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TMI Blog1996 (7) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... d the decision of this Court in H.R.S. Murthy v. Collector Chittoor [1964 (6) S.C.R. 666]. A writ appeal against the decision of the learned Single Judge was dismissed, again following the decision in H.R.S. Murthy. The matter was brought to this Court. It was heard ultimately by a seven-Judge Bench [ India, Cement Limited v. State of Tamil Nadu (1989 Suppl.(1) S.C.R. 692)] which held, the said levy to be outside the legislative competence of the Tamil Nadu Legislature. This Court held that (1) the levy cannot be sustained under and with reference to Entry 49 of List-Il of the Seventh Schedule to the Constitution of India as a tax on land; (2) the levy is a levy on minerals and is relatable to Entries 23 and 50 of List-II (3) that on account of the declaration made by Parliament contained in Section 2 of - the Mines and Minerals [Development and Regulation] Act, 1957, [M.M.R.D. Act], the State legislatures have been denuded of the power to levy tax on minerals. Regulation of mines and mineral development takes within its purview the levy of tax on minerals. Section 9 of the M.M.R.D. Act, this Court held, provides for levy of royalty/dead rent on minerals. The State legislatures can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases. As result of judgments in these cease, State Government became liable to refund cesses and other taxes collected by them. Since refund was likely to have a serious impact on State revenues of the concerned State Governments and having regard to the fact that it is extremely difficult to ensure that the levies collected are refunded to the large number of end users of minerals who have actually borne the burden of such levies, the Cess and Other Taxes on Minerals (Validation) Ordinance, 1992, to validate collection of such levies by State Governments up to the 4th day of April, 1991. 2. The Bill seeks to replace the aforesaid Ordinance. 1. Short title, extent and commencement(1) This Act May be called the Cess and Other Taxes on Minerals (Validation) Act, 1992. (2) It extends to the whole of the India. (3) It shall be deemed to have come into force on the 15th day of February, 1992. 2. Validation of certain State laws and actions taken and things done thereunder.- (1) The laws specified in the Schedule to this Act shall be, and shall be deemed always to have been, as valid as if the provisions contained therein relating to cesses or other taxes on Minerals had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes that cesses and other taxes on minerals imposed by certain State governments were struck down by this Courts on account of which they have become liable to refund cesses and other taxes collected by them. Since such refund is likely to have serious impact- on the revenues of the concerned State Governments and also because it is extremely difficult to ensure that the levies collected are refunded to the large number of end users of minerals who have actually borne the burden of such levies, the said Act was being made by Parliament. The Preamble to the Act states that it was an Act to validate the imposition and collection of cesses and certain other taxes on minerals under certain State laws . The Act is deemed to have come into force on February 15, 1992, the date on which the Ordinance of 1992 was promulgated by the President. Section which contains three sub-sections the main provisions in the Act. Sub-section (1) says that the provisions contained in the laws specified in the Schedule to the Act relating to cesses anc other taxes on minerals, shall be and shall be deemed always to have been as valid as if the provisions contained therein had been enacted by Parliament and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that Parliament does have such power. By virtue of the deeming clause contained in sub-section of Section 2, the relevant provisions of the State enactments must be deemed to have been enacted on the date they were enacted by the respective State Legislatures and they must be deemed to have remained in force upto the 4th day of April, 1991. The device adopted by Parliament is a well-known one. It may be called legislation by incorporation. The effect is as the relevant provisions of 'Scheduled Acts are individually and specifically enacted by Parliament; all those provisions must be read into Section 2 (1). The necessary and logical consequence flowing therefrom is the creation of levy of all the cesses and taxes, levied by the respective State enactments, by Parliament itself. The provisions so enacted are, however, declared to be in force upto the 4th day of April 1991. CONTENTIONS OF THE PARTIES: S/Sri K. Parasaran, G.L. Sanghi, A.K. Ganguli, B. Sen, V.A. Bobde, Abhishek Singhvi, Rohinton F. Nariman and Ajit Kumar Sinha urged the following contentions in support of their attack upon the validity of the Act: 1. The impugned Act is a clear case of the Parliament se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denudation of the State legislatures is only to the extent provided in the said Act. Section 9 is one of the provisions of the M.M.R.D. Act defining the extent of denudation. The impugned levy created by Section 2 f the impugned Act is in addition to the levy under section 9. In other word, the extent of denudation has been enhanced by the impugned levy. It so, such levy/denudation could have been effected only by making a fresh declaration in term of Entry 54 list-I of the Seventh Schedule to the Constitution. No such declaration has been made by Parliament and. therefore, the levy is incompetent and ineffective. 6. The levy in question can be related only to Entry 54 of List-I. It cannot be related to Entry 97 of List-I If so, the levy of cess/tax should be for the purposes of regulating the mines or mineral development. Absolutely no material is placed before the Court to show that the levy of the impugned cess/tax is for the said purpose. 