JUDGMENT
Vineet Kothari, J.
1. This appeal has been filed by the plaintiff – Appellant M/s Dev Ganga Enterprises against the State of Rajasthan and the Mining Department, Udaipur and Rajsamand being aggrieved by rejection of its Civil Suit No. 40/2005 filed for mandatory injunction against the defendant – Mining Department by the judgment and order dated 29.3.2006 of learned Additional Dist. Judge (Fast Track) No. 2, Udaipur.
2. That the plaintiff – appellant was granted contract for collection of excess royalty by the Superintending Mining Engineer, Udaipur on 18.7.2003 Ex.1 on record for the period of 2 years upto 31.3.2005 for a sum of Rs. 36,52,00,000/-(Thirty Six Crores Fifty Two Lacs). The relevant preamble clauses of the said contract Ex.1 are reproduced hereunder for ready reference:
Whereas the contractor has offered a bid for the grant of excess royalty collection contract for Mable (mineral) excavated and removed from the Mining leases situated within Revenue boundary of Tehsil Rajsamand, Kumbhalgarh, Amet and Railmagra of Dist. Rajsamand.
And whereas the said bid has been accepted by the State Government and the contractor had paid Rs. 3,05,00000/ for first installment of the contract and has undertaken to pay the remaining amount of Rs. 33,47,00,000/-in monthly installments, payable in advance upto tenth day of the month to the State Government with the condition that the working Mining Lease holder shall enjoy the right of mining on payment of royalty to the contractor at the rate specified in the first schedule to the Rajasthan Minor Mineral Concession Rules, 1986.
And whereas the contractor has further undertaken to pay increased amount of contract money, security and guarantee in proportion to the enhancement in the rate of royalty due to amendment in the first Schedule to the Rajasthan Minor Mineral Concession Rules, 1986 for the remaining period of the contract from the date of such enhancement along with the monthly installment payable as above.
Clauses 6 and 11 of the contract relevant for the present controversy involved in the present appeal are also reproduced hereunder:
(6) The contractor shall abide by the orders and instructions issued by the Government or any officer of the Department in accordance with the provisions of the Rajasthan Minor Mineral Concession Rules, 1986 regarding royalty collection not herein specified.
(11) The contract shall pay the installment of contract money according to the stipulations laid down in the contract, and if any amount is not paid on due date, it shall be collected as a arrears of land revenue and an interest @12% will be charged irrespective of any other action being taken for cancellation of contract or imposition of penalty under relevant rules.
Clause (1) of Other conditions of Notice Inviting Tender and Clause 28.1 of the conditions of tender are also reproduced hereunder for ready reference:
vU; izfrcU/k jktLFkku viz/kku [kfut fj;k;r fu;ekoyh] 1986 ,oa Bsdk lafonk o fufonk dh ‘krksZ ds vuqlkj tSlk fd le;≤ ij la’kks/ku gks] ds vuqlkj ekU; gksxs A fufonk dh ‘krsZ] Bsdk lafonk dk gh Hkkx ekuh tkosxh A
jktLFkku viz/kku [kftu fj;k;r fu;ekoyh 1986 ds izko/kkuks ,oa le;≤ ij jkT; ljdkj ;k l{ke vf/kdkjh }kjk fu/kkZfjr dh tkosxh tks Bsdsnkj dks ekU; gksxh A
2. The case of the plaintiff – appellant is that he successfully completed the term of the said contract even for the period of three months for which contract was extended upto 30.6.2005 on which date, the respondents issued no dues certificate in favour of the appellant. However, when the respondent – Department demanded interest of Rs. 18,46,899/-from the appellant – plaintiff on account of alleged delay in payment of monthly installments under the said contract, the plaintiff filed the aforesaid suit challenging the said levy of interest, which however, came to be rejected by the learned trial Court as aforesaid.
3. The learned Counsel for the appellant – plaintiff Mr. Vikas Balia pointed out that as per the terms of the contract quoted above, the monthly installments were payable in advance upto 10th day of the month to the State Government and, therefore, for monthly cycle commencing from 18.7.2003 for the period from 18.7.2003 to 17.8.2003, the said monthly installment was to be paid upto 28th July, 2003. Likewise for the period from 18.8.2003 to 17.9.2003, the monthly installment was required to be paid on or before 28.8.2003 and so on. In other words, he submitted that monthly installment was to be paid upto 10th of the ‘month’ meant that 11th day of the said period of 30 days spread over two calendar months as aforesaid, the said monthly installment really became due, otherwise upto 10th day of the said period of 30 days, the monthly installments could be paid on any day by the appellant. He submitted that Rule 61 of the Minor Mineral Concession Rules in fact further allow grace period of 15 days after the said amount of monthly installment became due on 11th day of the period of 30 days and said Rule provides grace period of 15 days from the date it becomes due and only thereafter if such monthly installment is not paid, the delay in payment would bear interest @15%. Rule 61 of the MMCR, 1986 is quoted below for ready reference:
61. Rate of Interest: Interest at the rate of 15% shall be charged on all dues in respect of dead rent, royalty, quarry licence fee and royalty collection contract amounts after 15 days from the date it becomes due.
