Holding

Parliament has constitutional authority to enact the GST (Compensation to States) Act, 2017 and levy the compensation cess, which is a separate tax permissible alongside GST and does not allow set‑off of Clean Energy Cess.

Summary

The Union of India challenged the validity of the Goods and Services Tax (Compensation to States) Act, 2017 and the accompanying Compensation Cess Rules, arguing that Parliament lacked legislative competence to levy a compensation cess and that the levy amounted to double taxation on the same taxable event. Mohit Mineral Pvt. Ltd. contended that the cess was colourable legislation, violated the Constitution (One Hundred and First Amendment) Act, 2016, and that the Clean Energy Cess already paid on coal stocks should be set‑off against the new compensation cess. The Supreme Court held that Article 270 and Section 18 of the Constitution (One Hundred and First Amendment) expressly empower Parliament to levy any cess for specific purposes, including compensation to States, and that the compensation cess is a distinct tax separate from GST. It further ruled that levying the compensation cess on the same transaction as GST does not constitute prohibited double taxation because the two imposts are separate and distinct. The Court rejected the petitioner's claim of set‑off, stating that the Clean Energy Cess and the compensation cess serve wholly different purposes and no legislative provision allows such credit. Consequently, the writ petition was dismissed and both civil appeals were allowed.

Issues considered

Whether the Goods and Services Tax (Compensation to States) Act, 2017 is beyond Parliament's legislative competence
Whether the Act violates the Constitution (One Hundred and First Amendment) Act, 2016 or is colourable legislation
Whether levy of the Compensation to States Cess together with GST on the same taxable event is permissible
Whether the petitioner is entitled to set‑off the Clean Energy Cess paid under the Finance Act, 2010 against the Compensation to States Cess

Legislation cited

Subjects

GSTCompensation to States Cesslegislative competenceArticle 246AArticle 270double taxationset‑offClean Energy Cessconstitutional amendmenttax law

Judgment

[2018] 13 S.C.R. 139 139

UNION OF INDIA & ANR. A
v.
MOHIT MINERAL PVT. LTD.
(Civil Appeal No. 10177 of 2018)
OCTOBER 03, 2018 B
[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 C
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
D
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 E
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
F
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. G
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
H
139
140 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B
permissible – Levy of compensation to States Cess is an increment
to goods and services tax which is permissible in law.
Cl ean Energy Cess pai d 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
C 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
D revenue ar ising on account of implementation of the goods and
services tax – Giving credit or set off in the payment is legislative
pol i cy whi ch had to be r efl ected i n the l egi sl ati ve 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
E 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

F 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
G 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]
H
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 141

Shinde Brothers Etc. v. Deputy Commissioner, Raichur A
& 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]
B
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 C
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]
D
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 E
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 F
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. G
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] H
142 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B
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
C 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
D
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]
E 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?
F 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
G 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
H Others (2012) 1 SCC 101 : [2011] 13 SCR 214;
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 143

Commissioner, Hindu Religious Endowments, Madras A
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 B
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 C
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) D
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 E
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 F
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] G
[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 H
144 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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.
B
[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
C imposts and on two different aspects of a transaction are
permissible as “in law there is no overlapping”. [Para 60][172-
H]
Federation of Hotel & Restaurant Associate of India,
Etc. v. Union of India and others (1989) 3 SCC 634 :
D [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
E 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
F 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?
G
4.1 The Clean Energy Cess and the States Compensation
Cess are collected for wholly different purposes. As per sub-
section (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
H area of clean energy or for any other purpose relating thereto
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 145

whereas States Compensation Cess is collected to “provide for A
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
B
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 C
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 D
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 E
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 F
[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
G
[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
H
[1979] 1 SCR 845 referred to Para 62
146 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B
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.
C 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
D
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
E 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
F 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.
G
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
H
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 147
[ASHOK BHUSHAN, J.]

by the Division Bench of the Delhi High Court in Writ Petition (C) No.7965 A
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,
B
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. C
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. D
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. E
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 F
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 G
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
H
148 SUPREME COURT REPORTS [2018] 13 S.C.R.

A (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
B
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:
C 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;
D 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
E 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
F 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
G 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
H
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 149
[ASHOK BHUSHAN, J.]

Goods and Services Tax (Compensation to States) Act, 2017, A
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.” B
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 C
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 D
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 E
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 F
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
G
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
H
150 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B 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
C 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
D 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
E 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
F 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
G
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
H
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 151
[ASHOK BHUSHAN, J.]

Parliament to levy cess and tax as it provides Parliament to make any A
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 B
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.
C
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 D
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. E
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 F
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 G
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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152 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B
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
C 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
D 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
E 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
F (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?
G (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?
H
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 153
[ASHOK BHUSHAN, J.]

20. We have considered the submissions of learned counsel for A
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 B
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 C
(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:- D

“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 E
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 F
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— G
(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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A 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,
B 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
(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;
D (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;
E (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
F 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
G 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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UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 155
[ASHOK BHUSHAN, J.]

