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TMI Blog1995 (4) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court of Orissa in a series of writ petitions. The main controversy in the cases was regarding the levy of tax under the Act on coal bearing lands . By a common Judgment dated 26.4.1994 the Division Bench of the High Court held that the State Legislature did not have the competence to levy the tax on coal bearing lands and struck down Section 3(2)(c) of the Act as well as the schedule attached to the act levying tax of ₹ 32,000 per acre on coal bearing lands and also the consequential demand notices and certificate proceedings. As a sequel thereto, the demands raised by Mahanadi Coalfields Ltd. against the traders and consumers on account of additional burden of tax on lands were also quashed. The High Court also took the view that the levy would be hit by Section 9A of Mines and Minerals (Regulation and Development) Act, 1957, (Act 67 of 1957) hereinafter referred to as 'M.M.R.D. Act' and the levy is also discriminatory and hit by Article 14 of the Constitution of India'. The question of passing on the burden by Mahanadi Coalfields Ltd. was left open, though the High Court opined that if the tax is on lands, the burden cannot be passed on to the consume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, learned Attorney General Sri M.K. Banerjee and the other counsel who supported him, contended that in substance, the levy is on minerals and mineral rights alone and not a tax on land covered by Entry 49, List II of the Seventh Schedule. Since substantially the levy is on minerals or on mineral rights, even if the levy falls under Entry 23 or 50, List II of the Seventh Schedule (Regulation of mines mineral development or Tax on mineral rights), it is subject to limitation imposed by Parliament under the law relating to regulation of mines and mineral development. Parliament has legislated on the subject under Entry 54, List I of the Seventh Schedule and has enacted the M.M.R.D. Act, which covers the field. In this view, the Orissa Act 36 of 1992 is ultra vires and beyond legislative competence. It was also contended that in effect and substance the levy is only on coal bearing lands without any basis, and so arbitrary and hit by Article 14 of the Constitution. Various other pleas taken up before the High Court to assail the levy were also taken up before us. 3. In order to evaluate the merits of the rival pleas urged before us, it is necessary to bear in mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PROGRAMMES. Be it enacted by the Legislature of the State of Orissa in the Forty-third Year of the Republic of India as follows : .... 2. In this Act, unless the context otherwise requires,- (a) annual value in relation to a financial year mean6- (i) in relation to land held by a raiyat, the rent payable by such raiyat to the landlord immediately under whom he holds the land: .... (a-1) 'coal-bearing land' means any land acquired or declared from time to time under any law for the purpose of obtaining coal; .... (c) 'land' means land of whatever description which is cultivated, uncultivated or covered with water, and includes all benefits to arise out of land and things attached to the earth or permanently fastened to anything which is attached to the earth, but does not include crops of any kind, or houses, shops or other buildings; (d) 'mineral-bearing land' means mineral-bearing land or quarry held for carrying on mining operations; (e) 'prescribed' means prescribed by rules; 3; (1) On and from the commencement of this Act, all lands shall be liable to payment of rural employment, education and production tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuance to the report of that Committee, the Government promulgated notification dated 16.9.1994, No. 12372-VII(A)SM- 23/94/SM, adding Schedule C prescribing rates of taxes for various mineral bearing lands (Aniiexure-B, page 270 of Paper Book). (This is subsequent to the decision of the High Court). Schedule C is follows : SCHEDULE - C (See Rule 2-A) ______________________________________________________________ Serial Description of mineral Rate of tax per No. bearing lands. acre. ______________________________________________________________ 1. Land bearing Asbestos ₹ 20.00 ______________________________________________________________ 2. Land bearing Bauxite ₹ 4,965.00 ______________________________________________________________ 3. Land bearing Chromite ₹ 26,960.00 ______________________________________________________________ 4. Land bearing Graphite ₹ 702.00 ______________________________________________________________ 5. Land bearing Lead Ore ₹ 9,942.00 ______________________________________________________________ 6. Land bearing Mica ₹ 710.00 ______________________________________________________________ 7. Land bearing Quartz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication; Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years. 9-A. 