, funding research
in the area of clean energy whereas States Compensation Cess is
collected to provide for compensation to the States for the loss of
revenue arising on account of implementation of the goods and
services tax - Giving credit or set off in the payment is legislative
policy which had to be reflected in the legislative scheme -
Compensation to States Act, 2017 or Rules framed thereunder does
not indicate giving of any credit or set off of the Clean Energy Cess
already paid till 30.06.2017 - Thus, the petitioner not entitled for
set off in payment of Compensation to States Cess to the extent he
had already paid Clean Energy Cess.
Allowing the appeals and dismissing the transferred cases,
the Court
HELD:
Whether the Compensation to States Act, 2017 is beyond the
legislative competence of Parliament?
1.1 Article 246A provides that "notwithstanding anything
contained in Articles 246 and 254, Parliament, and, subject to
clause(2), the Legislature of every State, have power to make
laws with respect to goods and services tax imposed by the Union
or by such State". In the instant case, the concern is with a cess
imposed by Compensation to States Act, 2017. The Act by Section
8 levies and authorizes collection of cess. [Para 35][161-A-B]
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Shinde Brothers Etc. v. Deputy Commissioner, Raichur
& Others Etc. AIR 1967 SC 1512 : [1967] SCR 548;
India Cement Ltd. & Others v. State of Tamil Nadu &
Others (1990) 1 SCC 12 : [1989] 1 Suppl. SCR 692;
Vijayalashmi Rice Mill & Others v. Commercial Tax
Officers, Palakol & Others (2006) 6 SCC 763 : [2006]
4 Suppl. SCR 279 - referred to.
Black's Law Dictionary, Tenth Edn; Advanced Law
Lexicon by P. Ramanatha Aiyar 3rd Edn - referred to.
1.2 The expression "cess" means a tax levied for some
special purpose, which may be levied as an increment to an
existing tax. The Scheme of Compensation to States Act, 2017
indicate that the cess is with respect to goods and services tax.
There are more than one reason to uphold the legislative
competence of Parliament to enact the Compensation to States
Act, 2017. [Para 40][163-C]
1.3 In context of impugned legislation, Compensation to
States Act, 2017, no entry is found in List II or List III of Seventh
Schedule, which may refer to levying of cess in question. Article
248 read with Articles 246 and 246A clearly indicate that residuary
power of legislation is with the Parliament. In the instant case,
no contention has been raised that the subject matter of legislation
was within the competence of State Legislature, and that the
Parliament had no competence to legislate. Applying the H.S.
Dhillon's test no lack of legislative competence is found in the
Parliament. [Para 41][164-B-C]
Union of India v. Harbhajan Singh Dhillon (1971) 2
SCC 779 - followed.
Hoechst Pharmaceuticals Ltd. & Others v. State of Bihar
& Others (1983) 4 SCC 45; M.P.V. Sundararamier &
Co. v. State of A.P. & Others AIR 1958 SC 468 : [1983]
3 SCR 130 - held inapplicable.
1.4 The present is a case where cess in question is levied
in respect of goods and services tax, the definition of cess as
given in Compensation to States Act, 2017 in Section 2(c) states
"cess means the goods and services tax compensation cess levied
under section 8". [Para 44][166-H; 167-A]
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD.
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1.5 Article 270 of the Constitution, both as it existed prior
to Constitution (One Hundred and First Amendment) Act, 2016
and subsequent to Constitution (One Hundred and First
Amendment) Act, 2016 uses the expression "any cess levied for
specific purposes under any law made by Parliament". After
Constitution (One Hundred and First Amendment) Act, 2016, as
per Article 270, Parliament can levy cess for a specific purpose
under a law made by it. Article 270, thus, specifically empowers
Parliament to levy any cess by law. Lastly, Section 18 of the
Constitution (One Hundred and First Amendment) Act, 2016
expressly empowers Parliament shall, "by law" on the
recommendation of the Goods and Services Tax Council, provide
for compensation to the states for loss of revenue arising on
account of implementation of the goods and services tax...." When
Constitution provision empowers the Parliament to provide for
Compensation to the States for loss of revenue by law, the
expression "law" used therein is of wide import which includes
levy of any cess for the above purpose. There is no merit in the
submission that Parliament has no legislative competence to enact
the Compensation to States Act, 2017. Thus, the Compensation
to States Act, 2017 is not beyond the legislative competence of
the Parliament. [Para 46, 47][167-C-D]
Whether Compensation to States Act, 2017 violates Constitution
(One Hundred and First Amendment) Act, 2016 and is against
the objective of Constitution (One Hundred and First
Amendment) Act, 2016 and Whether the Compensation to States
Act, 2017 is a colourable legislation?
