JUDGMENT
M.Y. Eqbal, J.
Page 2044
1. In all these writ petitions the petitioners have challenged the authority of the State of Jharkhand, Department of Mines to issue executive order/resolution revising the surface rent of the land held by the petitioners as mining lessees. In all these writ applications, since common question of law and facts are involved, they have been heard together and are disposed of by this common judgment.
2. The petitioners have prayed for issuance of appropriate writ for quashing the resolution as contained in memo No. 1055 dated 17.6.2005 whereby and where under the State Govt. has arbitrarily changed the rate and mode of calculation of the surface rent for the area used by the lessee for mining purposes and thereby decided that the entire land under the lease for mining purposes will be commercially valued and 5% of the valuation so arrived and will be charged as the surface rent and further for declaring the aforementioned resolution as illegal, void and contrary to the rule making power of the Govt. in respect of both major and minor minerals and further for quashing the demand notice issued by the respondents whereby surface rent has been demanded in terms of the aforesaid resolution.
3. In all the writ petitions, petitioners’ case is that they were time to time, granted mining lease as per the provisions of Mines and Minerals (Development and Regulation) Act, 1957 (in short MMDR Act), Mineral Concession Rules, 1960 (in short MC Rules) and Bihar Minor Mineral Concession Rule now, Jharkhand Minor Mineral Page 2045 Concession Rules 2004 (in short MMC Rules) in respect of major and minor minerals. Petitioner’s case is that being holder of mining leases for minerals, they are paying all statutory levies, royalty and surface rent as specified in the lease deed in the statutory form K as per the provisions of MMDR Act and M.C. Rules and MMC Rules. The petitioner are paying surface rent of the area of land actually occupied and used by them at different villages at the rate specified by the State Govt. in terms of the Rules and pursuant to the lease deed or Form K which is being accepted by the State Govt. Surprisingly the State Govt. came out with a resolution signed on 16.9.2005 whereby and where under the State Govt. has purported to change the rate and basis of calculation of surface rent for the entire area of land occupied by the petitioners lessees for mining purposes. In the said resolution rate of surface rent has been calculated taking into consideration the commercial value of the entire area of land as per the valuation chart obtained for the purpose of calculating the stamp duty in case of transfer and yearly charge of 5% of the said value as surface rent. Petitioners’ case is that in terms of the impugned notification the District Mining Officer illegally and arbitrarily issued demand notice dated 4.1.2006 in WPC 596/2006 demanding a sum of Rs. 1,10,37, 910/- and 1,17,7,164 as surface rent from the petitioner in respect of two mining leases for the period 17.6.2005 to 31.12.2005. In all other cases, similar demand have been raised enhancing exorbitant surface rent in respect of both major and minor minerals.
4. The respondent-State has filed counter affidavit stating, inter alia, that for the purpose of calculation of surface rent from the mining lessee a provision has been made under Rule 27(1)(d) of the M.C. Rules, 1960. It is further stated that under Rule 29(1)(gha) of Jharkhand Minor Mineral Concession Rules, 2004, surface rent is to be charged at the rate specified by the Collector from time to time for an area occupied or used by the lessee. The respondents’ further case is that surface rent has been revised after a very long gap of 83 years taking into account that huge amount of lands for mining purposes is used as commercial use.
5. Mr. Dipankar Gupta, learned Counsel appearing in WPC No. 1217 of 2006, firstly submitted that under Item No. 23 of List II of 7th Schedule to the Constitution, State Legislature has the power to legislate for regulation of mines and mineral development. This however, subject to the provisions of List I with respect to regulation and development under the control of the Union. Learned Counsel submitted that under Entry 54 of List I of the 7th Schedule the regulation of mines and mineral development to the extent to which such regulation and development is under the control of the Union as declared by Parliament in the public interest. As a result of the declaration under Section 2 of the said Act, matters relating, inter alia, to royalty, dead rent, surface rent as well as terms and conditions of mining leases are within the legislative control of the Parliament. The State has by reason of List I item 54 and List II item 23 read together lost all legislative competence with regards to surface rent of mining leases. Since the State has no legislative power with regard to surface rent, it has no executive power with regard thereto even under Article 162 of the Constitution. Learned Counsel submitted that the State Legislature has been denuded of any power to legislate with respect to mines and minerals in general and surface rent in particular in view of the legislative field having been occupied by the MMDR Act, 1957. In this connection, learned Counsel put reliance on the decision of the Page 2046 Supreme Court in the case of Hingir . Learned Counsel also put reliance on the decision of the Supreme Court in the case of Baijnath Kedia v. State of Bihar . Learned Counsel then submitted that fortiorari, as per Article 162 of the Constitution, the State executive also lacks power to issue administrative orders with respect to mines and minerals in general and surface rent in particular. Learned Counsel submitted that mining lease under the Act is a statutorily prescribed instrument. According to Rule 27(1)(d), the surface rent payable must be specified in the lease. If not specified, then it is not payable. No power is given to any authority to revise the said rent specified in the lease deed. Learned Counsel further submitted that Sections 9 and 9A confer power to the Central Government to revise royalty and the lessee shall be liable to pay royalty, but there is no provision for revision of surface rent payable by the lessee either under the Act or the Rules.
6. Mr. Jagdip Dhankar, learned Counsel appearing for one of the petitioners, reiterated the same submission made by Mr. Dipankar Gupta and submitted that the impugned resolution issued by the respondent-State is wholly without jurisdiction. Learned Counsel submitted that there is no specific provision in the M.M.R.D Act regarding payment of surface rent. The matter of payment of surface rent is left by the Act to subordinate or delegated legislation by the Central Government which, however, have to laid before Parliament under Section 28 of the Act. Learned Counsel submitted that Mineral Concession Rules, 1960 provides that every mining lease shall be subject to the condition inter alia that the lessee shall also pay, for the surface area used by him for the purposes of mining operations, surface rent and water rate at such rate, not exceeding the land revenue. Learned Counsel submitted that there is no direct statutory nexus or linkage between the surface rent for a mining lease and the land revenue. In this connection, learned Counsel drew our attention to various letters annexed with the counter affidavit filed by the respondent-State.
7. Mr. Dhankar giving reference to the mining lease, which is the subject matter of W.P. (C) No. 2233 of 2006, submitted that in this case, the petitioner is holding 4 mining leases and the surface rent is payable @ Rs. 24.50 paise per acre. In this way, the petitioner has been paying a total annual surface rent of Rs. 19,467/-. By the impugned resolution, the surface rent has been enhanced by 1500 times and by enforcing the resolution, the respondent-State is claiming Rs. 1,46,99,112/- by way of annual surface rent. According to the learned Counsel, the decision of the Supreme Court in the case of D.K. Trivedi and Sons and Ors. v. State of Gujarat and Ors. (1986) Supp. SCC-20 does not apply at all. Learned Counsel drew our attention to the ratio decided in the case of Jilubhai Nanbhai Khachar and Ors. v. State of Gujarat and Anr. 1995 Supp 1 S.C.C. 612 and in the case of State of West Bengal v. Kesoram Industries Ltd. . Learned Counsel also relied upon the decision of the Supreme Court in the case of India Cement Ltd. and Ors. v. State of Tamil Nadu and Ors. .
8. Mr. L.K. Bajla, learned Counsel for the petitioner submitted that most of the leased hold area have been described as Pahar(mountain) and are not agricultural land. Learned Counsel drew our attention to various entries made in List II of Seventh Schedule of the Constitution and submitted that in any case it can not be covered by Entry 49 of List II of the Seventh Schedule of the Constitution. Learned Counsel in this regard relied upon the decision of the Supreme Court in the case of Page 2047 Hindustan Times and Ors. v. State of U.P. and Anr. and in the case of S. Prakash Rao and Anr. v. Commissioner of Commercial Taxes and Ors. AIR 1990 SC-999
9. Mr. Ananda Sen in support of the case of his client in W.P. (C) No. 854 of 2006, which relates to minor mineral, submitted that without Amending Rule 29(Kha) and Minor Mineral Concessions Rules, the State Government has no authority to issue executive instruction or resolution. In W.P. (C) No. 1253 of 2006, Mr. S.L. Agarwal, learned Counsel, submitted that in the instant case, surface rent has been enhanced 600 times without proper justification.
