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The State of West Bengal Vs. Kesoram Industries Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution;Other Taxes
CourtSupreme Court of India
Decided On
Case NumberCivil Appeal Nos. 3518-3519 and 5149-54 of 1992, 1532-1533 and 2350 of 1993 and 7614 of 1994 and C.A
Judge
Reported in(2004)187CTR(SC)219; [2004]266ITR721(SC); JT2004(1)SC375; 2004(1)SCALE425; (2004)10SCC201
Acts Constitution of India - Articles 14, 21, 32, 51, 136, 141, 245, 246, 246(1), 246(2), 246(3), 248, 248(2), 249 to 252, 253, 256, 257, 265, 276, 301, 356 and 366; Cess Act, 1980 - Sections 2, 3, 5, 5(1) 6 and 18; West Bengal Primary Education Act, 1973 - Sections 78, 78A, 78(1), 78(2) and 78(2A); West Bengal Rural Employment and Production Act, 1976 - Sections 2 and 4; Cess Act, 1880 - Sections 3, 4, 5, 6(1) and 72; West Bengal Land Reforms Act, 1955 - Sections 23B(1); West Bengal Taxation Laws (Amendment) Act, 1992 - Sections 2; Bengal General Clauses Act, 1899 - Sections 3, 4(2) and 4(2A); West Bengal Taxation Laws (Amendment) Act, 1981; West Bengal Taxation Laws (Amendment) Act, 1989; Mines and Minerals (Development and Regulation) Act, 1957 - Sections 2, 4, 4A , 9, 9(2), 9A, 13(2
AppellantThe State of West Bengal
RespondentKesoram Industries Ltd. and ors.
Books referredWords and Phrases, Permanent Edition Vol.37A; Stroud's Judicial Dictionary of Words and Phrases Sixth Edition, 2000, Vol.3; Words and Phrases, Legally Defined Third Edition, 1990, Vol.4; Wharton's Law Lexicon Fourteenth Edition; Mozley & Whiteley's La
Excerpt:
west bengal primary education act, 1973, west bengal rural employment and production act, 1976 - west bengal taxation laws (amendment) act 1992 - cess act, 1980 - levy of cesses on coal bearing land, on tea plantation land and on removal of brick earth - constitutional validity of - cesses on coal bearing land, levied in exercise of power conferred by state legislation struck down by a division bench of calcutta on ground of levy being ultra vires legislative competence of state high court - high court holding that cess could not be said to be on land so as to be covered by entry 49 schedule ii - writ petition filed by bengal brickfield owner's association challenging levy of cesses on removal of brick earth - challenge to coal matters, brick earth matters on ground of state legislature.....case no.:appeal (civil)  1532 of 1993petitioner:state of west bengalrespondent:kesoram industries ltd. and ors.date of judgment: 15/01/2004bench:v.n.khare cji & r.c.lahoti & b.n.agarwal & s.b.sinha & a.r.lakshmananjudgment:judgmentdelivered by:r.c.lahoti, j.s.b.sinha, j.withcivil appeal nos. 3518-3519 and 5149-54 of 1992, 1532-1533 and 2350 of 1993and 7614 of 1994 and c.a. nos. 297, 298 and 299 of 2004 (arising out of slp(c) nos. 3986 of 1993, 11596 and 17549 of 1994) with w.p. (c) nos. 262,515, 641 and 642 of 1997, 347 and 360 of 1999, 50 and 553 of 2000, 207, 288and 389 of 2001 and 81 of 2003 and civil appeal nos. 5027, 6643 to 6650 and6894 of 2000 and 1077 of 2001decided on: 15.01.2004judgmentr.c. lahoti, j.this batch of matters, some appeals by special leave under.....
Judgment:

CASE NO.:
Appeal (civil)  1532 of 1993

PETITIONER:
State of West Bengal

RESPONDENT:
Kesoram Industries Ltd. and Ors.

DATE OF JUDGMENT: 15/01/2004

BENCH:
V.N.Khare CJI & R.C.Lahoti & B.N.Agarwal & S.B.Sinha & A.R.Lakshmanan

JUDGMENT:
JUDGMENT


DELIVERED BY:
R.C.LAHOTI, J.
S.B.SINHA, J.




WITH

Civil Appeal Nos. 3518-3519 and 5149-54 of 1992, 1532-1533 and 2350 of 1993
and 7614 of 1994 and C.A. Nos. 297, 298 and 299 of 2004 (Arising out of SLP
(C) Nos. 3986 of 1993, 11596 and 17549 of 1994) with W.P. (C) Nos. 262,
515, 641 and 642 of 1997, 347 and 360 of 1999, 50 and 553 of 2000, 207, 288
and 389 of 2001 and 81 of 2003 and Civil Appeal Nos. 5027, 6643 to 6650 and
6894 of 2000 and 1077 of 2001
Decided On: 15.01.2004


JUDGMENT


R.C. Lahoti, J.

This batch of matters, some appeals by special leave under Article 136 of
the Constitution and some writ petitions filed in this Court, raise a few
questions of constitutional significance centering around Entries 52, 54
and 97 in List I and Entries 23, 49, 50 and 66 in List II of the Seventh
Schedule to the Constitution of India as also the extent and purport of the
residuary power of legislation vested in the Union of India. Cesses on coal
bearing land, levied in exercise of the power conferred by State
Legislation, have been struck down by a Division Bench of the Calcutta High
Court. In exercise of the same power conferred by State legislation
whereunder cesses were levied on coal bearing land, cesses have also been
levied on tea plantation land which are the subject-matter of writ
petitions filed in this Court. The Bengal Brickfield Owners' Association
have also come up to this Court by filing a writ petition under Article 32
of the Constitution, laying challenge to the same cesses levied on the
removal of brick earth. These three sets of matters arise from West Bengal.
The High Court of Allahabad has upheld the constitutional validity of cess
levied in the State of U.P. on minor minerals which decisions are the
subject-matter of civil appeals filed under Article 136 of the
Constitution. For the sake of convenience, we would call these matters,
respectively as (A) 'Coal Matters', (B) Tea Matters', (C) 'Brick Earth
Matters', and (D) 'Minor Mineral Matter'. Inasmuch as the basic
constitutional questions arising for decision in all these matters are the
same, all the matters have been heard analogously.

We would first set out the facts in brief and so far as relevant for
appreciating the Issues arising for decision and thereafter deal with the
same.
(A) Coal Matters

A Division Bench of the Calcutta High Court has, vide its judgment dated
25.11.92 reported as Kesoram Industries Ltd. (Textiles Division) v. Coal
India Ltd.., struck down certain levies by way of cess on coal as
unconstitutional for want of legislative competence in the State
Legislature. Feeling aggrieved, the State of West Bengal has come up in
appeal by special leave

The levies which are the subject matter of challenge are as under:
This Cess Act, 1980
    "Section 5 All immovable property to be liable liable to a read
    case and public works cess... From and after the commencement of
    this Act in any district or part of a district, all immovable
    property situate therein except as otherwise in (Section 2)
    provided, shall be liable to the payment of a road cess and a
    public works cess."
    "Section 6 Cesses how to be assessed.
The road cess and the public works cess [shall be assessed--
(a) in respect of lands on the annual value thereof,
(b) in respect of all mines and quarries, on the annual dispatches
therefrom, and,
(c) in respect of tramways, railways and other immovable property, on the
annual net profit thereof, ascertained respectively as in this Act
prescribed)
and the rates at which such cesses respectively shall be levied for each
year shall be determined for such year in the manner in this Act
prescribed:
Provided that--
(1) the rates of such road cess and public works cess shall not exceed six
paise and twenty-five paise respectively on each rupee of such annual
value;
(2) the rates of each of such road cess and public works cess shall not
exceed--
(i) fifty paise on each tonne of coal, minerals or sand of such annual
dispatches, and
(ii) six paise on each rupee of such annual net profits,
Explanation. For the purposes of this proviso, one tonne of coke shall be
counted as one and a quarter tonne of coal."
2. West Bengal Primary Education Act, 1973
    "78. Education cess. -- (1) All immovable properties on which road
    and public works cesses are assessed, [or all such properties which
    are liable to such assessment] according to the provisions of the
    Cess Act, 1880, shall be liable to the payment, of education cess.
(2) The rate of the education cess shall be determined by the state
Government by notification and shall not exceed--
(a)[in respect of lands, other than a tea estate] ten paise on each rupee
of the annual value thereof;
  (aa) xxx  xxx   xxx
(b) in respect of coal mines [five per centum of the value of coal] on the
dispatches therefrom;
(c) in respect of quarries and mines other than coal mines, [one rupee on
each tonne of materials or minerals other than coal on the annual
dispatches therefrom]
Explanation. -- For the purpose of Clause (b) the expression 'value of
coal' shall mean--
(i) in the case of dispatches of coal as a result of sale thereof, the
prices charged by the owner of a coal mine for such coal, but excluding any
sum separately charged as tax, cess, duty, fee or royalty for payment of
such sum to Government to a local body, or any other sum as may be
prescribed or
(ii) in the case of dispatches other than those referred to in item(i), the
prices chargeable by the owner of a coal mine for such coal if they were
dispatched as a result of sale thereof, but excluding any sum separately
chargeable as tax, cess, duty, fee or--royalty for payment of such sum to
Government or a local body or any other sum as may be prescribed:
Provided that if more than one price is chargeable for the same variety of
Coal, the maximum price chargeable for that variety of coal shall be taken
as the basis of valuation for the purpose of this item."
3. West Bengal Rural Employment and Production Act, 1976.
    "Section 4. Rural employment cess, -- (1) On and from the
    commencement of this Act, all immovable properties on which road
    and public work cesses [are assessed or liable to be assessed]
    according to the provisions of the Cess Act, 1880, shall be liable
    to the payment of rural employment cess;
Provided that on raiyat who is exempted from paying revenue in respect of
his holding under Clause (a) of Sub-section (1) of Section 23B of the West
Bengal Land Reforms Act, 1955 shall be liable to pay rural employment cess.
(2) The rural employment cess shall be levied annually
(a) [in respect of lands, other than a tea estate,] at the rate of six
paise on each rupee of development value thereof;
  (aa) xxx xxx xxx
(b) in respect of coal mines, at the rate of [thirty-five paise per centum]
on each tonne of coal on the xxx dispatches therefrom;
(c) in respect of mines other than coal mines and quarries, [at the rate of
fifty paise on each tonne of materials other than coal on the annual
dispatches therefrom]
Explanation. -- For the purpose of Clause (b) the expression Value of coal
shall mean
(i) in the case of dispatches of coal as a result of sale thereof, the
prices charged by the owner of a coal mine for such coal but excluding any
sum separately charged as tax, cess, duty, fee or royalty for payment of
such sum to Government or a local body, or any other sum as may be
prescribed, or
(ii) in the case of dispatches, other than those referred to in item (i),
the prices chargeable by the owner of a coal mine for such coal if they
were dispatched as a result of sale thereof, but excluding any sum
separately chargeable as tax, cess, duty, fee or royalty for payment of
such sum to Government or a local body, or any other sum as may be
prescribed:
Provided that if more than one price is chargeable for the same variety of
coal, the maximum price chargeable for that variety of coal shall be taken
as the basis of valuation for the purpose of this item."

All the three legislations above-referred to are State enactments. The
provisions of the West Bengal Primary Education Act, 1973 and the West
Bengal Rural Employment and Production Act, 1976, which levied cess were
amended by the West Bengal Taxation Laws (Amendment) Act, 1992 with effect
from 1-4-1992. The text of the said Amendment Act is as follows:
"West Bengal Act II of 1092
    THE WEST BENGAL TAXATION LAWS (AMENDMENT) ACT, 1992.
[Passed by the West Bengal Legislature]
[Assent of the Governor was first published in the Calcutta Gazette,
Extraordinary, of the 27th March, 1992.]
An Act to amend the West Bengal Primary Education Act, 1973 and the West
Bengal Rural Employment and Production Act, 1976.
WHERAS it is expedient to amend the West Bengal Primary Education Act, 1973
and the West Bengal Rural" Employment and Production Act, 1976, for the
purposes and in the manner hereinafter appearing:
It is hereby enacted in the Forty-third Year of the Republic of India, by
the Legislature of West Bengal, as follows:-
1. (1) This Act may be called the West Bengal Taxation Laws (Amendment)
Act, 1992.
(2) It shall come into force on the 1st day of April, 1992,
(Section 2.)
2. In the West Bengal Primary Education Act, 1973,--
(1) in Section 78 for Sub-section (2), the following sub-section shall be
substituted:
(2) The education cess shall be levied annually--
(a) in respect of land, except when a cess is leviable and payable under
Clause (b) or Clause (c) of Sub-section (2A), at the rate of ten paise on
each rupee of annual value thereof as assessed under the Cess Act, 1880;
(b) in respect of a coal-bearing land, at the rate of five per centum of
the annual value of the coal-bearing land as defined in Clause (1) of
Section 2 of the West Bengal Rural Employment and Production Act, 1976;
(c) in respect of a Mineral-bearing land (other than coal-bearing land) or
quarry, at the rate of one rupee on each tonne of minerals (other than
coal) or materials despatched within the meaning of Clause (1b) of Section
2 of the West Bengal Rural Employment and Production Act, 1976, from such'
mineral bearing land or quarry;
Provided that when in the coal-bearing land referred to in Clause (b) there
is no production of coal for more than two consecutive years, such land
shall be liable for levy of cess in respect of any year immediately
succeeding the said two consecutive years in accordance with Clause (a):
Provided further that where no despatch of minerals or materials is made
during a period of more than two consecutive years from the mineral-bearing
land or quarry as referred to in Clause (c), such land or quarry shall be
liable for levy of cess In respect of any year immediately succeeding the
said two consecutive years in accordance with Clause (a).
Explanation. -- For the purposes of this chapter, "coal-bearing land' shall
have the same meaning as in Clause (la) of Section 2 of the West Bengal
Rural Employment and Production Act, 1976.
(2) In Section 78A,--
(a) for Clause (a), the following clause shall be substituted :-
    "(a) the education cess payable for a year under Sub-section (1) of
    Section 78 in respect of coal-bearing land referred to in Clause
    (b) of Sub-section (2) of that section shall be paid by the owner
    of such coal-bearing land in such manner, at such intervals and by
    such dates as may be prescribed;";
(b) for Clause (b), the following Clause shall be substituted :-
(b) every owner of a coal-bearing land shall furnish a declaration relating
to a year showing the amount of education cess payable by him under Clause
(a) in such form and by such date as may be prescribed and to such
authority as may be notified by the State Government in this behalf in the
Official Gazette (hereinafter referred to as the notified authority);";
(c) in Clause (c),--
(i) for the words "coal mine", wherever they occur, the words "coal-bearing
land" shall be substituted;
(ii) for the word "return", wherever it occurs, the word "declaration"
shall be substituted;
(iii) for the Word "period", wherever it occurs, the word "year" shall be
substituted; :
(d) for Clause (d), the following clause shall be substituted:-
    "(d) the education cess under Clause (b) of Sub-section (2) of
    Section 78 shall be assessed by the notified authority In the
    manner prescribed, and if the declaration under Clause (b) is not
    accepted, the owner of the coal-bearing land shall be given a
    reasonable opportunity of being heard before making such
    assessment;";
(e) in Clause (g), for the words "coal mine" in the two places where they
occur, the words "coal-bearing land" shall be substituted;
(f) for Clause (ga), the following clause shall be substituted:-
    "(ga) where an owner of a coal-bearing land furnishes a declaration
    referred to in Clause (b) in respect of any year by the prescribed
    date or thereafter, but fails to make full payment of education
    cess payable in respect of such period by such date, as may be
    prescribed under Clause (a), he shall pay a simple interest at the
    rate of two per centum for each English calendar month of default
    in payment under Clause (a) from the first day of such month next
    following the prescribed date up to the month preceding the month
    of full payment of such cess or up to the month prior to the month
    of assessment under Clause (d) in respect of such period, whichever
    is earlier, upon so much of the amount of education cess payable by
    him according to Clause (a) as remains unpaid at the end of each
    such month of default;"
(g) for Clause (gb), the following clause shall be substituted:-
    "(gb) where an owner of a coal-bearing land fails to furnish a
    declaration referred to in Clause (b) in respect of any year by the
    prescribed date or thereafter before the assessment under Clause
    (d) in respect of such year and, on such assessment, full amount of
    education cess payable for such year is found not to have been paid
    in the manner and by the date prescribed under Clause (a), he shall
    pay a simple Interest at the rate of two per centum for each
    English caiendar month of default in payment under Clause (a) from
    the first day of the month next following the prescribed date for
    such payment up to the month preceding the month of full payment of
    education cess under Clause (a) or up to tha month prior to the
    month of such assessment under Clause (d), whichever is earlier,
    upon so much of the amount of education cess payable by him
    according to Clause (a) as remains unpaid at the end of each such
    month of default:
Provided that where the education cess payable under Clause (a) is not paid
in the manner prescribed under that clause by the owner of a coal-bearing
land, the notified authority shall, while making the assessment under
Clause (d) in respect of a year, apportion on the basis of such assessment
the education cess payable in accordance with Clause (a);";
(h) in Clause (gc), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(i) in Clause (ge), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(j) for Clause (gf), the following clause shall be substituted:-
    "(gf) interest under Clause (ga) or Clause (gb) shall be payable in
    respect of payment of education cess which falls due on any day
    after the 30th day of April, 1992, and interest under Clause (gc)
    shall be payable in respect of assessment for which notices of
    demand of education cess under Clause (d) are issued on or after
    the date of commencement of the West Bengal Taxation Laws
    (Amendment) Act, 1992:
Provided that interest under Clause (ga) or Clause (gb) in respect of any
period ended on or before the 31st day of March, 1992, or interest under
Clause (gc) in respect of assessment, for which notices of demand of
education cess under, Clause (d) are issued before the date of commencement
of the West Bengal Taxation Laws (Amendment) Act, 1932, shall continue to
be payable in accordance with the provisions of this Act as they stood
immediately before the coming into force of the-aforesaid Act as if the
aforesaid Act had not come into force;";
(k) in Clause (gh), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(l) in Clause (gi), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(m) in Clause (gj), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
    "3. In the West Bengal Rural Employment and Production Act, 1976,--
(1) in Section 2, --
(a) for Clause (1), the following Clauses shall be substituted--
(1) "annual value of coal-bearing land", in relation to a financial year,
means one-half of the value of coal, produced from such coal-bearing land
during the two years immediately preceding that financial year, the value
of coal being that as could have been fetched by the entire production of
coal during the said two immediately preceding years, had the owner of such
coal-bearing land sold such coal at the price or prices excluding the
amount of tax cess, fee, duty, royalty, crushing charge, washing charge,
transport charge or any other amount as may be prescribed, that prevailed
on the date immediately preceding the first day of that financial year.
Explanation. -- Where different prices are prevailing on the date
immediately preceding the first date of that financial year for different
grades or qualities of coal, the value of coal of each grade or quality
produced during the two years immediately preceding that financial year
shall be determined accordingly;
(1a) "coal-bearing land" means holding or holdings of land having one or
more seams of coal comprising the area of a coal mine;
(1b) 'despatched', for a financial year, shall, in relation to a mineral-
bearing land (other than coal-bearing land) or a quarry, mean one-half the
quantity of minerals, or minerals, despatched during two years immediately
preceding that financial year from such mineral-bearing land or quarry;
(1c) 'development value' means a sum equivalent to five times the annual
value of land as assessed under the Cess Act, 1880; ' ;
(b) after Clause (3), the following clause shall be added and shall be
deemed always to have been added ;-
'(4) 'year' means a financial year as defined in Clause (15) of Section 3
of the Bengal General Clauses Act, 1899;';
(2) in Section 4, for Sub-section (2), the following sub-section shall be
substituted:-
"(2) The rural employment cess shall be levied annually--
(a) in respect of land, except when a cess is leviable and payable under
Clause (b) or Clause (c) or Sub-section (2A), at the rate of six paise on
each rupee of development value thereof;
(b) in respect of a coal-bearing land, at the rate of thirty-five per
centum of the annual value of coal-bearing land as defined in Clause (1) of
Section 2;
(c) in respect of a mineral-bearing land (other than coal-bearing land) or
quarry, at the rate of fifty paise on each tonne of minerals (other than
coal) or materials despatched therefrom:
(g) for Clause (gb), the following clause shall be substituted:-
    "(gb) where an owner of a coal-bearing land fails to furnish a
    declaration referred to in Clause (b) in respect of any year by the
    prescribed data or thereafter before the assessment under Clause
    (d) in respect of such year and, on such assessment, full amount of
    rural employment cess payable for such year is found not to have
    been paid in the manner and by the date prescribed under Clause
    (a), he shall pay a simple interest, at the rate of two per centum
    for each English calendar month of default in payment under Clause
    (a) from the first day of the month next following the prescribed
    date for such payment up to the month preceding the month of full
    payment of rural employment cess under Clause (a) or up to the
    month prior to the month of such assessment under Clause (d),
    whichever is earlier, upon so much of the amount of rural
    employment cess payable by him according to Clause (a) as remains
    unpaid at the end of each such month of default:
Provided that where the rural employment cess payable under Clause (a) is
not paid in the manner prescribed under that clause by the owner of a coal-
bearing land, the notified authority shall, while making the assessment
under Clause (d) in respect of a year, apportion on the basis of such
assessment the rural employment cess payable in accordance with Clause
(a);";
(h) in Clause (gc), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(i) in Clause (ge), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(j) for Clause (gf), the following clause shall be substituted :-
    "(gf) Interest under Clause (ga) or Clause (gb) shall be payable in
    respect of payment of rural employment cess which falls due on any
    day after the 30th day of April, 1992, and Interest under Clause
    (gc) shall be payable in respect of assessments for which notices
    of demand of rural employment cess under Clause (d) are issued on
    or after the date of commencement of the West Bengal Taxation Laws
    (Amendment) Act, 1992:
Provided that interest under Clause (ga) or Clause (gb) in respect of any
period ended on or before the 31st day of March, 1992, or interest under
Clause (gc) in respect of assessments for which, notices of demand of rural
employment cess under Clause (d) are issued before the date of commencement
of the WestBengal Taxation Laws (Amendment) Act, 1992, shall continue to be
payable in accordance with the provisions of this Act as they stood before
the coming into force of the said Act as if the said Act had not come into
force;";
(k) in Clause (gh), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(l) in Clause (gl), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
(m) in Clause (gj), for the words "coal mine", the words "coal-bearing
land" shall be substituted;
                                        --------
By order of the Governor

R. BHATTACHARYYA,
Secy, to the Govt. of West Bengal,"

It is the constitutional validity of the amendment in the two legislations,
given effect to from 1,4,92, which was successfully impugned in the High
Court and Is sought to be restored in these appeals.