7. The impugned enactment is a temporary statute. Its effect is only upto 4th day of April, 1991. On that date, the purpose of the Act comes to an end. Thereafter, it is a dead-letter. Since Section 6 of the General Clauses Act does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in different States of the country is not an unknown feature. Such a practice already exists. The Parliament is competent to enact a law applicable only to part of the country. Classification on the grounds of geographical division is a well-known and well-accepted one. It is also not necessary, they submitted, that there should be a fresh declaration in terms of Entry 54 of List-I whenever the rate of tax or royalty is enhanced or any of the provisions of the M.M.R.D. Act are amended. The impugned enactment is in the nature of addition or a proviso to the M.M.R.D. Act. The States have already been denuded of the power to levy any tax or cess on minerals. There is no fresh denudation now. The Parliament is only adding to the tax which it has already imposed and that too for a limited period. Learned counsel submitted that identical provisions have already been upheld by this Court and that there is no reason to take a different view. THE RELEVANT PROVISIONS OF THE CONSTITUTION AND THE M.M.R.D. ACT: For a proper appreciation of the questions arising herein, it is necessary to notice certain relevant provisions of the Constitution and the M.M.R.D. Act. Entries 23 and 50 of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for appellants-petitioners is that by enacting the impugned Act, the Parliament has sought to annul and invalidate the decisions of this Court in India Cement and Orissa cement But which it is not competent to do. lt is submitted that this Court had issued a mandamus directing certain State Governments to refund the taxes and cesses collected by them under the invalid laws, Some of the States had also given undertakings to this Court to - refund the taxes/cesses collected in the event of the success of appellants- petitioners. The mandamus so issued cannot be invalidated by making a law. The undertaking given by the State is binding upon it. Strong reliance is placed upon the decisions of this Court in Madan Mohan Pathak v. Union of India [1978 (3) S.C.R. 334 ] and A.V. Nachane v. Union of India [1582 (2) S.C.R. 246]. It is not possible to agree. It must be remembered that our Constitution recognises and incorporates the doctrine of separation of powers between the three organs of the State viz., Legislatures Executive and the Judiciary. Even though the Constitution has adopted the parliamentary form of Government where dividing line between the Legislature and the Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said entry. A Constitution Bench of this Court in H.R.S. Murthy upheld their stand and affirmed their belief. Several years later, a larger Bench of this Court overruled H.R.S. Murthy in India Cement and ruled that by virtue of the declaration contained in Section 2 of the M.M.R.D. Act and the provisions of the said Act, the State legislatures are denuded of their power to levy and tax on minerals. Entry 50 in List-II became practically a dead letter. Provisions in several State enactments levying cess/tax on minerals were accordingly invalidated with effect from different dates. The decisions of this Court clearly meant that the power to levy cess/tax on minerals vested exclusively with the parliament. Since this Court is the final arbiter on the interpretation of the Constitution, everybody was bound by the said declaration of law. In the circumstances, the Parliament stepped in and enacted the impugned law, avowedly to bail out States of the predicament aforementioned; the impugned enactment makes this objective clear beyond any doubt. At the same time, it should be noted that Parliament does not purport to clothe the State legislatures with the power which they do not posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the questions concerned therein, First, the decision in Madan Mohan Pathak. In June 1974, a settlement was arrived at between the life insurance Corporation and its employees relating to the terms and conditions of service of Class III and Class IV employees including the bonus payable to them. Clause 8(ii) provided for payment of annual cash bonus, arrived at by applying a particular formula. The settlement was valid for a period of four years and was to continue until a new settlement was arrived at. After the coming into force of the payment of Bonus (Amendment) Act, 1976, the Central Government decided that the employees of establishments not covered by the payment of Bonus Act would not be eligible for payment of bonus but an ex gratia payment in lieu of bonus would be made to them. Life Insurance Corporation was one of the establishments to whom the payment of Bonus Act did not apply. Pursuant to the said decision, the Government of India advised the Corporation to stop paying bonus in accordance with clause 8(ii) of the aforesaid settlement. The Corporation stopped the payment whereupon the employees approached the High Court of Calcutta by way of a writ petition, A lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Judge, it is relevant to note, cited with approval the law laid down by this Court in Shri Prithvi Cotton Mills but distinguished it by pointing out that the 1976 Act concerned before them [in Madan Mohan Pathak] purported to merely deny the benefit of settlement to the employees which settlement was directed to be implemented by means of a mandamus issued by the Calcutta High Court and hence, the principle in Shri Prithvi Cotton Mills did not help the Life Insurance Corporation. This is what the learned Judge said: It is difficult to see how this decision given in the context of a validating statute can be of any help to the Life Insurance Corporation. Here, the judgment given by the Calcutta High Court, which is relied upon by the petitioners, is not a mere declaratory judgment holding an impost or tax to be invalid, so that a validation statute can remove the defect pointed out by the judgment amending the law with retrospective effect and validate such impost or tax. The learned Judge then proceeded to examine the validity of enactment on the footing that it did take away the benefit of bonus vesting in the employees of