10. Mrs. Ritu Kumar, learned Counsel appearing on behalf of the petitioner -Central Coalfields Limited in WPC No. 4228/06 assailed the impugned resolution as being illegal and wholly without jurisdiction so far the coal company is concerned. According to the learned Counsel for the purpose of mining activities of the petitioner-Central Coalfields Limited lands were acquired under the provisions of Coal Bearing Areas (Acquisition and Development) Act 1957. Under Section 3 of the said Act, right title and interest of the owners in relation to coal company stood transferred and vested absolutely in the Central Government free from all encumbrances. Learned Counsel submitted that the Government of India vide letter dated 12.2.1999 addressed to the Chief Secretary, Govt. of Bihar clarified that land rent is not payable by the Coal Company owned by the Central Government and the State Government should not raise surface rent on the land acquired under different Acts by the coal companies owned by Central Government. The impugned resolution imposing surface rent upon the petitioner company is, therefore, wholly without jurisdiction.
11. For better appreciation of the submissions made by the learned Counsels, we would first like to refer some of the provisions of the Constitution, MMDR Act and the rules made there under.
12. Articles 245 and 246 of the constitution state about the law making powers of the Parliament and the Legislature. The Parliament is empowered to frame laws in respect of the matters mentioned in the Union List and the State Legislature is empowered to frame laws in respect of the matters mentioned in the state list. Entries in list I of 7th schedule of the constitution are the matters relating to Union List whereas List II of the 7th Schedule relates to State List. Entry 54 of List I relates to regulation of mines and minerals and development of the same and entry 23 of List II deals with the regulation of mines and minerals development subject to the provisions of List I in respect of regulation and development under the control of the Union. Entry 54 of List I reads as under:
54 Regulation of mines and mineral development to the extent to which such regulation and development under the control of Union is declared by Parliament by law to be expedient in the public interest.
Entry 23 of List II reads as under:
23. Regulation of mines and mineral development subject to the provisions of list I with respect to regulation and development under the control of the Union.
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13. By a declaration made under Section 2 of MMDR Act, the Union have taken under its control in the public interest, the regulation of mines and development of minerals to the extent provided in the said Act. Section 3(a) defines minerals which includes all minerals except mineral oil. Similarly Section 3(e) defines minor minerals which means building, stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the official Gazette, declare to be a minor mineral. Sections 5 to 12 deal with the procedure for grant of mining lease in respect of major minerals. Section 5 of the Act puts restriction on the grant of prospecting license for mining leases. Section 6 lays down the provisions as to the maximum area for which prospecting license or mining lease may be granted. Similarly Section 8 specifies the period by which the mining lease may be granted or renewed. Section 9 and 9A are relevant provisions which deal with payment of royalty and dead rent. Sections 9 and 9A read as under:
9. Royalties in respect of mining leases: (1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any law in fore at such commencement, pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub lease from the leased area after such commencement, at the rate for time being specified in the second schedule in respect of that mineral.
(2) The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or by his agent t, manager, employee, contractor or sub lessee from the leased area at the rate for the time being specified in the second schedule in respect of that mineral.
(2A) The holder of a mining lease, whether granted before or after the commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972, shall not be liable to pay any royalty in respect of any coal consumed by a workman engaged in a colliery provided that such consumption by the workman does not exceed one third of a tonne per month.
(3) The Central Government may, by notification in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification.
9A. Dead Rent to be paid by the lessee (1) The holder of a mining lease whether granted before or after the commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972, shall notwithstanding anything contained in the instrument of lease or in any other law for the time being in force, pay to the State Government, every year, dead rent at such rate as may be specified, for the time being, in the Third Schedule, for all the areas included in the instrument of lease.
Provided that where the holder of such mining lease becomes liable, under Section 9, to pay royalty for any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area, he shall be liable to pay either such royalty, or the dead rent in respect of that area whichever is greater.
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(2) The Central Govt. may, by notification in the Official Gazette, amend the Third Schedule so as to enhance or reduce the rate at which the dead rent shall be payable in respect of any area covered by a mining lease and such enhancement or reduction shall take effect from such date as may be specified in the notification. (3)
Provided that the Central Govt. shall not enhance the rate of the dead rent in respect of any such area more than once during any period of three years.
14. From bare perusal of Section 9, it is manifestly clear that lessee shall pay royalty in respect of any mineral removed or consumed at the rate specified in Second Schedule in respect of the mineral. This section further provides that holder of the mining lease shall not be liable to pay any royalty in respect of any coal consumed by the workman engaged in colliery subject to the condition that such consumption by the workman does not exceed 1/3 of a tonne per month. Sub-section 3 of Section 9 confer power to the Central Government to amend Second Schedule by issuing notification so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral. Section 9A lays down the provisions with regard to payment of dead rent. According to this, mining lessee shall pay to the State Government every year dead rent at such rate as may be specified for the time being in the Third Schedule for all the areas included in the instrument of lease. The Central Government has also been empowered to amend Third Schedule by issuing notification so as to enhance or reduce rate at which dead rent shall be payable in respect of any area covered by the mining lease. However, such enhancement of dead rent shall not be more than once during any period of three years. No provision has been made in the Act for enhancement of surface rent.
15. Section 13 confers power to the Central Government to make rules in respect of minerals. It provides that the Central Govt. may, by notification in the official gazette, make rule for regulating the grant of reconnaissance permits, prospecting licenses and mining leases in respect of minerals and for purposes connected therewith. Sub-section (2) of Section 13 prescribes the area where rules shall be framed. Section 13(2)(i) is relevant for the purposes of this case which reads as under:
(a) to (h) …
(i) the fixing and collection of fees for (reconnaissance permits prospecting licenses or mining leases) surface rent, security deposits, fines, other fees, or charges and the time within which and the manner in which the dead rent or royalty shall be payable.
16. It is, therefore, clear that the Central Government shall make rule relating to fixation and collection of fine, surface rent, security deposits, fine etc. in respect of major minerals. Section 14 very specifically provides that the provisions of Sections 5 to 13 shall not apply in respect of minor minerals. So far minor minerals are concerned, the State Government has been empowered under Section 15 of the Act to make rules. Hence, prima facie, it is clear that surface rent in respect of the mining area is payable as per the M.C. Rules framed by the Central Government.
17. Rule 27 of the M.C. Rules lays down the conditions and provides that every mining lease shall be subject to the conditions enumerated in the said Rule. The Page 2050 relevant portion of Sub-rule (1)(a), 1(b), 1(c), 1(d), (2), and (3) are quoted herein below:
Condition: (1) Every mining lease shall be subject to the following conditions:
(a) the lessee shall report to the State Government the discovery in the leased area of any mineral not specified in the lease, within sixty days of such discovery;
(b) if any mineral not specified in the lease is discovered in the leased area, the lessee shall not win and dispose of such mineral unless such mineral is included in the lease or a separate lease is obtained therefore;
(c) the lessee shall pay, for every year, except the first year of the lease, such yearly dead rent [at the rates specified in the Third Schedule] [of the Act] and if the lease permits the working of more than one mineral in the same area [the State Government shall not charge separate dead rent in respect of each mineral]:
Provided that the lessee shall be liable to pay the dead rent or royalty in respect of each mineral whichever he higher in amount but not both;
(d) the lessee shall also pay, for the surface rent used by hint for the purposes of mining operations, surface rent and water rate at such rate, not exceeding the land revenue, water and cesses assessable on the land, as may be specified by the State Government in the lease.