The High Court has placed reliance mainly on two decisions of this Court,
namely India Cement Ltd. and Ors. v. State of Tamil Nadu and Ors., (Seven-
Judges Bench decision) and Orissa Cement Ltd. v. State of Orissa and Ors.
1991 Supp.(1) SCC 430 (Three-Judges Bench decision). In both these
decisions the levy of cess impugned therein was struck down as
unconstitutional. The High Court of Calcutta has held that the levy
impugned herein is similar to the one held ultra vires the legislative
competence of the State twice by the Supreme Court, and hence the same was
liable to be struck down.

In the opinion of the High Court, the cass is assessed and computed on the
basis of value of coal produced from the coal bearing land, and coal
bearing land has bean defined to mean land having one or more seams of coal
comprising the area of a coal mine. Therefore, it is the production of coal
from a coal mine which is the basic event for the levies and the cess is to
be levied at 35 per centum of the 'annual value of the coal bearing land',
which, as per definition, is directly related to the value of coal produced
from the coal mines. The value of the coal has been related to the price.
Explanation to Clause (1) of Section (2) of the 1976 Act, as amended by the
1992 Act, makes the real nature of the levy clearer by providing that where
different prices are, prevailing on the relevant date for different grades
or qualities of coal, the value of coal of each grade or quality shall be
relevant, The High Court has concluded that the cess cannot be said to ba
on land so as to be covered by Entry 49 in Schedule II. On behalf of the
writ petitioner--respondents, the judgment of the High Court has been
supported on similar grounds as were successfully urged before the High
Court and which we shall presently deal with. On the other hand, the
learned counsel for the appellant-State of West Bengal has submitted that
having regard to the real nature of the levy, it clearly falls within the
legislative field of Entry 49 in List II.
(B) Tea matters

The writ petitions in which the validity of the levy of cesses relatable to
tea estates is involved has an interesting legislative history behind it.
By virtue of the West Bengal Taxation Laws (Amendment) Act, 1981,
amendments were effected in the provisions of the West Bengal Primary
Education Act, 1973, and the West Bengal Rural Employment And Production
Act, 1976. Cesses were sought to be levied upon certain lands and buildings
in the State for raising funds for the purpose of providing primary
education throughout the State and to provide for employment in rural
areas. Different rates in respect of lands, coal mines and other mines on
annual basis were provided. Tea estates were carved out as a separate
category and a separate rate was prescribed therefore as under.
"Section 4(2) : The rural employment cess shall be levied annually -
(a) in respect of lands, other than a tea estate, at the rate of six paise
on each rupee of development value thereof;
(aa) in respect of a tea estate-at such rate, not exceeding ruppes six on
each kilogram of tea on the despatches from such tea estate of tea grown
therein, as the State Government may, by notification in the Official
Gazette, fix in this behalf :
Provided that in calculating the despatches of tea for the purpose of levy
of rural employment cess, such despatches for sale made at such tea auction
centers as may be recognized by the State Government by notification in the
Official Gazette shall be excluded:
Provided further , that the State Government, may fix different rates on
despatches of different classes of tea.
Explanation. - For the purpose of this section, 'tea' means the plant
Camelia Sinensis (L) O. Kuntze as well as all verities of the product known
commercially as tea made from the leaves of the plant Camelia Sinensis (L)
O. Kuntze, including grsen taa and green tea leaves, processed or
unprocessed."
Sub-section (4) was introduced in Section 4 which empowered the State
Government to exempt "such categories of dispatches or such percentage of
dispatches from the liability to pay the whole or any part of the rural
employment cess or reduce the rate..." . By another amendment effected in
1982, the first proviso to Clause (aa) In Section 4(2) was omitted. Several
notifications were-issued by the Government from time to time as
contemplated by Section 4(2).
The constitutional validity of the abovesaid amendment was challenged
successfully in Buxa Dooars Tea Company Ltd. and Ors. v. State of West
Bengal and Ors. -. The decision is by a Bench of two learned Judges. The
levy of csss having been struck down, the State became liable to refund the
cess already collected and the relevant schemes which were financed by the
cessess so collected came under jeopardy. The West Bengal Taxation Laws
(Second Amendment) Act, 1989 was enacted, which is under challenge herein.

Section 2 of the impugned Act contains amendments to West Bengal Primary
Education Act while Section 3 sets out the amendments to West Bengal Rural
Employment and Production Act, 1976. As mentioned hereinbefore, it would be
enough to notice the gist of the amendments made in one of the two Acts of
1973 or 1976, since the amendments in both are identical.

Clause (aa) in Sub-section (2) of Section 4 was omitted with effect from
1.4.1981. After Sub-section (2), Sub-section (2-A) was introduced with
retrospective effect from 1.4.1981. Subsection (2-A) reads :
(2-A) The rural employment cess shall be levied annually, on a tea estate
at the rate of twelve paise for each kilogram of green tea leaves produced
in such estate.
Explanation. - For the purposes of this sub-section, Sub-section (3) and
Section 4-B-
(i) "green tea leaves' shall mean the plucked and unprocessed green leaves
of the plant Camelia Sinensis (L) O. Kuntze;
(ii) "tea estate' shall mean any land used or Intended to be used for
growing plant Camelia Sinensis (L) O. Kuntze and producing green tea leaves
from such plant, and shall include land comprised in a factory or workshop
for producing any variety of the product known commercially as 'tea' made
from the leaves of such-plant and for housing the persons employed in the
tea estate and other lands for purposes ancillary to the growing of such
plant and producing green tea leaves from such plant."

Clause (a) in Sub-section (3) was also substituted which had the effect of
making the owner of the tea estate liable for the said cess. The other
provisions require the owner of the tea estate to maintain a true and
correct account of green tea leaves produced in the tea estate. Sub-section
(4) was also substituted. The substituted Sub-section (4) empowered the
State Government to exempt from the cess such categories of tea estates
producing green tea leaves not exceeding two lakh fifty thousand kilograms
and located in such area as may be specified in such notification. Section
4-5 contains the validation clause, it says that any cess collected for the
period prior to the said Amendment Act shall be deemed to have been validly
levied by it and collected under the Amended Act. Any assessment made or
other proceedings taken in that behalf for assessing and collecting the
said tax were also to be deemed to have been taken under the Amended Act.

Goodricke Group Ltd. and Ors. filed a writ petition under Article 32 of the
Constitution of India in this Court. The levy of cesses under both the
State enactments as amended by the West Bengal Taxation Laws (Second
Amendment) Act, 1989 was impugned. A few matters raising a similar
challenge and pending in various High Courts were also withdrawn to this
Court. All the matters were heard and decided by a three-Judges Bench of
this Court, vide judgment dated November 25, 1994, reported as Goodricke
Group Ltd. and Ors. v. State of West Bengal and Ors. - (1995) Supp. 1 SCC
707. The decision of this Court in India Cement Ltd. and Ors. v. State of
Tamil Nadu and Ors. (1930) 1 SCC 12 (seven-judges Bench) and Orissa...
Cement limited v. State of Orissa and Ors. (1991) Suppl. 1 SCC 430 (three-
Judges Bench) were cited before the three-judges Bench in Goodricke. Both
the decisions were distinguished and the constitutional validity of the
1989 amendments was upheld. The writ petitions were dismissed,

It appears that a similar cess was levied by a pan materia provision
enacted by the State Legislature of Orissa as the Orissa Rural Employment,
Education and Production Act, 1982, The cess was on land bearing coal and
minerals. Challenge to the constitutional validity of such cess was
successfully laid before this Court, and the Orissa Legislation was struck
down as unconstitutional and ultra vires the competence of the State
Legislature in State of Orissa. v. Mahanadi Coal Fields Limited (1995)
Suppl.2 SCC 686 decided on April 21, 1995.

On 30.3.1996 a writ petition under Article 32 of the Constitution of India
has been filed in this Court laying challenge to the constitutional
validity of the very same amendments which were unsuccessfully impugned in
the Goodricke's case.

The writ petitioners in the Tea Matters have in their petition stated a few
grounds in support of the relief sought for. However, a perusal of the
grounds reveals that in substance the challenges is only one, i.e., the
decision in Goodricke runs counter to the view of the law taken by Seven-
Judges Bench in. India Cement and three-Judges Bench in Orissa Cement;
Goodricks was rightly not followed in Mahanadi Coal Fields; rather Mahanadi
Coal Fields has whittled down the authority of Goodricke and that being the
position of law the impugned cess is ultra vires the power of the State
Legislature and deserves to be pronounced so. In short, the same challenge
as was laid and turned down in Goodricke, is reiterated drawing support
from the decisions of this Court previous and subsequent to and seeks the
overruling of Goodricke.
(C) Brick-Earth Matters

The Bengal Brickfield Owners' Association, being a representative body of
the persons engaged in the activity of brick manufacturing and owning
brickfields as also one of the brickfield owners, have joined in filing a
writ petition before this Court wherein the constitutional validity of the
very same provisions as contained in the Cess Act, 1880, the West Bengal
Primary Education Act, 1973 and the West Bengal Rural Employment and
Production Act, 1976 ( both as amended by the Bengal Taxation Laws
Amendment Act, 1992) has been put in issue, as has been subjected to
challenge by the coal mine owners and the tea estate owners disputing the
levy of cess ailegediy on coal and tea. The grounds of challenge, briefly
stated, are three in number: firstly, that brick-earth is a minor mineral
to which the Mines and Minerals Development and Regulation Act, 1957,
applies and by virtue of the declaration made by Section 2 of the Act by
reference to Entry 54 in Schedule I of the Constitution, the field relating
to such minor minerals is entirely covered by the Centra! Legislation and
hence the State Legislations are not competent to levy the impugned cess;
secondly, that the levy is on tha dispatch of minor minerals fee sale,
while the process of manufacturing bricks does not involve any dispatch of
the brick-earth inasmuch as the brick-earth is consumed then and there, on
the brickfield itself, in the process of manufacturing of bricks, and there
being no dispatch of brick-earth, the cess is not leviable; and thirdly,
that the State Government is not empowered to levy any cess on either the
extraction of brick-earth or on the dispatch of brick-earth. In support of
these three grounds, it is further submitted that the same quantity of
brick-earth is subjected by Central Legislation to payment of royalty which
is a tax, and the same quantity of brick-earth is sought to be levied with
cess which is incompetent so far as the State Legislature is concerned. The
writ petition places reliance on the decisions of this Court in India
Cement Ltd. and Ors. (supra), Orissa Cement Ltd. (supra) and Buxa Dooars
Tea Company Ltd. and Ors. (supra). Some of the members of the petitioner
association were served with demand notices. The relief sought for in the
petition is striking down of the relevant provisions of the three State
Legislations as ultra vires the Constitution and quashing of the demand
notices. The reason for filing the petition in this Court, as stated in the
writ petition, is that the provisions sought to be impugned herein have
already been declared ultra vires by the High Court of Calcutta in relation
to 'tea', an appeal against which decision has been filed in this Court and
by an interim order the operation of the judgment of the High Court was
stayed.

According to the respondents, the cess sought to be levied by the impugned
State Legislation is in the nature of fee and not tax. The purpose of
levying fee, as stated in the Preamble to the relevant legislation, is
rendering different services to the society and for public benefit. The
cesses have been levied by the State Government for securing of welfare to
the people by the State as is enshrined in Part IV of the Constitution of
India by providing communication facilities, removal of illiteracy and
rural employment to the poor living below the poverty line. The impugned
legislations levying the cess, do not encroach upon the field covered by
the Central legislation, The brick-kiln owners extract the brick-earth as
an item of trade. From every 100 cft of brick-earth which weighs 5 metric
tones, 1382 bricks are manufactured. The dispatch of 1382 bricks means the
dispatch of 100 cft or 5 metric tones of brick-earth. A brickfield owner
performs dual functions: firstly, he extracts a quantum of brick-earth from
the quarry, and secondly, he dispatches the same for manufacture of bricks
in the some quarry-field. The brickfield owner is an extractor of brick-
earth and also a manufacturer of bricks. The element of dispatch is kept
hidden. That is why the cess is now assessed on annual dispatches.
Dispatch, in the context of brick-earth, means removal of brick-earth from
one place to another which may be within the same complex and for domestic
or captive use or consumption. In any case, the removal of brick-earth
involved in the process cannot escape assessment.
(D) Minor Mineral Matters

This batch of appeals puts in issue the judgment dated 1.3.2000 delivered
by a Division Bench of the Allahabad High Court (reported as Ram Dhani
Singh v. Collector, Sonbhadra and Ors. - AIR 2001 Allahabad 5), upholding
the constitutional validity of a cess on mineral rights levied under
Section 35 of the U.P. Special Area Development Authorities Act, 1986, read
with Rule 3 of the Shakti Nagar Special Area Development Authority (Cess on
Mineral Rights) Rules, 1997 (herein referred to briefly as "SADA Act' and
'SADA Cess Rules' respectively). There was a bunch of 73 writ petitions
filed in the High Court which have all been dismissed. The challenge is
being pursued in this Court by ten writ petitioners through these appeals
by special leave.

The Governor of Uttar Pradesh promulgated U.P. Ordinance No. 15 of 1985,
which was repealed by U.P. Special Area Development Authorities Act, 1986
(U.P. Act No. 9 of 1986), containing identical provisions as were contained
in the preceding Ordinance. The said Act received the assent of the
President of India on 19.3.1986 and was published in U.P. Gazette of that
day. Section 35 of the Act provides as under :
"35. Cess on mineral rights.-
(1) Subject to any limitations imposed by Parliament by law relating to
mineral development, the Authority may impose a cess on mineral rights at
such rate as may be prescribed.
(2) Any Cess imposed under this section shall be subject to confirmation by
the State Government and shall be leviable with effect from such data as
may be appointed by the State Government in this behalf."

On 24.2.1997, in exercise of the power conferred by Section 35 of the Act,
the Governor made the Shakti Nagar Special Area Development Authority (Cess
on Mineral Rights) Rules, 1997, which were published on the same day in the
U.P. Gazette and came into force. Rule 2(b) and Rule 3(1) and (2), relevant
for our purpose, are extracted and reproduced hereunder :
"2. In these rules, unless there is anything repugnant in the subject or
context--
(a) xxx xxx xxx
(b) "Mineral Rights" means rights conferred on a lessee under a mining
lease granted or renewed for mining operations in relation to Minerals
(providing operation for raising, winning or extracting coal) as defined in
the Mines and Minerals (Regulation and Development) Act, 1957 (Act No. 67
of 1957"
"3.(1) The Authority may, subject to Sub-rules (2) and (3) impose a cess on
mineral rights on such minerals and minor minerals and at such rates are
specified below :

MINERAL/MINOR MINERAL    MINIMUM RATE    MAXIMUM RATE
(1) Cess on Coal    Rs.5.00 (per ton)    Rs.10.00 (per ton)
(2) Cess on Stone, Coarse Sind/Sand    Rs.2.00 (Per Cubic metre)
Rs.5.00 (Per Cubic metre)
(2) The rates shall not be less than the minimum rates or more than the
maximum rates specified in Sub-rule (1) and shall be determined by the
Authority by a special resolution which shall be subject to confirmation by
the State Government."
In exercise of the power conferred by the Act and the Rules, the State
Government proceeded to levy cess and take steps for recovery thereof by
serving notices and issuing citations on the several stone crushers (which
the appellants are), who extract stone as mineral and convert the same into
metal by a process of crushing. They filed the writ petitions disputing the
levy and the demand by the State Government.

On behalf of the writ-petitioners, the SADA Cess Rules as also the
legislative competence of the State Legislature to enact Section 35 of the
SADA Act were challenged on the ground that the MMDR Act, 1957, having been
enacted containing a declaration under Section 2 as contemplated by Entry
54 of List-I and the Act being applicable to Sonbhadra failing within the
State of U.P. as well, the State Legislature was denuded of its power to
enact the impugned law and levy the impugned cess. It was also submitted
that the impugned cess would have the effect of adding to the royalty
already being paid and thereby increasing the same, which was ultra vires
the power of the State Government as that power was exercisable only by the
Central Government.

The High Court has held the SADA Act, the SADA Cess Rules and the levy of
cess thereunder within the competence of State Legislature by reference to
Entry 5 in List II.
Reference to Constitution Bench

Since the appeals referable to coal matters and the writ petition referable
to tea matters raised common issues, the cases were taken up for hearing
together. On 12.10.1999, the conflict amongst several decisions of this
Court was brought to the notice of the three-judges Bench hearing the
matter which passed the following order :
    "Great emphasis has been placed by learned counsel for the State of
    West Bengal upon the judgment of a Bench of three learned Judges in
    Goodricke Group Ltd. and Ors. v. State of West Bengal and Ors.
    [1995 Suppl. (1) SCC 707]. Quite apart from the fact that there are
    pending proceedings in this Court seeking to reconcile the judgment
    in Goodricke with that in State of Orissa and Ors. v. Mahanadi
    Coalfields Ltd. and Ors. [1995 Suppl.(2) SCC 686], we find some
    difficulty in accepting as correct the view taken by Goodricke,
    particularly having regard to the earlier decision (of a Bench of
    two learned Judges) in Buxa Dooars Tea Co. Ltd. v. State of West
    Bengal. We think, therefore, that these matters should be heard by
    a Constitution bench.
The papers and proceedings may, accordingly, be placed before the Hon'ble
Chief Justice for appropriate directions."

The brick-earth matters were also clubbed with the abovesaid matters for
hearing.

The impugned judgment of the High Court of Allahabad in Minor Mineral
Matters has placed reliance on the decision of this Court in Goodricke
Group Ltd. and Ors. v. State of West Bengal and Ors. - (1995) Supp. 1 SCC
707. The correctness of the said decision was in issue in Civil Appeal Nos.
1532-33 of 1993 and batch matters and hence these appeals were also
directed to be placed before the Constitution Bench for hearing.

This is how the four sets of matters have been listed before and heard by
the Constitution Bench.
Relevant Entries and principles of interpretation

Before we proceed to examine the merits of the submissions and counter
submissions made on behalf the parties, it will be useful to recapitulate
and summarise a few principles relevant for interpreting entries classified
and grouped into the three Lists of the Seventh Schedule of the
Constitution. The law is legion on the point and the principles which are
being briefly stated hereinafter are more than settled. These principles
are referred to in the several decisions which we shall be referring to
hereinafter. So far as the principles are concerned they have been followed
invariably in all the decisions, however diverse results have followed
based on facts of individual cases end manner of application of such
principles to the facts of those cases.

