1990 (4) TMI 302 - HC - Indian Laws

Summary

Issues Involved:
1. Legislative competency of the Andhra Pradesh Legislature in passing the Andhra Pradesh (Mineral Rights) Tax Act, 1975.
2. Ultra vires nature of the levy and collection of mineral rights tax under the State Act.
3. Interpretation of relevant constitutional entries and provisions of the Mines and Minerals (Regulation & Development) Act, 1957.
4. Applicability of the Supreme Court decision in India Cement Ltd. v. State of Tamil Nadu.
5. Refund of tax already collected.

Detailed Analysis:

1. Legislative Competency of the Andhra Pradesh Legislature:
The primary issue in this batch of writ petitions is the legislative competency of the Andhra Pradesh Legislature in passing the Andhra Pradesh (Mineral Rights) Tax Act, 1975. The petitioners argue that the entire field of legislation regarding the regulation and development of mines and minerals, including the right to collect royalty and tax on minerals, is vested in Parliament by virtue of the Mines and Minerals (Regulation & Development) Act, 1957. They contend that the State legislatures are denuded of their power to levy tax on all mineral rights held by holders of mining leases.

2. Ultra Vires Nature of the Levy and Collection of Mineral Rights Tax:
The petitioners seek a declaration that the levy and collection of mineral rights tax under the State Act is ultra vires of the powers of the State Legislature. They argue that the State should be restrained from levying and collecting the said tax in the future and that the tax already collected should be refunded. The State Act aims to levy a tax on mineral rights of holders of mining leases in respect of certain minerals in Andhra Pradesh, at a rate not exceeding one-fourth of the amount of royalty payable.

3. Interpretation of Relevant Constitutional Entries and Provisions:
The judgment delves into the interpretation of Entry 54 of List I and Entries 23, 49, and 50 of List II of the 7th Schedule of the Constitution. Entry 54 of List I pertains to the regulation of mines and mineral development under the control of the Union. Entries 23 and 50 of List II deal with the regulation of mines and mineral development and taxes on mineral rights, respectively, subject to any limitations imposed by Parliament.

The relevant provisions of the Mines and Minerals (Regulation & Development) Act, 1957, particularly Sections 9 and 9-A, which deal with royalties and dead rent, respectively, are examined. Section 9 of the Central Act provides for the levy of royalties on mining leases, and Section 9(3) imposes a limitation on enhancing royalty rates more than once during any period of three years.

4. Applicability of the Supreme Court Decision in India Cement Ltd. v. State of Tamil Nadu:
The petitioners rely on the Supreme Court's decision in India Cement Ltd. v. State of Tamil Nadu, where it was held that royalty is a tax. The Supreme Court in India Cement's case concluded that the entire field of regulation of mines and mineral development is occupied by the Central Act, 1957, leaving no room for the State Legislature to legislate under Entry 23 of List II. The judgment in India Cement's case also held that 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.

5. Refund of Tax Already Collected:
The judgment concludes that Section 3 of the State Act, 1975, is ultra vires of the powers of the State Legislature, and as all other provisions are dependent on Section 3, the entire State Act, 1975, is declared ultra vires. However, the amounts already collected need not be refunded by the State due to the justification for the levy and collection in view of the earlier decision in H.R.S. Murthy's case. The State is restrained from levying and collecting any mineral rights tax in the future under the provisions of the State Act, 1975.

Conclusion:
The Andhra Pradesh (Mineral Rights) Tax Act, 1975, is declared ultra vires of the powers of the State Legislature, and the State is restrained from levying and collecting the said tax in the future. The amounts already collected need not be refunded. The judgment relies heavily on the Supreme Court's decision in India Cement Ltd. v. State of Tamil Nadu, which held that royalty is a tax and that the entire field of regulation and development of mines and minerals is occupied by the Central Act, 1957.