(2) A mining lease may contain such other conditions as the State Government may deem necessary in regard to the following namely-
(a) the time limit, mode and place of payment of rents and royalties;
(b) the compensation for damage to the land covered by the lease
(c) the felling of trees;
(d) the restriction of surface operations in any area prohibited by any authority;
(e) the notice by lessee for surface occupation;
(f) the provision of proper weighing machines;
(g) the facilities to be given by the lessee for working other minerals in the leased area or adjacent area;
(h) the entering and working in a reserved or protected forest;
(i) the securing of pits and shafts;
(j) the reporting of accidents;
(k) the indemnity to Government against claims of third parties;
(l) the delivery of possession of lands and mines on the surrender, expiration or determination of the lease;
(la) the time limit for removal of mineral, ore, plant, machinery and other properties from the lease hold area after expiration, or sooner determination or surrender or abandonment of the mining lease;
(m) the forfeiture of property left after determination of lease;
(n) the power to lake possession of plant, machinery, premises and mines in the event of war of emergency;
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(o) filing of civil suits or petitions relating to disputes arising out of the area under lease.
(3) The State Government may, either with the previous approval of the Central Government or at the instance of the Central Government, impose such further conditions as may be necessary in the interests of mineral development, including development of atomic minerals.
18. From perusal of Rule 27(1)(d) of the M.C. Rules it is manifestly clear that surface rent and water rate shall be payable by the lessee for the surface area used by him for the purposes of mining operation at such rate not exceeding the land revenue, water and cess assessable on the land as may be specified by the State Government in the lease. In other words, surface rent shall be payable by the lessee:
(i) on the surface area used by him;
(ii) not exceeding the land revenue;
(iii) as may be specified in the lease.
19. As noticed above, from bare perusal of the provisions of the Act and the Rule we do not find any provision for enhancement of surface rent during the subsistence of lease. Prima facie, therefore, the impugned resolution has not only transgressed the area of legislative competence but also violate Rule 31 and Form ‘K’ of Mineral Concession Rules. The total area in respect of major minerals are controlled by the Central Act and the Rule.
20. We would now like to discuss some of the decisions of the Supreme Court which are relevant for deciding the issue involved in these writ petitions
21. In the case of India Cement v. State of Tamil Nadu , the fact of the case was that the Government of Tamil Nadu granted a mining lease to the appellant for extraction of limestone and kankar for a period of 20 years. The lease deed, which was in accordance with the Mineral Concession Rules, provided the rates of royalty, dead rent and surface rent. Under the lease the appellant was bound to pay rent and other charges and all other Central and State Government dues “except demands for land revenue”. The appellant started the mining operations and paying the royalties, dead rents etc. However, Section 115(1) of the Madras Panchayats Act, 1958 required payment of a local cess at the rate of 45 paise on every rupee of land revenue payable to the government in respect of any land for every Fasli. The appellant questioned the levy of cess under the aforesaid Act on royalty. The question that fell for consideration before the Supreme Court was whether the levy or imposition of cess on royalty under Section 115 of the Madras Act could be justified or sustained either under Entry 49, 50 or 45 of List II of the Seventh Schedule and was and within the legislative competence of the State Legislature. Answering the question their Lordships observed that cess on royalty cannot be justified under Entry 45 of List II as taxes on lands and buildings. Entry 49 List II contemplated a levy on land as a unit and the levy must be directly imposed on land and must bear a definite relationship to it. There is a clear distinction between tax directly on land and tax on income arising from land. Royalty, which is indirectly connected with land, cannot be said to be a tax directly on land as a unit. However in paragraph 34 their Lordships observed:
34. In the aforesaid view of the matter, we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the Page 2052 competence of the State legislature because Section 9 of the Central Act covers the field and the State legislature is denuded of its competence under Entry 23 of List II. In any event, we are of the opinion that cess on royally cannot be sustained under Entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax on land but a payment for the user of land.
22. In the Constitution Bench judgment in the case of State of W.B. v. Kesoram Industries Ltd. and Ors. , their Lordships has dealt with very exhaustively the scheme of nature and power to legislate under different entries and the scheme of allocation of legislative powers. In the said constitution Bench, their Lordships pointed out the error crept in paragraph 34 of the judgment rendered in India Cement case(Supra) and held that royalty is not a tax on land but a payment for the user of the land. Their Lordships observed:
We have clearly pointed out the said error, as we are fully convinced in that regard and feel ourselves 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 meaning of “royalty”. We hold 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. We declare that even in India Cement it was not the finding of the Court that royalty is a tax. A statement caused by an apparent typographical or inadvertent error in a judgment of the Court should not be misunderstood as declaration of such law by the Court. We also record our express dissent with that part of the judgment in Mahalaxmi Fabric Mills Ltd. which says (vide para 12 of SCC report) that there was no “typographical error” in India Cement and that the said conclusion that royalty is a tax logically flew from the earlier paragraphs of the judgment.
Interrelationship of List I Entry 54 and List II Entry 23.
In paragraph 147 their Lordships further observed:
147. Royalty is not a tax. The impugned cess 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 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 purled with 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
23. In paragraph 104 of the judgment their Lordships held that there is nothing like an implied power to tax. The source of power which does not specifically speak of taxation cannot be so interpreted by expanding its width as to include therein the power to tax by implication or by necessary inference.
24. The principle laid down by the Supreme Court in the aforesaid decision has been summarized in paragraph 129, which reads as under:
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(1) In the scheme of the lists in the Seventh Schedule, there exists a clear distinction between the general subjects of legislation and heads of taxation. They are separately enumerated.
(2) Power of “regulation and control” is separate and distinct from the power of taxation and so are the two fields for purposes of legislation. Taxation may be capable of being comprised in the main subject of general legislative head by placing an extended construction, but that is not the rule for deciding the appropriate legislative field for taxation between List I and List II, As the fields of taxation are to be found clearly enumerated in Lists I and List II, there can be no overlapping. There may be overlapping in fact but there would be no overlapping in law. The subject-matter of two taxes by reference to the two lists is different. Simply because the methodology or mechanism adopted for assessment and quantification is similar, the two taxes cannot he said to be overlapping. This is the distinction between the subject of a lax and the measure of a tax.
(3) The nature of tax levied is different from the measure of tax. While the subject of tax is clear and well defined, the amount of tax is capable of being measured in many ways for the purpose of quantification. Defining the subject of tax is a simple task; devising the measure of taxation is a far more complex exercise and therefore the legislature has to be given much more flexibility in the latter field. The mechanism and method chosen by the legislature for quantification of tax is not decisive of the nature of tax though if may constitute one relevant factor out of many for throwing light on determining the general character of the tax.
(4) Entries 52, 53 and 54 in List I are not heads of taxation. They are general entries. Fields of taxation covered by Entries 49 and 50 in List II continue to remain with State Legislatures in spite of the Union having enacted laws by reference to Entries 52, 53 and 54 in List I. It is for the Union to legislate and impose limitations on the States’ otherwise plenary power to levy taxes on mineral rights or taxes on lands (including mineral-bearing lands) by reference to Entries 50 and 49 in List II, and lay down the limitations on the States’ power, if it chooses to do so, and also to define the extent and sweep of such limitations.
(5) The entries in List I and List II must be so construed as to avoid any conflict. If there is no conflict, an occasion for deriving assistance from non obstante clause “subject to” does not arise. If there is conflict, the correct approach is to find an answer to three questions step by step as under:
One- Is it still possible to effect reconciliation between two entries so as to avoid conflict and overlapping?
Two- In which entry the impugned legislation falls, by finding out the pith and substance of the legislation?
Three- Having determined the field of legislation wherein the impugned legislation falls by applying the doctrine of pith and substance, can an incidental trenching upon another field of legislation be ignored?