By Constitution (One Hundred and First Amendment) Act, 2016, new A
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,
B
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. C

(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 D
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 E
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. F
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.
G
(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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156 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B 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
C 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
D 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).
... ... ... ...”
E
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,
F
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
G 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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UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 157
[ASHOK BHUSHAN, J.]

or other competent authority or until expiration of one year from A
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 B
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. in the course of inter-State C
trade or commerce shall, notwithstanding anything contained in
clause (1) of article 269A, be levied and collected by the
Government of India for a period of two years or such other period
as the Goods and Services Tax Council may recommend, and
such tax shall be assigned to the States in the manner provided in
clause (2). D

(2) The net proceeds of additional tax on supply of goods in any
financial year, except the proceeds attributable to the Union
territories, shall not form part of the Consolidated Fund of India
and be deemed to have been assigned to the States from where
the supply originates. E

(3) The Government of India may, where it considers necessary
in the public interest, exempt such goods from the levy of tax
under clause (1).
(4) Parliament may, by law, formulate the principles for determining F
the place of origin from where supply of goods take place in the
course of inter-State trade or commerce.”
27. Clause 19 contain compensation to States for loss of revenue
on account of introduction of goods and services tax. Clause 19 of the
Bill is as follows:-
G
“19. Compensation to States for loss of revenue on account
of introduction of goods and services tax.— Parliament may,
by law, on the recommendation of the Goods and Services Tax
Council, provide for compensation to the States for loss of revenue
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158 SUPREME COURT REPORTS [2018] 13 S.C.R.

A arising on account of implementation of the goods and services
tax for such period which may extend to five years.”
28. It is, however, to be noticed that Constitution (One Hundred
and Twenty-Second Amendment) Bill, 2014 was passed but Clause 18
of the Bill was not incorporated and Clause 19 found place as Section 18
B of the Constitution (One Hundred and First Amendment) Act, 2016.
After the aforesaid Constitution Amendment, Parliament enacted Central
Goods and Services Tax Act, 2017 (Act No.12 of 2017 dated 12.04.2017)
to make a provision for levy and collection of tax on intra State supply of
goods or services or both by the Central Government and for matters
connected therewith or incidental thereto. On the same day, another
C enactment namely ‘The Integrated Goods and Services Tax Act, 2017’
(Act No. 13 of 2017 dated 12.04.2017) was enacted to make a provision
for levy and collection of tax on inter-State supply of goods or services
or both by the Central Government and for matters connected therewith
or incidental thereto. Another enactment namely ‘The Union Territory
D Goods and Services Tax Act, 2017’ (Act No. 14 of 2017) was passed on
the same day to make a provision for levy and collection of tax on intra-
State supply of goods or services or both by the Union territories and for
matters connected therewith or incidental thereto. The Fourth
Parliamentary enactment, which is subject matter of challenge in the
present case was also enacted on the same day, i.e. 12.04.2017, namely
E ‘The Goods and Services Tax (Compensation to States) Act, 2017’ (Act
NO. 15 of 2017) 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. As the Preamble indicate (Compensation
F to States) Act, 2017 was enacted in pursuance of the provisions of the
Constitution (One Hundred and First Amendment) Act, 2016. Section 8
of the Compensation to States Act, 2017 provides for levy and collection
of Cess, which is as follows:-
8. Levy and collection of cess.—(1) There shall be levied a
G cess on such intra-State supplies of goods or services or both, as
provided for in section 9 of the Central Goods and Services Tax
Act, and such inter-State supplies of goods or services or both as
provided for in section 5 of the Integrated Goods and Services
Tax Act, and collected in such manner as may be prescribed, on
the recommendations of the Council, for the purposes of providing
H
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 159
[ASHOK BHUSHAN, J.]