2.1 One of the objectives in Statements of Objects and
Reasons was "conferring concurrent taxing powers upon
Parliament and the State Legislature to make laws for levying
goods and services tax". Article 246A sub- article(1) empowers
the Parliament to "make laws with respect to goods and
services tax". The word "with respect to" is word of expansion.
[Para 50][168-F-G]
M/s. Doypack Systems Pvt. Ltd. v. Union of India &
Others (1988) 2 SCC 299 : [1988] 2 SCR 962; Dewan
Chand Builders and Contractors v. Union of India and
Others (2012) 1 SCC 101 : [2011] 13 SCR 214;
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Commissioner, Hindu Religious Endowments, Madras
v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt
AIR 1954 SC 282 : [1954] SCR 1005 - held
inapplicable.
2.2 The expression used in Article 246A is "power to make
laws with respect to goods and services tax". The power to make
law, thus, is not general power related to a general entry rather it
specifically relates to goods and services tax. When express
power is there to make law regarding goods and services tax, it
cannot be comprehended that how such power shall not include
power to levy cess on goods and services tax. The Constitution
(One Hundred and First Amendment) Act, 2016 was passed to
subsume various taxes, surcharges and cesses into one tax but
the constitutional provision does not indicate that henceforth no
surcharge or cess shall be levied. [Para 55][171-A-B]
2.3 Additional tax, which was contemplated by Clause 18 of
the Constitution (One Hundred and Twenty Second Amendment)
Bill, 2014 did not find place in Constitution Amendment Act.
Further, Clause 19 of the Bill find place as Section 18 of the
Constitution (One Hundred and First Amendment) Act, 2016.
Thus, power of Parliament to make law providing for
compensation to the States for loss of revenue was expressly
included by constitutional provision. Further, the Preamble of
Compensation to States Act, 2017 expressly mentions the Act to
provide for compensation to the States for the loss of revenue
arising on account of implementation of the goods and services
Tax in pursuance of the provisions of the Constitution (One
Hundred and First Amendment) Act, 2016. Thus, the
Compensation to States Act, 2017 has been enacted under the
express Constitution (One Hundred and First Amendment) Act,
2016. Thus, there is no force in the submission that
Compensation to States Act, 2017 transgresses the Constitution
(One Hundred and First Amendment) Act, 2016. [Para 56, 57]
[171-D-F, H; 172-A]
2.4 Having held that Parliament has full legislative
competence to enact the Act and the Act having been enacted to
implement the Constitution (One Hundred and First Amendment)
Act and the object being clearly to fulfill the Constitution (One
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Hundred and First Amendment) Act's objective, the submission
of the petitioner that Compensation to States Act, 2017 is a
colourable legislation is rejected. The Compensation to States
Act, 2017 does not violate Constitution (One Hundred and
First Amendment) Act, 2016 nor is against the objective of
Constitution (One Hundred and First Amendment) Act, 2016.
[Para 58][172-B-D]
Whether levy of Compensation to States Cess and GST on the
same taxing event is permissible in law?
3.1 Two taxes/imposts which are separate and distinct
imposts and on two different aspects of a transaction are
permissible as "in law there is no overlapping". [Para 60][172H]
Federation of Hotel & Restaurant Associate of India,
Etc. v. Union of India and others (1989) 3 SCC 634 :
[1989] 2 SCR 918 ; Avinder Singh and others v. State
of Pubjab and others (1979) 1 SCC 137 : [1979] 1
SCR 845 - referred to.