the Corporation by virtue of clause 8( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article 31(2). The observations of Bhagwati, J. extracted hereinabove - upon which Sri Sanghi places strong reliance - indeed emphasise the fact that the 1976 Act was passed in ignorance of the mandamus issued by High Court and that the Act did not touch the decision of the High Court in any manner. These observations cannot be read to support the contention that where a mandamus issued is premised on the footing that State legislatives have no legislative power to impose the disputed levy the Parliament [which is undoubtedly competent to impose the said levies] cannot make a law imposing the said levies. As pointed out earlier, the majority Judgment of Bhagwati, J. did indeed affirm the statement of law in Shri Prithvi Cotton Mills, which we may quote here only with a view to emphasise the principle. Hidayatullah, C.J., speaking for the Constitution Bench held: When a legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or invalid laws the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition is that the legislature must possess the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the decisions in Madan Mohan Pathak and Nachane. It is needless to re- produce those observations over again here. We must also say that the fact-situation and the ratio of Madan Mohan Pathak and Nachane is totally at variance with the fact-situation in the case before us. They are worlds apart in every sense of the term. The first contention of the appellants is accordingly rejected. The second contention of the learned counsel for appellants- petitioners is that Section 2 of the impugned enactment does not achieve the purpose set out in the Preamble and that the language employed in Section 2 is not adequate to create any fresh levies. It is submitted that the Parliament must first create the levy and then give it retrospective effect. But it cannot relegate both the making of law and giving it retrospective effect to the realm of fiction, it is argued. The Parliament cannot say that it must be deemed to have made a law without actually making it. It is submitted that in sub-section (1) of Section 2, there are no words saying that the Parliament is levying the various taxes/cesses mentioned in the said subsection read with the Schedule. By way of contrast, our attention i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Emphasis added) The validity of Sugarcane Cess (validation) Act was questioned in this Court in Joara Sugar Mills Private Limited but was upheld. The contention of the learned counsel for appellants-petitioners is that if the parliament wanted to impose the levies which levies were earlier imposed by State enactments but declared incompetent, the Parliament must impose the levy as has been done by it in Section 3 of the Sugarcane Cess (Validation) Act, 1961. Section 2(1). it is contended. does not impose the levies and, therefore there is no levy and there is no imposition. It is not possible to agree with this contention either. The State enactments mentioned in the Schedule to the impugned enactment did contain provisions creating the levy. It is he very provisions which are enacted by Parliament now. section 2(1) says that the said provisions must be deemed to have been enacted and must be deemed always to have been enacted by Parliament. In such a situation, it is idle to contend that Section 2(1) does not create the levy or the impost. It does. We are also unable to find any qualitative difference between Section 3 of the Sugarcane Cess (Validation) Act Section 2 of the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsection (2) shall be construed as preventing any person from claiming refund of any rents or royalties paid by him in excess of the amount due from him under any such laws. lt was contended before this Court that language of Section 2 is not sufficient to bring about a levy. It was contended that no liability to levy rent or royalty can be created retroactively without two clear stages or steps: firstly, a law must be enacted creating the liability; next, such provision should be made retrospective. This two- stage procedure is absent in the statute under attack and therefore the purpose, whatever it be, has misfired . lt may be noticed that this is precisely the contention urged before us now. The said contention was, however, rejected by this Court. It observed: the Bihar Legislature is not is not legislating into validity by a deeming provision, what has been declared ultra vires by the Court. It is Parliament whose competency to legislate on the topic in question is beyond doubt, that is enacting the 'deeming' provision . The Court held further that the language of Section 2 is clear and unmistakable and that by enacting the said provision the Parliament desire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2 are relied upon in support of this contention. It is also pointed out that Section 2 does not contain a clause or words corresponding to clause (c) in sub-section (1) of Sections 3 of the Sugarcane Cess (Validation) Act, 1961, referred to hereinbefore. It is not possible to accede to this contention, either. Section 2 enacts the relevant provisions of the enactments mentioned in the Schedule with retrospective effect. The provisions so enacted do create the levy. Indeed, unless the levy is validated recoveries already made cannot be validated. It is for this reason that the Preamble to the Act says that it is an Act to validate the imposition and collection of cesses and certain other on minerals under certain state laws . Once the provisions, which create the Ievy, are deemed to have been enacted by Parliament, the levy is very much there with retrospective effect. Once there is a valid levy, not only the taxes already collected need not be refunded but the taxes and cesses which have not already been collected can also be collected. It is impossible to see any distinction in principle between both. Merely because sub-section (2) inter alia state that cesses or other taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration may not come to court. We are, therefore, of the clear