The relevant entries to which reference would be required to be made during
the course of this judgment are extracted and reproduced herein:-

"SEVENTH SCHEDULE
(Article 246)
List I - Union List
52. Industries, the control of which by the Union is declared by Parliament
by law to be expedient in the public interest.
54. 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.
96. Fees in respect of any of the matters in this List, but not including
fees taken in any court.
97. Any other matter not enumerated in List II or List III including any
tax not mentioned in either of those Lists.
List II - State List
23. Regulation of mines and mineral development subject to the provisions
of List I with respect to regulation and development under the control of
the Union.
49. Taxes on lands and buildings.
50. Taxes on mineral rights subject to any limitations imposed by
Parliament by law relating to mineral development.
66. Fees in respect of any of the matter in this List, but not including
fees taken in any court."

Article 245 of the Constitution is the fountain source of legislative
power. It provides - subject to the provisions of this Constitution.
Parliament may make laws for the whole or any part of the territory of
India, and the Legislature of a State may make Saws for the whole or any
part of the State. The legislative field between the Parliament and the
Legislature of any State is divided by Article 246 of the Constitution.
Parliament has exclusive power to make laws with respect to any of the
matters enumerated in List I in Seventh Schedule, called the 'Union List'.
Subject to the said power of the Parliament, the Legislature of any State
has power to make laws with respect to any of the matters enumerated in
List III, called the 'Concurrent List'. Subject to the abovesaid two, the
Legislature of any State has exclusive power to make laws with respect to
any of the matters enumerated in List II, called the 'State List'. Under
Article 248 the exclusive power of Parliament to make laws extends to any
matter not enumerated in the Concurrent List or State List. The power of
making any law imposing a tax not mentioned in the Concurrent List or Stats
List vests in Parliament. This is what is called the residuary power
vesting in Parliament. The principles have been succinctly summarized and
restated by a Bench of three learned Judges of this Court on a review of
the available decisions in Hoechst Pharmaceuticals Ltd. and Ors. v. State
of Bihar and Ors., -. They are-
(1) the various entries in the three Lists are not 'powers' of legislation
but 'fields' of legislation. The Constitution effects a complete separation
of the taxing power of the Union and of the States under Article 246. There
is no overlapping anywhere in the taxing power and the Constitution gives
independent sources of taxation to the Union and the States.
(2) In spite of the fields of legislation having been demarcated, the
question of repugnancy between law made by Parliament and a law made by the
State Legislature may arise only in cases when both the legislations occupy
the same field with respect to one of the matters enumerated in the
Concurrent List and a direct conflict is seen. If there is a repugnancy due
to overlapping found between List II on the one hand and List I and List
III on the other, the Stats law will be ultra vires and shall have to give
way to the Union law.
(3) Taxation is considered to be a distinct matter for purposes of
legislative competence. There is a distinction made between general
subjects of legislation and taxation. The general subjects of legislation
are dealt with in one group of entries and power of taxation in a separate
group. The power to tax cannot be deduced from a general legislative entry
as an ancillary power.
(4) The entries in the List being merely topics or fields of legislation,
they must receive a liberal construction inspired by a broad and generous
spirit and not in a narrow pedantic sense. The words and expressions
employed in drafting the entries must be given the widest possible
interpretation. This is because, to quote V. Ramaswami, J., the allocation
of the subjects to the lists is not by way of scientific or logical
definition but by way of a mere simplex enumeratio of broad categories. A
power to legislate as to the principal matter specifically mentioned in the
entry shall also include within its expanse the legislations touching
incidental and ancillary matters.
(5) Where the legislative competence of a Legislature of any State is
questioned on the ground that it encroaches upon the legislative competence
of Parliament to enact a law, the question one has to ask is whether the
legislation relates to any of the entries in Lists I or III. If it does, no
further question need be asked and Parliament's legislative competence must
be upheld. Where there are three Lists containing a large number of
entries, there is bound to be some overlapping among them. In such a
situation the doctrine of pith and substance has to be applied to determine
as to which entry does a given piece of legislation relate. Once it is so
determined, any incidental trenching on the field reserved to the other
Legislature is of no consequence. The Court has to look at the substance of
the matter. The doctrine of pith and substance is sometimes expressed in
terms of ascertaining the true character of legislation. The name given by
the Legislature to the legislation is immaterial. Regard must be had to the
enactment as a whole, to its main objects and to the scope and effect of
its provisions. Incidental and superficial encroachments are to be
disregarded.
(6) The doctrine of occupied field applies only when there is a clash
between the Union and the State Lists within an area common to both. There
the doctrine of pith and substance is to be applied and if the impugned
legislation substantially falls within the power expressly conferred upon
the Legislature which enacted it, an incidental encroaching in the field
assigned to another Legislature is to be ignored. While reading the three
Lists, List I has priority over Lists III and II, and List III has priority
over List II. However, still, the predominance of the Union List would not
prevent the State Legislature from dealing with any matter
with in List II though it may incidentally affect any item in List I.
                    (emphasis supplied)
Tax Legislation

The abovestated are general principles. Legislations in the field of
taxation and economic activities need special consideration and are to be
viewed with larger flexibility in approach. Observations of the
Constitution Bench in R.K. Garg v. Union of India and Ors., (1981) 4 SCC
676, are apposite, wherein this Court has emphasized a greater latitude -
like play in the joints - being allowed to the Legislature because it has
to deal with complex problems which do not admit of solution through any
doctrinaire or straitjacket formula. In this field the Court should feel
more inclined to give judicial deference to legislative judgment. Their
Lordships quoted with approval the following statement of Frankfurter, J.
in Morey v. Doud, (1957) 354 US 457:-
    "In the utilities, tax and economic regulation cases, there are
    good reasons for judicial self-restraint if not judicial deference
    to legislative judgment. The legislature after ail has the
    affirmative responsibility. The courts have only the power to
    destroy, not to reconstruct. When these are added to the complexity
    of economic regulation, the uncertainty, the liability to error,
    the bewildering conflict of the experts, and the number of times
    the judges have been overruled by events, self-limitation can be
    seen to be the path to judicial wisdom and institutional prestige
    and stability".
Their Lordships further observed that the Courts ought to adopt a pragmatic
approach in solving problems rather than measuring the propositions by
abstract symmetry. The exact wisdom and nice adaptations of remedies may
not be possible. Even crudities and inequities have to be accommodated in
complicated tax and economic legislations.

We now proceed to enter a deeper dimension in the field of tax legislation
by considering the problem of devising the measure of taxation. This aspect
has been dealt with in detail in Union of India and Ors. v. Bombay Tyre
International Ltd.,. Tracing the principles from the leading authority of
Re.: a reference under the Government of Ireland Act 1920 and Section 3 of
the Finance Act (Northern Ireland) 1934, (1936) A.C. 352, passing through
Ralla Ram v. Province of East Punjab, 1948 FCR 207, and treading through
the law as it has developed through judicial pronouncements one after the
ether, this Court has made subtle observations therein. It has been long
recognized that the measure employed for assessing a tax must not be
confused with the nature of the tax. A tax has two elements: first, the
person, thing or activity on which the tax is imposed, and secondly, the
amount of tax. The amount may be measured in many ways; but a distinction
between the subject matter of a tax and the standard by which the amount of
tax is measured must not be lost sight of. These are described respectively
as the subject of a tax and the measure of a tax. It is true that the
standard adopted as a measure of the levy may be indicative of the nature
of the tax, but it does not necessarily determine it. The nature of the
mechanism by which the tax is to be assessed is not decisive of the
essential characteristic of the particular tax charged, though it may throw
light on the general character of the tax.

Here we may refer to certain illustrative cases of well settled authority -
the authority which has not been shaken so far and has rather withstood the
test of times.
Taxation - measure of levy not suggestive of nature of tax - illustrative
cases

In Ralla Ram (supra) the Federal Court held that a tax on buildings under
Section 3 of the Punjab Urban Immovable Property Tax Act, 1940, measured by
a percentage of the annual value of such building, remained a tax on
buildings even though the measure of annual value of a building was also
adopted as a standard for determining income from property under the Income
Tax Act. The same standard was adopted as a measure for the two levies, yet
the levies remained separate imposts by virtue of their distinctive nature.
The measure adopted, it was held could not be identified with the nature of
the tax levied.

In Sainik Motors, Jodhpur v. State of Rajasthan, a tax on passengers and
goods was assessed as a rate on the fares and freights payable by the
owners of the motor vehicles. The contention that the levy was a tax upon
income and not upon passengers and goods was repelled by this Court. The
Court pointed out that though the measure of the tax is furnished by the
fares and freights it does not cease to be a tax on passengers and goods.

In D.G. Gouse & Co. v. State of Kerala,  the Court examined the different
modes available to the Legislature for measuring the levy of tax on
buildings. The Court upheld the provision made by the Legislature linking
the levy with the annual value of the building and prescribing a uniformed
formula for determining its capital value and for calculating the tax.

In the Hingir-Rampur Coal Co. Ltd. v. State of Orissa,  the form in which
the levy was imposed was held to be an impermissible test for defining in
itself the character of the levy. It was argued that the method of
determining the rate of levy was by reference to the minerals produced by
the mines and, therefore, it was levy in the nature of a duty of excise.
This Court held that the method thus adopted may be relevant in considering
the character of the impost but its effect must be weighed alongwith and in
the light of the other relevant circumstances. Referring to Bombay Tyre
International Ltd. (supra), the Court further held that it is clear that
when enacting a measure to serve as a standard for assessing the levy, the
Legislature need not contour it along lines which spell out the character
of the levy itself. A broader based standard of reference is permissible to
be adopted for the purpose of determining the measure of the levy. Any
standard which maintains a nexus with the essential character of the levy
can be regarded as a valid basis for assessing the measure of the levy.
Meaning of 'Lands' - as used in Entry 49 in list II

The word 'land' - as used in Entry 46, in List II, came up for the
consideration of this Court in Anant Mills v. State of Gujarat. It was held
that the word 'land' cannot be assigned a narrow meaning so as to confine
it to the surface of the earth. It includes all strata above or below. In
other words, the word 'land' includes not only the surface of the earth but
everything under or over it, and has in its legal significance an
indefinite extant upward and downward. The four-Judges' Bench upheld the
validity of the law levying tax in respect of area occupied by underground
lines by reference to Entry 49 in List II, holding it to be a tax on land
only.

Ample authority is available for the concept that under Entry 49 in List II
the land remains a land without regard to the use to which it is being
subjected. It is open for the Legislature to ignore the nature of the user
and tax the land. At the same time it is also permissible to identify, for
the purpose of classification, the land by reference to its user. While
taxing the land it is open for the Legislature to consider the land which
produces a particular growth or is useful for a particular utility and to
classify it separately and tax the same. Different pieces of land
identically situated otherwise, but being subjected to different uses, or
having different potential, are capable of being classified separately
without incurring the wrath of Article 14 of the Constitution. The
Constitution Bench in Kunnathat Thathunni Moopil Nair etc. v. State of
Kerala and Anr., held that the land on which a forest stands is not to be
excluded necessarily from Entry 49. The erstwhile Entry 19 of Schedule II
applied to 'forest'. Their Lordships held that the use of the word 'forest'
in Entry 19 could not be pressed into service to cut down the plain meaning
of the word 'land' in Entry 49. It was permissible to tax the land on which
a forest stands by reference to Entry 49. In Ajoy Kumar Mukherjee v. Local
Board of Barpeta, , the appellant, a land holder, held a hatt (or market)
on his land. The Local Board asked the appellant to take out a licence and
pay Rs. 600/-, later Rs. 700/-, by way of licence fee for holding the
market. It was urged that the impost was unconstitutional, inter alia, on
the ground that the tax was actually imposed on the market, which infringed
Article 14 of the Constitution, and also because the State Legislature had
no legislative competence to tax a market. The Local Board relied on Entry
49 in List. II. The appellant urged that Entries 45 to 63 which deal with
taxes do not contemplate a tax on markets. Repelling the plea, the
Constitution Bench held that the tax was on the land though the charges
arise only when the land is used for a market. The tax remained a tax on
land in spite of the imposition being dependant upon the user of the land
as a market. The tax was an annual tax as contrasted to a tax for each day
on which the market was held. The owner or occupier of the land was
responsible far payment of tax on an annual basis. The amount of tax
depended upon the area of the land on which the market was held and the
importance of the market. Thus, the tax was held to be a tax on land,
though the incidence depended upon the use of the land as a market.

In Vivian Joseph Ferreira and Anr. v. The Municipal Corporation of Greater
Bombay and Ors.,the tax was confined to the residential tenanted buildings.
The classification was held to be valid. In fine The Government of Andhra
Pradesh and Anr. v. Hindustan Machine Tools Ltd., house tax was levied on
the buildings. The new definition of 'house' included 'a factory'. However,
the house tax was levied only on the building occupied by the factory and
not on the machinery and furniture. The State Legislature claimed
competence to do so under Entry 49, List II. The power to tax a building,
exercisable without reference to the use to which the building is put, was
held to be valid. In the opinion of the Court, it was irrelevant that the
building was occupied by a factory which could not conduct its activities
without the machinery and furniture.

Once it is held that the land or building is available to be taxed, it does
not matter to what use the land is being subjected though the nature of the
user may enable land of one particular user being classified separately
from the land being subjected to another kind of user. The tax would remain
a tax on land. It cannot be urged that what is being taxed is not the land
but the nature of its user. So also it is permissible to adopt myriad forms
and methods of valuation for the purpose of quantifying the tax.

In Ralla Ram v. The Province of East Punjabu -1948 FCR 207, the Federal
Court made it clear that every effort should be made as far as possible to
reconcile the seeming conflict between the provisions of the Provincial
Legislation and the Federal Legislation. Unless the court forms an opinion
that the extent of the alleged invasion by a Provincial Legislature into
the field of the Federal Legislature is so great as would justify the view
that in pith and substance the impugned tax is a tax within the domain of
the Federal Legislature, the levy of tax would not be liable to be struck
down. The test Said down in Sir Byramjee Jeejeebhoys's case (AIR 1940 Bom
65) by the Full Bench of Bombay High Court was approved.

In Assistant Commissioner of Urban Land Tax Madras and Ors. etc. v.
Buckingham and Carnatic Co. Ltd. etc., for the purpose of attracting the
applicability of Entry 49 in List II, so as to cover the impugned levy of
tax on lands and buildings, the Constitution Bench laid down twin tests,
namely, (i) that such tax is directly imposed on lands and buildings, and
(ii) that it bears a definite relation to it. Once these tests were
satisfied, it was open for the State Legislature, for the purpose of
levying tax, to adopt the annual value or the capital value of the lands
and buildings for determining the incidence of tax. Merely, on account of
such methodology having been adopted, the State Legislature cannot be
accused of having encroached upon Entries 86, 87 or 83 of List I. Entry 86
In List I proceeds on the Principle of Aggregation and tax is imposed on
the totality of the value of all the assets. It is quite permissible to
separate lands and buildings for the purpose of taxation under Entry 49 in
List II. There is no reason for restricting the amplitude of the language
used in the Entry 49 in List II. The levy of tax, calculated at the rate of
a certain per centum of the market value of the urban land was held to be
intra vires the powers of the State Legislature and not trenching upon
Entry 86 in List I. So is the view taken by another Constitution Bench in
Shri Prithvi Cotton Mills Ltd., etc. v. Broach Borough Municipality and
Ors., (1959) 2 SCC 283, where the submission that the levy was not a rate
on lands and buildings as appropriately understood, but rather a tax on
capital value was discarded.

R.R. Engineering Co., etc. v. Zila Parishad,_ Bareilly and Anr. etc.  is a.
case of circumstance and properties tax levied on the basis of income which
the assessee receives from his profession, trade, calling or property. The
plea that the tax was a tax on income was discarded. The test propounded by
the Constitution Bench is that an excessive levy on circumstance may tend
to blur the distinction between a tax on income and a tax on circumstances.
Income will then cease to be a measure or yardstick of the tax and will
become the very subject-matter of the tax. Restraint in this behalf is a
prudent prescription for the local authorities to follow. The Constitution
Bench observed that it was only a matter of convenience that income was
adopted as a yardstick or measure for assessing the tax and the evolvement
of such mechanism was not conclusive on the nature of tax.

We are inclined to make a reference to a few selected Full Bench decisions
of different High Courts which have been cited with approval before this
Court in many of the decisions to which we are making reference during the
course of this judgment.

In Sir Byramjee Jeejeebhoy v. Province of Bombay and Ors. - A.I.R. 1940
Bombay 65 (F.B.) the Provincial Government levied a tax at the rate of 5%
of the annual letting value in the City of Bombay on the buildings and
lands. The buildings were classified by reference to their annual letting
value, and exception from payment of tax was also carved out in favour of
such buildings as remained vacant and unproductive of rent for the
specified period. It was urged that the impugned tax purported or desired
to tax the value. Placing reliance on the Federal Court's decision in "In
Re: C.P. Motor Spirit Act, 1939 (1939 FCR 18) Chief Justice Beaumont held
that the impugned tax was a tax on lands and buildings. Three submissions
were made in support of the challenge: (I) that the tax is graded by
reference to the annual value of the property charged, (II) that an
allowance was available to be made in respect of vacant properties, and
(III) that the basis of the tax was the same as the basis on which tax on
income from property was imposed by Sections 6 and 9 of Income Tax Act and,
therefore in reality the rate was a tax on income. Beaumont, C.J. held that
regard must be had to the pith and substance of the impugned tax arid not
merely to the form. All the items in the Provincial List must be so
construed as to exclude taxes on income. The tax is charged on lands and
buildings and it is based on the estimated rent which the property would
fetch. Such a value may bear very little relation to the actual income of
the property. It is imposed without any relation to the capital value
except insofar as such value can be ascertained by reference to the
rateable value. It did not make any difference if the arbitrary basis which
was adopted for the purpose of the rate might as well be applied for
ascertaining the capital value as for ascertaining income. The fact that
some concession is allowed to the small owner, a concession which may be
based as much on political as on economic considerations and that an
allowance may be made where the property is shown to produce no income, a
fact which may be taken to show that the estimated value was found to be
erroneous, cannot after the nature of the tax. The concept that in case of
conflict between the Federal List and Provincial List, an entry in the
Federal List may be given a more restricted meaning, was endorsed. The
legality of the levy was upheld.

In District Board of Farrukhabad v. Prag Dutt and Ors. - AIR 1948 Allahabad
382 (F.B.), a tax on 'circumstances and property' was under challenge. It
was urged that it was a tax on income. Chief Justice Malik held that the
fundamental difference between the tax on 'income' and a tax on
'circumstances and property' is that income tax can only be levied if there
is income and if there is no income, no tax is payable. But in the case of
'circumstances and property' tax, where a man's status has to be
determined, his total business turnover may be considered for purposes of
taxation, though he may not have earned any taxable income.

The State of Punjab v. The Union of India through the Secretary to
Government Finance Department, Government of India, New Delhi - AIR 1971
Punjab & Haryana 155 (F.B.), is a Five-Judges Bench decision delivered by
Chief Justice Harbans Singh. Conflict was noticed between List I, Entry 86
and List II, Entry 49. Dealing with the scope of Entry 49 in List II, it
was held that it empowers the State Legislatures to directly tax lands and
buildings, and for determining the basis of the tax the State Legislature
may take, either the area, annual rental value, market value or the capital
value of the land as a basis for calculating and quantifying the tax on
land. Merely because tax was calculated on the basis of annual rental
value, it will not turn it into a tax on income, and if it is based on
capital value, it will not turn it into a tax on capital value.