4. In the alternative, he submitted that if Rule 61 is held to be not applicable in the case of plaintiff – appellant and it is held by this Court that the contract in question was independent of these Rules, the interest @12% could be charged only after the due date of 10 days was over as per the terms of the contract, namely, 11th day onwards for a period of 30 days. He, however, emphasized that MMCR, 1986 have to be read as supplemental and fully applicable to the contract in question as there is no repugnancy in the said contract with these MMCR, 1986. He further contended that even if there was any such repugnancy or conflict between the terms of contract and MMCR, 1986, the said Rules of 1986 being statutory in nature would over-ride the terms of the contract. He urged that the defendant – respondent Department was in fact estopped from contending that Rule 61 did not apply in the present case because as a matter of fact, upon amendment of Rule 61 charging the rate of interest, the Department has raised additional demand of interest against the present plaintiff – appellant which the plaintiff – appellant had to challenge by way of separate writ petition in this Court, namely, SBCWP No. 6659/2007 in which this Court has stayed the recovery of such additional interest on account of amendment of Rule 61 enhancing the rate of interest from 12% to 15% w.e.f. 18.12.2004. He urged that the respondent – Department as a matter of fact has levied interest against the plaintiff – appellant wherever the monthly installment was delayed beyond 10 days of the period of 30 days, which was payable in advance for such period of 30 days right from the day one absolutely denying even the period of 10 days allowed in the contract itself and that is obviously contrary to the terms of the contract and cannot be sustained. He prayed that as a matter of fact, recovery of such interest not only deserves to be quashed, but such interest paid by the plaintiff – appellant deserves to be refunded back to the plaintiff – appellant with interest.
5. On the side opposite, Mr. Rishi Vaishnav, learned Counsel for the respondent – Department has urged that Rule 61 of MMCR, 1986 does not apply to the present contract because Rule 61 in its clear terms does not include the word “excess royalty”, though it uses the words “dead rent, royalty, quarry licence fee and royalty collection contract amount” in Rule 61. He further submitted that the said term “Excess Royalty collection” has been defined in Rule 3(xiiia) of MMCR, 1986 which was inserted w.e.f. 12.8.1994 on account of change of Marble Policy in the State of Rajasthan and thereafter there was no amendment in this respect in Rule 61 to include the terms “Excess Royalty Collection” in Rule 61 and therefore, the said omission on the part of the State Government has to be deemed to be a deliberate omission and therefore, Rule 61 cannot be applied to the contract relating to excess royalty collection contract. He submitted that in absence of Rule 61 being applicable to the contract in question, there was no question of allowing any grace period of 15 days to the appellant – plaintiff for payment of monthly installment. The contract itself provided according to him grace period of 10 days for payment of such monthly installments and if the plaintiff failed to deposit and pay such monthly installments within 10 days in advance as stipulated, such grace period was lost and interest right from the day one would become leviable as per terms of Clause 11 of the Contract and interest @12% was therefore, rightly charged from the plaintiff – appellant. He, therefore, prayed that the appeal against the rejection of suit filed by the plaintiff – appellant deserves to be dismissed.