opinion that once the levy is created or validated as the case may be, distinction can be drawn between the person who has paid and the person who has not paid. We are also unable to find any words in Section 2 or anywhere else in the impugned enactment limiting the levy only to the extent of the taxes/cesses already collected on or before 4th day of April, 1991. Nor are we satisfied that absence of a clause or words corresponding to clause (c) in Section 3(1) of the Sugarcane Cess (Validation) Act makes any difference. The said clause merely sets out the consequence flowing from he validation contained in the main limb of Section 3(1), by way of abundant caution. It cannot be treated as a substantive provision. Sri K. Parasaran then submitted that the words imposition and collection in the Preamble do evidence the intention to confine the imposition to amounts already collected. It is not possible to agree. By reading them conjunctively, their meaning cannot be cut down. On the contrary, the said words indicate the intention to validate the imposition as well as collection. Collection does not mean what is a already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r State. It does not include a differentiation based on other considerations, which are dependent on natural or business circumstances, and may operate with more or less force in different localities; and there is nothing in my opinion, to prevent the Australian Parliaments, charged with the welfare of the people as a whole, from doing what every State in the Commonwealth has power to do for its own citizens, that is to say, from basing its taxation measures on considerations of fairness and justice, always observing the constitution injunction not to prefer States or parts of States. At the same time we must say that where Parliament imposes different rates of tax in different States, lt is under an obligation to justify the same. It must satisfy the court that such a distinction does not amount to discrimination and that it is reasonable in the circumstances and has a purpose behind it. Now, let us see us see whether there is any justification for imposing different rates in different States in the present case. We think there is. If one only remembers the background and the context in which the impugned enactment was made by Parliaments the reason behind such different rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot absolute but only to the extent provided in the M.M.R.D. Act. Section 9, learned counsel submitted, is one of the facets of the extent of denudation. Section 9, it is submitted, sets out the rates of royalty levied states that such rates of royalty can be revised only once in three years. If Section 9 is sought to be amended, whether directly or indirectly, the learned counsel says, a fresh declaration in terms of Entry 54 of List-I is called for. This contention assumes that notwithstanding the declaration. contained in Section 2 of the M.M.R.D. Act, the States still retain the power to levy taxes upon minerals over and above those prescribed by the M.M.R.D. Act and that a fresh declaration is called for whenever such subsisting power of the State is sought to be further encroached upon. This suppositions however. flies in the face of the decisions of this Court in India Cement and Orissa Cement. The said decisions are premised upon the assumption that by virtue of the said declaration, the States are totally denuded of the power to levy any taxes on minerals. rt is for this reason that the State enactments were declared incompetent insofar as they purported to levy taxes/cesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned act was indeed enacted and published in April, 1992 and Section 1(30 says that the Act shall be deemed to have come into force on February 15, 1992. It is, therefore, meaningless to say that it has expired or it ceased to have any effect on the 4th day of April, 1991. There are no words anywhere in the impugned Act indicating that it expires on the expiry of a particular period or on a particular date. Merely because the cesses and taxes imposed by it are made effective upto a particular date (4th April, 1991), it does not mean that the statute itself expires on that date. We may in this connection refer to the decision of this Court in Maganti Subrahmanyam (dead) by L.Rs. v. The State of Andhra Pradesh [ 1969 (2) S.C.C.96]. The Madras legislature had enacted the Madras Estates Communal, Forest and Private Lands (Prohibition of Alienation) Act, 1947 with a view to prohibit the alienation of Communal, Forest and Private Lands in the estates in the province of Madras. The Preamble to the Act stated that it was enacted to prevent alienation of the several lands in the estates in the Province of Madras Pending enactment of legislation for acquiring the interests of land holders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes\cesses not already collected. This submission ignores the crucial circumstance that the levy is created by the impugned Act continues in force. Sub-section (3) of Section 2 is a firm indication that notwithstanding the cessation of levy after the 4th day or April, 1991, the machinery created to recover and refund the said cesses\taxes is kept alive. Sub-Section (3) of Section 2 reads: (3) For the removal of doubts, it is hereby declared that nothing in sub-section (2) shall be construed as preventing any person from claiming refund of any cess or tax paid by him in excess of the amount due from him under any such laws. Take a case where excessive collection is made sometime before April 4, 1991. What is the remedy of the person concerned. If the appellants argument were to be accepted, the person would be helpless; there would be no machinery to examine his claim. But then what does sub-section (3) mean and signify? It must, therefore, be held that notwithstanding the cessation of levy created by Section 2(1) with April 4, 1991, the machinery requisite for realising and refunding the taxes\cesses yet to be collected or wrongly collected, as the case may be, is kept al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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