Yet another angle which the Constitutional Courts would advisedly do better
to keep in view while dealing with a tax legislation, in the light of the
purported conflict between the powers of the Union and the State to
legislate, which was stated forcefully and which was logically based on an
analytical examination of constitutional scheme by Jeevan Reddy, J. in S.K.
Bomai and Ors. v. Union of India,  may be touched. Our Constitution has a
federal structure. Several provisions of the Constitution unmistakably show
that the Founding Fathers intended to create a strong centre. The
historical background relevant at the time of the framing of the
Constitution warranted a strong centre naturally and necessarily. This bias
of the framers towards the centre is found reflected in the distribution of
legislative heads between the Centre and the States. More important heads
of legislation are placed in List I. In the Concurrent List the
parliamentary enactment is given primacy, irrespective of the fact whether
such enactment is earlier or later in point of time to a State enactment on
the same subject matter. The residuary power to legislate is with the
Centre. By the Forty-second Amendment a few of the entries in List II were
omitted or transferred to other lists. Articles 249 to 252 further
demonstrate the primacy of Parliament, allowing it liberty to encroach on
the field meant exclusively for the State legislation though subject to
certain conditions being satisfied. In the matter of finances, the States
appear to have been placed in a less favourable position. True, the Centre
has been given more powers but the same is accompanied by certain
additional responsibilities as well. The Constitution is an organic living
document. Its outlook and expression as perceived and expressed by the
interpreters of the Constitution must be dynamic and keep pace with the
changing times. Though the basics and fundamentals of the Constitution
remain unalterable, the interpretation of the flexible provisions of the
Constitution can be accompanied by dynamism and lean, in case of conflict,
in favour of the weaker or the one who is more needy. Several taxes are
collected by the Centre and allocation of revenue is made to States from
time to time. The Centre consuming the lion's share of revenue has
attracted good amount of criticism at the hands of the States and financial
experts. The interpretation of Entries can afford to strike a balance, or
at least try to remove imbalance, so far as it can. Any conscious whittling
down of the powers of the State can be guarded against by the Courts. "Let
it be said that the federalism in the Indian Constitution is not a matter
of administrative convenience, but one of principle - the outcome of our
own historical process and a recognition of the ground realities." Quoting
from M.C. Setalvad, Tagore Law Lectures "Union and State relations under
the Indian Constitution" ( Eastern Law House, Calcutta, 1974), Jeevan
Reddy, J. observed - "It is enough to note that our Constitution has
certainly a bias towards the Centre vis-a-vis the States......It is equally
necessary to emphasise that Courts should be careful not to upset the
delicately-crafted constitutional schema by a process of interpretation."
The Conflict - a cautious evaluation of "India Cement"

We will now refer to and deal with those cases which have led to the three
learned Judges of this Court, placing the matter for consideration by a
Constitution Bench. We would refer to the cases mentioned in the order of
reference and also to those cases which were heavily relied upon on behalf
of the respondents, disputing the validity of the impugned tax.
Immediately, we take up India Cement.

In India Cement Ltd. and Ors. v. State of Tamil Nadu and Ors.  what was
impugned was a levy of cess on royalty and the question was, whether such
cess on royalty is within the competence of the State Legislature. The
appellant was required to pay, by the Madras Panchayats Act, 1958, local
cess at the rate of 45 paise per rupee of the royalty already being paid.
The question formulated by the Court, as arising for decision was : is cess
on royalty a demand of land revenue or additional royalty? The Court found
that the royalty was payable by the appellant as prescribed under the lease
deed. The rates of the royalty were fixed under the Mines and Minerals
(Development and Regulation) Act, 1957, which is a Central Act, passed
under Entry 54 in List I, by which the control of mines and minerals has
been taken over by the Central Government. The State Legislature sought to
justify and sustain the levy by reference to Entry 49, 50 or 45 in List II,
Cess is a tax and is generally used when the levy is for some special
administrative expense, suggested by the name of the cess, such as health
cess, education cess, road cess etc. This is a well-settled position of
law. The levy was sought to be justified under Entry 45 in List II by
including it within the meaning of land revenue, and in the alternative
under Entry 49 in List II as tax on lands. The challenge to the
constitutional validity of the levy was upheld. We would briefly state the
reasoning which prevailed with the learned Judges.

G.L. Oza, J. delivered a separate concurring opinion. The majority opinion
expressed through Sabyasachi Mukharji, J. (as his Lordship then was), first
clarified the distinction between 'royalty' and 'land revenue'. 'Land
revenue' is connotative of the share in the produce of land which the king
or the Government is entitled to receive. 'Royalty' is a charge payable on
the extraction of minerals from the land. A cess on royalty cannot,
therefore, be called additional land revenue and as such the State was
disabled from imposing tax on royalty. There is a clear distinction between
'tax directly on land' and 'tax on income arising from land'. Royalty is
indirectly connected with land and a cess on royalty cannot be called a tax
directly on land as a unit. The levy could also not be sustained under
Entry 50 in List II which deals with taxes on mineral rights subject to
limitation imposed by Parliament relating to mineral development. Assuming
that the tax in pith and substance fell to Entry 50 in List II, it would be
controlled by a legislation under Entry 54 in List I.

A Division Bench decision of Mysore High Court in Laxminarayana Mining Co.,
Bangalore and Anr. v. Taluk Development Board and Anr. - AIR 1972 Mysore
299 was cited with approval in India Cement . The Mysore High Court struck
down as violative of MMDR Act, 1957 a licence fee on mining manganese or
iron ore etc. imposed by a State Legislation. A perusal of the judgment of
the Mysore High Court shows that the impost was by way of licence fee on
the mining of certain minerals. Regulation and development of mines and
minerals was undertaken by the Central Legislation and therefore the power
of the State Legislature under Entries 23 and 52 in List-II got denuded in
the field of regulation and development covered by the Central Legislation.
The Division Bench vide para 6 held "it is therefore clear that to the
extent the Central Act makes provision regarding the regulation and
development of minerals, the powers of the States Legislatures under Entry
23 of List 11 stand curtailed ". The State Government had sought to defend
the licence fee on the ground that it was in the nature of a tax and not a
licence fee. This plea has been specifically noted by the High Court and
dealt with. However, what is significant to note is the revelation, made by
careful reading of the Judgment, that provision for licence fee was made in
the Central Legislation and licence fee was sought to be imposed by the
State too. In fact, the licence fee was a step trenching upon the field of
regulation and therefore was liable to be struck down on this ground alone.
Yet, another reasoning which prevailed with the High Court was that Section
143 of the State Act, which was not inconsistent with the Central Act, was
relied on by the State Government as conferring power on it to levy the
impugned licence fee. On that plea the High Court formed an opinion that on
the framing of Section 143 of the State Act it did not in express terms
authorize a levy of fee or tax. The High Court observed - "It (Section 143)
cannot also be construed as conferring such a power on the respondents to
levy a tax or fee on mining, in view of the well-settled and statutory
construction that a Court construing a provision of law must presume that
the intention of the authority in making it was not to exceed its power but
to enact it validly". The ratio of the decision of the Mysore High Court is
that provision for licenses and license fees, operating in the field of
regulation of mines and minerals is not available to be made by State
legislation - in view of the declaration in terms of Entry 54 in List I.

In our view, the decision by Mysore High Court cannot be read so widely as
laying down the law that Union's power to regulate and control results in
depriving the States of their power to levy tax or fee within their
legislative competence without trenching upon the field of regulation and
control. There is a distinction between power to regulate and control and
power to tax, the two being distinct and that difference has not been kept
in view by the Mysore High Court.
(A version from main issue) Royalty, if tax?

We Would like to avail this opportunity for pointing out an error,
attributable either to a stenographer's devil or to sheer inadvertence,
having crept into the majority judgment in India Cement Ltd.'s case
(supra). The error is apparent and only needs a careful reading to detect.
We feel constrained - rather duty-bound - to say so, lest a reading of the
judgment containing such an error - just an error of one word - should
continue to cause the likely embarrassment and have adverse effect on the
subsequent judicial pronouncements which would follow India Cement Ltd.'s
case, feeling bound and rightly, by the said judgment having the force of
pronouncement by seven-Judges Bench. Para 34 of the report reads as under :
    "In the aforesaid view of the matter, we are of the opinion that
    royalty is a tax, and as such 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 and the State
    legislature is denuded of its competence under Entry 23 of List II.
    In any event, we are of the opinion that cess on royalty cannot be
    sustained under Entry 49 of List II as being a tax on land. Royalty
    on mineral rights is not a tax on land but a payment for the user
    of land."
                        (underlining by us)

In the first sentence the word 'royalty' occurring in the expression -
'royalty is a tax', is clearly an error. What the majority wished to say,
and has in fact said, is - 'cess on royalty is a tax'. The correct words to
be printed in the judgment should have been 'cess on royalty' in place of
'royalty' only. The words 'cess on' appear to have been inadvertently or
erroneously omitted while typing the text of judgment. This is clear from
reading the judgment in its entirety. Vide para 22 and 31, which precede
para 34 above said, their Lordships have held that 'royalty' is not a tax.
Even the last line of para 34 records 'royalty on mineral rights is not a
tax on land but a payment for the user of land'. The very first sentence of
the para records in quick succession '......as such a cess on royalty being
a tax on royalty, is beyond the competence of the State legislature...'.
What their Lordships have intended to record is '......that cess on royalty
is a tax, and as such a cess on royalty being a tax on royalty is beyond
the competence of the State Legislature....'. That makes correct and
sensible reading, A doubtful expression occurring in a judgment, apparently
by mistake or inadvertence, ought to be read by assuming that the Court had
intended to say only that which is correct according to the settled
position of law, and the apparent error should be Ignored, far from making
any capital out of it, giving way to the correct expression which ought to
be Implied or necessarily read in the context, also having regard to what
has been said a little before and a little after. No learned Judge would
consciously author a judgment which is self-inconsistent or incorporates
passages repugnant to each other. Vide para 22, their Lordships have
clearly held that there is no entry in Schedule II which enables the State
to impose a tax on royalty and, therefore, the State was incompetent to
impose such a tax (cess). The cess which has an incidence of an additional
charge on royalty and not a tax on land, cannot apparently be justified as
failing under Entry 49 in List II.

It is of significance for the issue before us, to determine the nature of
royalty and whether it is a tax, and if not, then, what it is, Until the
pronouncement of this Court in India Cement (supra), it has been the
uniform and unanimous judicial opinion that royalty is not a tax.

First we will refer to certain dictionaries oft-cited in courts of law.

Words and Phrases, Permanent Edition (Vol.37A, page 597)-
    ""Royalty" is the share of the produce reserved to owner for
    permitting another to exploit and use property. The word "royalty"
    means compensation paid to landlord by occupier of land for species
    of occupation allowed by contract between them. "Royalty" is a
    share of the product or profit (as of a mine, forest, etc.)
    reserved by the owner for permitting another to use his property."

Stroud's Judicial Dictionary of Words and Phrases (Sixth Edition, 2000,
Vol.3, page 2341) -
    "the word "royalties" signifies, in mining leases, that part of the
    reddendum which is variable, and depends upon the quantity of
    minerals gotten or the agreed payment to a patentee on every
    article made according to the patent. Rights or privileges for
    which remuneration is payable in the form of a royalty"

Words and Phrases, Legally Defined (Third Edition, 1990, Vol.4, page 112) -
    "A royalty, in the sense in which the word is used in connection
    with mining leases, is a payment to the lessor proportionate to the
    amount of the demised mineral worked within a specified period"

Wharton's Law Lexicon (Fourteenth Edition, page 893) -
    "Royalty, payment to a patentee by agreement on every article made
    according to his patent; or to an author by a publisher on every
    copy of his book sold; or to the owner of minerals for the right of
    working the same on every ton or other weight raised."

Mozley & Whiteley's Law Dictionary (Eleventh Edition, 1993, page 243) -
    "A pro rata payment to a grantor or lessor, on the working of the
    property leased, or otherwise on the profits of the grant of lease.
    The word is especially used in reference to mines/ patents and
    copyrights."

Prem's Judicial Dictionary (1992, Vol. 2, page 1458) -
    "royalties are payments which the Government may demand for the
    appropriation of minerals, timber or other property belonging to
    the Government. Two important features of royalty have to be
    noticed, they are, that the payment made for the privilege of
    removing the articles is in proportion to the quantity removed, and
    the basis of the payment is an agreement."

Black's Law Dictionary (Seventh Edition, p.1330) -
    "Royalty - A share of the product or profit from real property,
    reserved by the grantor of a mineral lease, in exchange for the
    lessee's right to mine or drill on the land.
Mineral Royalty : A right to a share of income from mineral production."'

In D.K. Trivedi & Sons, and Ors. v. State of Gujarat and Ors., 1986 (Supp)
SCC 20, a Bench of two learned Judges of this Court dealt with "rent",
"royalty" and "dead rent" and held as follows. Rent is an integral part of
the concept of a lease. It is the consideration from the lessee to the
lessor for the demise of the property to him. In a mining lease the
consideration usually moving from the lessee to the lessor is the rent of
the area leased (often called surface rent), dead rent and royalty. Since
the mining lease confers upon the lessee the right not merely to enjoy the
property as under an ordinary lease but also to extract minerals from the
land and to appropriate them for his own use or benefit, in addition to the
usual rent for the area demised, the lessee is required to pay a certain
amount in respect of the minerals extracted proportionate to the quantity
so extracted. Such payment is called "royalty". It may, however, be that
the mine is not worked properly so as not to yield enough return to the
lessor in the shape of royalty. In order to ensure for the lessor a regular
income, regardless of whether the mine is worked or not, a fixed amount is
provided to be paid to him by the lesses. This is called "dead rent". "Dead
rent" is calculated on the basis of the area leased while "royalty" is
calculated on the quantity of minerals extracted or removed. Thus, while
dead rent is a fixed return to the lessor, royalty is a return which varies
with the quantity of minerals extracted or removed. Since dead rent and
royalty are both a return to the lessor in respect of the area leased,
looked at from one point of view dead rent can be described as the minimum
guaranteed amount of royalty payable to the lessor but calculated on the
basis of the area leased, and not on the quantity of minerals extracted or
removed. In H.R.S. Murthy v. Collector of Chittor,  too the Constitution
Bench of this Court had defined Royalty to mean 'the payment made for the
materials or minerals won from the land'.

The judicial opinion as prevailing amongst the High Courts may be noticed.
A Full Bench of the High Court of Orissa held in Laxmi Narayan Agarwalla
and Ors. v. State of Orissa and Ors.,  'Royalty is the payment made for the
minerals extracted; it is not tax'. In Surajdin Laxmanlal v. State of M.P.,
Nagpur and Ors.  a Division Bench of the High Court of Madhya Pradesh
referred to the Wharton's Law Lexicon and Mozley & Whiteley's Law
Dictionary and said - "royalties are payments which the Government may
demand for the appropriation of minerals, timber or other property
belonging to the Government." The High Court opined that there are two
important features of royalty: (i) the payment is in proportion to the
quantity removed; and (ii) the basis of the payment is an agreement.

Drawing a distinction between 'royalty' and 'tax', a Division Bench of the
High Court of Punjab and Haryana High Court held in Dr. Shanti Saroop
Sharma and Anr. v. State of Punjab and Ors. as under -
    "if a person is merely in occupation of land which contains minor
    minerals, he is not liable to pay any royalty, but it is only when
    he holds a mining lease and by virtue of that extracts one or more
    minor minerals that he is called upon to pay royalty to the
    Government where the lease is in respect of the land in which minor
    minerals vest inthe Government. Royalty thus has its basis in the
    contract. For payment to the owner of the minerals for the
    privilege of extracting the minor minerals computed on the basis of
    the quantity actually extracted and removed from the leased area.
    It is more akin to rent or compensation payable to an owner by the
    occupier or lessee of land for its use or exploitation of the
    resources contained therein. Merely because the provision with
    regard to royalty is made by virtue of the rules relating to the
    regulation of the mining leases and a uniform rate is prescribed,
    it does not follow that it is a compulsory exaction in the nature
    of tax or impost."

A Division Bench of Gujarat High Court in Saurashtra Cement & Chemical
Industries Ltd., Ranavav v. Union of India and Anr., emphatically said -
    "royalty may not be a fee but it is not a tax. It is a payment for
    the mineral which is removed or consumed by the holder of the
    mining lease. The minerals themselves, - the property beneath the
    soil - belong to the Union. When the holder of a mining lease
    removes these minerals or consumes them, he can do so only on
    payment of its price or value. Therefore, royalty is a share which
    the Union claims in the minerals which have been won from the soil
    by the lessee and which otherwise belong to it. Royalty is a share
    in such minerals and not a tax in the form of a compulsory
    exaction. It is not compulsory because anyone who applies for a
    mining lease to win minerals for being removed or consumed must pay
    its price. If he does not want to pay the price, he may not apply
    for a mining lease. Royalty which is a share of the owner of the
    minerals - the Union - won by the lessee from the soil with the
    authority of the Union can never be said to be an imposition on the
    holder of a mining lease.

We need not further multiply the authorities. Suffice it to say that until
the pronouncement in India Cement, nobody doubted the correctness of
'royalty' not being a tax.

Such has been the position even subsequent to the pronouncement in India
Cement.

In Inderjeet Singh Sial and Anr. v. Karam Chand Thapar and Ors., a Bench of
two learned judges held that -
    "In its primary and natural sense 'royalty', in the legal world, is
    known as the equivalent or translation of jura regalia or jura
    regia. Royal rights and prerogatives of a sovereign are covered
    thereunder. In its secondary sense the word 'royalty' would
    signify, as in mining leases, that part of the reddendum, variable
    though, payable in cash or kind, for rights and privileges
    obtained. It is found in the clause of the deed by which the
    grantor reserves something to himself out of that which he grants.
    It may even be a clause reserving rent in a lease, whereby the
    lessor reserves something for himself out of that which he grants."

In Ajit Singh v. Union of India and Ors. - 1995 supp. (4) SCC 224, another
Bench of two learned Judges held that the grant of mining lease involves
grant of a privilege by the State. In both these decisions India Cement's
is not noticed.

In Quarry Owners' Association v. State of Bihar and Ors. - (2000) 8 SCC
655, a Bench of two learned Judges was faced with a submission, based on
India Cement and subsequent decisions following it, that royalty is a tax.
The learned Judges found it difficult to accept the concept but tried to
wriggle out of the situation by observing -
    "royalty includes the price for the consideration of parting with
    the right and privilege of the owner, namely, the State Government
    who owns the mineral. In other words, the royalty/dead rent, which
    a lessee or licensee pays, includes the price of the minerals which
    are the property of the State; Both royalty and dead rent are
    integral parts of a lease. Thus, it does not constitute usual tax
    as commonly understood but includes return for the consideration
    for parting with its property."

In India Cement (vide para 31, SCC) decisions of four High Courts holding
'Royalty is not tax' have been noted without any adverse comment. Rather,
the view seems to have been noted with tacit approval. Earlier (vide para
21, SCC) the connotative meaning of royalty being 'share in the produce of
land' has been noted. But for the first sentence (in para 34, SCC) which we
find to be an apparent error, no where else has the majority judgment held
royalty to be a tax.

How the abovenoted inadvertent error in India Cement has resulted into
throwing on the loop line the movement of later case law on this point may
be noticed. In State of M.P. v. Mahalaxmi Fabric Mills Ltd., and Ors.
(decision by a Bench of three learned Judges) and Saurashtra Cement and
Chemicals Industries and Anr. etc. etc. v. Union of India and Ors. - (2001)
1 SCC 91 (decision by a Bench of two learned Judges) para 34 (from SCC) in
India Cement has been quoted verbatim and dealt with. In Mahalaxmi Fabric
Mills Ltd. and Ors.'s case (supra), the court noticed several dictionaries
defining royalty and also the decisions of High Courts available and stated
that traditionally speaking royalty is an amount which is paid under
contract of lease by the lessee to the lessor, namely, the State
Governments concerned and it is commensurate with the quality of minerals
extracted. But then (vide para 12), the Court felt bound by the view taken
in India Cement , reiterated in Orissa Cement, to hold that royalty is a
tax. The point that there was apparently a 'typographical error' in para 34
in India Cement was specifically raised but was rejected. In Saurashtra
Cement and Chemicals Industries and Anr. (supra) too the Court fait itself
bound by the decision in Mahalaxmi Fabric Mills Ltd. and Ors. (supra),
backed by India Cement, and therefore held royalty to be tax.