6. The aforesaid submissions of learned Counsel for the respondent – Mining Department have been countered by the learned Counsel for the appellant Mr. Vikas Balia on the ground that as matter of fact “Excess Royalty Collection” is nothing but part of “royalty” which has been defined in Rule 3(xx) as “Royalty” means the charge payable to the Government in respect of the ore or mineral excavated, removed or utilised from any land as prescribed in Schedule-I and “Dead Rent” as defined in Rule 3(x) was only a specie of genus “Royalty”. The word “Dead Rent” has been defined in Rule 3(x) to mean the minimum guaranteed amount of royalty per year payable as per rules of agreement under a mining lease. Relying on a recent Constitution Bench decision of Hon’ble Supreme Court in the case of State of West Bengal v. Kesoram Industries Ltd. and Ors. wherein in part VI, the Hon’ble Supreme Court explaining the concept of Royalty and cess and the previous decision in the case of India Cement Ltd. v. State of T.N. held that royalty is not in fact a tax, but an impost for right to extract mineral given to the mining lessees. By majority of 4:1, the Hon’ble Supreme Court held that in India Cement case, finding that “Royalty” was tax was not correct. It would be appropriate to extract some portion of the said majority view from SCC Reports:
Until the pronouncement of the Supreme Court in India Cement, , it has been the uniform and unanimous judicial opinion that royalty is not a tax. Such has been the position even subsequently to the pronouncement in India Cement. The error is apparent and only needs a careful reading to detect. The Supreme Court feels constrained – rather duty-bound – to say so, lest a reading of the judgment containing such an error – just an error of one word – should continue to cause the likely embarassment and have adverse effect on the subsequent judicial pronouncements which would follow India Cement, feeling bound and rightly, by the said judgment having the force of pronouncement by a seven- Judge Bench.
In the first sentence of para 34 of India Cement case , the word “royalty” occurring in the expression “royalty is a tax”, is clearly an error. What the majority wished to say, and has in fact said, is “cess on royalty is a tax.” The correct words to be printed in the judgment should have been “cess on royalty” in place of “royalty” only. The words “cess on” appear to have been inadvertently or erroneously omitted while typing the text of the judgment. This is clear from reading the judgment in its entirety. What Their Lordships have intended to record is “…that cess on royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature….” That makes correct and sensible reading.
The said error is being clearly pointed out and the Supreme Court is fully convinced in this regard and fees itself obliged constitutionally, legally and morally to do so, lest the said error should cause any further harm to the trend of jurisprudential thought centring around the the meaning of of “royalty”. It is held that royalty is not tax. Royalty is paid to the owner of land who may be a private person and may not necessarily be a State. A private person owning the land is entitled to charge royalty but not tax. The lessor receives royalty as his income and for the lessee the royalty paid is an expenditure incurred. Royalty cannot be tax. It is declared that even in India Cement it was not the finding of the Court that royalty is a tax.
Royalty is not a tax. The impugned cess envisaged through the SADA Act and Rules by no stretch of imagination can be called a tax on tax. The impugned levy also does not have the effect of increasing the royalty. Simply because the royalty is levied by reference to the quantity of the minerals produced and the impugned cess too is quantified by taking into consideration the same quantity of the mineral produced, the latter does not become royalty. The former (royalty) is the rent of the land on which the mine is situated or the price of the privilege of winning the minerals from the land parted by the Government in favour of the mining lessee. The cess is a levy on mineral rights with impact on the land and quantified by reference to the quantum of minerals produced. The distinction, though fine, yet exists and is perceptible.
Ordinarily, royalty would not be a tax and the question as to whether it will come within the purview of Article 366(28) of the Constitution or not has not been considered in any of the judgments. But in a situation of this nature and particularly having regard to the fact that the Central Government has the requisite power to fix royalty and not the owner of the mineral right, it would be an impost within the meaning of Article 366(28) of the Constitution being a special impost on a class of citizens who are the mining lessees. The amount collected by way of royalty is also expended like ordinary revenue. Whether royalty is a tax or not though is required to be deliberated upon only for a limited purpose, namely, as to whether Section 25 of the 1957 Act covers the field of taxation and not for any other purpose.
Royalty may not be the produce of the land or the yield of the land, but it is directly linked with the income of the land or the value of the minerals extracted. Royalty is a levy on the extraction of produce by weight. When the cess is levied on the royalty, the levy, which remains on extraction by weight, is enhanced or incremented. It is, thus, an incremental addition to the royalty. Its nature and character is the same as that of royalty. The value of the coal or for that matter of green tea has a direct nexus with the weight thereof. Thus, there may not be any significant distinction in principle between the levy in India Cement Case, (1990) 1 SCC 12, and levy in the present one. The very fact that the methodology of royalty or cess is the same, is also a relevant factor for the purpose of ascertaining the nature of tax.
