9911796707
TMI Blog1990 (4) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... her and depends upon the point urged for the petitioners that the entire field of legislation in respect of regulation and development of mines and minerals including the right to collect royalty and tax on minerals vests in Parliament alone by virtue of the provisions of the Mines and Minerals (Regulation Development) Act, 1957 and that the State legislatures are denued of their power to levy tax on all mineral rights held by holders of mining leases. 2. The petitioners are therefore seeking 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 and that the State should be restrained in future from levying and collecting the said tax and also that the tax already collected should be directed to be refunded. 3. The preamble to the State Act says that it is an Act passed to provide for the levy and collection of tax on mineral rights of holders of mining leases in respect of certain minerals in the State of Andhra Pradesh. The 'Statement of Objects and Reasons' reads as follows :-- The need to provide and improve infrastructural facilities for rapid exploitation of the vast miner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals with appeals, S. 6 with revisions and S. 7 says that the tax will be recovered as an arrears of land revenue under the A. P. Revenue Recovery Act, 1864. S. 8 deals with the power to. make rules. S.9 amends the A.P. (Telangana Area) Mining Settlement Act, 1956. Rules have been made under the State Act in G.O.Ms. No. 534 dated 14-5-1975. The State Act has been amended in 1985 by A.P. Act 7/85 in so far as fixation of rates is concerned. 5. We shall now refer to the relevant provisions of the Constitution. Arts. 245 and 246 deal with the powers of Parliament and State Legislatures to legislate with respect to the matters contained in Lists I, II and III of the 7th Schedule to the Constitution. List I which enumerates the matters upon which Parliament could legislate contains Entry 54 and it reads as follows : Entry 54. List I : Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. So far as the State Legislature is concerned, the following entries in List II are relevant : Entry 23 List II : Regulation of mines and min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for levy of royalties in respect of mining leases. It reads as follows : S.9 : Royalties in respect of mining leases : (1) The holders of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral. (2) The holder of a mining lease granted oh or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or his agent, manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral. (2-A) The holder of a mining lease, whether granted before or after commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972, (56 of 1972) shall not be liable to pay any royalty in respect of any coal consumed by a workman engaged in a colliery provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o these items in detail later. 7. In the present case, we are mainly concerned with Entry 54 of List J and Entry 23 and Entry 50 of List II. In fact, the case turns more upon whether the State Act could be passed under Entry 50 of List II in spite of Ss.9, 13, 18 of the Central Act, 1957. 8. In the period between 1957 and 1970, the Supreme Court considered, in three cases, the general effect of the declaration made in S. 2 of the Central Act, upon Entry 23, List II in view of what is stated in Entry 54 of List I. The question arose whether after the declaration in S. 2 of the Central Act, 1957, anything was leftover to the State Legislature with regard to the matter specified in Entry 23 of List I. These three cases decided by the Supreme Court are : Hingir -- Rampur Coal Co. Ltd. v. State of Orissa, ; State of Orissa v. M. A. Tulloch Co., and Baijnath Kedia v. State of Bihar, . They dealt with the scope of Entry 23 of List II in the context of Entry 54 of List I and S. 2 of the Central Act. The Supreme Court clearly held in all these three cases that the 'entire field' relating to 'regulation of mines and development of minerals' is occupied by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Concession Rules (1964), Hidayatullah, C.J. considered the validity of the levy of royalty and dead rent under the second proviso to S. 10, Bihar Land Reforms Act (13 1950), as amended by Bihar Act, 4 of 1965 and the amended rules. Though the levies were of royalty and dead rent, the Supreme Court had no occasion to refer to S. 9 of the Central Act, 1957 inasmuch as the levy related to minor minerals and S. 9 stood excluded because of S. 14 of the Central Act, 1957 which said that Ss. 4 to 13 could not apply to 'minor minerals'. Now the Central Act, 1957, under S. 15 permitted the State Governments to make rules for minor minerals and the impugned levy was therefore a levy made by the State Legislature under Entry 23 of List II but not by the State Government exercising its rule-making power under S. 15. Inasmuch as the 'entire field' was covered by the Central Act, 1957 the State Legislature had no authority to make the levy but the State Government could make rules as per S. 15 of the Central Act, 1957. Though the matter related to royalty on minor minerals, no reference was made to Entry 50 of List II which permits levy, by the State, of taxes on mineral rights. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that does not stamp it as a tax on either extraction of the mineral or on the mineral right . It was also held that it was 'unnecessary' for the purpose of the case to examine the question as to what exactly was a 'tax on mineral rights' under Entry 50, List II, seeing that such a tax is not leviable by Parliament but only by the State and the sole limitation on the State's power to levy the tax is that it must not interfere with a law made by Parliament as regards mineral development, and the Supreme Court said that their 'attention was not invited to the provisions of any such law enacted by Parliament' and the land cess under Ss. 78, 79 fell squarely within Entry 49 of List II as a 'tax on land'. 10. During the period when the decision of H.R.S. Murthy v. Collector of Chittoor, was in force, the two Division Benches of this Court referred to earlier i.e., Kesoram Cements v. Government of A.P., W.T. No. 1451 of 1976, D/-21-9-1982 (Andh Pra) and M. K. Rama Murthy v. Government of A.P., (1985) 1 APLJ 84 held that the 'mineral rights tax' levied under the State Act, 1973 was a levy within the competence of the State legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR) and it was held that the cess could not mean 'land revenue' properly called but was a levy on royalty. The question then arose whether royalty was in itself a tax. The Supreme Court referred to the conflicting views of various High Courts in this behalf, Mysore and Patna taking the view that royalty is a tax while the Rajasthan, Punjab, Gujrat and Orissa High Courts taking the view that royalty was an impost different from a tax. The Supreme Court approved the Mysore and Patna views in M/s. Laxminarayana Mining Co., Bangalore v. Taluk Dev Board, AIR 1972 Mys 299 and L.Mal. v. State of Bihar, AIR 1963 Pat 491 that royalty was a tax. (see AIR paras 27. 28 and 31). While dealing with the question whether the royalty was a tax or not, the Supreme Court referred (see paras 28. 29 of AIR) to H.R.S. Murthy's case and held that that case in so far as it held that the cess on royalty had only a remote relation with mining but a direct relation to land, thereby falling under Entry 49 of List II. was not correct. Coming to the nature of the cess which was the subject matter of levy, the Supreme Court held that the word 'cess' is used in India generally to mean a ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Court was not invited to the provisions of Mines and Minerals (Regulation Development) Act, 1957 and Section 9 thereof Section 9(3) of the Act in terms states that royalties payable under the Second Schedule of the Act shall not be enhanced more than once during a period of four years. It is, therefore, a clear bar on the State legislature taxing royalty so as to, in effect, amend Second Schedule of the Central Act. The Supreme Court therefore held in India Cement's case that so far as royalty was concerned there was a limitation in Sec. 9(3) of the Central Act 1957 and the cess levied by the Tamil Nadu Government on the royalty by expanding the definition of 'land revenue, would result in exceeding the limitation prescribed by law made by Parliament and that therefore the levy was ultra vires of the powers of the Tamil Nadu legislature. 15. Having thus dealt with Sec. 9(3) of the Central Act and the limitations imposed by the law made by Parliament in the context of Entry 50 of List II, the Supreme Court then proceeded to deal with a larger ground viz., the 'field' occupied by the law made by Parliament. It is in this context that they referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permissible in view of the language of Entry 50 of List II. It is further contended for the petitioners that in any event the entire 'field' of levy of tax of mineral rights is covered by Sec. 9(2) of the Central Act and in view of Entry 54 of List I the State legislature is denuded of its power whether under Entry 23 or Entry 50 of List II. 19. On the other hand, it is contended by the learned Advocate General that Sec. 9(3) of the Central Act imposes limitation only in respect of royalty and not in respect of tax on mineral rights and therefore the State legislature is competent to enact a law such as the one covered by Sec. 3(2) of the State Act, 1975 for imposing a tax on mineral rights in addition to the royalty payable by the lease- holder. It was also argued that the field covered by Sec. 9(2) of the Central Act is restricted to royalty and even on the basis of the 'occupied field' theory enunciated by the Supreme Court since 1961, the State legislature is not denuded of its power to levy a tax on mineral rights. Reference in this context is made to Sec. 6(2) of the Mineral Development and Regulation Act, 1948 to show that the said sub-section permitted r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possesses, one of the rights is the right to extract the mineral as well as consume the same. The tax relatable thereto would be a tax on royalty according to India Cement case. Thus the right to extract and consume the mineral extracted is only a part of the totality of the rights arising out of the lease of the mines. It is with regard to the totality of the rights and the tax thereon that Entry 50 of List II is concerned. Therefore, in our opinion, the limitation prescribed by Sec. 9(3) of the Central Act 1957 must be treated as a limitation imposed not merely with respect to levy of royalty but with respect to any tax on 'mineral rights', properly