We have clearly pointed out the said error, as we are fully convinced in
that regard and feel ourselves obliged constitutionally, legally and
morally to do so, lest the said error should cause any further harm to the
trend of jurisprudential thought centering around the meaning of 'royalty'.
We hold that royalty is not tax. Royalty is paid to the owner of land who
may be a private person and may not necessarily be State. A private person
owning the land is entitled to charge royalty but not tax. The lessor
receives royalty as his income and for the lessee the royalty paid is an
expenditure incurred. Royalty cannot be tax. We declare that even in India
Cement it was not the finding of the Court that royalty is a tax. A
statement caused by an apparent typographical or inadvertent error in a
judgment of the Court should not be misunderstood as declaration of such
law by the Court. We also record, our express dissent with that part of the
judgment in Mahalaxmi Fabric Mills Ltd. and Ors. which says (vide para 12
of SSC report) that there was no 'typographical error' in India Cement and
that the said conclusion that royalty is a tax logically flew from the
earlier paragraphs of the judgment.
Inter-relationship of Schedule I Entry 54 and Schedule II Entry 23

With the abovesaid reflection of ours on clarifying India Cement,
clarification now we proceed to examine the inter-relationship of Schedule
I Entry 54 and Schedule II Entry 23 which have been quoted and reproduced
in the earlier part of this judgment.
Conflict in Entries (in the three Lists in Seventh Scheduled

The analysis of decided cases as made by eminent constitutional jurist H.M.
Seervai in his work on Constitutional Law of India (Fourth/Silver Jubilee
Edition, Vol.3) is apposite. Vide para 22.168, he states - "In Gov.-Gen. in
Council v. Madras, 1945 FCR 179, the Privy Council laid down important
principles for interpreting apparently conflicting legislative entries in
general, and apparently conflicting tax entries in particular. The Privy
Council held, first, that though a tax in List I (e.g. a duty of excise)
and a tax in List II (e.g. a tax on the sale of goods) of the Government of
India Act, 1935, may overlap, in fact there would be no overlapping in few,
if the taxes were separate and distinct imposts; secondly, that the
machinery of tax collection did not affect the real nature of a tax.
Another principle for reconciling apparently conflicting tax entries
follows from the fact that a tax has two elements : the parson, thing or
activity on which the tax is imposed, and the amount of the tax. The amount
may be measured in many ways; but decided cases establish a clear
distinction between the subject matter of a tax and the standard by which
the amount of tax is measured. These two elements are described as the
subject or a tax and the measure of a tax. In D.G. Gouse v. Kerala -, which
is considered later, the above passage was quoted with approval by the
Supreme Court as stating precisely the two elements involved in almost all
tax cases, namely, the subject of a tax and the measure of a tax."

It is necessary to examine the scheme underlying the Seventh Schedule of
the Constitution. We are relieved of the need of embarking upon any maiden
voyage in this direction in view of the availability of a Constitution
Bench decision in M.P.V. Sundararamier & Co. v. The State of Andhra Pradesh
and Anr., (1958) SCR 1422. Venkatarama Aiyar, 3., speaking for the
Constitution Bench, traced the history of legislations preceding the
Constitution, analysed the scheme underlying the division of legislative
powers between the Centre and the States and then succinctly summed up the
quintessence of the analysis. It was held, inter alia:
1. In List I, Entries 1 to 81 mention the several matters over which
Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes
which could be imposed by a law of Parliament. An examination of these two
groups of Entries shows that while the main subject of legislation figures
in the first group; a tax in relation thereto is separately mentioned in
the second.
2. In List II, Entries 1 to 44 form one group mentioning the subjects on
which the States could legislate. Entries 45 to 63 in that List form
another group, and they deal with taxes.
3. 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. And this
distinction is also manifest in the language of Article 248, Clauses (1)
and (2) and of Entry 97 in List I of the Constitution. Under the scheme of
the Entries in the Lists, taxation is regarded as a distinct matter and is
separately set out .
4. The entries in the Legislative Lists must be construed broadly and not
narrowly or in a pedantic manner,
5. The entries in the two Lists - List I and II - must be construed, if
possible, so as to avoid conflict. Faced with a suggested conflict between
entries in List I and List II, what has first to be decided is whether
there is any conflict. If there is none, the question of application of the
non-obstante clause 'subject to' does not arise. And, if there be conflict,
the correct approach to the question is to see whether it was possible to
effect a reconciliation between the two Entries so as to avoid a conflict
and overlapping.
Illustration
If it is possible to construe Entry 42 in List I as not Including tax on
inter-state sales it should be so construed and the power to levy such tax
must be held to be included in Entry 54 in List II (Entries as they existed
pre-Forty Second Amendment, 1976) (See: Governor General in Council v.
Province of Madras - AIR 1945 PC 98, and Province of Madras v. Bodder
Paidenna & Sons - AIR 1942 FC 33)
6. In the event of a dispute arising it should be determined by applying
the doctrine of pith and substance to find out whether between two Entries
assigned to two different legislatures the particular subject of the
legislation falls within the ambit of the one or the other. Where there is
a clear and irreconcilable conflict of jurisdiction between the Centre and
a provincial legislature it is the law of the Centre that must prevail.
[underlining by us ]

Referring to M.P.V. Sundararamier & Co. (supra) Sabyasachi Mukharji, J. (as
his Lordship then was) speaking for six out of the seven Judges
constituting the Bench in Synthetics and Chemicals Ltd. and Ors. v. State
of U.P. and Ors. held that under the constitutional scheme of division of
powers in the Seventh Schedule, there are separate entries pertaining to
taxation and other laws. A tax cannot be levied under a general entry.

The abovesaid principles continue to hold the field and have been followed
in cases after cases.
General power of 'Regulation and Control' does not include power of
taxation

One thing, which too is well settled by a series of decisions is that the
power of                 "regulation and control" is
separate and distinct from the power of taxation. How this principle has
been applied in myriad situations may be illustratively noticed.

The Constitution Bench in The Hingir-Rampur Coal Co. Ltd. and Ors. v. The
State of Orissa and Ors. etc., was faced with a challenge to the
constitutional validity of the Orissa Mining Areas Development Fund Act,
1952. The petitioner-company was engaged in producing and selling coal
excavated from its collieries at Rampur in the State of Orissa. The Act and
the Rules framed and the notification issued thereunder levied the payment
of cess on the petitioner's Rampur Colliery. The cause of action had arisen
to the petitioner therein on account of the communications made to the
company in March 1959 ceiling upon them to file monthly returns for the
assessment of the cess which was levied by issuance of a notification dated
June 24, 1958.

The challenge to the constitutional validity of the levy imposed by the
impugned Act came to be examined by reference to Entry 54 in List I read
with the Mines and Minerals (Regulation and Development) Act, 1948 (Act No.
53 of 1948) as also by reference to Entry 52 in List I read with the
Industries (Development and Regulation) Act, 1951 (Act No. 65 of 1951). On
behalf of the State of Orissa, the levy was defended as a fee relatable to
Entries 23 and 66 in List II. The Constitution Bench entered into an
enquiry as to what is the primary object of the levy and the essential
purpose which it is intended to achieve. It was observed that its primary
object and the essential purpose must be distinguished from its ultimate or
incidental results or consequences, as that is the true test in determining
the character of the levy. The submission that the impugned levy could be
either duty of excise or tax, was dismissed. The Constitution Bench held
that the form in which the levy is imposed and the extent of the levy,
i.e., being too high, do not alter the character of the levy from a fee
into that of a duty of excise. The Constitution Bench laid down the
features which would distinguish excise from a tax or fee and also the
features which distinguish a tax from a fee though there is no generic
difference in a tax and a fee, both being compulsory exactions of money by
public authorities.
The scheme of the impugned Orissa Act was examined in-depth and their
Lordships found that the cess levied by the impugned Act was a fee. The Act
was passed for the purpose of the development of mining areas in the State.
Orissa is a poor State carrying in its womb a lot of mineral wealth of
great potential value, but the areas where its mineral wealth is located
lack infrastructure which would enable the exploitation of minerals. The
primary and the principal object of the Act was to develop the mineral
areas in the State and to assist more efficient and extended exploitation
of its mineral wealth. The cess levied did not become a part of the
consolidated fund and was not subject to an appropriation in that behalf ;
it went into the special fund earmarked for carrying out the purpose of the
Act and thus its existence established a correlation between the cess and
the purpose for which it was levied, satisfying the element of quid pro quo
in the scheme. The scheme of the Act showed that the cess was levied
against the class of persons owning mines in the notified area and to
enable the State Government to render specific services to the said class
by developing the notified mineral area. Its application was regulated by a
statute and was confined to its purposes. There was a definite correlation
between the impost and the purpose of the Act which was to render services
to the notified area. These feature of the Act impressed upon the levy the
character of a fee as distinct from a tax.
The inter-relationship of Entries 23 and 66 in List II qua Entry 54 in List
I was so stated by the Constitution Bench:-
"The effect of reading the two Entries together is clear. The jurisdiction,
of the State Legislature under Entry 23 is subject to the limitation
imposed by the latter part of the said Entry. If Parliament by its law has
declared that regulation and development of mines should in public interest
be under the control of the Union, to the extent of such declaration the
jurisdiction of the State Legislature is excluded. In other words, if a
Central Act has been passed which contains a declaration by Parliament as
required by Entry 54, and if the said declaration covers the field occupied
by the impugned Act the impugned Act would be ultra vires, not because of
any repugnance between the two statutes but because the State Legislature
had no jurisdiction to pass the law. The limitation imposed by the latter
part of Entry 23 is a limitation on the legislative competence of the State
Legislature itself."
The Constitution Bench then proceeded to test the validity of the cess by
reference to two Central Acts, namely (A) the Mines and Minerals
(Regulation and Development) Act, 1948 (Act No. 53 of 1948) and (B) The
Industries (Development and Regulation) Act, 1951 (Act No. 65 of 1951).
(A) Act No. 53 of 1948 is a pre-constitutional piece of Central
legislation. It was found that the applicability of the Act which was
initially attracted to mines as well as oil fields remained confined to oil
fields in view of the subsequent parliamentary enactment, i.e., the MMDR
Act, 1957 (Act No. 67 of 1957). Therefore, the question which remained to
be examined was only for the year 1952 as at that time the Act No. 53 of
1948 applied to mines as well as oil fields. The factual constitutional
position was that Act No. 53 of 1948 ceased to apply to Orissa post-
constitution and assuming it applied yet there was no such declaration
post-constitution made by Parliament as is referred to in Entry 23 in List
II read with Entry 54 in List I and therefore in either case the validity
of the said State Legislation was not impaired in spite of the finding
recorded by the Court that 'there can be no doubt that the field covered by
the impugned (State) Act is covered by the Central Act 53 of 1948'.

(B) What is significant for our purpose is the law laid down by the
Constitution Bench as to the validity of the impugned State legislation by
reference to Act No. 65 of 1951, Section 2 whereof contained a declaration
- "it is hereby declared that it is expedient in the public interest that
the Union should take under its control the industries specified in the
First Schedule" as contemplated by Entry 52 in List I to which Entry 23 in
List II is subject. The first schedule included coal as an article as to
which the industry engaged in the manufacture or production was brought
within the purview of the Act. Section 9 empowered the Central Government
to levy cess for the purpose of the Act on all goods manufactured or
produced in any scheduled industries including coal. The Constitution Bench
held that the Central Act was passed to provide for the development and
regulation of certain industries one of which undoubtedly is coal mining
industry. The declaration made by Section 2 of the Act covered the same
field as is covered by the impugned State Act.. Then the Constitution Bench
held :-
    ".........but in dealing with this question it is important to bear
    in mind the doctrine of pith and substance. We have already noticed
    that in pith and substance the Impugned Act is concerned with the
    development of the mining areas notified under it. The Central Act,
    on the other hand, deals more directly with the control of all
    industries including of course the industry of coal. Chapter II of
    this Act provides for the constitution of the Central Advisory
    Council and Development Councils, Chapter III deals with the
    regulation of scheduled industries, Chapter IIIA provides for the
    direct management or control of industrial undertakings by Central
    Government in certain cases, and Chapter IIIB is concerned with the
    topic of control of supply, distribution, price, etc. of certain
    articles. The last chapter deals with miscellaneous incidental
    matters. The functions of the Development Councils constituted
    under this Act prescribed by Section 6(4) bring out the real
    purpose and object of the Act. It is to increase the efficiency or
    productivity in the scheduled industry or group of scheduled
    industries, to improve or develop the service that such Industry or
    group of industries renders or could render to the community, or to
    enable such industry or group of Industries to render such service
    more economically. Section 9 authorises the imposition of cess on
    scheduled industries in certain cases. Section 9(4) provides that
    the Central Government may hand over the proceeds of the cess to
    the Development Council there specified and that the Development
    Council shall utilize the said proceeds to achieve the objects
    mentioned in Clauses (a) to (d). These objects include the
    promotion of scientific and industrial research, of improvements in
    design and quality, and the provision for the training of
    technicians and labour in such industry or group of industries. It
    would thus be seen that the object of the Act is to regulate the
    scheduled industries with a view to improvement and development of
    the service that they may render to the society, and thus assist
    the solution of the larger problem of national economy. It is
    difficult to hold that the field covered by the declaration made by
    Section 2 of this Act, considered in the light of its several
    provisions, is the same as the field covered by the impugned Act.
    That being so, it cannot be said that as a result of Entry 52 read
    with Act LXL of 1951 the vires of the impugned Act can be
    successfully challenged.
Our conclusion, therefore, is that the impugned Act is relatable to Entries
23 and 66 in List II of the Seventh Schedule, and its validity is not
impaired or affected by Entries 52 and 54 in List I read with the Act LXV
of 1951 and Act LIII of 1948 respectively. In view of this conclusion it is
unnecessary to consider whether the impugned Act can be justified under
Entry 50 in List II, or whether it is relatable to Entry 24 in List III and
as such suffers from the vice of repugnancy with the Central Act XXXII of
1947."
[Underlining by us]

In spite of having held that the Central Act of 1951 was attracted to coal
industries, their Lordships, by applying the doctrine of pith and
substance, refused to annul the levy of cess under the impugned Orissa Act
based on the following distinction :-

Central- Act, 1951.    State Legislation of 1952

Deals more directly with the control of all industries including the
industry of coal with a view to improvement and development of the service
that they may render to the society and thus assist the solution of the
larger problem of national economy.    Is concerned with the development
of the mining areas notified under it.


Though both were cesses, one levied by the Central Act and the other levied
by the State Act, inasmuch as they had different fields to operate, Entries
52 and 54 in List I were held not to have any adverse or denuding effect on
the legislative competence of the State referable to Entries 23 and 65 in
List II.

As a result, the writ petitions laying challenge to the constitutional
validity of Orissa Act of 1952 were directed to be dismissed.

The distinction: Here we will pause for a moment with a view to highlight a
feature of singular significance in The Hingir-Rampur Coal Co. as it would
be the decisive factor for the applicability of the ratio of the case --
where it would apply and where it would not. Section 6 of Act No. 43 of
1948 which came up for the consideration of the Constitution Bench,
specifically provides :-
    "6. Power to make rules as respects minerals development (i) The
    Central Government may, by notification in the official Gazette,
    make rules for the conservation and development of minerals.
(2) In particular, and without prejudice to the generality of the foregoing
power, such rules may provide for all or any of the following matters,
namely:-
xxx xxx xxx xxx
(i) the levy and collection of royalties, fees or taxes inrespect of
minerals mined, quarried, excavated or collected;
XXX XXX XXX XXX
10. Rules to be laid before the Legislature--All rules made under any of
the provisions of this Act shall be laid before the Central Legislature as
soon as may be after they are made."
Thus, the power to levy and collect fees or taxes in respect of minerals
mined, quarried, excavated or collected was expressly conferred on the
Central Government by a specific provision made in that regard by the Act
itself. Because the power to levy tax or fee was appropriated to itself by
a Central Legislation it was held that the impugned Orissa Act - a State
Legislation, could not have provided for the levy of a fee as by virtue of
the Central Legislation, the Union having exercised its power to legislate,
the field was covered and exempted from the legislative competence of the
State. Yet the recovery was field not liable to be annulled inasmuch as the
Central Act No. 53 of 1948 was a pre-Constitution Legislation and as to
which a declaration in terms of Entry 54 in List I was not made by the
Parliament after the coming into force of the Constitution.

As to the Central Act of 1951, though it contained a declaration as
contemplated by Entry 52 of List I, and though it applied to several goods
including coal, the doctrine of pith and substance when correctly applied
showed that the Central Act was intended for improvement of service while
the State Act of 1952 was intended to deal with development of mining areas
and the latter was valid.

The MMDR Act, 1957, which we are called upon to deal with, stands on much
better footing for the writ petitioners herein as it does not contain any
provision similar to Sections 6 and 10 of the Central Act No. 53 of 1948 or
Section 9 of the Central Act No. 65 of 1951.

Challenge to levy under the abovesaid Orissa Act 27 of 1952 did not come to
an end with Hinger-Rampur Coal Co., It was once again raised in the High
Court with success and the State of Orissa came up In appeal which was
heard and decided by a Constitution Bench In State of Orissa and Anr. v.
M.A. Tulloch and Co. The respondent writ-petitioner was working a manganese
mine in the State of Orissa under a lease granted under the provisions of
the MMRD Act, 1948. The fee levied under the Orissa Act for the period of
six quarters from September 30, 1956, to March 31, 1958, was under
challenge. The MMDR Act 1957 came into force w.e.f. June 1/1958. The
recovery impugned, therefore, related to the period pre-MMDR Act 1957 i.e.
for the period during which Industries (Development and Regulation) Act
1951 was applicable. The recovery was sought to be effected after the
enactment and corning into force of the Act No. 67 of 1957, though the
recovery was referable to the period prior to it. It was held that the
demand was liable to be raised for the period for which it was raised and
the validity of the demand was an issue concluded by Hingir-Rampur Coal Co.
The demand having validly accrued prior to June 1, 1958, the recovery
thereof could be validly enforced, notwithstanding the repeal of Act No. 65
of 1951, on the general principles of interpretation of statutes as also
under Section 6 of the General Clauses Act. Reiterating the findings in
Hingir-Rampur Coal Co. the Constitution Bench held that the impugned Act
empowered the State Government to levy a fee on a percentage of the value
of the mined ore at the pit's mouth, the collections being intended for the
development of the "mining areas" in the State, This finding is very
significant.

The Constitution Bench laid down the following principles which are
relevant for our purpose :-
(1) Entry 23 of the State List vests in the State Legislature power to
enact laws on the subject of 'regulation of mines and mineral development
subject to the provisions of List I with respect to regulation and
development under the control of the Union'. It would be seen that "subject
to" the provisions of List I the power of the State to enact Legislation on
the topic of "mines and mineral development" is plenary. The relevant
provision in List I is, as already noticed, Entry 54 of the Union List.
(2)To the extent to which the Union Government had taken under its control
the regulation and development of minerals that much (i.e. to that extent)
was withdrawn from the, ambit of the power of the State Legislature under
Entry 23 and legislation of the State which had rested on ' the existence
of power under that entry would, to the extent of that control, be
superseded or rendered ineffective, for hare we have a case not of mere
repugnancy between the provisions of the two enactments but of a denudation
or deprivation of State legislative power by the declaration which
Parliament is empowered to make, and has made.
(3) The States would lose legislative competence only to the "extent to
which regulation and development under the control of the Union has been
declared by Parliament to be expedient In the public interest".
(4) It would be logical first to examine and analyse the State Act and
determine its purpose, width and scope and the area of Its operation and
then consider to what "extent" the Central Act cuts into it or trenches on
it.

As to the MMDR Act, 1957, the Constitution Bench In M.A. Tulloch observed
by reference to Section 18 of the Act that the intention of Parliament was
to cover the entire field and thus to leave no scope for the argument that
until rules were framed there was no inconsistency and no supersession of
the State Act.

The following holding of the above Constitution Bench is again worth noting
:
    "......that technically speaking the power to levy a fee is under
    the entries in the three lists treated as a subject-matter of an
    independent grant of legislative power, but whether it is an
    incidental power related to a legislative head or an Independent
    legislative power it is beyond dispute that in order that a fee may
    validity be Imposed the subject-matter or the main head of
    legislation in connection with which the fee is imposed is within
    legislative power. The material words of the Entries are : "Tees in
    respect of any of the matters in this List". It is, therefore, a
    prerequisite for the valid imposition of a fee that it is in
    respect of "a matter in the List". If by reason of the declaration
    by Parliament the entire subject-matter of "conservation and
    development of minerals" has been taken over, for being dealt with
    by Parliament, thus depriving the State of the power which it
    therefore possessed, it would follow that the "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."