3.2 Goods and Services Tax imposed under the 2017 Acts
and levy of cess on such intra-State supply of goods and services
or both as provided under Section 9 of the CGST Act and such
supply of goods and services or both as part of Section 5 of CGST
Act is, thus, two separate imposts in law and are not prohibited
by any law so as to declare it invalid. Thus, it cannot be said that
levy of Compensation to States Cess on same taxable event is
not permissible. Levy of compensation to States Cess is an
increment to goods and services tax which is permissible in law.
[Para 63-64][174-D-F]
Whether on the basis of Clean Energy Cess paid by the petitioner
till 30.06. 2017, the petitioner is entitled for set off in payment of
Compensation to States Cess?
4.1 The Clean Energy Cess and the States Compensation
Cess are collected for wholly different purposes. As per subsection (3) of Section 83 of the Finance Act, 2010, the Clean
Energy Cess was levied and collected for the purposes of financing
and promoting clean energy initiatives, funding research in the
area of clean energy or for any other purpose relating thereto
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whereas States Compensation Cess is collected to "provide for
compensation to the States for the loss of revenue arising on
account of implementation of the goods and services tax". The
distribution between the Union and States of the Clean Energy
Cess and GST Compensation Cess so collected are also different.
Under Section 83(6) the Clean Energy Cess was to be used for
the purposes of the Union and not to be distributed to the States
whereas States Compensation Cess has to be wholly distributed
amongst the States to compensate the States. [Para 65-66]
[174-G-H; 175-A-B]
4.2 The petitioner's submission that the petitioner should
be given the credit to the extent of payment of Clean Energy
Cess upto 30.06.2017 cannot be accepted. The Clean Energy
Cess and States Compensation Cess are entirely different from
each other, payment of Clean Energy Cess was for different
purpose and has no bearing or connection with States
Compensation Cess. Giving credit or set off in the payment is
legislative policy which had to be reflected in the legislative
scheme. Compensation to States Act, 2017 or Rules framed
thereunder does not indicate giving of any credit or set off of the
Clean Energy Cess already paid till 30.06.2017. Thus, the
petitioner is not entitled for set off in payment of Compensation
to States Cess to the extent he had already paid Clean Energy
Cess. [Para 67][175-C-E]
Case Law Reference
[1967] SCR 548
referred to
Para 37
[1989] 1 Suppl. SCR 692
referred to
Para 38
[2006] 4 Suppl. SCR 279
referred to
Para 39
(1971) 2 SCC 779
followed
Para 41
(1983) 4 SCC 45
held inapplicable
Para 45
[1983] 3 SCR 130
held inapplicable
Para 45
[1988] 2 SCR 962
referred to.
Para 50
[2011] 13 SCR 214
referred to.
Para 51
[1954] SCR 1005
referred to
Para 52
[1989] 2 SCR 918
referred to
Para 61
[1979] 1 SCR 845
referred to
Para 62
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD.
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10177
of 2018
From the Judgment and Order dated 25.08.2017 of the High Court
of Delhi at New Delhi in Writ Petition No. 7459 of 2017
WITH
T.C. (C) No. 9/2018, Civil Appeal No. 10179/2018.
K. K. Venugopal, AG, Ms. Nisha Bagchi, B. Krishna Prasad,
J. K. Mittal, Rajveer Singh, Praveen Swarup, M/S. Khaitan & Co., Advs.
for the appearing parties.
The Judgment of the Court was delivered by
ASHOK BHUSHAN, J. 1. Leave granted.
2. The validity of the Goods and Services Tax (Compensation to
States) Act, 2017 enacted by Parliament as well as the Goods and
Services Tax Compensation Cess Rules, 2017, the Rules framed by the
Central Government in exercise of power under Section 11 of the Goods
and Service Tax (Compensation to States) Act, 2017 are under challenge
in these cases.