(6.) “Land”, the term as occurring in Entry 49 of List II, has a wide connotation. Land remains land though it may be subjected to different user. The nature of user of the land would not enable a piece of land being taken out of the Page 2054 meaning of land itself. Different uses to which the land is subjected or is capable of being subjected provide the basis for classifying land into different identifiable groups for the purpose of taxation. The nature of user of one piece of land would enable that piece of land being classified separately from another piece of land which is being subjected to another kind of user, though the two pieces of land are identically situated except for the difference in nature of user. The tax would remain a tax on land would not become a tax on the nature of its user.
7. To be a tax on land, the levy must have some direct and definite relationship with the land. So long as the tax is a tax on land by bearing such relationship with the land, it is open for the legislature for the purpose of levying tax to adopt any one of the well-known modes of determining the value of the land such as annual or capital value of the land or its productivity. The methodology adopted, having an indirect relationship with the land, would not alter the nature of the tax as being one on land.
8. The primary object and the essential purpose of legislation must be distinguished from its ultimate or incidental results or consequences, for determining the character of the levy. A levy essentially in the nature of a tax and within the power of the State Legislature cannot be annulled as unconstitutional merely because it may have an effect on the price of the commodity. A State legislation, which makes provisions for levying a cess, whether by way of tax to augment the revenue resources of the Slate or by way of fee to render services as quid pro quo but without any intention or regulating and controlling the subject of the levy, cannot be said to have encroached upon the field of “regulation and control” belonging to the Central Government by reason of the incidence of levy being permissible to be passed on to the buyer or consumer, and thereby affecting the price of the commodity or goods. Entry 23 in List II speaks of regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. Entries 52 and 54 of List I are both qualified by the expression “declared by Parliament by law to be expedient in the public interest.” A reading in juxtaposition shows that the declaration by Parliament must be for the “control of industries” in Entry 52 and “for regulation of mines or for mineral development” in Entry 54. Such control, regulation or development must be “expedient in the public interest”. Legislation by the Union in the field covered by Entries 52 and 54 would not like a magic touch or a taboo denude the entire field forming the subject-matter of declaration to the State Legislatures Denial to the Stale would extend only to the extent of the declaration so made by Parliament. In spite of declaration made by reference to Entry 52 or 54, the State would be free to act in the field left out from the declaration. The legislative power to tax by reference to entries in List II is plenary unless the entry itself makes the field “subject to” any other entry or abstracts the field by any limitations imposable and permissible. A tax or fee levied by the State with the object of augmenting its finances and in reasonable limits does not ipso facto trench upon regulation, development or control of the subject. It is different if the tax or fee sought to be levied by the State can itself be called regulatory, the primary purpose whereof is to regulate or control and augmentation of revenue or rendering service is only secondary or incidental.
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(9) The heads of taxation are clearly enumerated in Entries 83 to 92-B in List I and Entries 45 to 63 in List II. List III, the Concurrent list, does not provide for any head of taxation. Entry 96 in List I, Entry 66 in List II and Entry 47 in List III deal with fees. The residuary power of legislation in the field of taxation spelled out by Article 248(2) and Entry 97 in List I can be applied only to such subjects as are not included in Entries 49 of List II cannot be levied by the Union. Taxes on mineral rights, a subject in Entry 50 of List II, can also not be levied by the Union though as stated in Entry 50 itself the Union may impose limitations on the power of the State and such limitations, if any, imposed by Parliament by law relating to mineral development to that extent shall circumscribe the States; the power to lay down limitations on exercise of such power, in the interest of regulation, development or control, as the case may be, is with the Union. This is the result achieved by homogeneous reading of Entry 50 in List II and Entries 52 and 54 in List I. So long as a tax or fee on mineral rights remains in pith and substance a tax for augmenting the revenue resources of the State or a fee for rendering services by the Stale and it does not impinge upon regulation of mines and mineral development or upon control of industry by the Central Government, it is not unconstitutional.
25. In the case of Hingir-Rampur Coal Co. Ltd and Ors. v. The State of Orissa and Ors. , the validity of Orissa Mining Area Development Fund Act, 1952 Act was challenged by the petitioner who was the lessee in respect of the minerals under the Orissa Government. By virtue of the aforesaid Act of 1952 and the Rules made thereunder, notifications were issued directing the lessee to submit monthly rent for assessment of cess. Various other restrictions were also imposed. Their Lordships observed:
23. This decision has been expressly approved by the Privy Council in Governor-General-in-Council v. Province of Madras Consistently with the decision of the Federal Court their Lordships expressed the opinion that “a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods and not on sales or the proceeds of the sale of goods. The two taxes, the one levied on the manufacturer in respect of his goods and the other on the vendor in respect of his sales may in one sense overlap, but in law there is 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 exciseable article leaves the factory or workshop for the first time on the occasion of its sale”. In that case the question was whether the tax authorised by the Madras General Sales Tax Act, 1939, was a tax on the sale of goods or was a duty of excise, and the Privy Council held it was the former and not the latter. Therefore e, in our opinion, the mere fact that the levy imposed by the impugned Act has adopted the method of determining the rate of the levy by reference to the minerals produced by the mines would not by itself make the levy a duty of excise. The method thus adopted may be relevant in considering the character of the impost but its effect must be weighed along with and in the light of the other relevant circumstances. In this connection it is always necessary to bear in mind that where an impugned statute passed by a State Legislature is relatable to an Entry in List II it is not permissible to Page 2056 challenge its vires only on the ground that the method adopted by it for the recovery of the impost can be and is generally adopted in levying a duty of excise. Thus considered the conclusion is inevitable that the cess levied by the impugned Act is neither a tax nor a duty of excise but is a fee.
26. In another decision in the case of State of Orissa and Anr. v. M.A. Tulloch and Co. , the Supreme Court considered the levy of fee upon the mine owners by enacting Orissa Mining Area Development Fund Act, 1952. The Supreme Court observed that so far mines and minerals development is concerned, the Union Government had taken under its control the regulation and development of minerals. Subject to the provisions of List I the power of State to enact legislative on the topic of mines and minerals development is plenary. Their Lordships observed:
It does not need much argument to realize that to the extent to which the Union Government had taken under “its control” “the regulation and development of minerals” so much was withdrawn from the ambit of the power of the State Legislative under Entry 23 and legislation of the State which had rested on the existence of power under that entry would to the extent of that “control” be superseded or be rendered ineffective, for here we have a case not of mere repugnancy between the provisions of the two enactments but of a denudation or deprivation of State legislative power by the declaration which Parliament is empowered to make and has made.
27. As noticed above, Rule 27(1)(d) of the Mineral Concession Rules clearly provides that the lessee shall pay surface rent in respect of the surface area used by him, which shall not exceed the land revenue. Similarly, Rule 31 of the MC Rules provides that lessee shall pay rent and water rent to the State Government in respect of parts of the surface of the said land, which shall be occupied or used by the lessee.
28. In the light of the aforesaid fact, surface rent payable by the mining lessee shall have to be specified in the lease deed itself. From Section 9 and 9A of MMDR Act, it is also clear that royalty and dead rent shall be payable by the lessee and the same shall be revised in three years Under the said provisions for revision of surface rent either in the Rule or in the lease deed the reason for not providing clause for revision of the surface rent i.e. if the leased land is not used for extraction of minerals then dead rent is to be paid which is revisable by the Central Government. Once land in the lease is used for extraction of minerals then royalty becomes payable and the Central Government can revise the rate of royalty. Another reason for not making provisions for revision of surface rent during subsistence of the lease is that it depends on the user of the surface, which are subject to various restrictions and limitations.
29. Taking into consideration the Act and the Rules, we have no doubt in our mind in holding that the State Legislature has no legislative competence to issue executive orders for revision of surface rent in respect of the mining lease of major minerals as its jurisdiction is fully occupied by the Central Act and the Rules.