In the last but one para of M.A. Tulloch this sentence occurs:- "If this
were the true position about the effect of the Central Act 67 of 1957 as
the liability to pay the fee which was the subject of the notices of the
demand had accrued prior to June 1, 1958, it would follow that these
notices were valid and the amounts due thereunder could be recovered
notwithstanding the disappearance of the Orissa Act by virtue of the
superior legislation by the Union Parliament". This observation, read out
of the context and facts of the case alongwith the Court having referred to
Sections 18 and 25 of the MMDR Act 1957, creates an impression that the
power to levy fee having been appropriated by the Central Legislation to
the Central Government, the cess levied by the State would stand
obliterated or repealed, is the holding by the Court. But that is not the
ratio of the case and It could not have been because in Hingir-Rampur Coal
Co. the Constitution Bench has clearly held to the contrary and the
Constitution Bench in M.A. Tulloch has squarely followed the holding in
Hingir-Rampur Coal Co. Nobody should act on an assumption that in M.A.
Tulloch the Constitution Bench has held - much less as a ratio of the
decision - that under Act No. 67 of 1957 the Central Government has
appropriated to itself the power to levy tax or cess on minerals or mineral
bearing land. All that the Court has said is that the 1957 enactment covers
the field of legislation as to the regulation of mines and the development
of minerals. As Section 2 itself provides and indicates, the assumption of
control in public interest by the Central Government is on (i) the
regulation of mines, (ii) the development of minerals, and (iii) to the
extent hereinafter provided. The scope and extent of declaration cannot and
could not have been enlarged by the Court nor has it been done. The effect
is that no State Legislature shall have power to enact any legislation
touching (i) the regulation of mines, (ii) the development of minerals, and
(iii) to the extent provided by Act No. 67 of 1957. The Preamble to the
Central Act 67 of 1957 itself speaks -- "An Act to provide for the
development and regulation of mines and minerals under the control of the
Union". Tax and fee is not a subject dealt with by Act No. 67 of 1957. Let
us demonstrate the same from the provisions of the Act and for that purpose
relevant part of Section 13, Sub-section (1) and relevant part of Sub-
section (2) of Section 18, Sub-section (3) of Section 18 and Section 25 are
extracted and reprodused as under:
"13. Power of Central Government to make rules in respect of minerals. -
(1) The Central Government may, by notification in the Official Gazette,
make rules for regulating the grant of reconnaissance permits, prospecting
licences and mining leases in respect of minerals and for purposes
connected therewith.
(2) In particular, and without prejudice to the generality of the foregoing
power, such rules may provide for all or any of the following matters,
namely.
(a) to (h) ***        ***
(i) the fixing and collection of fees for reconnaissance permits,
prospecting licences or mining leases, surface rent, security deposit,
fines, other fees or charges and the time within which and the manner in
which the dead rent or royalty shall be payable;
18. Mineral development. - (1) It shall be the duty of the Central
Government to take ail such steps as may be necessary for the conservation
and systematic development of minerals in India and for the protection of
environment by preventing or controlling any pollution which may be caused
by prospecting or mining operations and for such purposes the Central
Government may, by notification in the Official Gazette, make such rules as
it thinks fit,
(2) In particular, and without prejudice to the generality of the foregoing
power such rules may provide for ail or any of the following matters,
namely:
(a) to (o) - (Not reproduced)
(p) the procedure for and the manner of imposition of fines for the
contravention of any of the rules framed under this section and the
authority who may impose such fines; and
(q) the authority to which, the period within which, the form and the
manner in which applications for revision of any order passed by any
authority under this Act and the rules made thereunder may be made, the fee
to be paid and the documents which should accompany such applications.
(3) All rules made under this section shall be binding on the Government.
25. Recovery of certain sums as arrears of land revenue. - Any rent,
royalty, tax, fee or other sum due to the Government under this Act or the
rules made thereunder or under the terms and conditions of any
reconnaissance permit, prospecting licence or mining lease may, on a
certificate of such officer as may be specified by the State Government in
this behalf by general or special order, be recovered in the same manner as
an arrear of land revenue.

We have three comments to offer on M.A. Tulloch. Firstly , the provisions
of the Act No. 67 of 1957 did not directly come up for the scrutiny of the
Constitution Bench as there was no demand raised after the commencement of
this Act which was put in issue before the Constitution Bench; the
Constitution Bench was only adjudicating upon the issue whether a liability
to pay cess incurred under the previous Act could be enforced under Act No.
67 of 1957 or in other words if Act No. 67 of 1957 had any castigating
effect on the demand validly raised under the previous enactment. Secondly,
the extent to which power to legislate by the States was excluded by the
Central Act No. 65 of 1951 was not a question dealt with in-depth as it was
done in Hingir-Rampur Coal Co. Thirdly, M.A. Tulloch, if not correctly
read, creates a wrong impression that Act No,67 of 1957 provides for levy
of tax and fee, which in fact It does not.

Section 13(2)(i) cannot be read as empowering the Central Government to
levy any tax or fee. The expression "other fees and charges" have to be
interpreted ejusdem generis taking colour from other words and phrases
employed in the same clause. The word "charges" cannot and does include
within its meaning any tax, The expression "other fees or charges" must be
assigned such meaning as to include therein only such fees and charges as
are meant for regulation or development.
We are clear in our minds that a power to levy tax or fee cannot be spelled
out from sections 13, 18 and 25 of the Act No.67 of 1957. It is well-
settled that power to tax cannot be inferred by implication; there must be
a charging section specifically empowering the State to levy tax. Section
18(2)(q) speaks of fee to be paid on applications for revision and not on
minerals, mineral rights or mining land. Section 25 speaks of 'recovery of
tax and fee' amongst others. Two observations are spontaneous. Firstly a
provision for recovery, being a machinery provision, cannot be read as
empowering the levy of tax or fee. Secondly, it speaks of tax or fee being
due to the Government without defining the same and without qualifying the
word "Government' with Central or State, A perusal of several provisions of
the Act and in particular Sections 9A, 15, 15(1-A)(a) and (g), 15(3),
17(3), 21(5), 25 goes to show that the power of recovery is invariably
given to the State Government and obviously the word 'Government' in
Section 25 refers to the State Government, which only is empowered to
recover the sums due as arrears of land revenue.

The relevant principles of law laid down in M.A. Tulloch Which we have
extracted and reproduced hereinabove, do not run contrary to the view we
are taking in the present case. The recovery of fee could have been held to
be vitiated in that case because the field of mining activity in manganese
ore was fully covered by the MMDR Act, 1957, and the levy under the
impugned State Act, as found by the two Constitution Benches in Hingir-
Rampur Coal Co. and M.A. Tulloch was being collected for the development of
the mining areas in the State. The doctrine of pith and substance noted and
applied in Hingir-Rampur Coal Co. has been restated In M.A. Tulloch wherein
the Constitution Bench had said,, as noted hereinabove, that the Orissa Act
was concerned with the development of the mining areas notified under the
Act while the Central Act on the other hand dealt more directly with the
control of all industries Including of course the industry of coal and the
object of the Central Act was to regulate the scheduled industry with a
view to make improvement and development of the service that they may
render to the society and thus assisting the solution of the larger problem
of the national economy, In spite of the declaration made by Section 2 of
the Central Act of 1951 considered in the light of its several provisions
ft was found difficult to hold that the field covered by the Central Act
was the same as the field covered by the impugned Orissa Act. None of the
two Constitution Benches have held that power to regulate and develop with
which the Central Act of 1951 was concerned would include the power to levy
tax and fee, which power, shall have to be traced to some other entry in
List I. List I contains a general entry i.e. Entry 96 for levy of fee in
respect of matters in List I but so far as levy of tax is concerned there
are separate .and specific entries (see Entries 82 to 92B in List I and
Entries 45 to 63 in List II). Further in view of Entry 50 of List II,
Parliament can by any law relating to mineral development limit or place
limitations on the power of the State Legislatures to impose taxes on
mineral rights.
Power to tax not a residuary power

Article 265 mandates - no tax shall be levied or collected except by
authority of law. The scheme of the Seventh Schedule reveals an exhaustive
enumeration of legislative subjects, considerably enlarged over the
predecessor Government of India Act. Entry 97 in List I confers residuary
powers on Parliament, Article 248 of the Constitution which speaks of
residuary powers of legislation confers exclusive power on Parliament to
make any law with respect to any matter not enumerated in the Concurrent
List or the State. List. At the same time, it provides that such "residuary
power shall include the power of making any law imposing a tax not
mentioned in either of those Lists. It is, thus, clear that if any power to
tax is clearly mentioned in List -II the same would not be available to be
exercised by Parliament based on the assumption of residuary-power. The
Seven-Judges Bench in Union of India v. Harbhajan Singh Dhillon, ruled, by
a majority of 4:3, that, the power to legislate in respect of a matter does
not carry with It a power to impose a tax under our constitutional scheme.
According to Seervai (Constitutional Law of India, Fourth/Silver Jubilee
Edition, Vol.3, para 22.191):- "Although in Dhillon's case conflicting
views were expressed about the nature of the residuary power, the nature of
that power was: stated authoritatively in Kesvananda's Case. Earlier, in
Golak Nath's case , Subha Rao C.L (for himself, Shah, Sikri, Shelat and
Vaidyalingam 33) had held that Article 368 only provided the procedure for
the amendment of the Constitution, but that the power to amend the
Constitution was to be found in the residuary power conferred on Parliament
by Articles 245 and 246(1) read with entry 97, List I and by Article 248.
Seven out of the nine judges who overruled Golak Nath's Case held, inter
alia, that the power to amend the Constitution could not be located in the
residuary powers of Parliament, Hegde and Mukherjea JJ held that -
    "It is obvious that these Lists have been very carefully prepared.
    They are by and large exhaustive. Entry 97 in List I was included
    to meet same unexpected and unforeseen contingencies. It is
    difficult to believe that our Constitution-makers who were keenly
    conscious of the importance of the provision relating to the
    amendment of the Constitution and debated that question for several
    days, would have left the important power hidden in entry 97 of
    List I leaving to the off chance of the courts locating that power
    in that entry. We are unable to agree with those learned judges
    when they sought to place reliance on Arts. 245, 246 and 248 and
    entry 97 of List I for the purpose of locating the power of
    amendment in the residuary power conferred on the Union." (Italics
    supplied)

Similar views were expressed by five other judges, According to Seervai,
"the law laid down in Kesavananda's Case is that if a subject of
legislation was prominently present to the minds of the framer of our
Constitution, they would not have left it to be found by courts in the
residuary power; a fortiori, if a subject of legislative power was not only
present to the minds of the framers but was expressly denied to Parliament,
it cannot be located in the residuary power of Parliament."

Vide para 22.194 the eminent jurist poses a question: "Does Article 248 add
anything to the exclusive residuary power of Parliament under Article
246(1) read with Entry 97 List I to make laws in respect of "any other
matter" not mentioned in List II and List III including any tax not
mentioned in those Lists?" and answers by saying --"The answer is 'No'."

As to the riddle arising in the context of mines and minerals development
legislation by reference to the Entries in List I and List II, Seervai
states -- "the regulation of mines and mineral development is a subject of
exclusive State legislation, but for the limitation placed upon that power
by making it subject to the provisions in that behalf in List I. If
Parliament does not exercise its power under Entry 54, List I, the States'
power under Entry 23, List II would remain intact. If Parliament exercised
Its power under Entry 54, List I, only on a part of the field, as for
example, major minerals, the States' legislative power over minor minerals
would remain intact." (para 22.195 at p. 2433)
Power to tax must be express, else no power to tax

There is nothing like an implied power to tax. The source of power which
does not specifically speak of taxation cannot be so interpreted by
expanding its width as to include therein the power to tax by implication
or by necessary inference. States Cooley in Taxation (Vol. 1, Fourth
Edition) -- "There is no such thing as taxation by implication, the burden
is always upon the taxing authority to point to the act of assembly which
authorizes the imposition of the tax claimed." (para 122 at p. 278).

Justice G.P. Singh in Principles of Statutory Interpretation (Eighth
Edition, 2001) while dealing with general principles of strict construction
of taxation statutes states "A taxing statute is to be strictly construed.
The well-established rule in the familiar words of Lord Wensleydale,
reaffirmed by Lord Halsbury and Lord Simonds, means : "The subject is not
to be taxed without clear words for that purpose; and also that every Act
of Parliament must be read according to the natural construction of its
words". In a classic passage Lord Cairns stated the principle thus ; "If
the person sought to be taxed comes within the letter of the law he must be
taxed, however great the hardship may appear to the judicial mind to be. On
the other hand, if the Crown seeking to recover the tax, cannot bring the
subject Within the letter of the law, the subject is free, however
apparently within the spirit of law the case might otherwise appear to be.
In other words, if there is admissible in any statute, what is called an
equitable construction, certainly, such a construction Is not admissible in
a taxing statute where you can simply adhere to the words of the statute.
Viscount Simon quoted with approval a passage from Rowlatt, J. expressing
the principle in the following words : "in a taxing Act one has to look
merely at what is clearly said. There is no room for any intendment. There
is no equity about a tax. There is no presumption as to tax. Nothing is to
be read in, nothing Is to be implied. One can only look fairly at the
language used." (at p.635)

The judicial opinion of binding authority flowing from several
pronouncements of this Court has settled these principles; (i) in
interpreting a taxing statute, equitable considerations are entirely cut of
place. Taxing statutes cannot be interpreted on any presumption or
assumption. A taxing statute has to be interpreted in the light of what is
clearly expressed; it cannot imply anything which is not expressed; it
cannot import provisions in the statute so as to supply any deficiency;
(ii) before taxing any person it must be shown that he fails within the
ambit of the charging section by clear words used In the Section; and (iii)
if the words are ambiguous and open to two interpretations, the benefit of
interpretation is given to the subject. There is nothing unjust in the tax-
payer escaping if the letter of the law falls to catch him on account of
Legislature's failure to express itself clearly. (See, Justice G.P. Singh,
ibid, pp.638-639).

Power to tax is not an incidental power. According to Seervai, although
legislative power includes all incidental and subsidiary power, the power
to impose a tax is not such a powerunder our Constitution, It is for this
reason that it was held that the power to legislate in respect of inter-
state trade and commerce (Entry 42, List I, Schedule 7) did not carry with
it the power to tax the sale of goods in inter-state trade and commerce
before the insertion of Entry 92A in List I and Such power belonged, to the
States under Entry 54 in List II. Entry 97 in List I also militated against
the contention that the power to tax is an incidental power under our
Constitution (See: Constitutional Law of India, H.M. Seervai, Fourth/Sliver
Jubilee Edition, Vol. 3, para 22.20).
Power to regulate and control and power to tax --determining the nature of
legislation by reference to the power exercised

It is of paramount significance to note the difference between power to
regulate and develop' and 'power to tax'.

The primary purpose of taxation is to collect revenue. Power to tax may be
exercised for the purpose of regulating an industry, commerce or any other
activity; the purpose of levying such tax, an Impost to be more correct, is
the exercise of sovereign power for the purpose of effectuating regulation
though Incidentally the levy may contribute to the revenue. Cooley in his
work on Taxation (Vol.1, Fourth Edition) deals with the subject in
paragraphs 26 and 27. 'There are some cases in which levies are made and
collected under the general designation of taxes, or under some term
employed In revenue laws to indicate a particular class of taxes, where the
imposition of the burden may fairly be referred to some other authority
than to that branch of the sovereign power of the state under which the
public revenues are apportioned and collected. The reason is that the
imposition has not for its object the raising of revenue but looks rather
to the regulation of relative rights, privileges and duties as between
individuals; to the conservation of order in the political society, to the
encouragement of industry, and the discouragement of pernicious
employments. Legislation for these purposes it would seem proper to look
upon as being made in the exercise of that authority which is inherent In
every sovereignty, to make all such rules and regulations as are needful to
secure and preserve the public order, and to protect each individual in the
enjoyment of his own rights and privileges by requiring the observance of
rules of order, fairness and good neighborhood, by all around him. This
manifestation of the sovereign authority is usually spoken of as the police
power. The power to tax must be distinguished from an exercise of the
police power. (State v. Tucker, 56 S.C. 516). The political power is a very
different one from the taxing power, in its essential principles, though
the taxing power, when properly exercised, may indirectly tend to reach the
end sought by the other in some cases."(p.94) "The distinction between a
demand of money under the police power and one made under the power to tax
is not so much one of form as of substance." (p.95). The distinction
between a levy in exercise of police power to regulate and the one which
would be in nature of tax is illustrated by Cooley by reference to a
license. He says - "So-called license taxes are of two kinds. The one is a
tax for the purpose of revenue. The other, which is, strictly speaking, not
a tax at all but merely an exercise of the police power, is a fee imposed
for the purpose of regulation." (p.97)

"Suppose a charge is imposed partly for revenue and partly for regulation.
Is it a tax or an exercise of the police power? Other considerations than
those which regard the production of revenue are admissible in levying
taxes, and regulation may be kept in view when revenue is the main and
primary purpose. The right of any sovereignty to look beyond the immediate
purpose to the general effect neither is nor can be disputed. The
government has general authority to raise a revenue and to choose the
methods of doing so; it has also general authority over the regulation of
relative rights, privileges and duties, and there is no rule of reason or
policy in government which can require the legislature, when making laws
with the one object in view, to exclude carefully from its attention the
other. Nevertheless cases of this nature are to be regarded as cases of
taxation. If revenue is the primary purpose, the imposition is a tax. Only
those cases where regulation is the primary purpose can be specially
referred to the police power. If the primary purpose of the legislative
body in imposing the charge is to regulate, the charge is not a tax even if
it produces revenue for the public." (Cooley, ibid, pp.98-99)

This Court in seven-judges Bench decision in Synthetics and Chemicals Ltd.
and Ors. v. State of U.P. and Ors., agreed that regulation is a necessary
concomitant of the police power of the State. However, it was an American
doctrine and in the opinion of the Court it was not perhaps applicable as
such in India. The Court endorsed recognizing the power to regulate as a
part of the sovereign power of the State exercisable by the competent
legislature. Brushing aside the need for discussion on the question -
whether under the Constitution the States have police power or not, the
Court accepted the position that the State has the power to regulate.
However, in the garb of exercising the power to regulate, any fee or levy
which has no connection with the cost or expenses of administering the
regulation, cannot be imposed; only such levy can be justified as can be
treated as part of regulatory measure. Thus, the State's power to regulate
perhaps not as emanation of police power but as an expression of the
sovereign power of the State has its limitations. In our opinion these
observations of the Court lend support to the view we have formed that a
power to regulate, develop or control would not include within its ken a
power to levy tax or fee except when it is only regulatory. Power to tax or
levy for augmenting revenue shall continue to be exercisable by the
Legislature in whom it vests i.e. the State Legislature in spite of
regulation or control having been assumed by another legislature i.e. the
Union. State Legislation levying a tax in such manner or of such magnitude
as can be demonstrated to be tampering or intermeddling with Center's
regulation and control of an industry can perhaps be the exception to the
rule just stated.

In Synthetics and Chemicals and Chemicals Ltd. and Ors. v. State of U.P.
and Ors. the question before the seven-Judges Bench was as to the power of
State to legislate on industrial alcohol as a subject. Entry 8 in List II
and Entry 33 in List III came up for consideration. Their Lordships noticed
the provisions of Industries (Development and Regulation) Act, 1951 (as
amended in 1956), especially Section 18-G thereof, and held that the
provisions evinced dear intention of the Union to occupy the whole field
relating to industrial alcohol and therefore the State could not claim to
regulate it. The power with regard to the control of alcoholic industries
was considered and their Lordships concluded that in spite of the Central
Legislation operating in the field the State was left with the following
powers available to legislate In respect of alcohol -
"(a) it may pass any legislation in the mature of prohibition of potable
liquor referable to Entry 6 of List II and regulating powers.
(b) It may lay down regulations to ensure that non-potable alcohol is not
diverted and misused as a substitute for potable alcohol.
(c) The State may charge excise duty on potable alcohol and sales tax under
Entry 52 of List II. However, sales tax cannot be charged on industrial
alcohol in the present case, because under the Ethyl Alcohol (Price
Control) Orders, sales tax cannot be charged by the State on industrial
alcohol.
(d) However, in case State is rendering any service, as distinct from its
claim of so-called grant of privilege, it may charge fees based on quid pro
quo. See in this connection, the observation of Indian Mica case.

It may be seen that the power to levy sales tax on industrial alcohol was
available to the State but for the provisions of the Ethyl Alcohol (Price
Control) Orders on account of which the State could not charge sales tax on
industrial alcohol. The State could levy any fee based on quid pro quo. The
seven-Judges Bench decision lends support to the view we are taking that in
the field occupied by the Centre for regulation and central, power to levy
tax and fee is available to the State so long as it doss not interfere with
the regulation - the power assumed and occupied by the Union.

Before a seven-Judges Bench In The Automobile Transport (Rajasthan) Ltd. v.
The State of Rajasthan and Ors.,  the question arose if State could make
laws imposing regulatory restrictions on free trade, commerce and
intercourse guaranteed by Article 301 of constitution and whether a State
tax could be treated as impeding freedom under Article 301 of Constitution.
The following statement of law by majority speaking through S.K. Das, J.
(at pp.524-525) is very much in point for our purpose:-
    "Such an interpretation would, in our opinion, seriously affect the
    legislative power of the State Legislatures which power has been
    held to be plenary with regard to subjects in list II. The States
    must also have revenue to carry out their administration and there
    are several items relating to the imposition of taxes in list II.
    The Constitution-makers must have intended that under those items
    the States will be entitled to raise revenue for their own
    purposes. If the widest view is accepted, then there would be for
    all practical purposes, an end of State autonomy even within the
    fields allotted to them under the distribution of powers envisaged
    by our Constitution. An examination of the entries in the lists of
    the Seventh Schedule to the Constitution would show that there are
    a large number of entries in the State list (list II) and the
    Concurrent list (list III) under which a State Legislature has
    power to make laws. Under some of these entries the State
    Legislature may impose different kinds of taxes and duties, such as
    property tax, sales tax, excise duty etc., and legislation in
    respect of any one of these items may have an indirect effect on
    trade and commerce. Even laws other than taxation laws, made under
    different entries in the lists referred to above, may indirectly or
    remotely affect trade and commerce. If it be held that every law
    made by the Legislature of a State which has repercussion on
    tariffs, licensing, marketing regulations, price-control etc., must
    have the previous sanction of the President, then the Constitution
    in so far as it gives plenary power to the States and State
    Legislatures in the fields allocated to them would be meaningless."

