1988 (9) TMI 341 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the respondent's industry manufacturing Rayon Grade Pulp falls under any category mentioned in Schedule I of the Water (Prevention and Control of Pollution) Cess Act, 1977.
2. The constitutional validity of the Water (Prevention and Control of Pollution) Cess Act, 1977.

Summary:

Issue 1: Classification of Industry
The primary issue was whether the respondent's industry, which manufactures Rayon Grade Pulp, falls under any category mentioned in Schedule I of the Water (Prevention and Control of Pollution) Cess Act, 1977, for the purposes of levy of Water Cess. The High Court of Andhra Pradesh held that Rayon Grade Pulp is not covered by any of the items specified in Schedule I, which includes industries like "Ferrous metallurgical industry," "Non-ferrous metallurgical industry," "Mining industry," "Ore processing industry," "Petroleum industry," "Petro-chemical industry," "Chemical industry," "Ceramic industry," "Cement industry," "Textile industry," "Paper industry," "Fertilizer industry," "Coal (including coke) industry," "Power (thermal and diesel) generating industry," and "Processing of animal or vegetable products industry."

The Supreme Court agreed with the High Court's interpretation, emphasizing that the Act is fiscal in nature and must be strictly construed. The Court noted that the industry should be classified based on its predominant purpose and process, not by any ancillary or incidental processes. The Court rejected the contention that Rayon Grade Pulp could be considered part of the chemical, textile, or paper industries, stating that the industry does not predominantly involve chemical activities.

Issue 2: Constitutional Validity
The High Court had rejected the contention challenging the constitutional validity of the Act. However, this issue was not under consideration before the Supreme Court as the petitioner, Andhra Pradesh State Board for Prevention and Control of Water Pollution, did not challenge this finding.

Conclusion:
The Supreme Court upheld the High Court's decision that the respondent's industry manufacturing Rayon Grade Pulp is not liable to pay cess under the Water (Prevention and Control of Pollution) Cess Act, 1977, as it does not fall under any of the specified industries in Schedule I. The petition was dismissed.