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Karnataka High Court · body

2009 DIGILAW 9 (KAR)

S. v. Sreenivasulu VS The State of Karnataka

2009-01-07

RAM MOHAN REDDY

body2009
Judgment :- (This Writ petition is filed under Articles 226 and 227 of the Constitution of India praying to declare that the respondents have no authority to impose or levy and demand any forest lease rent supervision charges and forest development tax in respect of schedule mining leases for competence under any State of Central Enactment to make such a Demand). Common questions of fact and that of law arise for decision making hence with the consent of learned counsel for the parties, the petitions are clubbed together, finally heard and are disposed of by this common order. 2. Thepetitioners are in possession of forest land in Bellary District to mine iron ore under registered lease deeds executed by the State of Karnataka. The State Government, by letter dt. 4/5.7.1974 imposed a lease rent of Rs.250/- per acre (Rs.625/- per hectare), per annum and by Govt. Order No. FEE 52-FM-94 dt. 21.5.1997 enhanced the lease rent to Rs.5,000/- and in addition, imposed supervision charges at Rs.187.50, per hectare, of the leased land. By another Govt. Order bearing No.APG 69-FFM-96 dt. 29.8.1997 the lease rent was revised thus: (a) for the first 5 years :Rs. 1,000/- (b) for the next 5-10 years : Rs. 2,000/- (c) from 10-15 years : Rs. 3,500/- (d) from 15th year onwards :Rs.5,000/- Guidelines in the matter of recovery of lease rents and supervision charges were in the Order No.APG 93-FFM-2001 dt. 26.6.2003, of the State Government. 3. The petitioners having paid part of the lease rent and supervision charges, under protest, led to the Deputy Conservator of Forest issuing “lease rent demand notices” calling upon the petitioners to pay the balance. 4. According to the petitioners, the mining leases sanctioned by the State Government in the first instance prior to 1980, were under the Mines and Minerals (Development and Regulation) Act 1957, for short MMRD Act and Mineral Concession Rules 1960, for short Rules of 1960. 5. In view of the directions of the Apex Court in T.N. Godavarman Thirumulkpad –v- Union of India AIR 1997 SC 1228 , the State Government issued notices to all the lessees to stop mining activity from January 1997 and after securing the approval of the Central Government under Section 2 of the Forest Conservation Act 1980, renewed the leases subject to certain conditions. The petitioners having invested money, labour, infrastructure and left with no alternative, entered into lease agreements drawn up accordance with Form No.K under Rule 31 of Rule of 1960, agreeing to pay royalty at the rate specified in the II Schedule under Section 9(2) or dead rent specified in the III Schedule under Section 9-A of the MMRD Act, whichever is higher, in addition to Surface Rent and water rate under Rule 27(d) of the Rules of 1960 and (a) Compensatory aforestation charges; (b) penal aforestation charges; and (c) amounts towards transfer of C & D class lands for aforestation, under the Forest (Conservation) Act 1980 and Rules framed therein. 6. It is the allegation of the petitioners that the State Government, in the absence of legislation, had no authority in law to impose, demand and recover lease rent and supervision charges, for lease of forest land. Hence these petitioners. 7. The petitions are opposed by filing statement of objection of the respondent-State and its authorised department inter alia contending that the lease rent and supervision charges are a tax on the leased forest land, not impinging upon the MMRD Act and Rules of 1960 and that the orders impugned issued by the Executive in exercise of a jurisdiction, in law, and hence, legal and valid. 8. The contention of the petitioner as urged by the learned Sr.counsel is that the MMRD Act, the Concession Rules of 1960, Forest (Conservation) Act 1980, fully cover the field leaving no scope for legislation by the State to impose a tax in the form of lease rent and supervision charges on the leased forest land. According to the learned Sr.counsel the Government Orders impugned trench upon the field disclosed in the declaration by the parliament that the ‘control and regulation’ of mines and mining activity should rest in the Central Government and hence unconstitutional. It is further contended that land revenue being a share from out of the produce of the land for which royalty/dead rent is paid, on extraction of the mineral from the leased lands, tax cannot be imposed and recovered. 9. Sri.Keshav Reddy, learned Govt. Advocate addressed arguments in great elaboration with reference to several reported opinions of this Court as well as that of the Apex Court, to contend thus: (a) The non-quoting or wrong quoting of provisions of law will not vitiate the Govt. 9. Sri.Keshav Reddy, learned Govt. Advocate addressed arguments in great elaboration with reference to several reported opinions of this Court as well as that of the Apex Court, to contend thus: (a) The non-quoting or wrong quoting of provisions of law will not vitiate the Govt. Orders impugned, if the source of power can be traced either to a statute or to the Constitution; (b) That Article 162 of the Constitution of India provides that the executive power is co-extensive with that of legislature if the field is not covered by legislation; (c) That the legislature, in exercise of jurisdiction under Article 265 of the Constitution of India has the authority of law to impose a tax subject to the conditions laid down in Article 13 of the Constitution; (d) That mere declaration under entry 54 list I (Union list) incorporated in the MMRD Act 1957 does not denude the power of State to legislate on the subjects in list II (State list); (e) That the State is empowered to levy tax on land under entry 49 list II (State list), despite the declaration by the Union of India under entry 54 List I in MMRD Act. 10. At the outset there can be no dispute over the contentions advanced by the learned Govt. Advocate, more appropriately in the light of the authoritative pronouncement of the Apex Court in State of West Bengal –v- Kesoram