30. Mr. S. Ganesh, learned Counsel appearing for the respondent-State has submitted that the State Government has jurisdiction to levy surface rent for mining of major minerals and to enhance the same even during the subsistence of mining lease is borne out from the Act and the Rules. According to learned Counsel, there is direct nexus of surface rent with the land revenue and Central Act and the Rules Authorise Page 2057 the State Government to fix rate of surface rent with reference to land revenue. Learned Counsel put heavy reliance on the decision of the Supreme Court in the case of D.K. Trivedi and Sons and Ors. v. State of Gujarat and Ors. (1986) Supp. SCC-20, in the case of Raojibhai Jivabhai Patel and Ors. v. State of Gujarat and Ors. 1989 (Suppl.) 2 SCC-744 and in the case of State of M.P. v. Mahalaxmi Fabric Mills ltd and Ors. (1995) Suppl. 1 SCC-642.
31. In D.K. Trivedi case (Supra) the constitutionality of Section 15(1) of the Mines and Minerals (Development and Regulation) Act, 1957 and the power of State Government to make rules under Section 15 to enable them to charge dead rent and royalty in respect of the lease of minor minerals and to enhance the rates of dead rent and royalty during the subsistence of such lease was challenged. Mr. Ganesh learned advocate drew our attention to paragraph 31 of the said decision where their Lordships observed:
31. Entry 54 in the Union List uses the word “regulation”. “Regulation” is defined in the Shorter Oxford English Dictionary, 3rd Edn., as meaning “the act of regulating, or the state of being regulated”. Entry 54 reproduces the language of Entry 36 in the Federal Legislative List in the Government of India Act, 1935, with the omission of the words “and oilfields”. When the Constitution came to be enacted, the framers of the Constitution knew that since early days mines and minerals were being regulated by rules made by Local Governments. They also knew that under the corresponding Entry 36 in the Federal Legislative List, the 1948 Act had been enacted and was on the statute book and that the 1948 Act conferred wide rule-making power upon the Central Government to regulate the grant of mining leases and for the conservation and development of minerals. It also knew that in the exercise of such rule-making power the Central Government had made the Mineral Concession Rules, 1949, and that by Rule 4 of the said Rules the extraction of minor minerals was left to be regulated by rules to be made by the Provincial Governments, Thus, the makers of the Constitution were not only aware of the legislative history of the topic of mines and minerals but were also aware how the Dominion legislature had interpreted Entry 36 in the Federal Legislative List in enacting the 1948 Act. When the 1957 Act came to be enacted, Parliament knew that different State Governments had, in pursuance of the provisions of Rule 4 of the Mineral Concession Rules, 1949, made rules for regulating the grant of leases in respect of minor minerals and other matters connected therewith and for this reason it expressly provided in Sub-section (2) of Section 15 of the 1957 Act that the rules in force immediately before the commencement of that Act would continue in force until superseded by rules made under Sub-section (1) of Section 15. Regulating the grant of mining leases in respect of minor minerals and other connected matters was, therefore, not something which was done for the first time by the 1957 Act but followed a well recognized and accepted legislative practice. In fact, even so far as minerals other than minor minerals were concerned, what Parliament did, as pointed out earlier, was to transfer to the 1957 Act certain provisions which had until then been dealt with under the rule-making power of the Central Government in order to restrict the scope of subordinate legislation. To take into account legislative history and practice when considering the validity of a statutory provision or while interpreting a Page 2058 legislative entry is a well established principle of construction of statutes: see, for instance, State of Bombay v. Narothamdas Jethabai 3 Ors. and State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd.
32. There is no dispute that in respect of the minor minerals the State is empowered under Section 15 to make Rules for regulating and controlling mining lease in respect of the minor minerals. In the said decision, their Lordships observed as under:
51. The next submission was that the rates of royalty and dead rent cannot be enhanced unilaterally without giving an opportunity of being heard to the lessees who would be adversely affected thereby. This submission found favour with the Gujarat High Court in Sonbai case 1. It was sought to be supported by a reference to Sections 9(3), 9A(2) and 28, Under Section 9(3) the Central Government can by notification published in the official Gazette amend the Second Schedule to the 1957 Act so as to enhance or reduce the rate at which royalty is payable and similarly under Section 9A(2) the Central Government can, by notification published in the official Gazette, amend the Third Schedule to the 1957 Act so as to enhance or reduce the rate at which dead rent is payable. Under Section 28, every rule and notification made by the Central Government is to be laid before Parliament and if not approved, it is to be of no effect. There is no such provision with respect to a rule or notification amending a rule made by a State Government. It was, therefore, submitted that in the absence of any provision for legislative approval with respect to the rules made by the State Governments or a notification amending such rules, it is all the more necessary that an opportunity should be given to the concerned lessees to raise their objections to any proposed enhancement. The argument that the lessees who would be affected by an enhancement in the rate of royalty or dead rent should be heard before making such enhancement is based upon a total misunderstanding of the rule-making process and the power to make rules. The enhancement in the rates of royalty and dead rent is made in the exercise of the power to amend the rules framed under Section 15(1). It is thus made in the exercise of statutory power. There is no such principle of law that before such a statutory power is exercised, persons who may be affected thereby should be heard. Whether any opportunity is to be given to persons affected to make representations to the Government would depend upon the form in which the rule-making power is conferred. It is for the legislative body which confers the rule-making power to decide in what form such power should be conferred. In some Acts it is provided that the draft of the rules proposed to be made as also any proposed amendment thereto should be published in the official Gazette so that members of the public may have an opportunity of making such representations or raising such objections as they think fit. Some other Acts provide for rules to be laid before Parliament or the legislature for its approval and to be effective only after such approval is given or to continue in force with such modifications as Parliament or the legislature may make, and if the approval is not given to cease to have any effect. It was, therefore, for Parliament to decide whether rules and notifications made by the State Governments under Section 15(1) should be laid before Parliament or the legislature of the State or not. It, however, thought it fit to do so with respect to minerals other than minor minerals since Page 2059 these minerals are of vital importance to the country’s industry and economy, but did not think it fit to do so in the case of minor minerals because it did not consider them to be of equal importance. An amendment of the rules made under Section 15(1), even though it may have the effect of enhancing the rates of royalty or dead rent does not, therefore, become bad in law because no opportunity of being heard or making a representation is given to persons who would be prejudicially affected thereby. Section 15(1) does not contain any provision for giving any such opportunity and no such provision can be imported into that sub-section.
33. In Raojibhai jivabhai Patel and Others case (Supra) upon which Mr. Ganesh, learned Counsel put reliance, in which validity of notification issued by the Govt. of Gujarat in exercise of power under Section 15 of MMDR Act was challenged whereby rate of royalty payable by the lessee in respect of the minor minerals was fixed or revised. Learned Counsel referred paragraph 9 of the said decision which is quoted as under:
9. We do not also find much substance in the contention that the levy in question is unreasonably heavy and has been imposed in an arbitrary manner. The burden of establishing that the levy is unreasonably heavy, is on the petitioners. It is urged that in the other States the royalty is being levied at the rate of Re I per metric tonne of black trap and hard murrum and Rs. 7 levied in the notification is excessive. The fact that in other States the royalty is fixed at Re 1 is not by itself sufficient to hold that Rs. 7 per metric tonne is unreasonably high rate of royalty. In Trivedi case 1 this Court had upheld the levy of Rs. 4 per metric tonne which had been fixed in 1981 and in 1985 it was increased to Rs. 7. Having regard to the depreciation in the value of the rupee and the increase in the cost of administration of the State, which is ever increasing, as a welfare State we cannot say that Rs. 7 is an unreasonably high rate. We have taken this view after going through the observations made by this Court in Trivedi case I at page 544 where this Court has observed that where a statute confers discretionary powers upon the executive or an administrative authority, the validity or constitutionality of such power cannot be judged on the assumption that the executive or such authority will act in an arbitrary manner in the exercise of the discretion conferred upon it. If the executive or the administrative authority acts in an arbitrary manner, its action would be bad in law and liable to be struck down by the courts but the possibility of abuse of power or arbitrary exercise of power cannot invalidate the statute conferring the power or the power which has been conferred by it. We do not find that the levy is arbitrarily imposed.<
34. As discussed above, there is no dispute with regard to power of the State Government in the matter of regulating the lease of minor minerals in the manner provided in the Rules framed by the State Government. This decision also therefore, will be of no help to the respondents. In the case of M.P. v. Mahalaxmi Fabric Mills Ltd and Ors. (1995) Suppl. 1 SCC-642 similar proposition of law has been laid down by the Supreme Court.
