SC allows large diesel cars in Delhi subjected a 1% Environment Compensation Charge

In a trend setting verdict on diesel cars and environmental standards, the Supreme Court allowed large diesel cars subjected to the payment of 1% green tax in Delhi. The new verdict will end the ban on cars above 2000 cc imposed by the Court in December last year.

The bench also said it is open to extend the tax to small diesel cars as well.

The verdict by the SC was based on the appeal by Mercedez Benz – the leader in the large car segment.

Over the last one year, the Delhi government was in hard efforts to find ways to check worsening air quality in the National Capital. Practical difficulties were highlighted by the manufactures in their representation at the SC and the adverse impact on sales. Several manufactures have argued that large cars have high standard emission norms and are less polluting.

There were debates about the administrative and technical difficulties of establishing large diesel cars as more polluting compared to the rest. Several large and high priced car manufactures pointed out that they are following advanced global emission standards and Toyota described the ban as a ‘corporate death sentence’.

The Green Tax or Environment Compensation Charge (ECC)

Interestingly the appeal and the verdict has given birth to a new tax and specifically a penalty called Environment Compensation Charge (ECC) to the family of existing green taxes. Last year, the SC has ordeered the imposition of ECC on light commercial vehicles entering Delhi. 

 The 1% ECC at ex-showroom or retail price must be deposited in a designated state-run bank by the manufacturer or seller. Tax revenue will go to the Central Pollution Control Board and the Board has to open a separate account for the purpose.

Earlier, the German high end car maker Mercedes Benz intimated the court that it is ready to pay 1% tax as penalty for pollution. Others including Toyota also agreed to this. The tax was thus a suggestion of Benz.  

Few weeks back, the National Green Tribunal ordered authorities to stop all diesel vehicles at least 10 years old from being driven in the capital.


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