Industries Limited (2004) 10 SCC 201 , wherein per majority the Apex Court having considered all important earlier pronouncements which have a bearing on its decision making recorded its summary of finding in paragraph 135. Advocate, more appropriately in the light of the authoritative pronouncement of the Apex Court in State of West Bengal –v- Kesoram Industries Limited (2004) 10 SCC 201 , wherein per majority the Apex Court having considered all important earlier pronouncements which have a bearing on its decision making recorded its summary of finding in paragraph 135. According to their Lordships: i) the power of ‘Regulation and control’ is separate and distinct from the power of taxarion being two fields for the purpose of legislation; ii) the nature of tax levied is different from the measure of tax; iii) Entries 52,53 and 54 in List I are not heads of taxation but are general entries while fields of taxation are covered by entries 49-50 in list II which remain with the State legislature in spite of the Union having enacted laws by reference to entries 52,53 and 54 in List I; iv) the Union may impose limitation of State’s otherwise or plenary power to levy taxes to entry 49 and 50 in List II and to define the extent and sweep off State limitations; v) the entries in List I and List II must be so construed as to avoid conflict and if there is conflict the correct approach is to find an answer to three questions step by step as set out therein; vi) ‘Land’ the term occurring in entry 49 of List II has a wide connotation though subjected to different user and tax would remain tax on land and would not become a tax on the nature of its user; vii) tax on land must be a levy having some direct and definite relationship with the land and it is open for the legislature to adopt any one of the well-known method of determining the value of land such as annual or capital value of land or its productivity; viii) the primary object and essential purpose of legislation must be distinguished from its ultimate or incidential results or consequences, for determining the character of the levy; and ix) The taxes on land and building in entry No.49 of List II cannot be levied by the Union. In addition, the Apex Court after considering several judicial dicta on interpretation of taxing statute culled out the following principles: “111. In addition, the Apex Court after considering several judicial dicta on interpretation of taxing statute culled out the following principles: “111. The judicial opinion of binding authority flowing from several pronouncements of this Court has settled these principles: (i) in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the Section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the tax-payer escaping if the letter of the law fails to catch him on account of Legislature’s failure to express itself clearly. (See, Justice G.P.Singh, ibid, pp.638-639). 114. The primary purpose of taxation is to collect revenue. Power to tax may be exercised for the exercised for the purpose of regulating an industry, commerce or any other activity, the purpose of levying such tax, an impose to be more correct, is the exercise of sovereign power for the purpose of effectuating regulation though incidentally the levy may contribute to the revenue. Cooley in his work on Taxation (Vol. 1, Fourth Edition) deals with the subject in paragraphs 26 and 27. “There are some cases in which levies are made and collected ‘under the general designation of taxes, or under some term employed in revenue laws to indicate a particular class of taxes, where the impositions of the burden may fairly be referred to some other authority than to that branch of the soverign power to the State under which the public revenues are apportioned and collected. The reason is that the imposition has not for its object the raising of revenue but looks rather to the regulation of relative rights, privileges and duties as between individuals, to the conservation of order in the political society, to the encouragement of industry, and the discouragement of pernicious employments. The reason is that the imposition has not for its object the raising of revenue but looks rather to the regulation of relative rights, privileges and duties as between individuals, to the conservation of order in the political society, to the encouragement of industry, and the discouragement of pernicious employments. Legislation for these purposes it would seem proper to look upon as being made in the exercise of that authority which is inherent in every sovereignty, to make all such rules and regulations as are needful to secure and preserve the public order, and to protect each individual in the enjoyment of his own rights and privileges by requiring the observance of rules of order, fairness and good neighbourhood, by all around him. This manifestation of the soverign authority is usually spoken of as the police power. The power to tax must be distinguished from an exercise of the police power (State –Vs-Tucker, 56 SC 516). The political power ‘is a very different one from the taxing power, in its essential principles, though the taxing power, when properly exercise, may indirectly tend to reach the end sought by the other in some cases”.(P.94) “The distinction between a demand of money under the police power and one made under the power to tax is not so much one of form as of substance”. (p.95). The distinction between a levy in exercise of police power to regulate and the one which would be in nature of tax is illustrated by Cooley by reference to a license. He says – ‘So-called license taxes are of two kinds. The one is a tax for the purpose of revenue. The other, which is strictly speaking, not a tax at all but merely an exercise of the police power, is a fee imposed for the purpose of regulation”. (p.97). 