Their Lordships also observed (at p.526-527) that the freedom guaranteed by
Article 301 does not mean freedom from taxation. The power of levying tax
is essentially for the very existence of Government, though its exercise
may be controlled -by constitutional provisions made in that behalf. Power
to tax is not outside constitutional limitations. It is for Parliament to
exercise power in the field made available to it by Entry 52 and 54 in List
I. It is also for Parliament to state by law the limitations - and the
sweep thereof - which it may choose to impose on field available to stats
for taxation by reference to Entry 50 !n List IT, It may not be for Courts
to venture into enquiry in just an individual case to find and hold what
tax would hamper mineral development if Parliament has chosen to observe
silence by not legislating or failed to say something explicit.

A reasonable tax or fee levied by State legislation cannot, in our opinion,
be construed as trenching upon, Union's power and freedom to regulate and
control mines and minerals.
India Cement and decision post India Cement, based thereon :

India Cement is clearly distinguishable so far as the present cases are
concerned. As we have already pointed cut it was a case of cess levied by
Sate Legislature on royalty and not on mineral rights or land and
buildings. That is why the levy was held ultra vires. Seervai's comment and
objective criticism on Indian Cement is noteworthy (See - ibid, para 22.257
C). Royalty is income and State Legislatures are not competent to tax an
income.' This single ground was enough to strike-down the levy of cess
impugned in India Cement. Nothing more was needed. The Orissa Cement Ltd.
(supra) also as the very opening part of the report shows, dealt with the
levy of a cess by the State based on the royalty derived from mining lands
which was held to be directly and squarely governed by India Cement and,
therefore, struck down.

In State of Orissa and Ors. v. Mahanadi Coalfields Ltd. and Ors., 1995
Supp. (2) SCC 686, the impugned levy by the State Legislature was a tax of
Rs.32 per thousand acre on coal bearing lands, It was sought to be defended
as falling under Entry 49 or in the alternative under Entry 23 or Entry 50
in List II. The attack was that the legislation being one on mineral lands
and mineral rights and the Parliament having enacted the Mines and Minerals
(Development and .Regulation) Act, 1957, the field was entirely covered and
the State Legislature was incompetent to levy the tax. Reliance was placed
on India Cement, Orissa Cement and Buxa Dooars Tea Co. Ltd. (supra). Only
mineral bearing land and coal bearing land were the subject of the levy of
tax. The three-Judges Bench speaking through K.S. Paripoornan, J.,
concluded that the charging section of the impugned Act imposed a tax on
the minerals also, and was not confined to a levy on land or surface
characteristic of the land. All non-mineral bearing, lands and non-coal
bearing lands were left out of the levy. The levy was struck down as
levying a tax not on land (related to surface 'characteristic...of the
land) but on minerals and mineral rights, Goodricke's case (supra) was
cited before their Lordships and it was observed that in Goodricke's case
the impugned levy was held to be a tax on land and that makes all the
difference.

We find it difficult to subscribe to the reasoning adopted in Mahanadi
Coalfields Ltd..

Buxa Dooars Tea Co. Ltd. and Ors. v. State of West Bengal and Ors. is a
two-Judges Bench decision. Rural employment cess was levied at the rate of
Rs.5 per kg. on all dispatches of tea. The rate was changed from time to
time but that is not very material. A careful reading of the report shows
that the primary challenge was on the ground of the impugned cess being
violative of Article 14 and 301 of the Constitution as it had the direct
and immediate effect of impeding the movement of goods throughout the
territory of India, The challenge was sustained. Incidentally, and very
briefly, their Lordships have in one paragraph also dealt with the question
of legislative competence of the State Government by reference to Entry 49
in List II. Their Lordships have observed, "if the legislation is in
substance legislation in respect of dispatches of tea, legislative
authority must be found for it with reference to some other entry. No Entry
in Lists II and III is pertinent, Moreover, the Union had, in public
interest, assumed con(SIC) ver the tea industry including the tea trade and
control of tea prices." Therefore, the Court concluded that the impugned
legislation was also void for want of legislative competence as it
pertained to a covered field. Suffice it to observe that to the extent the
learned Judges have dealt with the challenge by reference to legislative
competence of the State Legislature under Entry 49 in List II, there is not
much of discussion and is just incidental and the observations are too wide
to be countenanced, Another distinguishing feature common to these
decisions is that the distinction and demarcation of fields of operation
between Central and State Acts by reference to the doctrine, of pith and
substance seems to have been not adverted to.
From Baijnath Kadio to Eastern Coalfields

Before we proceed to deal with Goodricke, it will be necessary to complete
the chain of thought by referring to four decisions and the law which
developed therewith between the years 1970 and 1982 which can be termed a
period by itself on the issues at hand.

In Baijnath Kadio v. The State of Bihar and Ors. the writ-petitioners were
holding mining leases for minor minerals. The State of Bihar amended the
Bihar Minor Mineral Concession Rules, 1964, whereby with affect from
27.1.1964 the rates of dead rent, royalty and surface rent were revision
Additional demands were raised. It was submitted that in view of the
provisions contained in the MMOR Act, 1957 incorporating (vide, Section 2
thereof) a declaration within the meaning of Entry 54 in List I, it was not
competent for the State Legislature to revise the rates as abovesaid. This
Court held that the whole of the legislative field relating to minor
minerals was covered by the Central Legislation by virtue of the
declaration made by Section 2 and the enactment of Section 15 in the Act,
thereby leaving no scope for the enactment of the second proviso to Section
10 of t he Bihar Land Reforms Act whereunder the powers to Increase the
royalty, dead rent and surface rent were sought to be exercised. There were
preexisting old leases which could have been modified only by a legislative
enactment made by the Parliament on the Sines of Section 16 of Act No. 67
of 1957. Any attempt to regulate such old mining leases will fall not In
Entry 18 but in Entry 23 of List II even though the regulation incidentally
touches them. The pith and substance of the amendment of Section 10 of the
Bihar Land Reforms Act fails within Entry 23 although it incidentally
touches land and not vice versa. Entry 18 did not come to the rescue of the
State Government and Entry 23 was subject to the provisions of List I. The
impugned provision and the action taken thereunder were held ultra vires
the Constitution. The decisions of this Court in The Hingir Rampur Coal Co.
Ltd. & Ors. and M/s M.A. Tulloch and Co. were referred to. However, the law
laid down by the Constitution Bench (vide para 13) is significant. It held
:-
    "..........It is open to Parliament to declare that it is expedient
    in the public interest that the control should rest in Central
    Government. To what extent such a declaration can go is for
    Parliament to determine and this must be commensurate with public
    interest. Once this declaration is made and the extant laid down,
    the subject of legislation to the extent laid down becomes an
    exclusive subject for legislation by Parliament. Any legislation by
    the State after such declaration and trenching upon the field
    disclosed in the declaration must necessarily be unconstitutional
    because that field is abstracted from the legislative competence of
    the State Legislature."
                        [underlining by us]

H.R.S. Murthy v. The Collector of Chittoor and Anr.- (1964) 6 SCR 566 was a
writ petition filed under Article 32 of the Constitution laying challenge
to the validity pf notices of demand for the payment of land cess under the
Madras District Boards Act, 1920. The mining lease dated September 15,
1953, authorised the lessee to work and win iron ore in a tract, of land in
Chittoor; dead rent, royalty and surface rent were payable under the mining
lease. The District Board levied land cess on the annual rental value of
all occupied lands. The challenge to the constitutional validity of the
land cess was dismissed. The Court held:-
(1) It is therefore not possible to accept the contention, that the fact
that the lessee or licensee pays a royalty on the (SIC)aral won, which is
in excess of what he would pay if his right over the land extended only to
the mere use of the surface land, places it in a category different from
other types where the lessee uses the surface of the land alone. In each
case the rent which a lessee or licensee actually pays for the land being
the test, it is manifest that the land cess is nothing else except a land
tax.
(2) When a question arises as to the precise head of legislative power
under which a taxing statute has been passed, the subject for enquiry is
what in truth and substance is the nature of the tax. No doubt, in a sense
but in a very remote sense, it has relationship to mining as also to the
mineral won from the mine under a contract by which royalty is payable on
the quantity of mineral extracted, But that, does not stamp it as a tax on
either the extraction of the mineral or on the mineral right. It is
unnecessary for the purpose of this case to examine the Question as to what
exactly is a tax on mineral rights seeing that such a tax is not leviable
by Parliament but only by the State and the sols 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. Our attention was not invited to
the provision of any such law enacted by Parliament. In the context of
Sections 78 and 79 and the scheme of those provisions it Is clear that the
land (SIC)ss is in truth a "tax on lands" within Entry 49 of the State
List.

The only decisions referred to in H.R.S. Murthy were Hingir Rampur Coal Co.
Ltd. & Ors. and M.A. Tulloch.

In State of Haryana and Anr. v. Chanan Mal, referring to the provisions of
the MMDR Act, 1957 and a State enactment of Haryana, (the constitutional
validity whereof was under challenge) the Constitution Bench held that
subject to the overall supervision of the Central Government, the State
Government has a sphere of its own power and can take legally specified
action under the Central Act and rules made thereunder. Thus, the whole
field of control and regulation under the provisions of the Central Act 67
of 1957 cannot be said to be reserved for the Central Government.

Western Coalfields Ltd. v. Special Area Development Authority, Korba and
Anr., is a Division Bench decision. The M.P. Municipality Act, a State
enactment, levied property tax payable by the owner of the land or
buildings and could also be recovered from the occupier of the land or the
building in certain contingencies. The validity of the property tax was
upheld by reference to Entry 5 (Local Government) read with Entry 49 (Taxes
on lands and buildings) in List II. 'The availability of the MMDR Act.,
1957, and the declaration incorporated in Section 2 thereof did not come in
the way of the validity of the property tax inasmuch as the property tax
levied by the State Government through municipalities had nothing to do
with the development of mines. The Court opined that the functions, powers
and duties of municipalities did not become part of the occupied field by
virtue of declaration under Section 2 of the Act No. 67 of 1957 and the
competence of the State to enact laws for municipal administration will
remain unaffected by that declaration. Bajinath Kadlo was distinguished.
Goodricke's case

Now, we come to Goodricke's case. The impugned provisions were incorporated
by the West Bengal Taxation Laws (Second Amendment) Act 1989 into the West
Bengal Primary Education Act, 1973 and the West Bengal Rural Employment and
Production Act, 1976, Both the amendments were identical and have been set
out in the earlier part of this judgment.

While the State sought to justify the levy of impugned cess by reference to
Entry 49 of List II, the writ petitioner laid challenge to the validity of
levy on very many grounds. It was submitted, firstly, that to bring the
levy within the field of Entry 49 of List II it must be directly upon the
land whereas the levy in question is really a tax on production of tea, a
subject covered by Entry 84 of List I; secondly, that a tax on land must be
a constant figure whereas the impugned levy varies from year to year based
as it is on the quantity of tea produced in a tea estate in a given year
and where there is no production of tea leaves at all in a particular year,
no cess would be payable by tea estate in that year; thirdly, that the
definition of 'tea estate' further establishes the absence of any nexus
between 'cess' and the "land"; land covered by the factory and building and
even fallow land, is included within the meaning of 'tea estate' and if no
tea leaves are produced and plucked, there would not be levy on the estate
at all; and fourthly, that the levy is clearly invalid in view of the
seven-Judges Bench decision of this Court in India Cement and the three-
Judges Bench decision in Orissa Cement. It was urged that the impugned
amendment was brought to remove the defact in the levy pointed out in Buxa
Dooars, but the flaw was persisting. Jeevan Reddy, J., spoke for the three
Judges Bench, placing on record their unanimous opinion. The Court noticed,
vide para 10, the real factual situation as generally obtains about the tea
estate. The definition of 'tea estate' as incorporated by the amendment is
a well-understood entity and hence is legitimately and reasonably capable
of being classified as a separate category for the purpose of taxation and
the rate of tax. The Court, on a near -exhaustive review of the available
decisions on the point, arrived at a few conclusions which, so far as
relevant for our purposes, are summed up as under:
(i) a financial levy must have a mode of assessment but the mode of
assessment does not determine the character of a tax. The nature of
machinery for assessment is often complicated and is not of much assistance
except insofar as it may throw light on the general character of the tax.
The annual value is not necessarily an actual income but only a standard by
which income may be measured. Merely because the same standard or mechanism
of assessment has been adopted in a legislation covered by an entry under
the Union List and also by a legislation covered by an entry in the State
List, the latter legislation cannot be said to have encroached upon the
field meant for the former;
(ii) the subject of tax is different from the measure of the levy;
(iii) merely because a tax on land or building is imposed by reference to
its income or yield, 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. No one can say that a tax under a
particular entry must be levied only in a particular manner. The
legislature is free to adopt such method of levy as it chooses. So Song as
the essential character of levy is not departed from within the four
corners of the particular entry, the manner of levying the tax would not
have any vitiating effect;
(iv) ample authority is available to hold that a tax on land within the
meaning of Entry 49 of List II can be levied with reference to the yield or
income. Whether an agricultural land or an orchard or a tea estate, they do
require some capital and labour to make them yield or to produce income
which yield or income can without difficulty be taken as measure for
quantifying the tax which would undoubtedly be a levy on the land;
(v) It is not an essence of a tax, nor a condition of its validity, that
the tax must, be constant and uniform for all the years or for a particular
number of years. The tax on land or building can be levied and assessed by
reference to previous year's income or yield. In short, it is open to the
State Legislature to adopt such formula as it thinks appropriate for
levying the tax and so long as the character of the tax remains the same as
contemplated by the entry, it does not matter how the tax is calculated,
measured or assessed;
(vi) it is permissible to classify land by reference to its user as a
separate unit for the purpose of levy of cess. Tea estate, as a separate
category of land, is a valid classification;
(vii) the fact that the Tea Act empowers the Central Government to levy a
duty or cess upon tea or tea leaves for the purposes of that Act can in no
manner deprive the State Legislature of its power to tax the Sand comprised
in a tea estate. By levying the cess the State Legislature is not seeking
to control the cultivation of tea but only to levy the tax on land
comprised in a tea estate. The fact that ultimately the tax may have to be
borne by the tea industry is no ground for holding that the said levy is
upon the tea industry. The State Legislature is not denuded of its power to
levy a tax upon the land or upon a building merely because such land or
building is held or owned by an industry which is governed by a central
legislation.

On applying the abovesaid principles the Court concluded that taking the
quantum of yield of a tea estate for measuring the amount of tax is
perfectly valid and cannot be equated to the situation in India Cement. We
may observe that the reasoning adopted in Goodricke accords with the
reasoning in Hingir-Rampur.

Having made an independent review of several judicial decisions and the
several settled legal principles, as dealt with hereinabove, we are
satisfied that the Goodricke's case (supra) was correctly decided and the
law laid down therein is correct and supported by authority in abundance.
The distinguishing features which exclude the applicability of law laid
down in India Cement and Orissa Cement to the fact situations like the ones
we are called upon to deal with, were rightly pointed out in Goodricke and
those very reasons additionally explained by us do not permit the cases on
hand being ruled by India Cement and Orissa Cement.
In a nutshell

The relevant principles culled out from the preceding discussion are
summarized as under:-
(1) In the scheme of the Lists in the Seventh Schedule, there exists a
clear distinction between the general subjects of legislation and heads of
taxation. They are separately enumerated.
(2) Power of 'regulation and control' Is separate and distinct from the
power of taxation and so are the two fields for purposes of legislation.
Taxation may be capable of being comprised in the main subject of general
legislative head by placing an extended construction, but that is not the
rule for deciding the appropriate legislative field for taxation between
List I and List II. As the fields of taxation are to be found clearly
enumerated in Lists I and II, there can be no overlapping. There may be
overlapping in fact but there would be no overlapping in law. The subject
matter of two taxes by reference to the two Lists is different. Simply
because the methodology or mechanism adopted for assessment and
quantification is similar, the two taxes cannot be said to be overlapping.
This is the distinction between the subject of a tax and the measure of a
tax.
(3) The nature of tax levied is different from the measure of tax. While
the subject of tax is clear and well defined the amount of tax is capable
of being measured in many ways for the purpose of quantification, Defining
the subject of tax is a simple task; devising the measure of taxation is a
far more complex exercise and therefore the legislature has to be given
much more flexibility in the latter field. The mechanism and method chosen
by Legislature for quantification of tax is not decisive of the nature of
tax though it may constitute one relevant factor out of many for throwing
light on determining the general character of the tax.
(4) Entries 52, 53 and 54 in List I are not heads of taxation. They are
general entries. Fields of taxation covered by Entries 49 and 50 in List II
continue to remain with State Legislatures in spite of Union having enacted
laws by reference to Entries 52, 53, 54 in List I. It is for the Union to
legislate and impose limitations on the States' otherwise plenary power to
levy taxes on mineral rights or taxes on lands; (including mineral bearing
lands) by reference to Entry 50 and 49 in List II and lay down the
limitations on State's power, if it chooses to do so, and also to define
the extent and sweep of such limitations.
(5) The Entries In List I and List II must be so construed as to avoid any
conflict. If there is no conflict, an occasion for deriving assistance from
non-obstante clause "subject to" does not arise. If there is conflict, the
correct approach is to find an answer to three questions step by step as
under:
One - Is it still possible to effect reconciliation between two Entries so
as to avoid conflict and overlapping?
Two - In which Entry the impugned legislation fails by finding out the pith
and substance of the legislation?
and
Three - Having determined the field of legislation wherein the impugned
legislation fails by applying doctrine of pith and substance, can an
incidental trenching upon another field of legislation be Ignored?
(6) 'Land'", the term as occurring in Entry 49 of List II, has a wide
connotation, Land remains land though it may be subjected to different
user. The nature of user of the land would not enable a piece of land being
taken out of the meaning of land itself. Different uses to which the land
is subjected or is capable of being subjected provide basis for classifying
land into different identifiable groups for the purpose of taxation. The
nature of user of one piece of land would enable that piece of land being
classified separately from another piece of land which is being subjected
to another kind of user, though the two pieces of land are identically
situated except for the difference in nature of user. The tax would remain
a tax on land and would not become a tax on the nature of its user.
(7) To be a tax on land, the levy must have some direct and definite
relationship with the land. So long as the tax is a tax on land by bearing
such relationship with the land, it is open for the legislature for the
purpose of levying tax to adopt any one of the well known modes of
determining the value of the land such as annual or capital value of the
land or its productivity. The methodology adopted, having an indirect
relationship with the land, would not alter the nature of the tax as being
one on land.
(8) The primary object and the essential purpose of legislation must be
distinguished from its ultimate or incidental results or consequences, for
determining the character of the levy. A levy essentially in the nature of
a tax and within the power of State Legislature cannot be annulled as
unconstitutional merely because it may have an affect on the price of the
commodity. A State legislation, which makes provisions for levying a cess,
whether by way of tax to augment the revenue resources of the State or by
way of fee to render services as quid pro quo but without any intention of
regulating and controlling the subject of the levy, cannot be said to have
encroached upon the field of 'regulation and control' belonging to the
Central Government by reason of the incidence of levy being permissible to
be passed on to the buyer or consumer, and thereby affecting the price of
the commodity or goods. Entry 23 in List II speaks of regulation of mines
and mineral development subject to the provisions of List I with respect to
regulation and development under the control of the Union, Entries 52 and
54 of List I are both qualified by the expression "declared by Parliament
by law to be expedient in the public interest". A reading in juxtaposition
shows that the declaration by Parliament must be for the 'control of
industries' in Entry 52 and for regulation of mines or for mineral
development' in Entry 54. Such control, regulation or development must be
'expedient in the public interest'. Legislation by the Union in the field
covered by Entries 52 and 54 would not like a magic touch or a taboo denude
the entire field forming subject matter of declaration to the State
Legislatures. Denial to the State would extend only to the extent of the
declaration so made by Parliament. In spite of declaration made by
reference to Entry 52 or 54, the State would be free to act in the field
left out from the declaration. The legislative power to tax by reference to
Entries in List II is plenary unless the entry itself makes the field
'subject to' any other entry pr abstracts the field by any limitations
imposable and permissible. A tax or fee levied by State with the object of
augmenting its finances and in reasonable limits does not ipso facto trench
upon regulation, development or control of the subject. It is different if
the tax or fee sought to be levied, by State can itself be called
regulatory, the primary purpose whereof is to regulate or control and
augmentation of revenue or rendering service is only secondary or
incidental.
(9) The heads of taxation are clearly enumerated in Entries 83 to 92B in
List I and Entries 45 to 63 in List II. List III, the Concurrent List, does
not provide for any head. of taxation. Entry 96 in List I, Entry 66 in List
II and Entry 47 in List III deal with fees. The residuary power of
legislation in the field of taxation spelled out by Article 248(2) and
Entry 97 In List I can be applied only to such subjects as are not included
in Entries 45 to 63 of List II. It follows that taxes on lands and
buildings in Entry 49 of List II cannot be levied by the Union. Taxes on
mineral rights, a subject in Entry 50 of List II can also not be levied by
the union though as stated in Entry by itself the union may impose
limitations on the power of the State and such limitations, if any, imposed
by the Parliament by law relating to mineral development and to that extent
shall circumscribe the States power to legislate. Power to tax mineral
rights is with the States; the power to lay down limitations on exercise of
such power, in the interest of regulation, development or control, as the
case may be, is with the union. This is the result achieved by homogeneous
reading of Entry 50 in List II and Entries 52 and 54 in List I. So long as
a tax or fee on mineral rights remains in pith and substance a tax for
augmenting the revenue resources of the State or a fee for rendering
services by the State and it does not impinge upon regulation of mines and
mineral development or upon control of industry by the Central Government,
it is not unconstitutional.
The Result: - individual cases
(A) Coal Matters