compensation to the States for loss of revenue arising on account A
of implementation of the goods and services tax with effect from
the date from which the provisions of the Central Goods and
Services Tax Act is brought into force, for a period of five years
or for such period as may be prescribed on the recommendations
of the Council:
B
Provided that no such cess shall be leviable on supplies made
by a taxable person who has decided to opt for composition levy
under section 10 of the Central Goods and Services Tax Act.
(2) The cess shall be levied on such supplies of goods and services
as are specified in column (2) of the Schedule, on the basis of C
value, quantity or on such basis at such rate not exceeding the
rate set forth in the corresponding entry in column (4) of ,the
Schedule, as the Central Government may, on the
recommendations of the Council, by notification in the Official
Gazette, specify:
D
Provided that where the cess is chargeable on any supply of
goods or services or both with reference to their value, for each
such supply the value shall be determined under section 15 of the
Central Goods and Services Tax Act for all intra-State and inter-
State supplies of goods or services or both:
E
Provided further that the cess on goods imported into India
shall be levied and collected in accordance with the provisions of
section 3 of the Customs Tariff Act, 1975 (51 of 1975), at the
point when duties of customs are levied on the said goods under
section 12 of the Customs Act, 1962 (52 of 1962), on a value
determined under the Customs Tariff Act, 1975. F
29. Section 12(1) empowers the Central Government to make
rules for carrying out the provisions of the Act on the recommendation
of the Council. The Council is defined in Section 2(e) of the Act as
“Council means the Goods and Services Tax Council constituted under
the provision of Article 279A of the Constitution”. The Schedule of the G
Act read with Section 8 contains description of supply of goods or services
in column 2; Tariff item, heading, sub-heading, Chapter or supply of
goods or services, as the case may be, in column 3 and the maximum
rate at which goods and services tax compensation cess may be collected
in column 4. The Central Government, in exercise of power under Section
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160 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 12, has framed the rules namely “The Central Goods and Services Tax
Rules, 2017”.
30. Parliament enacted the Taxation Laws (Amendment) Act,
2017 dated 04.05.2017 to amend the Customs Act, 1962, the Customs
Tariff Act, 1975, the Central Excise Act, 1944, the Central Sales Tax
B Act, 1956, the Finance Act, 2001 and the Finance Act, 2005 and to
repeal certain enactments.
31. By Taxation Laws (Amendment) Act, 2017, the Finance Act,
2010, Chapter VII has been repealed. The Finance Act, 2010, Chapter
VII provided for levy of Clean Energy Cess, which stood repealed.
C 32. We now proceed to consider the issues as noted above.
Whether the Compensation to States Act, 2017 is beyond the
legislative competence of Parliament? (Issue No.1)
33. The petitioners have challenged the legislative competence of
D Parliament to enact Compensation to states Act, 2017. The petitioners
submits that impugned legislation has transgressed the limits of its power
granted under the Constitution. It is contended that although the impugned
legislation is described as for purpose of giving compensation to States
by Centres to States for loss of revenue but in fact it impose tax (termed
as cess), hence in pith and substance the legislation does not belong to
E the subject falling within the limits of its power but is outside it.
34. Part XI of the Constitution deals with the relation between the
Union and the States, Chapter I of which deals with “Legislative
Relations”. Article 245 deals with “Distribution of Legislative Powers”.
The Parliament has exclusive power to make laws with respect to any
F of the matters enumerated in List I in Seventh Schedule of the Constitution.
The Parliament, and subject to Clause(1) of Article 246, the Legislature
of a State also have power to make laws with respect to any of the
matters enumerated in List III of the Seventh Schedule. Article 248
deals with residuary power of Legislation in following manner:-
G Article 248 – Residuary powers of legislation—(1) Subject to
article 246A, Parliament has exclusive power to make any
law with respect to a matter not enumerated in the Concurrent
List or State List.
(2) Such power shall include the power of making any law imposing
H a tax not mentioned in either of those Lists.
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 161
[ASHOK BHUSHAN, J.]

35. Article 246A as noticed above provides that “notwithstanding A
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 present case, we are concerned with a cess imposed by
Compensation to States Act, 2017. The Act by Section 8 levies and
B
authorizes collection of cess. We need to first examine nature of cess.
Cess has been defined in Black’s Law Dictionary, Tenth Edition as “An
assessment or tax.”
36. P. Ramanatha Aiyar, Advanced Law Lexicon, 3rd Edition
defines cess as follows:-
C
“Cess” is “An assessment tax; levy; specifically: (a) A rate or
local tax…….(b) In Scotland, the land tax. (c) in India, a tax for a
special object; as, a road cess”. (Webster)
The word “cess” is used in Ireland and is still in use in India
although the word rate has replaced it in England. It means a tax D
and is generally used when the levy is for some special
administrative expense which the name (health cess, education
cess, road cess, etc.) indicates. When levied as an increment to
an existing tax, the name matters not for the validity of the cess
must be judged of in the same way as the validity of the tax to
which is an increment. Guruswamy and Co. v. State of Mysore, E
AIR 1967 SC 1512, per dissenting judge and India Cement Ltd. v.
State of T.N., AIR 1990 SC 85.
The word ‘cess’ means a tax and is generally used when the levy
is for some special administrative expense which the name (health
cess, education cess, road cess, etc.) indicates. Shinde Brothers F
v. Hy. Commissioner, Raichur, AIR 1967 SC 1512, 1525.”
37. This Court had considered the expression “cess” in Shinde
Brothers Etc. Vs. Deputy Commissioner, Raichur & Others Etc.,
AIR 1967 SC 1512, Justice M. Hidyatullah, as he then was in his
dissenting opinion has defined the cess (“no contrary opinion was G
expressed by majority in that regard”) in paragraph 39, which is to the
following effect:-
“39. Now the health cess is first assailed on the ground that there
is no entry “health cess” as such in the legislative entries. The
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162 SUPREME COURT REPORTS [2018] 13 S.C.R.

