PETITIONER:
STATE OF ORISSA & ORS.
Vs.
RESPONDENT:
M/S STEEL AUTHORITY OF INDIA LTD.
DATE OF JUDGMENT: 10/08/1998
BENCH:
CJI, K. VENKATASWAMI
ACT
HEADNOTE
JUDGMENT
JUDGMENTK. Venkataswami, J.
Special leave granted.
These appeals raise a common question of law and the parties are same in both the appeals. As a matter of fact, in Civil Appeal arising out of S.L.P. (C) No. 16665/92 the High Court has simply followed its earlier judgment against which the Civil Appeal arising out of S.L.P. (C) No. 16718/91 has been filed. In the circumstances, both the appeals are disposed of by this common judgement.
The respondent, a manufacturer of iron, steel and allied products, entered into an agreement of lease in respect of land measuring 569.6 acres with the State Government in order to meet its own requirements of raw materials, namely, limestone and dolomite. Under the agreement, it was agreed that the respondent was liable to pay royalty on the minerals extracted. However, the dispute that arises for consideration out of the two judgments of the High Court is whether the respondent is liable to pay royalty on the quantity of mineral extracted as it is or on the quantity arrived at after the said mineral had undergone a processing to remove waste and foreign matters. It was the case of the appellants that the respondent was liable to pay royalty on the mineral extracted while the case of the respondent was that the liability was on the quantity of mineral obtained after it had undergone the process.
The process adopted by the respondent is given in the SLP paper book at page 11, which reads as follows :-
"In the Mechanised Section of the
respondent’s quarry, after
blasting, the blasted materials
containing Limestone and other
foreign materials are loaded by
mechanical shovels and are brought
to the crushing Plant by dumpers.
These are called "Rum of Mines",
for short R.O.M. The R.O.M. are fed
into the crusher, and when
necessary stockpile is made, the
same is fed into the primary
crusher whereafter it goes to the
secondary crusher mechanically.
In between he secondary crusher and
the screening Plant is affixed the
Weighto-meter. From the secondary
crusher the Limestone is moved into
the screening Plant and from the
screening Plant to the stockpile.
The stockpile is then transported
and loaded into the Railway wagons.
The Weighto-meter recording
mentioned hereinabove, is done as
the workmen are paid their
incentives on the basis of
production. This figure recorded by
the Weighto-meter is duly recorded
in the books kept by the
respondent-company in the regular
course of business as "production".
The Senior Mining Officer is duly
intimated of the weight recorded in
the manner as aforesaid."
The High Curt, after referring to Section 9(1) f the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter called "the Act") and also clause 3 of Par V of the Lease Deed, held as follows :-
"A distinction has to be made
between removal from the mine and
removal from the leased area. If
after the mineral is extracted from
the mine, it undergoes some
processing and during processing a
part of the mineral is wasted and
the wasted remains on the leased
area and is not removed therefrom,
the lessee cannot be asked too pay
royalty on that portion f the
wastage."
On that view of the matter, the High Court quashed the demands, which were levied on the quantity of ‘unprocessed’ minerals.
Aggrieved by the order of the High Court, the present appeals are filed by special leave.
The learned counsel appearing for the appellants submitted that the High Court was not right in making the distinction and concluding that the quantity of minerals which had undergone certain process alone was liable to levy of royalty. According to the learned counsel, this view runs counter to the view already taken by another Division Bench of the same High Court in O.J.C. No. 909/74. The further case of the learned counsel was that the judgment on O.J.C. 909/74 was taken on appeal to this Curt by the aggrieved assessee in Civil Appeal N. 807/76 [National Cal Development Corporation Ltd. Vs. State of Orissa & Ors.] and this Court approved the view taken by the High Court and dismissed the said Civil Appeal on 5.12.91. Learned counsel, in support of his argument, placed reliance on the judgments of this Court, namely, India Cement Ltd. & Ors. Vs. State of Tamil Nadu & Ors. [(1990) 1 SCC 12] and Saurashtra Cement and Chemical Industries Ltd. Vs. Union of India & Anr. [(1994)1 SCC 226]. Learned counsel appearing for the respondentassessee supported the judgments under appeal on the basis of the distinction made by the High Court.
We have considered the arguments and the reasonings contained in the judgments under appeal.
Section 9(1) of the Act reads as
follows :-
"The holder of a mining lease
granted before the commencement of
this Act shall, notwithstanding
anything contained in the
instruments of lease or in any law
in force at such commencement, pay
royalty in respect of any mineral
removed or consumed by him 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.
(Emphasis supplied)
It is to be noted that the levy of royalty is in respect of minerals removed or consumed by the contractor from the leased ares. We have seen earlier the process that the mineral said to undergo before the same was removed form leased area. Section 9(1) of the Act also contemplates the levy of royalty on the mineral consumed by the holder of a mining lease in the leased area. If that be so, the case of the appellants that such processing amounts to consumption and, therefore, the entire mineral is exigible to levy of royalty has t be accepted. We are unable to agree with the distinction made by the High Court and the conclusion that the royalty can be levied only on the quantity of mineral obtained after processing.
Another Division Bench of the Orissa High Court in National Coal Development Corporation case (supra), while considering the question whether the coal extracted by the workmen for their own domestic consumption is exigible to levy of royalty, accepting the contention of t he Revenue, held "that removal from the seam in the mine and extracting the same through the pits’s mouth to the surface satisfy the requirement of Section 9 in order to give rise to liability for royalty". This view of the High Court found approval by this Court in Civil Appeal No. 807/76 and this Court held that the lessee in that case was liable to pay royalty for the coal supplied to its workmen for consumption.
In India Cement’s case (supra), a Constitution Bench, while considering the constitutionality of levy of case on the royalty, held as follows :-
"In the Western India Theaters Ltd.
Vs. Cantonment Board, Poona
Cantonment it was held that an
entertainment tax is dependent upon
whether there would or would not be
a show in the cinema house. If
there is no show, there is no tax.
It cannot be a tax on professions
or calling. Professional tax does
not depend on the exercise of one’s
profession but only concerns itself
with the right to practice. It
appears that in the instant case
also on tax can be levied or is
leviable under the impugned Act if
on mining activities are carried
on. Hence, it is manifest that it
is not related to land as a unit
which is the only method of
valuation of land under Entry 49 of
List II, but is relatable to
minerals extracted. Royalty is
payable on a proportion of the
minerals extracted........
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For the reasons stated above, we hold that the High Court was not right in quashing the demands, which were rightly calculated and levied. The impugned judgments of the High Court are set aside and the O.J.Cs. filed by the respondent stand dismissed.
The appeals are allowed accordingly with no order as to costs.