3. Civil Appeal arising out of SLP(C)No.25415 of 2017 has been
filed by the Union of India challenging ad interim order dated 25.08.2017
passed by the Division Bench of the Delhi High Court in Writ Petition
(C) No.7459 of 2017 (Mohit Mineral Pvt. Ltd. vs. Union of India and
another). In the writ petition validity of the Goods and Services Tax
(Compensation to States) Act, 2017 as well as Rules framed thereunder
were under challenge. The Division Bench passed a partial ad interim
order providing that additional levy on the stocks of coal on which writ
petitioner had already paid Clean Energy Cess in terms of Finance Act,
2010, he shall not be required to make any further payment. However,
on stocks of coal on which no Clean Energy Cess under the Finance
Act, 2010 was paid any payment in terms of the impugned Act would be
subject to the result of the writ petition.
4. This Court issued notice in the SLP on 22.09.2017 and stayed
impugned order passed by the High Court.
5. Civil Appeal arising out of SLP(C)No.7708 of 2018 has been
filed by Union of India challenging interim order dated 08.09.2017 passed
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by the Division Bench of the Delhi High Court in Writ Petition (C) No.7965
of 2017 (Hind Energy and Coal Benefication (India) Ltd. vs. Union of
India and another). The Division Bench of the High Court passed interim
order dated 08.09.2017 almost in the similar manner as was passed on
25.08.2017. This Court passed an order on 16.01.2018, while hearing
SLP(C)No.25415 of 2017 filed against interim order dated 25.08.2017,
on oral request of Attorney General, which was also joined by the learned
counsel appearing for the respondents-writ petitioners, transferred Writ
Petition (C) No.7459 of 2017 to this Court to be heard along with
SLP(C)No.25415 of 2017. Transferred Case(C) No.9 of 2018 (Mohit
Mineral Pvt. Ltd. vs. Union of India and another) has been registered on
transfer of Writ Petition (C)No.7459 of 2017 to this Court.
6. The decision in Transferred Case (C)No.9 of 2018 by which
Writ Petition (C)No.7459 of 2018 is to be heard by this Court shall dispose
of the transferred writ petition as well as both the civil appeals. With the
consent of the learned counsel for the parties, we have proceeded to
hear the writ petition finally.
Facts in the Writ Petition (C) No.7459 of 2017
7. Mohit Mineral Pvt. Ltd. (hereinafter referred to as the 'writ
petitioner') is a Company incorporated under the Companies Act which
is a trader of imported and Indian coal. The writ petitioner imports coal
from Indonesia, South Africa and also purchases coal from Indian mines.
The Finance Act, 2010 with effect from 01.07.2010 levied Clean Energy
Cess which was in the nature of a duty of excise on the production of
coal and was being collected at the time of removal of raw coal, raw
lignite and raw peat from the mine to the factory. The Constitution (One
Hundred and Twenty-Second Amendment) Bill, 2014 was introduced in
the Lok Sabha to seek amendment in the Constitution, inter alia, providing
for subsuming of various indirect taxes and Central and States surcharges
and cesses so far as they relate to supply of goods and services both on
inter-State and intra-State. The Constitution (One Hundred and First
Amendment) Act, 2016 was passed to levy goods and services tax.
Section 18 of the Amendment Act enabled the Parliament to levy a cess
for five years to compensate the States for the loss of revenue on account
of GST. On 12.04.2017, Parliament enacted three Acts, namely, (1) The
Central Goods and Services Tax Act, 2017; (2) The Integrated Goods
and Services Tax Act, 2017; and (3) The Goods and Services Tax
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD.
[ASHOK BHUSHAN, J.]