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, (56 of 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 Government may, by notification in the Official Gazette, amend the Third Schedule so as to enhance or reduce the fate at which the dead rent shall be payable in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per tonne (v) Group V coals: Non-coking coal Grade F Two rupees and fifty Non-coking coal Grade G paise per tonne (vi) Group VI Coals: Coal produced in Andhra Five rupees per tonne Pradesh (Singareni Collieries Company Limited) THE THIRD SCHEDULE (See Section 9A) Dead Rent (1) The rates of dead rent applicable to the leases other than those obtained for supply of raw material to the industry owned by the concerned lessee: (RATES OF DEAD RENT IN RUPEES PER HECTARE PER ANNUM) __________________________________________________________________________ Category of the Mining 1st year 2nd to 5th 6th to 10th 11th year of Lease of the year of year of the leases lease the lease lease onwards __________________________________________________________________________ 1 2 3 4 5 __________________________________________________________________________ 1. Lease area upto 50 Nil 30 60 90 hectares __________________________________________________________________________ 2. Lease area (above 50 Nil 40 80 120 hectares but not exceeding 100 hectares.) __________________________________________________________________________ 3. Lease area above 100 Nil 60 100 150 hectares. ____________________ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anguage of the entries. But some of the entries in the different lists or in the same list may overlap or may appear to be in direct conflict with each other. It is then the duty of this Court to reconcile the entries and bring about a harmonious construction. In in re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, 1939 FCR 18 : AIR (1939) FC 1, Sir Maurice Gwyer proceeded to state: 'Only in the Indian Constitution Act can the particular problem arise which is now under consideration; and an endeavour must be made to solve it, as the Judicial Committee have said by having recourse to the content and scheme of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying, the language of the one by that of the other. In K.C. Gajapati Narayan Deo and Ors. v. The State of Orissa [1954] SCR 1, the Constitution Bench of this Court stated at page 11 thus: If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the enactment as a whole, to its objects and to the scope and effect of its provisions. If on such examination it is found that the legislation is in substance one on a matter assigned to the legislation, then it must be held to be valid in its entirety, even though it might incidentally trench on matters which are beyond its competence. (emphasis supplied) In Buxa Dooars Tea Company Ltd. and Ors. (supra) a Bench of two Judges of this Court held that in order to determine the true nature of a levy, the substance of the legislation should be ascertained from the relevant provisions of the statute. In K.P. Varghese v. Income Tax Officer, Emakulam and Anr. , in explaining the extent to which external aid can be resorted to in the interpretation of a statute, this Court held at page 1930, thus: ...the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation, and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of excise but a fee. The question turned on the impact of MMRD Act, on the States' power to levy a fee under Entry 66 read with Entry 23 of List II as a consequence of the declaration contained in Section 2 of the Central Act 53 of 1948. The Court held that the declaration by Parliament in terms of Entry 54 of List I of the Seventh Schedule operated as a limitation on the legislative competence of the State Legislature itself. The Court was inclined to the view that if Central Act 53 of 1948 contained the declaration referred to in Entry 23 of the List II, there would be no difficulty in holding that the declaration covered the field of conservation and development of minerals and the said field was indistinguishable from the field covered by the Orissa Act. But it was found by the Court that the declaration made by Section 2 of the Central Act (Act 53 of 1948) did not constitutionally amount to the requisite declaration by Parliament and that the declaration did not cover the field covered by the Orissa Act, and so the limitation imposed by Entry 54 of List I does not come into operation. On the second occasion, when Orissa Act 27 of 1952 came up for consideration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision has been made in the Bill that under the Orissa Cess Act, 1962 one who has paid taxes will not be further liable to pay tax under the present Bill. Therefore there should be no apprehension in the mind of the Hon'ble Members that either it will be double taxing or the cultivators who have already over-burdened with tax will be further liable to pay any tax. Stress has been given on imposing tax particularly on the mineral bearing lands. You know, Sir, ours is a State which is full of mineral resources. Even though we are rich in from 1.6.1958, on which date the MMRD Act of 1957 came into force. This Court reached the conclusion that the Central Act 67 of 1957 contained the requisite Parliamentary declaration in Section 2 of the Act to occupy the entire field of legislation covered under Entry 54 of List I, and since the aforesaid Central Act covered the same field as the State Act of 1952 in regard to mines and mineral development, the earlier decision in Hingir Rampur Coal Company v. State of Orissa and Ors. AIR (1961) SC 549, concluded the matter and the State legislature was denuded of its powers to enact any law on the subject. It is thereafter, Orissa Cess Act, (Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view the Orissa Cement Case and India Cement case, the two judgments of the Supreme Court, this Bill has been introduced. (emphasis supplied) 10. Let us examine the crucial provisions of Orissa Act 36 of 1992. The charging section provides that all lands shall be liable to payment of rural employment, education and production tax assessed in the prescribed manner subject to provisions thereafter contained. The proviso to Section 3(1) of the Act states thus: Provided that any land which is liable to payment of cess under