A word “cess” is used in Ireland and is still in use in India although
the word rate has replaced it in England. It means a tax and is
generally used when the levy is for some special administrative
expense which the name (health cess, education cess, road cess
etc.) indicates. When levied as an increment to an existing tax,
the name matters not for the validity of the cess must be judged
B
of in the same way as the validity of the tax to which it is an
increment. By Schedule A(1) read with Section 3 of the Act, it is
collected as an additional levy with a tax, which, as described in
Schedule A, is undoubtedly one within the powers of the State
Legislature and has been so even prior to the
C Constitution……………………”
38. In the Constitution Bench judgment of this Court in India
Cement Ltd. & Others Vs. State of Tamil Nadu & Others, (1990)
1 SCC 12, the above definition given by Hidayatuallah, J. was quoted
with approval in Para 19, which is quoted as below:-=
D “19. Here, we are concerned with cess on royalty. One can have
an idea as to what cess is, from the observations of Hidayatullah,
J., as the learned Chief Justice then was, in Guruswamy & Co. v.
State of Mysore9 where at page 571, the learned Judge observed :
“The word ‘cess’ is used in Ireland and is still in use in
E India although the word rate has replaced it in England. It means
a tax and is generally used when the levy is for some special
administrative expense which the name (health cess, education
cess, road cess etc.) indicates. When levied as an increment
to an existing tax, the name matters not for the validity of the
F cess must be judged of in the same way as the validity of the
tax to which it is an increment.”
39. The meaning of “cess” as noticed above was again reiterated
by a Two Judge Bench judgment of this Court in Vijayalashmi Rice
Mill & Others Vs. Commercial Tax Officers, Palakol & Others,
G (2006) 6 SCC 763, in paragraph 13, following has been laid down:-
“13. Hence ordinarily a cess is also a tax, but is a special kind
of tax. Generally tax raises revenue which can be used generally
for any purpose by the State. For instance, the income tax or
excise tax or sales tax are taxes which generate revenue which
H
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 163
[ASHOK BHUSHAN, J.]

can be utilised by the Union or the State Governments for any A
purpose e.g. for payment of salary to the members of the armed
forces or civil servants, police, etc. or for development programmes,
etc. However, cess is a tax which generates revenue which is
utilised for a specific purpose. For instance, health cess raises
revenue which is utilised for health purposes e.g. building hospitals,
B
giving medicines to the poor, etc. Similarly, education cess raises
revenue which is used for building schools or other educational
purposes.”
40. The expression “cess” as held above 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 as noticed above C
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. Constitution
Bench of this Court in Union of India Vs. Harbhajan Singh Dhillon,
(1971) 2 SCC 779 held that only question to be asked while examining D
the legislative competence of Parliament with regard to a particular
enactment is: Is the matter sought to be legislated or included in List II
or in List III or is the tax sought to be levied mentioned in List II or in
List III”. In Para 21, the Constitution Bench laid down following:-
“21. It seems to us that the function of Article 246(1), read with E
Entries 1-96, List I, is to give positive power to Parliament to
legislate in respect of these entries. Object is not to debar
Parliament from legislating on a matter, even if other provisions
of the Constitution enable it to do so. Accordingly we do not
interpret the words “any other matter” occurring in Entry 97, List
I, to mean a topic mentioned by way of exclusion. These words F
really refer to the matters contained in each of the Entries 1 to 96.
The words “any other matter” had to be used because Entry 97,
List I follows Entries 1-96, List I. It is true that the field of
legislation is demarcated by Entries 1-96, List I, but demarcation
does not mean that if Entry 97, List I confers additional powers, G
we should refuse to give effect to it. At any rate, whatever doubt
there may be on the interpretation of Entry 97, List I is removed
by the wide terms of Article 248. It is framed in the widest possible
terms. On its terms the only question to be asked is: Is the matter

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164 SUPREME COURT REPORTS [2018] 13 S.C.R.

A sought to be legislated or included in List II or in List III or is the
tax sought to be levied mentioned in List II or in List III: No
question has to be asked about List I. If the answer is in the
negative then it follows that Parliament has power to make laws
with respect to that matter or tax.”
B 41. When we pose the above question in context of impugned
legislation, i.e. Compensation to States Act, 2017, we do not find any
entry 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 present case, we may notice that no contention has been raised
C before us 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 (supra), we do not find any
lack of legislative competence in the Parliament.
42. Learned counsel for the petitioner relied on two decisions of
D this Court namely Hoechst Pharmaceuticals Ltd. & Others Vs. State
of Bihar & Others, (1983) 4 SCC 45 and M.P.V. Sundararamier &
Co. Vs. State of A.P. & Others, AIR 1958 SC 468 to contend that
taxation is a distinct matter for purposes of legislative competence and
the power to tax cannot be deduced from a general legislative entry as
E an ancillary power. He submits that State Compensation Cess being not
covered by any taxing entry, the legislation is beyond the competence of
Parliament. We may first notice the proposition, which has been laid
down by this court in Hoechst Pharmaceuticals Ltd. (supra). This
Court in the above case had occasion to examine Bihar Finance Act,
1981, by which surcharge was levied on certain dealers selling essential
F commodities such as drugs. Challenge to the legislative competence of
the State was raised. In the above context, this Court had observed that
taxation is considered to be a distinct matter for purposes of legislative
competence. In paragraphs 74, 75 and 76, following was laid down:-
“74. It is equally well settled that the various entries in the three
G Lists are not ‘powers’ of legislation, but ‘fields’ of legislation. The
power to legislate is given by Article 246 and other Articles of the
Constitution. Taxation is considered to be a distinct matter for
purposes of legislative competence. Hence, the power to tax
cannot be deduced from a general legislative entry as an ancillary
H power. Further, the element of tax does not directly flow from the
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 165
[ASHOK BHUSHAN, J.]