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(Compensation to States) Act, 2017 (hereinafter referred to as
"Compensation to States Act, 2017"). On 04.05.2017, the axation Laws
(Amendment) Act, 2017 was enacted, whereunder, several cesses
including Clean Energy Cess was repealed. The writ petitioner submitted
a representation to the GST Council seeking set off of Clean Energy
Cess against GST Compensation Cess. Writ Petition (C) No.7459 of
2017 was filed by Mohit Minerals Pvt. Ltd. in Delhi High Court praying
for following reliefs:
"It is therefore, most respectfully prayed that this Hon'ble High
Court be pleased to:
A) issue a Writ of certiorari/mandamus or any other appropriate
Writ/order/direction against the Respondents by quashing
impugned Goods and Services Tax (Compensation to States) Act,
2017 by declaring that same lack legislative competency and
unconstitutional;
B) issue a Writ of certiorari/mandamus or any other appropriate
Writ/order/direction against the Respondents by quashing
impugned the Goods and Services Tax Compensation Rules, 2017
under the impugned legislation are illegal and unconstitutional;
C) issue a Writ of certiorari/mandamus or any other appropriate
Writ/order/direction against the Respondents by quashing
impugned Notification No.1/2017 & 2/2017-Compensation Cess
(Rate), dated 28.06.2017 issued by the Respondent No.1 under
the impugned legislation, are illegal and unconstitutional;
D) issue a Writ of certiorari/mandamus or any other appropriate
Writ/order/direction against the Respondent No.2 by declaring that
the Respondent No.2 has no power under Article 279A of
Constitution of India to make any recommendation, whatsoever,
for levy and collection of cess as envisaged and levied under the
impugned Goods and Services Tax (Compensation to States)Act,
2017 or framing of Rules and issuance of Notification under the
said impugned legislation;
E) issue such other writ/order/direction to the Respondent No.2
to place before this Hon'ble Court the records of the
recommendation given and all decision taken in respect of levy
and collection of cess as envisaged and levied under the impugned
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Goods and Services Tax (Compensation to States) Act, 2017,
framing of Rules and issuance of Notification under the said
impugned legislation;
F) issue such other writ/order/direction and further orders as the
Hon'ble Court may deem just and proper in the facts and
circumstances of the case."
8. The Division Bench of the Delhi High Court passed ad interim
order on 25.08.2017. In the interim order dated 25.08.2017, the Division
Bench observed that there is a prima facie case made out by the writ
petitioner regarding lack of legislative competence of Parliament to enact
Compensation to States Act, 2017. In paragraphs 8, 9, 13 and 14 of the
interim order following was observed:
"8. The Court sees prima facie merit in the contention of the
Petitioner, based on the history of the abolition of the Clean Energy
Cess and the introduction of the GST regime, that the power of
Parliament to enact the impugned Act cannot be traced to Section
18 of the COI 101st Amendment Act. There is therefore a prima
facie case made out as regards the legislative competence of the
Parliament to enact the impugned Act.
9. Another aspect of the matter is that Section 8 of the impugned
Act contemplates levy of "a cess on such intra-State supplies of
goods or services or both", the same that is provided in Section 9
of the Central Goods and Services Tax Act, 2017 ('CGST Act')
and such "inter-State supply of goods and services or both" as
provided for in Section 5 of the Integrated Goods and Services
Tax Act, 2017 ('IGST Act'). Therefore, it is clear that cess is
being levied on the same taxable event that is the subject matter
of the levy under the CGST and IGST Acts, viz., supply of goods
and services.
... ... ... ...
13. The Court, at this stage, is of the view that, the Petitioner has
made out a prima facie case for partial ad interim relief subject to
conditions. As far as the additional levy on the stocks of coal on
which it has already paid the Clean Energy Cess in terms of FA
Act, 2010, the Petitioner should not be required to make any further
payment. However, on stocks of coal on which no Clean Energy
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD.
[ASHOK BHUSHAN, J.]
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Cess under the FA, 2010 was paid, any payment made in terms of
the impugned Act would be subject to the result of this petition. It
is ordered accordingly.
14. It is made clear that, in the event of the Petitioner succeeding
in the present petition, the Petitioner would be entitled to a refund
of amounts of Clean Energy Cess paid under the Act and on such
terms as the Court may determine in the final order."
9. On 08.09.2017, another interim order was passed in Writ Petition
(C) No. 7965 of 2017.
10. We have heard Shri J.K. Mittal, learned counsel appearing
for the writ petitioner and Shri K.K. Venugopal learned Attorney General
appearing for the Union of India.