35. In the light of the provisions of the Act and the Rules and the law laid down by the Supreme Court, we shall now examine the impugned resolution issued by the Govt. of Jharkhand department of Mines and Geology. The said resolution is Page 2060 in Hindi. Translated copy of the said resolution, correctness of which has not been disputed by any of the parties, reads as under:
Government of Jharkhand
Department of Mines and Geology
Resolution
Subject: Regarding collection of surface rent on the area of mining leases at part with the land under commercial use.
According to the Rule 27(1)(d) of the Mineral concession Rule, 1960 the mines lease holder has to pay the surface rent and water tax for the area being used for mining work by him at the rate which shall not be more than the land revenue and water tax determinable on such land.
2. Similarly, according to the Rule 29(1)(d) of the Jharkhand Minor Mineral Concession Rule, 2006 the land rent payable by the mine lease holder for the area under use / occupied at the rate which is not more than the land revenue of that area.
3. At present, the surface rent is being assessed in the light of demi-official letter being letter No. 6842 dated 30.9.1965 of Shri K. Abrahim, Commissioner, Mines and Geology, Bihar wherein it has been made clear that the mining work is of commercial nature not of agricultural one. Therefore, the surface rent on the land under mining use / occupied should be at part with the land revenue payable for the land being used for commercial purposes.
4. In the course of state level review, it has been found that at present the surface rent is being collected from the minor and major mineral lease holders by the Divisional Commissioner, Dhanbad at the minimum rate fixed at Rs. 30 per acre for the urban and sub-urban land in the year 1962, whereas the price of land for commercial use like mining has increased heavily and the high profit is being earned by the lease holders by making commercial use in the form of mining work.
5. By the letter of Shri Kamta Prasad Sinha, Advisor cum Land Reform Commissioner, Bihar, Patna bearing letter No. 1021/83 dated 21.5.1983 directives have been given in respect of collection of Salami and land revenue as result of change of nature of the land that if the price of agricultural land changes as result of use of land for commercial purposes.
The amount of Salami shall be equivalent to the price of the land prevalent in the market and the rent shall be 29th part of such Salami i.e. it shall be payable in the place of 5% of the predetermined rent.
6. Under the aforesaid perspective, the matter of collection of the surface rent for the area held under mining lease at part with the land revenue for the land being used for commercial purposes was under consideration of the State Government.
On proper consideration by the State Government the following decisions have been taken:
(a) The area hold for minor and major mineral mining lease shall be treated as held for commercial purposes in accordance therewith the surface rent shall be collected on it.
Page 2061
(b) The annual land rent for the entire area held under minor and major mineral shall be equal to the 5% of the latest market price determined for that particular area by the Dy. Commissioner cum District Registration and it shall be collected by the District / Asst. Mining Officer from the lease holders.
(c) This rate shall be variable from time to time in proportion of the market price determined by the Dy. Commissioner cum District Registrar.
(d) The arrear of the surface rent can be realized by initiating case for auction as a public under the Bihar and Orissa Public Demand Recovery Act, 1914.
7. The said decisions have received consent of the Law Department.
8. The said decisions shall come in force with immediate effect, Order: It is hereby ordered that for the knowledge of the public in general, it may be published in the extra-ordinary number of Jharkhand Gazette.
By the Order of the Governor of Jharkhand
Sd/-
Secretary to the Government
Dated 16.6.2005.
Memo 1055/M Dated 17.6.2005
Copy forwarded to the Superintendent Secretariat Press, Doranda, Ranchi, for publication in the extra ordinary number of Jharkhand Gazette / he is requested to make available 150 copies of the gazette to the Mines and Geology Department, Nepal House, Doranda, Ranchi.
Sd/-
Secretary to the Government
Dated 16.6.2005.
36. In paragraph 4 of the said resolution, it is stated that according to Rule 27(1)(d) of the MC Rules, lessee has to pay surface rent for the year being used for mining work at the rate which shall not be more than land revenue and water tax determinable on such land, whereas Rule 27(1)(d) in fact provides that lessee shall pay surface rent for the surface area used by him for the purpose of mining operation at the rate not exceeding land revenue, land revenue and water cess assessable on the land, as may be specified by the State Government in the lease. The resolution then refers Rule 29(1)(gha) of the Jharkhand Minor Mineral Concession Rules 2006. The resolution further refers letter No. 6842 dated 30.9.65 issued by the Commissioner Mines and Geology on the basis of which surface rent is being assessed. Resolution further says that by letter No. 1021/83 dated 21.5.1983 issued by the Advisor-cum- Land Reforms Commissioner, Bihar Patna giving directive for collection of Salami and land revenue, as a result of change of nature of land. According to the said letter salami shall be equivalent to the price of the land prevalent in the market and the rent shall be 29th part of such Salami i.e. it shall be payable at the rate of 5% of the pre determined rent. On the basis of the aforesaid directives issued vide letter dated 21.5.83 impugned resolution was issued for recovery of Page 2062 surface rent from the holder of the lease of both major and minor minerals treating lease as held for commercial purpose.
37. On the face of the resolution, we are of the definite opinion that said resolution is not only beyond the competence of the State Legislature but also illegal, arbitrary and without application of mind. The letter referred to in the said resolution i.e. letter No. 1021/83-dated 21.5.83 which is the basis of issuance of the impugned resolution has not been produced by the respondent/State. However, the said letter No. 1021/83 dated 21.5.83 was considered by the Division Bench of the Patna High Court in the case of Bajrang Talkies. v. State of Bihar and Ors. 1997 Bihar Revenue Journal Report-65 On the basis of the aforesaid letter demand was raised by the authority of the State Government for payment of salami and rent with respect to the land over which petitioners establishment (Cinema Hall, factory etc.) are situate on the ground that lands are being used for non agriculture purpose. In course of hearing, learned State Counsel fairly conceded that the impugned demand on the basis of letter/circular dated 21.5.1983 cannot be sustained for the reason that the said circular was issued only in respect of the Khas Mahal land and not for any other land.
38. The Division Bench of this Court also considered the aforesaid letter/circular dated 21.5.83 in the case of State of Bihar and Ors. v. Vijay Kumar Choudhary (2002) 2 JCR 56. In that case the question that fell for consideration was as to whether Revenue Authority have jurisdiction to demand salami or commercial rent in the event raiyati holding is used for commercial purposes. The fact of the case was that the writ petitioner constructed Cinema Hall on the raiyati land and was paying rent and taxes including holding tax to different authorities of the State of Bihar (Now Jharkhand). All of a sudden on the basis of the aforesaid circular/letter dated 21.5.83 a demand was raised for payment of commercial rent to the tune of Rs. 2,48,000/-. The writ petition was allowed by a Single Bench and in an appeal filed by the State the Division Bench dismissed the same and held that the letter/circular dated 21.5.83 applies only in respect of the Khas Mahal land. The Division Bench (one of us Justice M.Y. Eqbal as party) observed:
It appears that on the basis of circular No. 1452 dated 21.5.1983 of the Revenue Department, Government of Bihar. Similar demand was raised against the owner of Bajrang Talkies and others who were using the land for commercial purposes. All those person moved the Patna High Court by filing several writ petitions. A Division Bench of the Patna High Court (of which I was a member) quashed the said demand taking notice of the fact that the said circular was held to be not applicable to the land other than Khas Mahal lands. Reference may be made to the decision reported on 1997 Bihar Revenue Labour Journal
39. So far Minor Minerals are concerned, Rule 29(1)(Gha) of the Jharkhand Minor Mineral Concession Rules 2004 is exactly similar to Rule 27(1)(d) of the Mineral Concession Rules 1960. Rule 27 clearly provides that the lessee shall pay surface rent in respect of the land used, which shall not be more than the land revenue of that area.