power to regulate trade or commerce in, and the production, supply A
and distribution of essential commodities under Entry 33 of List
III, although the liability to pay tax may be a matter incidental to
the Centre’s power of price control.
75. “Legislative relations between the Union and the States inter
se with reference to the three Lists in Schedule VII cannot be B
understood fully without examining the general features disclosed
by the entries contained in those Lists”: Seervai in his Constitutional
Law of India, 3rd Edn., Vol. 1 at pp. 81-82. A scrutiny of Lists I
and II of the Seventh Schedule would show that there is no
overlapping anywhere in the taxing power and the Constitution
gives independent sources of taxation to the Union and the States. C
Following the scheme of the Government of India Act, 1935, the
Constitution has made the taxing power of the Union and of the
States mutually exclusive and thus avoided the difficulties which
have arisen in some other Federal Constitutions from overlapping
powers of taxation. D
76. It would therefore appear that there is a distinction made
between general subjects of legislation and taxation. The general
subjects of legislation arc dealt with in one group of entries and
power of taxation in a separate group. In M.P.V. Sundararamier
& Co. v. State of A.P.43 this court dealt with the scheme of the E
separation of taxation powers between the Union and the States
by mutually exclusive lists. In List I, Entries 1 to 81 deal with
general subjects of legislation; Entries 82 to 92-A deal with taxes.
In List II, Entries 1 to 44 deal with general subjects of legislation;
Entries 45 to 63 deal with taxes. This mutual exclusiveness is also
brought out by the fact that in List III, the Concurrent Legislative F
List, there is no entry relating to a tax, but it only contains an entry
relating to levy of fees in respect of matters given in that list other
than court-fees. Thus, in our Constitution, a conflict of the taxing
power of the Union and of the States cannot arise. That being so,
it is difficult to comprehend the submission that there can be G
intrusion by a law made by Parliament under Entry 33 of List III
into a forbidden field viz. the State’s exclusive power to make a
law with respect to the levy and imposition of a tax on sale or
purchase of goods relatable to Entry 54 of List II of the Seventh
Schedule. It follows that the two laws viz. sub-section (3) of Section
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166 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 5 of the Act and para 21 of the Control Order issued by the Central
Government under sub-section (1) of Section 3 of the Essential
Commodities Act, operate on two separate and distinct fields and
both are capable of being obeyed. There is no question of any
clash between the two laws and the question of repugnancy does
not come into play.”
B
43. Levy of surcharge was upheld referring to Entry 52 of List II
of Seventh Schedule. Following was laid down in paragraph 90:-
“90. The decision in Fernandez case, AIR 1957 SC 657 is therefore
clearly an authority for the proposition that the State Legislature
C notwithstanding Article 286 of the Constitution while making a
law under Entry 54 of List II of the Seventh Schedule can, for
purposes of the registration of a dealer and submission of returns
of sales tax, include the transactions covered by Article 286 of
the Constitution. That being so, the constitutional validity of sub-
section (1) of Section 5 of the Act which provides for the
D classification of dealers whose gross turnover during a year
exceeds Rs 5 lakhs for the purpose of levy of surcharge, in addition
to the tax payable by him, is not assailable. So long as sales in the
course of inter-State trade and commerce or sales outside the
State and sales in the course of import into, or export out of the
E territory of India are not taxed, there is nothing to prevent the
State Legislature while making a law for the levy of a surcharge
under Entry 54 of List II of the Seventh Schedule to take into
account the total turnover of the dealer within the State and
provide, as has been done by sub-section (1) of Section 5 of the
Act, that if the gross turnover of such dealer exceeds Rs 5 lakhs
F in a year, he shall, in addition to the tax, also pay a surcharge at
such rate not exceeding 10 per centum of the tax as may be
provided. The liability to pay a surcharge is not on the gross
turnover including the transactions covered by Article 286 but is
only on inside sales and the surcharge is sought to be levied on
G dealers who have a position of economic
superiority………………”
44. In M.P.V. Sundararamier (supra) this Court also laid down
that the tax cannot be levied under general entry. The present is a case
where cess in question is levied in respect of goods and services tax, the
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UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 167
[ASHOK BHUSHAN, J.]