11. Shri J.K. Mittal learned counsel for the writ petitioner submits
that the Constitution (One Hundred and First Amendment) Act, 2016
was enacted by the Parliament with the intent to consolidate number of
indirect taxes which were levied by the Union and States with the intention
to reduce the Goods and Services Tax (GST)by giving concurring taxing
power to Union and States for levying GST on every transaction of
supply of goods or services both. There was a clear objective of the
aforesaid constitutional amendment that with the introduction of Goods
and Services Tax, not only the indirect taxes but the cesses and surcharges
levied on goods and services shall also be subsumed in it.
12. By Taxation Laws (Amendment) Act, 2017 various
enactments levying various types of cesses were repealed including Clean
Energy Cess/Clean Environment Cess which was levied and collected
on coal.
13. The Compensation to States Act, 2017 is repugnant to and
transgress the mandate of the Constitution (One Hundred and First
Amendment) Act, 2016. It was the Parliament's conscious decision to
abolish with effect from 01.07.2017 all cesses including cess levied on
coal as per mandate of the Constitution (One Hundred and First
Amendment) Act, 2016. The impugned legislation is colourable legislation
which lacks legislative competence. No power could be traced in Section
18 to the Constitution (One Hundred and First Amendment) Act, 2016 to
amend Compensation to States Act, 2017. Section 18 of the Constitution
(One Hundred and First Amendment) Act, 2016 does not empower the
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Parliament to levy cess and tax as it provides Parliament to make any
law to provide compensation to the States for loss of revenue arising on
account of implementation of GST for a period of 5 years. The impugned
legislation is a colourable legislation which lacks legislative competence
so far as collection of levy on cess is concerned.
14. The impugned legislation defeat the very objective of the
Constitution (One Hundred and First Amendment) Act, 2016. On the
very same transaction there cannot be two levies, one under Central
GST Act and another under impugned legislation as it would amount to
double taxation as levied on the same taxable event and same subject.
Thus, there is an overlapping in law which is not permissible.
15. The writ petitioner suffered cess of Rs.400 per ton on the
coal and under the impugned legislation the Union is again levying and
collecting cess at the rate of Rs.400 per ton on the stock lying with the
petitioner as on 30.06.2017 just on eve of the day when all legislation
related to GST including impugned legislation was introduced, whereas
on the same stock of coal, cess was already levied and collected under
the provisions of Chapter VII of Finance Act, 2010. Thus, it amounts to
double collection of tax at the same rate on the same stock. Even if the
impugned legislation is found to be within legislative competency, the
petitioner may be permitted to set off the cess of Rs.7.68 crores which
was already paid on the stock lying with the petitioner on 30.06.2017.
Levy under impugned legislation is tax and not a cess, hence, not
permissible in law.
16. Shri K.K. Venugopal, learned Attorney General submits that
cess is nothing but a special kind of tax. If the legislature is competent to
levy the main tax, i.e. GST under Article 246A of the Constitution, then
legislative competence of levying the cess flows from the very same
power to levy the tax itself. The phrase used in Article 246A "with respect
to" has wide implication and will allow levy of cess also. Power to levy
a cess, in any case, can be traced back to Article 270 of the Constitution.
However, Entry 97 of List I of Seventh Schedule to the Constitution
grants a residuary power to levy a tax to the Union. The Clean Energy
Cess which was imposed by the Finance Act, 2010 and GST
Compensation Cess are levied on entirely different transactions and both
are for entirely different purpose. The Clean Energy Cess was in the
nature of a duty of excise on the production of coal and was being
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collected at the time of removal of raw coal, raw lignite and raw peat
from the mine to the factory whereas GST Compensation Cess is imposed
on inter-State and intra-State supply of specified goods and services.
The Clean Energy Cess was levied and collected for the purposes of
financing and promoting clean energy initiatives, funding research in the
area of clean energy, for any other purpose relating thereto whereas
GST Compensation Cess is collected to provide for compensation to the
States for the loss of revenue arising on account of implementation of
the goods and services tax.
17. The High Court committed an error in prima facie holding that
credit of Clean Energy Cess should be allowed to be utilised for paying
GST Compensation Cess. The provision of credit and flow of credit is a
purely policy decision of the Executive. The Parliament does not lack
legislative competence to enact Compensation to States Act, 2017 nor
the legislation can be said to be colourable legislation. The Compensation
to States Act, 2017 in no manner transgressed Constitution (One Hundred
and First Amendment) Act, 2016.