7. Mr. Balia, therefore, submitted that the terms “Excess Royalty Collection” which was inserted in MMCR, 1986 in the year 1994 was only bifurcation of genus “Royalty” into “dead rent” and “excess over dead rent defined as “excess royalty collection”. He submitted that absence of words “excess royalty” in Rule 61 did not alter the position and since the word “royalty” did appear in Rule 61, the contention of the respondent – Department that Rule 61 did not apply to the contract in the present case was not sustainable. Therefore, he submitted that levy of interest for alleged delay in payment of monthly installments was unjustified. In the alternative, he submitted that even if the grace period of 15 days allowed under Rule 61 is not held to be applicable in the present case of the appellant – plaintiff, in no case, the respondent – Department was entitled to levy interest from day one and it was bound to allow the period of 10 days as given in the contract itself and the delay could be counted only from 11th day of said period of 30 days as aforesaid and interest if any could be charged only from 11th day till the actual date of payment.
8. I have heard the learned Counsel for the parties at length and given my thoughtful consideration to the controversy and perused the record.
9. This Court is of the considered opinion that the stand of the respondent -Department that Rule 61 would not apply to the contract in question is incorrect and cannot be sustained. The said contract is admittedly executed under Rule 37(2) of the MMCR, 1986 itself in model form No. 10 appended to these Rules of 1986. The contract for collection of excess royalty is nothing but part of royalty over and above dead rent which is minimum guaranteed amount of royalty irrespective of actual quantity of mining done by the lessee is nothing but a “Royalty” and it is not a third concept other than “Dead rent” or “Royalty”. The use of term defined in Rule 3(xiii-a) separately as “Excess Royalty Collection” does not make “Excess Royalty Collection” as a different concept and since contract in question is granted only for excess royalty over dead rent in terms of Rule 37, the absence of words “excess royalty” in Rule 61 does not make it inapplicable ipso facto. This Court finds no substance in this argument of the respondent – Department that Rule 61 does not apply. The mere fact that upon amendment in rule 61, they have demanded additional interest in pursuance of increase in the rate of interest under Rule 61 estops them from raising contention that Rule 61 would not apply to the contract in question. This Court as a matter of fact finds no repugnancy in the contract executed in model form No. 10 under Rule 37 of the MMCR, 1986 and other provisions of MMCR including the Rule 61. Therefore, the said Rules can be read as supplemental to the terms of the contract executed between the parties for deciding the controversy as to whether the interest can be levied by the respondent – Department for alleged delay in payment of monthly installments. It cannot be lost sight of that such monthly installments of total amount of the contract fixed upon auction is payable in advance upto 10th day of month to the State Government as per the quoted portion of the contract aforesaid. Thus, the period of 10 days given for the payment of such monthly installments in advance cannot be said to be grace period for payment of such monthly installments. As a matter of fact, if such monthly installment is not paid within 10 days, on 11th day only, it would fall due and whether further grace period of 15 days as given in Rule 61 would be available to the appellant or not or in other words, whether meter for charging interest as per Clause 11 of the Contract or Rule 61 of the MMCR, 1986 would commence from 11th day or after providing further grace period of 15 days after lapse of 10 days, is the relevant question.
10. In the considered opinion of this Court, since Rule 61 applies to the contract in question, the period of 15 days allowed under Rule 61 “from the date it becomes due” is further allowable as grace period to the appellant – plaintiff from 11th day of the ‘month’ when said monthly installments really falls due to be paid. Since Clause 11 of the contract itself does not provide any outer limit for payment of such monthly installments and it only says that if any amount is not paid on due date, it shall be collected as arrears of land revenue and interest @12% will be charged, Rule 61 gives fillip to that and further provides a period of 15 days beyond which levy of interest should commence. The due date for payment of monthly installments provided in the preamble of the contract in the opinion of this Court is 11th day of the month and after allowing 15 days of grace period from such day, when the payment of monthly installment falls due, if there is still delay in the payment of monthly installments, the respondent – Department is certainly entitled to charge interest @12% per annum. The respondents – defendants also cannot be held to be justified in charging interest right from the day one, if monthly installment is not paid within 10 days as stipulated in the contract. Thus, in the opinion of this Court, Clause 11 and Rule 61 have to be read together for determining as to from which date the levy of interest from the appellant – plaintiff commences for alleged delay in payment of monthly installments.
11. Accordingly, this appeal is allowed. The impugned judgment order of the trial Court dated 29.3.2006 is set aside. The respondents – defendants shall be, however at liberty to compute interest after allowing the period of 10 days as stipulated in the contract and further grace period of 15 days as provided in MMCR, 1986 and if there is any further delay in payment of monthly installments on the part of the plaintiff – appellant, the defendants shall be at liberty to raise fresh demand of such re-computed interest in terms of this judgment against the plaintiff – appellant.
12. With these observations, this appeal is allowed. No order as to costs.