definition of cess as given in Compensation to States Act, 2017 in Section A
2(c) states “cess means the goods and services tax compensation cess
levied under section 8”. The judgment of this Court relied by petitioner
in Hoechst Pharmaceuticals Ltd. (supra) and M.P.V. Sundararamier
(supra) is not applicable to the present case.
45. Entry 97 of List I also lead to the same conclusion, for B
reference, which is quoted as below:-
“97. Any other matter not enumerated in List II or List III including
any tax not mentioned in either of those Lists.”
46. Article 270 of the Constitution, both as it existed prior to
Constitution (One Hundred and First Amendment) Act, 2016 and C
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”. Article 270(1) as existed prior to
Constitution (One Hundred and First Amendment) Act, 2016, is as
follows:- D
“Art.270.(1) All taxes and duties referred to in the Union list,
except the duties and taxes referred to in Arts. 268, 268A and 269
respectively, surcharge on taxes and duties referred to in Art. 271
and any cess levied for specific purposes under any law made by
Parliament shall be levied and collected by the Government of E
India and shall be distributed between the Union and the States in
the manner provided in clause (2).”
47. 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 F
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 G
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. We, thus, do not find any merit in the submission of
the learned counsel for the petitioner that Parliament has no legislative
competence to enact the Compensation to States Act, 2017.
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168 SUPREME COURT REPORTS [2018] 13 S.C.R.

A Answer to Issue No.1 is,thus, as follows:
The Compensation to States Act, 2017 is not beyond the legislative
competence of the Parliament.
Issue No.2 and Issue No.3
B 48. We now come to Issue No.2 and Issue No.3, which, being
interconnected, are taken up together.
49. The next attack on Compensation to States Act, 2017 is on
the ground that the Act transgresses the mandate of Constitution (One
Hundred and First Amendment) Act, 2016. It is submitted that Constitution
C (One Hundred and First Amendment) Act, 2016 does not permit levy of
cess on supply of goods or services on which Goods and Services Tax
has been levied. Elaborating the submission, it is contended that the clear
objective of Constitution (One Hundred and First Amendment) Act, 2016
was to subsume various Central and States Taxes, Central and States
surcharges and cesses, so far as, they relate to supply of goods and
D services. When all taxes, surcharges and cesses were subsumed in by
Goods and Services Tax, imposition of compensation to States cess clearly
falls foul to the Constitution (One Hundred and First Amendment) Act,
2016. The Statements of Objects and Reasons of Constitution (One
Hundred and Twenty-Second Amendment) Bill, 2014, as noticed above,
E was to subsume various Central Indirect Taxes and levy of Service Tax,
Additional Customs Duty, Special Additional Duty of Customs, Central
Surcharges and Cesses so far as they relate to the supply of goods and
services.
50. One of the objectives as noticed in Statements of Objects and
F 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. Similar expressions namely, “pertaining to”,
“in relation to” came to be considered before this Court in M/s. Doypack
G Systems Pvt. Ltd. Vs. Union of India & Others, (1988) 2 SCC
299, where this Court held that the above expressions are used in the
expansive sense. Following has been laid down in paragraphs 48 and
49:-
“48………………….The expressions “pertaining to”, “in relation
H to” and “arising out of”, used in the deeming provision, are used in
UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 169
[ASHOK BHUSHAN, J.]