18. Learned counsel for both the parties have placed reliance on
various judgments of this Court in support of their respective submissions
which shall be referred to while considering the submissions in detail.
19. From the submissions of the learned counsel for the parties
and pleadings following issues arise for consideration:
(1) Whether the Compensation to States Act, 2017 is beyond the
legislative competence of Parliament?
(2) Whether Compensation to States Act, 2017 violates Constitution
(One Hundred and First Amendment) Act, 2016 and is against
the objective of Constitution (One Hundred and First Amendment)
Act, 2016?
(3) Whether the Compensation to States Act, 2017 is a colourable
legislation?
(4) Whether levy of Compensation to States Cess and GST on
the same taxing event is permissible in law?
(5) Whether on the basis of Clean Energy Cess paid by the
petitioner till 30th June, 2017, the petitioner is entitled for set off in
payment of Compensation to States Cess?
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20. We have considered the submissions of learned counsel for
the parties and have perused the records.
21. First, we need to notice relevant constitutional provisions and
the Parliamentary enactments relevant for the issues raised in these
cases.
22. Part XII of the Constitution deals with Finance. Article 265
provides that no tax shall be levied or collected except by authority of
law. Article 366 contains definitions. Article 366(26A) defines "services"
as "services means anything other than goods". Whereas Article 366
(29A) contains an inclusive definition of "tax on the sale or purchase of
goods". A Bill was introduced in the Lok Sabha namely, the Constitution
(One Hundred and Twenty-Second Amendment) Bill, 2014 on 19.12.2014
proposing constitutional amendments to introduce the goods and services
tax for conferring concurrent taxing powers on the Union as well as the
States including Union territory with Legislature to make laws for levying
goods and services tax on every transaction of supply of goods or services
or both. Statement of Objects and Reasons of the Bill are as follows:-
"STATEMENT OF OBJECTS AND REASONS
The Constitution is proposed to be amended to introduce the goods
and services tax for conferring concurrent taxing powers on the
Union as well as the States including Union territory with
Legislature to make laws for levying goods and services tax on
every transaction of supply of goods or services or both. The
goods and services tax shall replace a number of indirect taxes
being levied by the Union and the State Governments and is
intended to remove cascading effect of taxes and provide for a
common national market for goods and services. The proposed
Central and State goods and services tax will be levied on all
transactions involving supply of goods and services, except those
which are kept out of the purview of the goods and services tax.
2. The proposed Bill, which seeks further to amend the Constitution,
inter alia, provides for-
(a) subsuming of various Central indirect taxes and levies such
as Central Excise Duty, Additional Excise Duties, Excise
Duty levied under the Medicinal and Toilet Preparations
(Excise Duties) Act, 1955, Service Tax, Additional Customs
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Duty commonly known as Countervailing Duty, Special
Additional Duty of Customs, and Central Surcharges and
Cesses so far as they relate to the supply of goods and
services;
(b) subsuming of State Value Added Tax / Sales Tax,
Entertainment Tax (other than the tax levied by the local
bodies), Central Sales Tax (levied by the Centre and
collected by the States), Octroi and Entry tax, Purchase
Tax, Luxury tax, Taxes on lottery, betting and gambling;
and State cesses and surcharges in so far as they relate to
supply of goods and services;
(c) dispensing with the concept of 'declared goods of special
importance' under the Constitution;
(d) levy of Integrated Goods and Services Tax on inter-State
transactions of goods and services;
(e) levy of an additional tax on supply of goods, not exceeding
one per cent. in the course of inter-State trade or commerce
to be collected by the Government of India for a period of
two years, and assigned to the States from where the supply
originates;
(f) conferring concurrent power upon Parliament and the State
Legislatures to make laws governing goods and services
tax;
(g) coverage of all goods and services, except alcoholic liquor
for human consumption, for the levy of goods and services
tax. In case of petroleum and petroleum products, it has
been provided that these goods shall not be subject to the
levy of Goods and Services Tax till a date notified on the
recommendation of the Goods and Services Tax Council.
