In a significant ruling that will have wide implications for the mining and cement industries, the Chhattisgarh High Court at Bilaspur on October 8, 2025, quashed the levy of infrastructure and environment cesses imposed by the State government on Shree Cement Limited. The Division Bench comprising Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru held that the imposition and collection of these cesses were unconstitutional, being without the authority of law and contrary to the mandate of Article 265 of the Constitution of India. The Court declared that the State could not levy or recover any such charges when no land revenue or rent was lawfully assessed or payable on the lands in question.
The case was brought by Shree Cement Limited, a leading cement manufacturer with operations across India, which operates a major plant and limestone mines in Baloda Bazar district of Chhattisgarh. The company had challenged the State’s decision to impose and collect the so-called Infrastructure Development Cess and Environment Cess under the Chhattisgarh (Adhosanrachna Vikas Evam Paryavaran) Upkar Adhiniyam, 2005, and the corresponding rules and notifications issued under it. Shree Cement argued that its mining lands were exempt from the payment of land revenue under the Chhattisgarh Land Revenue Code, 1959, and hence no cess could be legally charged or collected under Sections 3 and 4 of the 2005 Act, as both those provisions specifically linked the cess to lands on which land revenue or rent was actually levied.
The petitioner contended that despite this legal position, the State had continued to automatically deduct the cess from advance payments made for royalty through its online system. Between April 2015 and July 2022, the company had been compelled to pay more than ₹65 crore in cesses and sought a refund of the entire amount along with a direction to stop further deductions. It was also submitted that under the Mines and Minerals (Development and Regulation) Amendment Act, 2015, the company was already contributing to the District Mineral Foundation (DMF) fund, a statutory mechanism designed to support infrastructure, welfare, and environmental conservation in mining-affected regions. This, the company said, made the State’s additional cess redundant and unconstitutional.
Senior Advocate Balbir Singh, appearing for Shree Cement, argued that the charging provisions under Sections 3 and 4 of the 2005 Act were entirely dependent on the existence of land revenue or rent. Since there was no land revenue assessed on mining leases and the area was expressly exempt, the cess lacked a lawful basis. He also pointed out that the Madhya Pradesh High Court, in the 1988 case of Satna Stone and Lime Co. Ltd. vs. State of Madhya Pradesh, had struck down similar provisions as violative of Article 14 of the Constitution, and that judgment had attained finality. The Chhattisgarh government, despite merely adopting those same rules under a new name after statehood, continued to impose cess without any legislative foundation.
The State, represented by Deputy Advocate General Shashank Thakur, defended the levy by asserting that the cess was not based on land revenue but on surface rent payable under the mining lease. The government argued that surface rent, as per the lease terms and relevant provisions of the Land Revenue Code, was distinct from land revenue but still fell within the meaning of “rent” mentioned in Sections 3 and 4 of the 2005 Act. Therefore, the imposition of cess was lawful and not in violation of the constitutional provisions. The State maintained that it had the legislative competence to levy and collect such charges in the interest of infrastructure and environmental development.
The High Court, after examining the entire legal framework, rejected the State’s justification. It observed that the levy of cess under the 2005 Act was conditional upon the existence of either land revenue or rent being legally charged. The Court noted that in the present case, no such charge existed. Mining leaseholders, including Shree Cement, were exempt from payment of land revenue under the Chhattisgarh Land Revenue Code, and hence the precondition for imposing cess was absent. The Court further held that the State’s automatic deduction of cess from deposits made toward royalty payments amounted to unauthorized collection of money, violating Article 265, which categorically provides that no tax shall be levied or collected except by authority of law.
In its detailed reasoning, the Bench observed that the legislative intent behind Sections 3 and 4 of the 2005 Act was unambiguous—the cess could be levied only on lands where land revenue or rent was already in force. The absence of such a charge rendered the State’s entire action invalid. The judges held that the State had overstepped its constitutional limits and that its notifications enhancing the cess rates, including those dated 27 December 2011, 16 June 2015, 4 September 2019, and 15 October 2019, were equally unsustainable. These notifications, the Court noted, had no legal foundation since the parent levy itself was invalid.
The Court further observed that the State’s reliance on “surface rent” to justify the cess was misplaced. Surface rent, it held, was a term used in lease agreements for the limited purpose of compensating for land use, not a form of rent or revenue within the meaning of the 2005 Act. By conflating these concepts, the State had effectively created a new taxable event without legislative sanction. The judgment underscored that taxation cannot be extended by interpretation or implication—there must be a clear and express charging provision.
The High Court therefore allowed the petition filed by Shree Cement Limited, declaring that the levy and collection of both the infrastructure development cess and environment cess were unconstitutional and void. It directed the State government to immediately stop all automatic deductions of such cesses and to refund the amounts already collected. The decision marks a major victory for the petitioner and for several other industrial and mining enterprises in Chhattisgarh that have been subjected to similar demands in recent years.
This ruling carries far-reaching implications. It reinforces the constitutional principle that no tax or cess can be imposed or collected without explicit legislative authority. It also establishes that industrial entities operating under mining leases cannot be subjected to arbitrary fiscal exactions under the guise of development or environmental contributions when such contributions are already mandated under central law through the District Mineral Foundation framework. The Court’s decision brings much-needed clarity to the interplay between state taxation powers and central mining regulations, ensuring that businesses are not burdened with dual levies for the same purpose.
By striking down the State’s levy, the Chhattisgarh High Court has reaffirmed the supremacy of constitutional safeguards against unauthorized taxation. The judgment is expected to serve as a guiding precedent for similar disputes pending in other jurisdictions and as a reminder to state authorities that all fiscal measures must strictly conform to statutory and constitutional provisions.
Case Details: WPT No. 263 of 2023, Shree Cement Limited Company vs State of Chhattisgarh and Others,
For Petitioner(s) : Mr. Balbir Singh, Senior Advocate assisted by Mr. M.P.Devnath, Mr. Raja Sharma, Mr. Abhishek Anand and Ms. Aditi Parakh, Advocates.
For Respondents No. 1 to 4 / State : Mr. Shashank Thakur, Deputy Advocate General.