the expansive sense, as per decisions of courts, meanings found A
in standard dictionaries, and the principles of broad and liberal
interpretation in consonance with Article 39(b) and (c) of the
Constitution.
49. The words “arising out of” have been used in the sense that it
comprises purchase of shares and lands from income arising out B
of the Kanpur undertaking. We are of the opinion that the words
“pertaining to” and “in relation to” have the same wide meaning
and have been used interchangeably for among other reasons,
which may include avoidance of repetition of the same phrase in
the same clause or sentence, a method followed in good drafting.
The word “pertain” is synonymous with the word “relate”, see C
Corpus Juris Secundum, Volume 17, page 693.”
51. Learned counsel for the petitioner has placed reliance on
judgment of this Court in Dewan Chand Builders and Contractors
Vs. Union of India and Others, (2012) 1 SCC 101. The Parliament
had enacted Building and Other Construction Workers’ (Regulation of D
Employment and Conditions of Service) Act, 1996 and Building and Other
Construction Workers Welfare Cess Act, 1996. The constitutional validity
and competence of Parliament was challenged before the Delhi High
Court. Delhi High Court upheld the validity of Building and Other
Construction Workers’ (Regulation of Employment and Conditions of E
Service) Central Rules, 1998 holding the levy under the impugned
enactment as a fee referable to Entry 97 of List I of Seventh Schedule
of the Constitution. Before this Court, it was contended that cess in
question was a tax and not a cess since no element of quid pro quo
exists and if it is a tax, then it is a tax on “lands and buildings” falling
within the ambit of Schedule VII List II Entry 49. Argument was noticed F
in paragraph 23 to the following effect:-
“23. It is evident from the contentions raised on behalf of the
appellant that there is a two-pronged attack on the legislative
competence of Parliament to enact the Cess Act: (i) it is a “tax”
and not a “cess” because no element of quid pro quo exists between G
the payer of the cess and the beneficiary, and (ii) if it is a “tax”
then it is a tax on “lands and buildings” falling within the ambit of
Schedule VII List II Entry 49 (the State List), ousting the legislative
competence of Parliament.”
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170 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 52. This Court noticed the distinction between fee and tax and
referred to earlier judgments including judgment of this Court in
Commissioner, Hindu Religious Endowments, Madras Vs. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, AIR 1954 SC
282. This Court upheld the cess as fee and not tax. In paragraph 31,
reasons for upholding levy as fee has been given by this Court, which is
B
to the following effect:-
“31. There is no doubt in our mind that the Statement of
Objects and Reasons of the Cess Act, clearly spells out the
essential purpose the enactment seeks to achieve i.e. to augment
the Welfare Fund under the BOCW Act. The levy of cess on the
C cost of construction incurred by the employers on the building and
other construction works is for ensuring sufficient funds for the
Welfare Boards to undertake social security schemes and welfare
measures for building and other construction workers. The fund,
so collected, is directed to specific ends spelt out in the BOCW
D Act. Therefore, applying the principle laid down in the aforesaid
decisions of this Court, it is clear that the said levy is a “fee” and
not “tax”. The said fund is set apart and appropriated specifically
for the performance of specified purpose; it is not merged in the
public revenues for the benefit of the general public and as such
the nexus between the cess and the purpose for which it is levied
E gets established, satisfying the element of quid pro quo in the
scheme. With these features of the Cess Act in view, the subject
levy has to be construed as “fee” and not a “tax”. Thus, we uphold
and affirm the finding of the High Court on the issue.”
53. The above judgment has no application in the facts of the
F case. The case of the Union is not that cess is a fee. Rather contention
is that it is increment to the goods and services tax. We having already
held that State compensation cess is “with respect to” goods and services
tax, it is a tax.
54. Learned counsel for the petitioner has further relied on certain
G decisions on distinction between tax and fee. But the levy of cess, in the
present case, not even claimed as fee, it is not necessary to refer to
above cases which reiterate the well established principles emanating
from Commissioner, Hindu Religious Endowments, Madras Vs.
Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (supra).
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UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 171
[ASHOK BHUSHAN, J.]

55. The expression used in Article 246A is “power to make laws A
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, we fail to comprehend that how such
power shall not include power to levy cess on goods and services tax.
B
True, that 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.
56. Learned counsel for the petitioner has referred to Section 18
of the Constitution (One Hundred and Twenty-Second Amendment) Bill, C
2014, where an additional tax on supply of goods not exceeding one per
cent was contemplated, which did not find place in Constitution (One
Hundred and First Amendment) Act, 2016. He submits that the additional
tax, which was proposed by the Constitution (One Hundred and Twenty-
Second Amendment) Bill, 2014 was not allowed to find place in D
Constitution (One Hundred and First Amendment) Act, 2016, it is to be
accepted that Constitution Amendment did not contemplate levy of
additional tax on services and goods tax. The above submission in so far
as not continuing an additional tax on supply of goods in the Constitution
(One Hundred and First Amendment) Act is concerned, the submission
of the learned counsel for the petitioner is correct that additional tax, E
which was contemplated by Clause 18 of the Bill 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 F
by constitutional provision.
57. 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 G
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. We, thus, also do not find
any force in the submission of the learned counsel for the petitioner that

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172 SUPREME COURT REPORTS [2018] 13 S.C.R.

A Compensation to States Act, 2017 transgresses the Constitution (One
Hundred and First Amendment) Act, 2016.
58. Due to above reasons, we do not find any substance in the
submission of the petitioner that Compensation to States Act, 2017 is a
colourable legislation. We having held that Parliament has full legislative
B 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 Hundred and
First Amendment) Act’s objective, we reject the submission of the
petitioner that Compensation to States Act, 2017 is a colourable legislation.
We, thus, answer Issue No.2 and Issue No. 3 in following manner:-
C
Ans. 2 - 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.
D Ans.3 - The Compensation to States Act is not a colourable
legislation.
Whether levy of Compensation to States Cess and GST on the
same taxing event is permissible in law? (Issue No.4)
59. The petitioner elaborating his contention submits that as per
E Section 8 of impugned legislation there shall be levied a cess on intra-
State supply of goods and services as provided in Section 9 of the CGST
Act whereas CGST Act has been enacted to levy tax as provided under
Article 246A of the Constitution. This is also true in respect of the cesses
imposed on inter-State supplies of goods and services covered by Section
F 5 of IGST Act, 2017. Therefore, on the same very transaction there
cannot be two levies, one under CGST Act and another under impugned
legislation as it would amount to double taxation as levy is on the same
taxable event and same subject. Thus, there is an overlapping on law
which is not permissible. The petitioner contends that goods and services
tax being already imposed by three enactments of 2017 as noticed above
G imposition of States Compensation Cess is levied on the same taxing
event and has overlapping effect.
60. The principle is well settled that 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”.
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UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 173
[ASHOK BHUSHAN, J.]