so-called. We are supported in our view by the observations of the Supreme Court in India Cement's case (see para 28 of AIR) to the following effect : It was held in H. R. S. Murthy's case that land cess paid on royalty has a direct relation to the land and only a remote relation with mining. This, with respect, seems to be not a correct approach. It was further observed that it was not necessary to consider the meaning of the expression 'tax on mineral right' following under Entry 50 of List II inasmuch a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis that a law made by Parliament in relation to mineral development could limit the levy of tax on mineral rights. Apart from that the decision of the Supreme Court in Baijnath Kedia v. State of Bihar already referred to also bears a close-analogy. There the Bihar Land Reforms Act and Rules as amended in 1965 enabled the State to levy royalty and seigniorage fee by the State Government but the Supreme Court pointed out that such a levy could be made only by rules made in regard to minor minerals as provided in Sec. 15 of the Central Act 1957 and not by a law made by the State legislature. It was clearly held that the power of levying royalty, after the declaration made in Sec. 2 of the Central Act 1957, was occupied by the Central Act and the. levy could only be made as provided in the Central Act viz., by rules made by the State Government, so far as minor minerals are concerned and not by the legislation made by the State legislature. This decision, in our opinion, shows that the power of levying royalty which, in the absence of a Central law, would fall under Entry 50 of List II if royalty is to be treated as a tax, could no longer be available to the State legislature inasmuch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislate and Entries 82 to 92 enumerate the taxes which could be imposed by Parliament. It was observed that an examination of these two groups of entries showed that while the main subject of legislation figured in the first group, a tax in relation thereto was separately mentioned in the second group. After referring to certain examples, the learned Judge also referred to the separation of these two groups of entries in List II also. It was pointed out that Entries I to 44 in List II form one group mentioning the subjects on which the States could legislate. Entries 45 to 63 in that list form another group and dealt with taxes. After saying so Aiyar, J. observed : Entry 23 (List II) is regulation of mines and Entry 50 is 'taxes on mineral rights'. The above analysis -- and it is not exhaustive of the entries in the list -- leads to the inference that taxation is not intended to be comprised in the main subject in which it might, on an extended construction, be regarded as included -- but is treated as a distinct matter for purposes of legislative competence. No doubt, the above analysis of the Lists I and II brings out the distinction between certain general entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;matter' in the State list is, to the extent of the declaration subtracted from the scope and ambit of Entry 23 of the State list. There would, therefore, after the Central Act of 1957, be no matter in the list to which the fee could be related in order to render it valid. 26. In fact in M. K. Rama Murthy's case (1985) 1 APLJ 84, the Division Bench of this Court accepted (at page 88 of column II of APLJ) that there is a dependence between Entry 50 of List II and Entry 54 of List I. 27. In view of the above said reasoning and also in view of the decision of the Supreme Court in India Cement's case holding that the entire field is fully covered by the Central legislation viz., Central Act 1957, the argument that Entry 50 of List II is an independent entry under which tax on mineral rights could be levied cannot be accepted. 28. It is then argued by the learned Advocate General that the Madhya Pradesh High Court struck down a cess on mineral rights under S. 9 of the M. P. Karadhan Adhinyam, 1982 in M/s. Hiralal Rameshwar Prasad v. State of M. P. 1986 MPLJ 514 and the Supreme Court, in India Cement's case expressly refrained (see para 33 at p. 96 of AIR) from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of Wanchoo, J. (as he then was) that the levy of tax on 'mineral produced' is a duty of excise falling under Entry 84 of List I, in our view, runs counter to the view of the Supreme Court in India Cement's case where it is held clearly that levy of tax on mineral produced or extracted is 'royalty' falling under S.9 of the Central Act, 1957 and is also a tax on mineral rights falling under Entry 50 of List II. As the same is limited by S. 9 (3) of the Central Act or occupied by Entry 54 of List I in view of S. 9(2) of the Act; royalty cannot therefore be treated as excise duty in view of India Cement's case. 31. Reliance is then placed by the Advocate General on the earlier unreported Division Bench judgment of this Court in Kesoram Cement's case (W. P. No. 1451 of 1976, D/-21-9-1982). That case was, as earlier stated, decided long before India Cement's case and even before the Division Bench case in M. K. Rama Murthy's case(1985) 1 AP LJ 84. Madhava Reddy, A. C. J. (as he then was) after referring to S. 9 of the Central Act, 1957 permitting levy of 'royalty' observed that It is now well-settled that royalty is not a tax as such. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