40. Recently, a Division Bench of the Orissa High Court in WPC No. 11133/05 and other bunch of petitions considered the vires of Orissa Rural Infrastructure And Socio-Economic Development Act, 2004 enacted by State Legislature of Orissa Page 2063 and the Rules framed there in by which Rural Infrastructure and Socio-economic Development Tax was levied on all mineral bearing land in the manner provided under Section 3 of the said Act which was charging section. The Division Bench after considering the provisions of the MMDR Act and the Rules made therein and the law laid down by the Supreme Court held as under:
45. It is, therefore, apparent from the aforesaid discussion that whatever rights are given to a lessee under a mining lease in Form ‘K’ in terms of the provisions of the said Central Act and the Rules framed thereunder are indubitably related to “…the mines beds/veins seams of situated lying and being in or under the lands…” and have no nexus whatsoever with the surface of the land as unit except some privileges etc. to an insifnificant extent as set out therein. Owner or occupier of the surface of the land is usually either the Government or private person. Though under Part VII of the mining lease, lessee is enjoined to pay rents, royalties, water rate etc. he is under no obligation to pay land revenue. In this connection, it may be useful to make a reference to the Constitution Bench decision of the Supreme Court in State of Andhra Pradesh v. Balaram Reddy where it was held that in the circumstances of that case the grant did not include subsoil rights in the Shrotriemdar and the mere fact that grant include the Poramboke would not by itself establish that the subsoil rights were also included in the grant. Therefore, mica mining would be of no legal effect and the lessee cannot put forward the lease for claiming a mining lease from the Government under the Mineral Concession Rules, 1949, after the interest of the Shrotriemdar had been taken over by the Government under Madras Act 26 of 1948. Therefore, it is contended on behalf of the petitioners that a private land owner or occupier may have right over the surface of the land but the same is distinct and different from the rights of a lessee is not liable to pay land tax contemplated under Entry 49 of the State List. Such land tax is payable by owner or occupier of the surface of the land only. What is contemplated by Entry 49 of the State List is merely a tax on surface rights. It does not include subsoil rights in respect of minerals. Only the Government has right over subsoil minerals and none can operate the same except under and in accordance with terms and conditions of a mining lease granted by the Government. A lessee under a mining lease cannot be saddled with land tax in respect of land over which such a lessee does not enjoy any surface right whatsoever except some insignificant privileges to facilitate mining operation. It is further contended that this important distinction between surface right and subsoil right in respect of minerals should not be lost sight of while dealing with this type of cases. Clause 2 of Part VIII of Form ‘K’ in which mining lease is granted appears to be very important in this connection and the same is quoted hereunder:
2. If in accordance with the provisions of Clause 4 of Part VII of this Schedule the lessee/lessees shall offer to pay an occupier of the surface of any part of the said lands compensation for any damage or injury which may arise from the proposed operations of the lessee/lessees and the said occupier shall refuse his consent to the exercise of the right and powers reserved to the State Government and demised to the lessee/lessees by these presents and the lessee/lessees shall report the matter to the Slate Government and shall deposit with it the amount offered as Page 2064 compensation and if the Central/State Government is satisfied that the amount of compensation offered is fair and reasonable or if it is not so satisfied and the lessee/lessees shall have deposited with it such further amount as the State and Central Government shall consider fair and reasonable the State Government shall order the occupier to allow the lessee/ lessees to enter the land and to carry out such operations as may be necessary for the purpose of this lease. In assigning the amount of such compensation the State Government shall be guided by the principles of the Land Acquisition Act.
68. As the lessee under the provisions of the said Central Act are not owners of lands in question, the tax on mineral extracted by them cannot, therefore, be passed off as a tax on land within the meaning of Entry 49 of the State List. In this respect reference may further be made to what has been held by the Apesl Court in State of Bihar v. Indian Aluminium: . It has been held there that Entry 49 of List II of the Seventh Schedule to the Constitution deals with levy of tax directly on land as unit. The land has been garded as meaning the land on the surface and also below the surface. Therefore, in order that tax can be levied under Entry 49 of List II it is essential that land as a unit must exist on which the tax is imposed. In that case Section 3 read with Schedule (and Clauses (a), (b) and (c) of the Act by which the impugned tax was imposed was not on the surface of the land but is on the extent to which the destruction took place. It is with reference to the extent of the empty surface or the void which was created as a result of the mining activity that the tax was levied. Tax, in effect, was levied on the absence of land and not on land itself. The levy was on the void which had been created. The forest land which was being used was not subjected to tax. Schedule to the impugned Act itself showed that the assessment of tax was on excavation and use of forest land for non-forest purpose. Schedule further provided that the rate of tax that was levied, in the case of mining or excavation varied with the extent of the land voided. In case the land had been rehabilitated no tax was due to be levied. Tax was levied in effect on the activity of removal or excavation of land. In other words tax was squarely on the activity of mining because it was under the mining lease that mechanized and non-mechanized excavation as well as underground excavation took place and that was what was referred to in column 1 of the Schedule of the Act impugned in that case while determining the amount of tax leviable. At the most this could be regarded as a tax in respect of land but it was certainly not a tax on land (emphasis supplied). The existing land or trees were not taxed, the tax was leviable only when a non-forest activity took place and the land was not rehabilitated. Therefore, in pith and substance it was a tax on activity on land and not on land itself. Levy in other words was on activity or removal of earth and not on land itself and was, therefore, outside the ambit of Entry 49 of List II. It was further held in that case that one of the facets of tax being levy on land the primary responsibility of the payment of tax was on the owner of the land. In that case the levy was not on general ownership of the land but was on the person who uses it and who may or may not be the owner. The primary liability is on the use by the occupier and if the occupier and the owner are two different persons the liability would be that of the occupier alone and not of the owner. It was Page 2065 further held that the tax contemplated under the Act impugned in that case was one on the excavation and use of forest land and not on the forest land as such (emphasis supplied). Taxing of the undertaking of a non-forest activity in a forest land cannot be regarded as being covered by Entry 49 of the State List because what is sought to be taxed is not land but the tax is in absence of land or forest by reason of the activity of excavation and/or mining or use of forest land for a non-forest purpose.
77. After considering the aforesaid provisions of the impugned Act none should have even an iota of doubt that the impugned levy has absolutely no nexus with land within the meaning of Entry 49 of the State List or with mineral right under Entry 50. Only relation it speaks of is the value of the mineral extracted from such land over a certain period. Therefore, incidence of such tax squarely falls on extract of minerals and not on the land from which such mineral is extracted over a certain period of time. It has been pointed out in paragraph 33 of Kesoram’s case that a ‘tax has two elements, first, the person, thing or activity on which the tax is imposed and second, the amount of tax.” In the present case, we are primarily concerned with the “thing” on which tax is imposed in order to find out true character of the tax. We find from the measure provided itself that “thing” on which levy is imposed is value of mineral produced from coal or mineral bearing land over a certain period of time. Accordingly, the subject matter is not at all covered by Entry 49. It may be covered by Entry 50 subject to other limitations as prescribed therein.