(h) compensation to the States for loss of revenue arising on
account of implementation of the Goods and Services Tax
for a period which may extend to five years;
 xxxxxxxxxxxxxxxxxxxx"
23. The Constitution (One Hundred and First Amendment) Act,
2016 dated 08.09.2016 was passed to amend the Constitution of India.
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By Constitution (One Hundred and First Amendment) Act, 2016, new
Articles 246A, 269A and 279A were inserted. Amendments were also
made in Articles 248, 249, 250, 268, 269, 270, 271, 286, 366 and 368.
Article 268A was omitted. Amendments were also made in Seventh
Schedule of the Constitution in List I and List II. Article 246A and 269A
as inserted by Constitution (One Hundred and First Amendment) Act,
2016 is as follows:-
"246A. Special provision with respect to goods and services
tax.- (1) Notwithstanding anything contained in articles 246 and
254, Parliament, and, subject to clause (2), the Legislature of every
State, have power to make laws with respect to goods and services
tax imposed by the Union or by such State.
 (2) Parliament has exclusive power to make laws with respect
to goods and services tax where the supply of goods, or of services,
or both takes place in the course of inter-State trade or commerce
 Explanation.-The provisions of this article, shall, in respect
of goods and services tax referred to in clause (5) of article 279A,
take effect from the date recommended by the Goods and Services
Tax Council.".
269A. Levy and Collection of goods and services tax in
course of inter-State trade or commerce.- (1) Goods and
services tax on supplies in the course of inter-State trade or
commerce shall be levied and collected by the Government of
India and such tax shall be apportioned between the Union and
the States in the manner as may be provided by Parliament by
law on the recommendations of the Goods and Services Tax
Council.
 Explanation.-For the purposes of this clause, supply of goods,
or of services, or both in the course of import into the territory of
India shall be deemed to be supply of goods, or of services, or
both in the course of inter-State trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not
form part of the Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has
been used for payment of the tax levied by a State under article
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246A, such amount shall not form part of the Consolidated Fund
of India.
(4) Where an amount collected as tax levied by a State under
article 246A has been used for payment of the tax levied under
clause (1), such amount shall not form part of the Consolidated
Fund of the State.
(5) Parliament may, by law, formulate the principles for determining
the place of supply, and when a supply of goods, or of services, or
both takes place in the course of inter-State trade or commerce.".
24. Article 270 of the constitution as amended by the above
Amendment Act is as follows:-
"270.Taxes levied and distributed between the Union and
the States.- (1) All taxes and duties referred to in the Union List,
except the duties and taxes referred to in Articles 268, 269 and
269A, respectively, surcharge on taxes and duties referred to in
Article 271 and any cess levied for specific purposes under any
law made by Parliament shall be levied and collected by the
Government of India and shall be distributed between the Union
and the States in the manner provided in clause (2).
... ... ... ..."
25. Section 18 and Section 19 of the Constitution (One Hundred
and First Amendment) Act, 2016 is also relevant, which are to the following
effect:-
"18. Compensation to States for loss of revenue on account
of introduction of goods and services tax.- Parliament shall,
by law, on the recommendation of the Goods and Services Tax
Council, provide for compensation to the States for loss of revenue
arising on account of implementation of the goods and services
tax for a period of five years.
19. Transitional provisions.- Notwithstanding anything in this
Act, any provision of any law relating to tax on goods or services
or on both in force in any State immediately before the
commencement of this Act, which is inconsistent with the
provisions of the Constitution as amended by this Act shall continue
to be in force until amended or repealed by a competent Legislature
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or other competent authority or until expiration of one year from
such commencement, whichever is earlier.
26. At this stage, it is also relevant to notice that in the Constitution
(One Hundred and Twenty-Second Amendment) Bill, 2014, Clause 18
contain a provision for arrangement for assignment of additional tax on
supply of goods to States for two years or such other period recommended
by Council, which was to the following effect:-
"18. Arrangement for assignment of additional tax on supply
of goods to States for two years or such other period
recommended by Council (1) An additional tax on supply of
goods, not exceeding one per cent.