1986 (3) TMI 339 - HC - Indian Laws

Summary

Issues Involved:
1. Constitutional validity of the imposition of Mineral Area Development cess.
2. Legislative competence of the State Legislature to enact the law imposing the cess.
3. Nature of the imposition: whether it is a fee or a tax.
4. Applicability of relevant entries in the Seventh Schedule of the Constitution.
5. Refund of the amounts recovered as cess.

Detailed Analysis:

1. Constitutional Validity of the Imposition of Mineral Area Development Cess:
The petitions challenged the constitutional validity of the imposition of Mineral Area Development cess under Section 9 of the Madhya Pradesh Karadhan Adhiniyam, 1982, as amended by subsequent Acts. The imposition is payable by the person holding a mining lease for a major mineral on the land held under such a lease for undertaking mining operations.

2. Legislative Competence of the State Legislature:
The primary contention was the legislative competence of the State Legislature to enact the law imposing the mineral areas development cess. The petitioners argued that the State Legislature lacked the competence to impose such a fee, as it falls under the Union List's purview following the declaration made by the Parliament under Entry 54 of List I through the Mines and Minerals (Regulation and Development) Act, 1957.

3. Nature of the Imposition: Fee or Tax:
The first issue was to determine whether the imposition was a fee or a tax. The petitioners claimed it was a fee, which could only be levied by the State Legislature under Entry 66 read with Entry 23 of List II. The State contended it was a tax on land or mineral rights, which the State Legislature was empowered to impose under Entries 49 and 50 of List II.

The court referred to the Supreme Court's decision in City Corporation of Calicut vs. T. Sadasivan, which clarified that the traditional concept of quid pro quo in a fee is evolving. The levy must have a relation to the services rendered, even if indirect. The court concluded that the mineral areas development cess is a fee, as it is applied towards the development of mineral-bearing areas, benefiting those paying the cess.

4. Applicability of Relevant Entries in the Seventh Schedule:
The court examined the relevant entries in the Seventh Schedule:
- Union List (List I): Entry 54 pertains to the regulation of mines and mineral development under the control of the Union.
- State List (List II): Entry 23 pertains to the regulation of mines and mineral development, subject to Union control. Entry 49 pertains to taxes on lands and buildings, and Entry 50 pertains to taxes on mineral rights, subject to Parliament's limitations.

The court noted that the Parliament's declaration under Entry 54 of List I through Section 2 of the Mines and Minerals (Regulation and Development) Act, 1957, supersedes the State Legislature's power under Entry 23 of List II. Therefore, the State Legislature was not competent to impose the fee under Entry 23 read with Entry 66 of List II.

5. Refund of the Amounts Recovered as Cess:
The court concluded that the mineral areas development cess is a fee, and the State Legislature was not competent to impose it. Consequently, the imposition was struck down as unconstitutional. The respondents were restrained from recovering any amount as mineral areas development cess, and the amounts already recovered were directed to be refunded to the petitioners.

Conclusion:
The court allowed the petitions, declaring the imposition of mineral areas development cess unconstitutional. The respondents were restrained from recovering the cess, and any amounts already recovered were to be refunded to the petitioners. The court awarded costs to the petitioners, with counsel's fee set at Rs. 200 if certified.