41. There is much difference between the ownership right and surface right over the land. There is also vast difference between the mining lease and the ordinary lease. As noticed above, Rule 27(1)(d) of the M.C. Rule provides that mining lessee shall pay surface rent for the surface area used by him for mining purposes. Rule 31 of the said Rule clearly provides that mining lease shall be in Form ‘K’ and the date of commencement of the period for which mining lease was granted shall be the date on which duly executed deed under the said Rule is registered. There is no dispute that all the mining leases in favour of the petitioners were executed in Form ‘K’ appended with the Rule. It would be very useful to discuss and quote some of the relevant clauses of the said lease deed. Part I of the lease deed provides description and location of the area of the lease. Part II describes liberties, powers and privileges to be exercised and enjoyed by the lessee subject to the restrictions and conditions contained in Part II. Clause I confer power to the lessee to enter upon the land and search for and work. Similarly various clauses confer right to lessee to bring and use machinery equipment and to make road and ways to bring building, road materials to use water from streams and for other purposes. Clause 7 of Part II of the lease confers liberty and power to the lessee to use the land for stacking, heaping, depositing purposes. Clause 7 reads as under:
7. Liberty and power to enter upon and use a sufficient part of the surface of the said lands for the purpose of stacking, heaping, storing or depositing therein any produce of the mines or works carried on and any tools, equipment, earth and materials and substances dug or raised under the liberties and powers mentioned in this part.
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42. Part II of the lease contains the restriction and conditions as to the exercise of the liberties, powers and privileges in Part II. Clause 1 and 5 are worth to be quoted:
1. No building or thing shall be erected, set up or placed and no surface operations shall be carried on in or upon any public pleasure ground, burning or burial ground or place held sacred by any class of persons or any house or village site, public road or other place which the State Government may determine as public ground nor in such a manner as to injure or prejudicially effect any buildings, works, property or rights of other persons and no land shall be used for surface operations which is already occupied by persons other than the State Government for works or purposes not included in this lease. The lessee/lessees shall not also interfere with any right of way, well or tank.
5. The lessee/lessees shall not work or carry on or allow to be worked or carried on any mining operations at or to any point within a distance of 50 metres from any railway line except with the previous written permission of the Railway Administration concerned [or under or beneath any ropeway or any ropeway trestle or station, except under and in accordance with the written permission of the authority owning the ropeway] or from any reservoir, canal or other public works such as public roads and buildings or inhabited site except with the previous written permission of the Deputy Commissioner/Collector or any other officer authorized by the State Government in this behalf and otherwise than in accordance with such instructions, restrictions and conditions either general or special which may be attached to such permission. The said distance of 50 metres shall be measured in the case of railway, reservoir or canal horizontally from the outer toe of the bank of the outer edge of the cutting as the case may be and in case of a building horizontally fro the plinth thereof In the case of village roads no working shall be carried on within a distance of 10 metres of the outer edge of the cutting except with the previous permission of the Deputy Commissioner/Collector or any other officer duly authorized by the State Government in this behalf and otherwise than in accordance with such directions, restrictions and additions, either general or special, which may be attached to such permission.
43. Part V of the lease deed makes provisions for payment or rents and royalties reserved by this lease. Clause 1 speaks about the payment of dead and royalties. Clause 2 provides Rate and mode of payment of dead rent. Clause 3 provides rate and mode of payment of royalty. Clause 4 speaks about payment of surface rent, and water rate. Clause 4 reads as under:
4. The lessee/lessees shall pay rent and water rate to the State Government in respect of all parts of the surface of the said lands which shall from time to time be occupied or used by the lessee/lessees under the authority of these presents at the rate of Rs…and Rs…respectively per annum per hectare of the area so occupied or used and so in proportion for any area less than a hectare during the period from the commencement of such occupation or use until the area shall cease to be so occupied or used and shall as far as possible restore the surface land so used to its original condition. Surface rent and water rate shall be paid as hereinbefore detailed in Clause 2: PROVIDED THAT no such rent/water rate shall be payable in respect of the occupation and use of the area comprised in any roads or ways to which the public have full right of access.
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44. Part VI of the lease deed lays down the provisions relating to the rents and royalties. Part VII lays down other covenants. Clause 2 of Part VII provides that lessee shall and keep at his own expenses of boundary marking, pillars, demarcation etc. Part VIII lays down covenants of the State Government. Clause 2 of Part VIII is worth to be quoted herein below:
2. If in accordance with the provisions of Clause 4 of Part VII of this Schedule the lessee/lessees shall offer to pay an occupier of the surface of any part of the said lands compensation for any damage or injury which may arise from the proposed operations of the lessee/lessees and the said occupier shall refuse his consent to the exercise of the right and powers reserved to the State Government and demised to the lessee/lessees by these presents and the lessee/lessees shall report the matter to the State Government and shall deposit with it the amount offered as compensation and dif the Central/State Government is satisfied that the amount of compensation offered is fair and reasonable or it is not so satisfied and the lessee/lessees shall have deposited with it such further amount as the State and Central Government shall consider fair and reasonable the State Government shall order the occupier to allow the lessee/lessees to enter the land and to carry out such operations as may be necessary for the purpose of this lease. In assessing the amount of such compensation the State Government shall be guided by the principles of the Land Acquisition Act.
45. Part IX of the lease deed lays down the General Provisions. The General Provisions contained free access to the Central Government and the State Government for inspection of the leased hold area, penalty in case of payment of royalty and breach of covenants.
46. From the different clauses of the mining lease as quoted herein above, it is clear that the use of surface of a mining lease is subject to various restrictions and limitations. For example, although by Clause 1 and 7 of Part II of the lease certain opportunities, powers, privileges have been given to the lessee to enter upon the land and to search for mining and to win the minerals and to use sufficient part of the surface of the leased hold area in stacking, heaping and depositing etc. but the lessee has been prohibited from any surface operation in public pleasure ground, burial ground or the place held sacred by any class or any house or village site, public road etc. Similarly by Clause 1 of Part IV of the lease, the State Government has been empowered to enter upon the lease and to mine and carry the minerals other than those, which are covered by the lease. For that purpose, the State Government or any other person authorized by the Government, sink, drive, use such pits shafts inclines etc. in respect of the leased hold land. Similarly, there is an indemnity clause in Part VII of the lease deed whereby lessee was indemnified by the Government and also cast a duty upon the lessee to report discovery of other minerals and pay compensation for injury to third party and also not to obstruct working of other minerals. The lessee is also under obligation in terms of Clause 2 of Part VIII of the deed to pay compensation for acquisition of land of third party. The lessee shall also be prohibited from carrying on any mining operation on or at any point within the distance of 50 metres from railway line except with the permission of the railway administration. It is also important to note that the Government has the right to grant lease to third party in respect of the same leasehold land for Page 2068 carrying on mining activities in respect of different minerals. In our opinion, therefore, the mining lease cannot be compared with any other lease of the land where right of enjoyment of the land is exclusively transferred to the lessee. In our considered opinion, therefore, the surface rent in respect of the mining lease cannot and shall not be equal to the land revenue payable in respect of other lease hold land used for commercial purpose.
47. As noticed above, Entry 45 of List II relates to land revenue including assessment and collection of revenue. Entry 46 relates to taxes on agricultural income. Entry 49 relates to taxes on land and building and Entry 50 relates to taxes on mineral right subject to any limitation imposed by the Parliament by law relating to mineral development. From Entry 50 also it is clear that imposition of any tax or mineral right by the State Government shall be subject to any limitation imposed by the Parliament by law relating to mineral development.
48. Be that as it may, when the imposition of surface rent is beyond the legislative power of the State Government then by executive orders of the State demand of surface rent treating mining leasehold used for commercial purposes is uncalled for. In our considered opinion, therefore, demand of surface rent both for major and minor minerals by issuing executive orders is illegal, arbitrary and wholly without jurisdiction.
49. In the result, all these writ applications are allowed and the impugned resolution issued by the State Government, Department of Mines and Geology is quashed. Consequently, all demand notices issued by the respondents are also stand quashed.