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2007 DIGILAW 396 (JHR)

Misrilall Jain And Sons v. State Of Jharkhand

2007-05-07

DILIP KUMAR SINHA, M.Y.EQBAL

body2007
JUDGMENT M.Y. Eqbal, J. 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 Concession Rules 2004 (in short MMC Rules) in respect of major and minor minerals. Petitioners 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. 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. 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 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. 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. 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 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. 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. 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. 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. (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. 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. 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 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; (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. 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. 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 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. 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