the Orissa Cess Act, 1962 shall not be liable to payment of rural employment, education and production tax. Though the charging section provides for a levy on all lands, land which is liable to payment of tax under the Orissa Cess Act, 1962 shall not be liable to payment of the rural employment, education and production tax. Section 4 of the Orissa Cess Act, 1962, as it originally stood, is as follows: 4. All lands to be liable to payment of cess. (1) From and after the commencement of this Act all lands shall be liable to the payment of cess determined and payable as herein provided: Provided that no such cess shall be payable in respect of lands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for carrying on mining operations would be taken in by the said definition. It is patently clear that minerals , which are benefits to arise out of land, will be roped in within the purview of the levy under Section 3(1) read with Section 2(c) of the Act. So the charging section of the impugned Act imposes a tax on the minerals also and not confined to a levy on land or surface characteristic of the land. Yet another aspect that is self-evident is that for all lands, other than mineral bearing land, the tax is levied at a percentage of the annual value of the land . So far as tax on mineral bearing land is concerned, it is for the State Government to prescribe the same and it has been so fixed in accordance with Section 3(4)(i) of the Act based on average annual income . As stated in paragraph 3 (supra), by adding Schedule C as per Notification dated 26.9.1994 (Annexure-B, page 270 of Paper Book), the rates of tax are fixed for different kinds of minerals per acre, obviously based on average annual income . With regard to coal bearing land, as per Section 3(2)(c), the statute itself has specified the rate of tax in the Schedule at ₹ 32,000 per acre. We have already seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, fee or rent, are provided in the said Act. In particular, Section 9-A provides payment of dead rent as provided therein by the holder of a mining lease to the State Government at the rates specified in the Third Schedule to the Act. And the proviso thereto states that in cases where the holder of the mining lease is to pay royalty under Section 9, he shall be liable to pay either royalty under Section 9 or the dead rent, as provided under Section 9-A, whichever is greater. Section 9-A enables the Central Government to enhance or reduce dead rent by amending the Third Schedule. The Second and the Third Schedules provide varying rates for different minerals including coal. Since exhaustive provisions as also the Parliamentary declaration, contemplated by List I Entry 54, have been made in the Mines and Minerals (Regulation Development) Act, 1957, regarding all kinds of taxation on minerals and mineral rights, - tax, royalty - fee - dead rent etc., the State Legislature is denuded or deprived of the power to enact any law or to impose any tax of other levy with reference to List II Entry 23 or List II Entry 50. We have already held that levy of tax under Orissa Act 36 of 1992 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be so construed as to make any one entry redundant. It was further argued that even in pith and substance the tax fell to entry 50 of List II, it would be controlled by a legislation under entry 54 of List I. After referring to H.R.S. Murthy's case of the report the Court held thus: ...attention of the Court was not invited to the provisions of Mines and Minerals (Development Regulation) Act 1957 and Section 9 thereof. S, 9(3) of the Act in terms states that royalties payable under the 2nd Schedule of the Act shall not be enhanced more than once during a period of 4 years. It is, therefore, a clear bar on the state legislature taxing royalty so as to in effect amend 2nd Schedule of the Central Act. In the premises, it cannot be right to say that tax on royalty can be a tax on land, and even if it is a tax, if it falls within entry 50 will be ultra vires the State legislature power in view of Section 9(3) of the Central Act. It was contended by Mr. Krishnamurthy Iyer that the State has a right to tax minerals. It was further contended that if tax is levied, it will not be irrational to correlate it to the value of the property and to make some kind of annual value ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a tax on tax thereby denuding the legislation of its true character as a tax on land. It was held that royalty being within the purview of Section 9 of MMRD Act, the levy was invalid. But, in the instant case, tax is levied on land, and so clearly within List II Entry 49. Support was sought from certain observations in Orissa Cement case [1991] Supp. 1 SCC 430 and also the latest decision in Goodricke Group Ltd. and in particular, the following observations contained in paragraph 29 of the latter Judgment: It is thus clear from the aforesaid decisions that merely because a tax on land or building is imposed with reference to its income or yields, it does not cease to be a tax on land or building. The income or yield of the land/building is taken merely as a measure of the tax; it does not alter the nature or character of the levy. It still remains a tax on land or building. There is no set pattern of levy of tax on lands and building indeed there can be no such standardisation. No one can say that a tax under a particular entry must be levied only in a particular manner, which may have been adopted hitherto. The Legislature is free to adopt such method of levy as it chooses an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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