61. A Constitution Bench of this Court in Federation of Hotel & A
Restaurant Associate of India, Etc. Vs. Union of India and others,
(1989) 3 SCC 634, held that a law with respect to a subject might
incidentally affect another subject in some way, but that is not the same
thing. There might be overlapping but the overlapping must be in law.
The fact that there is an overlapping does not detract from the
B
distinctiveness of the aspects. Therefore, if the taxes are separate and
distinct imposts and levied on the different aspects, then there is no
overlapping in law. Following was laid down in paragraph 31:
“31. Indeed, the law ‘with respect to’ a subject might incidentally
‘affect’ another subject in some way; but that is not the same
thing as the law being on the latter subject. There might be C
overlapping; but the overlapping must be in law. The same
transaction may involve two or more taxable events in its different
aspects. But the fact that there is an overlapping does not detract
from the distinctiveness of the aspects, Lord Simonds in Governor
General in Council v. Province of Madras [1945] FCR 179 P.C. D
at 193, in the context of concepts of Duties of Excise and Tax on
Sale of Goods said:
“...The two taxes, the one levied on a manufacturer in respect
of his goods, the other on a vendor in respect of his sales, may,
as is there pointed out, in one sense overlap. But in law there is E
no overlapping. The taxes are separate and distinct imposts. If
in fact they overlap, that may be because the taxing authority,
imposing a duty of excise, finds it convenient to impose that
duty at the moment when the excisable article leaves the
factory or workshop for the first time on the occasion of its
sale....”” F

62. Justice Krishna Iyer in Avinder Singh and others Vs. State
of Pubjab and others, (1979) 1 SCC 137, laid down that if on the
same subject-matter the legislature chooses to levy tax twice over there
is no inherent invalidity in the fiscal adventure unless there are some
other prohibitions. In the above case Government of Punjab had issued G
a notification under Section 90(4) of the Punjab Municipal Corporation
Act, 1976 imposing tax at the rate of Rupee 1 per bottle on Indian made
Foreign Liquor within the Municipal Corporation of Ludhiana. One of
the contentions raised was that tax imposed is on sale, hence, beyond
Government power. In paragraph 4 following was laid down: H
174 SUPREME COURT REPORTS [2018] 13 S.C.R.

A “4.......A feeble plea that the tax is bad because of the vice of
double taxation and is unreasonable because there are heavy prior
levies was also voiced. Some of these contentions hardly merit
consideration, but have been mentioned out of courtesy to counsel.
The last one, for instance, deserve the least attention. There is
nothing in Article 265 of the Constitution from which one can spin
B
out the constitutional vice called double taxation. (Bad economics
may be good law and vice versa). Dealing with a somewhat similar
argument, the Bombay High Court gave short shrift to it in Wester
India Theatres (AIR 1954 Bom 261). Some undeserving
contentions die hard, rather survive after death. The only epitaph
C we may inscribe is : Rest in peace and don’t be re-born ! If on the
same subject-matter the legislature chooses to levy tax twice over
there is no inherent invalidity in the fiscal adventure save where
other prohibitions exist.”
63. Goods and Services Tax imposed under the 2017 Acts as
D noticed above 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.
E 64. We, thus, do not find any substance in the submission that levy
of Compensation to States Cess on same taxable event is not permissible.
We, thus, answer Issue No.4 in the following manner:
Levy of Compensation to States Cess is an increment to goods
and services tax which is permissible in law.
F
Issue No. 5
65. The last submission of the petitioner is that he having paid
Clean Energy Cess till 30.06.2017 on the stocks of coal, he is at least
entitled to set off in payment of Compensation to States Cess. As noticed
above Clean Energy Cess was imposed under the Finance Act, 2010.
G
The Clean Energy Cess and the States Compensation Cess are collected
for wholly different purposes. As per sub-section (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
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UNION OF INDIA & ANR. v. MOHIT MINERAL PVT. LTD. 175
[ASHOK BHUSHAN, J.]

relating thereto whereas States Compensation Cess is collected to A
“provide for compensation to the States for the loss of revenue arising
on account of implementation of the goods and services tax”.
66. 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) of the Finance Act, 2010 the Clean Energy Cess B
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.
67. 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 C
also 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 D
does not indicate giving of any credit or set off of the Clean Energy
Cess already paid till 30.06.2017. Thus, claim of the petitioner that he is
entitled for set off in payment of Compensation to States Cess to the
extent he had already paid Clean Energy Cess cannot be accepted.
We, thus, answer Issue No.5 in the following manner: E

The petitioner is not entitled for any set off of payments made
towards Clean Energy Cess in payment of Compensations to States
Cess.
68. In view of the foregoing discussions, we do not find any merit F
in the writ petition. The writ petition is dismissed. The transferred case
is accordingly dismissed. Both the civil appeals are allowed. Parties shall
bear their own costs.

Nidhi Jain Matters disposed of. G

H