115. “Suppose a charge is imposed partly for revenue and partly for regulation. Is it a tax or an exercise of the police power? Other considerations than those which regard the production of revenue are admissible in levying taxes, and regulation may be kept in view when revenue is the main and primary purpose. The right of any sovereignty to look beyond the immediate purpose to the general effect neither is nor can be disputed. Other considerations than those which regard the production of revenue are admissible in levying taxes, and regulation may be kept in view when revenue is the main and primary purpose. The right of any sovereignty to look beyond the immediate purpose to the general effect neither is nor can be disputed. The Government has general authority to raise a revenue and to choose the methods of doing so; it has also general authority over the regulation of relative rights, privileges and duties, and there is no rule of reason or policy in Government which can require the legislature, when making laws with the one object in view, to exclude carefully from its attention the other. Nevertheless cases of this nature are to be regarded as cases of taxation. If revenue is the primary purpose, the imposition is a tax. Only those cases where regulation is the primary purpose can be specially referred to the police power. If the primary purpose for the legislative body in imposing the charge is to regulate, the charge is not a tax even if it produces revenue for the public”. (Cooley, ibid, pp.98-99).” 11. There can be also no dispute over the proposition that Article 162 of Constitution of India invests in the executive a co-extensive jurisdiction with that of the legislature if the field is not covered by legislation of the legislature, in the light of the reported opinions of the Apex Court in the cases of Rai Saheb Ram Jawaya Kapur & Others –V- State of Punjab( AIR 1955 SC 549 ), M.R. Balaji –V- State of Mysore ( AIR 1963 SC 649 ); State of Andhra Pradesh and another –v- Lavu Narendranath & others ( AIR 1971 SC 2560 ); M/s. Bishambar Dayal Chandra Mohan –V-State of Uttar Pradesh ( AIR 1982 SC 33 ) and that of the Division Bench of this Court in M.V. Dixit –V- State of Karnataka and others (2004 Lab.I.C.3272). 12. 12. The preamble in the orders of the State Government, impugned, discloses reference to particulars regarding recommendations made by the State to Central Government for release of forest land for mining purposes in favour of the petitioners and the approval conveyed by the Central Government, while the operative portion of the orders accords approval for the release of the said lands in favour of the lessees, subject to payment of lease rent and supervision charges, amongst other conditions such as payment of royalty, forest development tax and other taxes as per the prevailing rates, to the Forest Department. Neither the orders impugned nor the statement of objections filed by the State disclose the jurisdiction of the State Government to impose lease rent and supervision charges nor the method or rate at which the amounts are calculated. It is only in the course of arguments that the learned Govt.Advocate contends that the impost is by way of a tax under Article 265 in exercise of executive function under Article 162 of the Constitution of India. 13. In the absence of relevant particulars and material to establish that the orders impugned are in the nature of a tax law, it is not possible for this Court to interpret the same on presumptions or assumptions in the light of the principles enunciated by the Apex Court, as extracted, supra, in the case of State of West Bengal. A taxing statute needs to be interpreted in the light of what is clearly expressed and cannot imply anything which is not expressed nor import provisions of law so as to supply any deficiency. In addition there is absence of clear words in the orders impugned, in relation to the ambit of the charging section. 14. Power to tax is not an incidental power under the Constitution. The Government has general authority to raise revenue and choose the methods of doing so. A financial levy must have a mode of assessment, though, is not determinative of the character of a tax. It is permissible to classify land by reference to its user as a separate unit for the purpose of levy of cess. 15. The Government has general authority to raise revenue and choose the methods of doing so. A financial levy must have a mode of assessment, though, is not determinative of the character of a tax. It is permissible to classify land by reference to its user as a separate unit for the purpose of levy of cess. 15. Applying the ratio laid down in the case of State of West Bengal (supra2), to the facts of the case, the orders impugned do not disclose whether the primary purpose of the State Government in imposing the lease rent and supervision charges is to regulate and, if so, it is not a tax, even if it is assumed that it is raise revenue for the public. It is also not known as to whether the impost is partly for revenue or partly for regulation. It is also not known whether the levy has some direct and definite relationship with the land as a unit, or the mode of determining the value of the land such as annual or capital value or its productivity. The condition incorporated in the orders impugned to pay the tax is both sketchy and skimpy in details, unable to identify its primary object, so as to distinguish its ultimate or incidental results or consequences to determine the character of the levy. Yet another gray area is the fact that it is not known as to whether the lease rent and supervision charge tantamounts to a tax or any exercise of police power. 16. In short, the State having not discharges its obligation to establish that the impugned Government orders are under Article 265 and entry 49 List II, in exercise of executive function under Article 162 of the Constitution of India, in respect of a matter which the State Legislature has not legislated upon, coupled with the absence of relevant material, the condition in the orders impugned to pay lease rent and supervision charges is not an impose in accordance with law. As a consequence, the demand notices calling upon the petitioners to pay the balance lease rentals and supervision charges are without authority of law. In the result, these writ petitions are allowed. The condition in the impugned Government Orders, regarding payment of lease rent and supervision charges and the demand notices are quashed.