The amendments incorporated by the West Bengal Taxation Laws (Amendment)
Act 1992 w.e.f. 1.4.1992 into the provisions of the West Bengal Primary
Education Act 1973 and the West Bengal Rural Employment and Production Act
1976 classify the land into three categories: (i) coal-bearing land, (ii)
mineral bearing land (other than coal-bearing land) or quarry and (iii)
land other than the preceding two categories. These three are well-defined
classifications by reference to the user or quality and the nature of
product which it is capable of yielding. The cess is levied on the land.
The method of quantifying the tax is by reference to the annual value
thereof. It is well-known that one of the major factors contributing to the
value of the land is what it produces or is capable of producing. Merely
because the quantum of coal produced and dispatched or the, quantum of
mineral produced and dispatched from the land is the factor taken into
consideration for determining the value of the land, it does not become a
tax on coal or minerals. Being a tax on land it is fully covered by Entry
49 in List II. Assuming it to be a tax on mineral rights it would be
covered by Entry 50 in List II. Taxes on mineral rights lie within the
legislative competence of the Stats Legislature "subject to" any limitation
imposed by Parliament by law, relating to mineral development. The Central
legislation has not placed any limitation on the power of the States to
legislate In the field of taxation on mineral rights. The challenge to
constitutional validity of State legislation is founded on non-availability
of legislative field to State; it has not been the case of any of the writ
petitioners that there are limitations enacted by Central legislation and
the State of West Bengal has breached or crossed those limits. Simply
because incidence of tax is capable of being passed on to buyers or
consumers by the mine owners with an escalating affect on the price of the
coal, it cannot be inferred that the tax has an adverse effect on mineral
development. Entry 23 in List II. speaks of regulation of mines and mineral
developments, subject to the provisions of List I with respect to
regulation and development under the control of the Union. The Central
Legislation has taken over regulation and development of mines, and mineral
development in public interest. By reference to Entry 50 of List II and
Entry 54 in List I, the Central legislation has not cast any limitations on
the State Legislature's power to tax mineral rights, or land for the matter
of that. The impugned cess is a tax on coal-bearing and mineral-bearing
land. It can at the most be construed to be a tax on mineral rights. In
either case, the impugned cess is covered by Entries 49 and 50 of List II.
The West Bengal Taxation Laws (Amendment) Act 1992 must be and Is held to
be intra vires the Constitution.
135. We also hold that Mahanadi Coalfield was not correctly decided in as
much as India Cement Ltd. and Orissa Cement Ltd. were applied to the levy
of a cess to which they did not apply. The learned Judges, deciding
Mahanadi Coalfields Ltd. were, with respect, not right in forming the
opinion that the cess was levied on minerals and mineral rights and not on
land and hence the conclusion reached therein that the State Legislature
did not have the legislative competence and that the State legislation
trenched upon a field already occupied by Mines and Minerals (Regulation
and Development) Act 1957, a Central Legislation is incorrect. State of
Orissa and Ors. v. Mahanadi Coalfields Ltd. and Ors., 1995 Supp. (2) SCC
686, is overruled.
(B) Tea Matters

Inasmuch as we have held Goodricke Group Ltd. and Ors. v. State of West
Bengal and Ors. - (1995) Supp. 1 SCC 707 to have been correctly decided the
impugned levy on tea estates as levied by the West Bengal Taxation Laws
(Second Amendment) Act 1989, is held to be Intra vires the Constitution.
However, in brief, we may state that the impugned levy is of cesses on tea
estates i.e. the land forming part of tea estates as defined in the
Impugned Act. The land forming part of the tea estates is a well-defined
classification. Simply because the method for quantifying the tax is by
reference to the yield of the land determinable by taking into account the
quantum of tea produced and dispatched, it doss not become a cess on tea or
a tax on production of tea or a tax on income of land. The Tea Act of 1953
contains a declaration vide Section 2 thereof that it is expedient in the
public interest that the Union should take under its control the tea
industry. The declaration is in terms of Entry 52 in List I. Union's
assumption of control of tea as Industry and as being expedient in the
public interest, does not amount to vesting the power to tax or levy fee in
the Central Government by reference to tea or on tea estates. Section 25 of
Tea Act empowers the Central Government to levy and collect excise duty on
tea produces, which on collection shall be credited to the Consolidated
Fund of India. There is no other provision in Tea Act empowering levy of
any tax or fee on tea or tea bearing land. The impugned cess is a tax on
tea-bearing land, a well-defined Classification and is covered by Entry 49
in List II. We uphold the logic and reasoning assigned and conclusions
drawn by this Court in Goodricke on all the counts.
(C) Brick Earth Matters

Brick earth is a minor mineral. What we have stated about the impugned cess
by reference to coal applies to brick earth as well. The field as to
taxation cannot be said to have been covered by Central Legislation by
reference to Entry 54 In Schedule I. Quantification of lavy by reference to
quantity of brick earth dispatched is a methodology adopted for the purpose
of finding out the quantity of brick earth removed from the land, It has a
definite and direct co-relation with the land. There is no particular charm
about the challenge developed by the writ petitioners laying emphasis on
the meaning of the word "dispatched". The gist and substance of what the
legislature is taking into account is the brick earth actually removed.
"Dispatched" has the effect of taking into account the brick earth
"removed" and not simply "moved" and left behind, The average quantity of
brick earth utilized in making bricks whether on the brick field Itself or
on a place nearby, does involve removal - and consequently dispatch -- of
the brick earth from the place where it was to the place where it is
captively consumed in making bricks. The fact that methodology for working
out the royalty payable and the cess payable is the same, does not have any
detrimental effect on the constitutional validity of the cess whether it be
treated as one on the land - classified by reference to its production,
i.e., the brick earth or as one on mineral rights in brick earth. In either
case it would be covered by Entries 49 or 50 in List II. None of the pleas
raised has any merit.
(D) Minor-Mineral Matters

While narrating the facts, we have quoted in the earlier part of the
judgment Section 35 of the U.P. Special Area Development Authorities Act;
1986 (SADA Act, for short) which is the charging section and the Rules
framed under the Act. We refer to other relevant provisions of the Act in
brief.

Section 3 of the SADA Act authorizes the State Government to declare by
notification an are to be a special development area upon its forming an
opinion that any area of special importance In the State needs to be
developed in a planned manner. The authority is empowered to prepare a
master plan for the special development area, to provide for the
development of lands in the area, to compulsorily acquire land and so on.
The powers are drastic and all-oriented with the object of effecting a
planned intensive and extensive development of an area as to which the
State Government may have formed an opinion that it was an area of special
Importance, Declaring an area as a special development area In view of its
special Importance and constituting an authority for the administration and
management of the area entrusted with the obligation of Its development is
not a matter of empty formality. The empowerment of the authority is
accompanied by an obligation cast on it by the State Government through the
special legislation of fulfilling the object behind the declaration of
special area and constitution of the authority. The Act has been given an
over-riding effect by virtue of Section 52 thereof. Mot only the area Is
taken out of the administration by the other bodies of local self-
government such as municipality or panchayat, but any other master plan or
development plan formulated by any other authority ceases to apply to such
area.

It was contended on behalf of the writ petitioners-appellants that whether
a major or a minor mineral, by virtue of the provisions contained in the
MMDR Act, 1957 and U.P, Mine & Minerals Concession Rules 1963, framed in
exercise of the power conferred by Section 15 of the MMDR Act, the mineral
rights in any land are subject to payment of royalty which is fixed.
Sections 8 and 9 of the MMDR Act confer the power to enhance or reduce the
rate at which royalty, or dead rent shall be payable in respect of any
mineral. Any cess levied by the State Government would have the effect of
increasing the royalty, Section 2 of the MMDR Act makes the requisite
declaration to the effect that it is expedient in the public interest that
the Union should take under its control the regulators of mines and the
development of minerals 'to the extent hereinafter provided'. Such
declaration is In the terms contemplated by Entry 54 of List I. It was
submitted that the levy of cess by the State Government would be clearly
repugnant to the power reserved by the Constitution and the MMDR Act to be
exercised only by the Central Government and hence the impugned levy of
cess is repugnant to the central legislation. To test the validity of the
submission we have to examine the real nature of the levy and find out if
such levy encroaches upon the field reserved for central legislation.

All the minerals form part of the land. Minerals are conceived by the
mother earth by the process of nature and nurtured over innumerable number
of years and delivered on their assuming value and utility for the
earthlings. Generally and broadly speaking - and that would suffice for our
purpose, a mine is an excavation in the earth which yields minerals.
Mineral is something which grows in a mine and is capable of being won or
extracted so as to be subjected to a better or precious use. Until
extracted, the mineral forms part of the crust of the earth. A mineral
right, according to Black's Law Dictionary (Seventh Edition) is the right
to search for, develop, and remove materials from the land. It also means
the right to receive a royalty based on the production of minerals which
right is usually granted by a mineral lease. In both the senses, the right
vests in the owner of the land and is capable of being patted with.

It is well settled that it is for the legislature to draft a piece of
legislation by making the choicest selection of words so as to give
expression to its intention. The ordinary rule of interpretation is that
the words used by the legislature shall be given such meaning as
legislature has chosen to assign them by coining definitions contained in
the interpretation clause and in absence thereof the words would be given
such meaning as they are susceptible of in the ordinary parlance, may be by
having recourse to dictionaries. However still, the interpretation is the
exclusive privilege of the Constitutional Courts and the Court embarking
upon the task of interpretation would place such meaning on the words as
would effectuate the purpose of legislation avoiding absurdity,
unreasonableness, incongruity and conflict. As is with the words used so is
with the language employed in drafting a piece of legislation. That
interpretation would be preferred which would avoid conflict between two
fields of legislation and would rather import homogeneity. It follows as a
corollary of the abovesaid statement that while interpreting tax laws the
Courts would be guided by the gist of the legislation instead of by the
apparent meaning of the words-used and the language employed. The Courts
snail have regard to the object and the scheme of the tax law under
consideration and the purpose for which the cess is levied, collected and
intended to be used. The Courts shall make endavour to search where the
impact of the cess falls. The subject matter of levy is not to be confused
with the method and manner of assessment or realisation.

It is true that once a central legislation declares regulation of mines and
mineral development by law to be expedient in the public interest, the
legislation relating to regulation of mines and development of minerals
shall fall within the sweep of Entry 54 of List I. The entry has to be
liberally and widely interpreted. Yet it cannot be lost sight of that the
entry itself employs an expression "to the extent to which such regulation
and development under the control of the Union is declared by Parliament by
law" as qualifying the preceding expression stating the subject "regulation
of mines and minerals development", Section 2 of MMDR Act too qualifies the
relevant declaration by suffixing to It the expression "to the extent
hereinafter provided". Section 15 of the Act has excepted and preserved the
power of State Governments to make rules in respect of minor minerals. The
qualifying words used in Entry 54 of List I end in Section 2 of the MMDR
Act contain an in-built indication that in spite of an inclination on the
part of the Courts to be liberal in assigning a wide meaning to the scope
of the said provisions, the boundaries of limitation are there and the
expanse of these provisions cannot be so stretched as to strike at the
State Legislations which are adequately accommodated within the field of an
Entry in List II which too shall have to be meaningfully and liberally
construed.

The MMDR Act enables control over the regulation of mines and the
development of minerals being exercised by the Central Government through
legislation. The High Court has upheld the validity of the SADA Act by
relating it to Entry 5 in List II which is local government'. Any local
government exercising the power of governance over a local area shall have
to administer, manage and develop the area lying within its territory which
cannot be done without raising funds. It is usual for every piece of
legislation giving birth to an institution of local government to feed it
by incorporating provisions conferring power of generating funds for
meeting the expenses of governance, The SA.DA Act intends to achieve a
level of local governance which the usual models of local government such
as boards and municipalities are not considered capable of achieving and
that is why a special development area and a Special Area Development
Authority. The fund established under the Act meets expenses of
administration needed to be incurred by the authority. The funds cannot be
utilized for any purpose other than the administration of the Act. There
are pieces of land which though containing a mine yet fall within the
territory of special development area. It was pointed out by the
respondents before the High Court that in spite of the. Act having been
enacted In the year 1986 the successive State Governments, which had
preceded, did not take care of the legislation and it was only the then
government which became conscious of Its obligations under the SADA Act and
commenced identifying special areas requiring development such as
Sonbhadra, The imposition of cess envisaged through the SADA Act and the
Rules was a step towards developing the special area, It is a matter of
common knowledge, and does not need any evidence to demonstrate, that
mining activity carried on the land within the special area involves
extraction, removal, loading-unloading, and transportation of the minerals
accompanied by its natural consequences entailed on the environment and the
infrastructure such as roads, water and power supply etc. within the
special area. The impugned cess can, therefore, be justified as a fee for
rendering such services as would improve the Infrastructure and general
development of the area the benefits whereof would be availed even by the
stone crushers. Entry 66 in List II is available to provide protective
constitutional coverage to the impugned levy-as fee.

As held in Goodricke Group Ltd., 1995 Supp.(1) SCC 707, which we have held
as correctly decided, this Court has noted the principle of law well
established by several decisions that the measure of tax is not
determinative of its essential character. The same transaction may involve,
two or more taxable events in its different aspects. Merely because the
aspects overlap, such overlapping does not detract from the distinctiveness
of the aspects. In our opinion, there is no question of conflict solely on
account of two aspects of the same transaction being utilized by two
legislatures for two levies both of which may be taxes or fees or one of
which may be a tax and other a fee falling within two fields of legislation
respectively available to the two.

As we have pointed out earlier, a cess may be tax or fee. So far as the
present case Is concerned, this distinction doss not need any further
enquiry by reference to the facts of the case inasmuch as the impugned cess
is constitutionally valid considered whether a tax or a fee. We do not
propose to continue dealing therewith any more inasmuch as it would be an
exercise in futility. We would only place on record briefly our reasons for
upholding the validity of the impugned levy whether a tax or a fee.

As a tax the impugned levy of cess is clearly covered by Entry 5 of List II
(as the High Court has held, and we add) read with Entries 49 and 50 of
List II. There is no challenge to the declaration of the area as a special
development area and the constitution of Special Area Development Authority
for the administration thereof. In other words, the constitutional validity
of the enactment as a whole and the rules framed thereunder is not put in
issue. What is under challenge is only the levy of cess. There is nothing
wrong in the state legislation levying cess by way of tax so as to generate
its funds. Although it is termed as, a 'cess on mineral right', the impact
thereof falls on the land delivering the minerals. Thus, the levy of cess
also falls within the scope of Entry 49 of List II Inasmuch as the levy on
mineral rights does not contravene any of the limitations imposed by the
Parliament by law relating to mineral development, it is also covered by
Entry 50 of List II. The power to levy any tax or fee lying within the
legislative competence of the State Legislature can be delegated to any
institution of local government constituted by law within the meaning of
Entry 5 in List II. The Entries 5, 23, 49. 50 and 66 of List II provide
adequate constitutional coverage to the impugned levy of cess. True it is
that the method of quantifying the cess is by reference to the quantum of
mineral produced, This would not alter the character of the levy. There are
myriad methods of calculating the value of the Sand for the purpose of
quantifying the tax reference whereto has already been made by us In the
other part of this judgment. Validity of cess upon the land quantified by
reference to the quantity of its produce was held to be a levy on the land
and hence constitutional in Ralla Ram, AIR 1949 FC 81, Moopil Nair, and
Ajoy Kumar Mukherjee. It does not become excise duty on manufacture and
production of goods merely on account of having relation with the quantity
of product yielded of the land. Rather it is a safe, sound and scientific
method of determining the value of the land to which the product relates.
The levy of cess considered as a tax is constitutionally valid.

In Western Coalfields Ltd. v. Special Area Development Authority- Korba and
Anr., the levy of a cess almost similar to the one in issue In the present
case, came up for the consideration of this Court. The levy was for the
purpose of enabling the municipal administration to exercise its power and
discharge its functions under the Act. It was held that the declaration
contained in Section 2 of the MMDR Act does not have the effect of bringing
the powers, duties and functions of the local authority within the purview
of occupied field. The power to levy tax on lands and buildings within
their jurisdiction by the local authority was upheld by this Court.

The following observations of Constitution Bench in Hingir-Rampur Coal Co.
squarely apply to SADA Act and SADA Rules for upholding their
constitutional validity -
    "............In pith and substance the impugned Act is concerned
    with the development of the mining areas notified under it. The
    Central Act, on the other hand, deals more directly With the
    control of all industries Including of course the industry of
    coal."

    "The functions of the Development Councils constituted under this
    Act prescribed by Section 6(4) bring out the real purpose and
    object of the Act. It is to increase the efficiency of productivity
    in the scheduled Industry or group of scheduled industries, to
    improve or develop the service that such industry or group of
    industries renders or could render to the community, or to enable
    such industry or group of industries to render such service more
    economically."

    "........the object of the (Central) Act is to regulate the
    scheduled industries with a view to improvement and development of
    the. service that they may render to the society, and thus assist
    the solution of the larger problem of national economy. It is
    difficult to hold that the field covered by the declaration made by
    Section 2 of this Act, considered in the light of its several
    provisions, is the same as the field covered by the impugned Act.
    That being so, it cannot be said that as a result of Entry 52 read
    with Act LXV of 1951 the vires of the impugned Act can be
    successfully challenged,"

    "Our conclusion, therefore, is that the impugned Act is relatable
    to Entries 234 and 66 in List II of the Seventh Schedule, and its
    validity is not impaired or affected by Entries 52 and 54 In List I
    read with Act LXV of 1951 and Act LIII of 1948 respectively,"

As stated earlier also, the impugned cess can be justified as fee as well.
The term cess is commonly employed to connote a tax with a purpose or a tax
allocated to a particular thing. However, it also means an assessment or
levy. Depending on the context and purpose of levy, cess may not be a tax;
it may be a fee or fee as well. It is not necessary that the services
rendered from out of the fee collected should be directly in proportion
with the amount of fee collected. It is equally not necessary that the
services rendered by the fee collected should remain confined to the
persons from whom the fee has been collected. Availability of indirect
benefit and a general nexus between the persons bearing the burden of levy
of fee and the services rendered out of the fee collected is enough to
uphold the validity of the fee charged. The levy of the impugned cess can
equally be upheld by reference to Entry 66 read with Entry 5 of Schedule
II.

Royalty is not a tax. The impugned cess by no stretch of imagination can be
called a tax on tax. The impugned levy also does not have the effect of
increasing the royalty. Simply because the royalty is levied by reference
to the quantity of the minerals produced and the impugned cess too is
quantified by taking into consideration the same quantity of the mineral
produced, the latter does not become royalty, The former is the rent of the
land on which the mine is situated or the price of the privilege of winning
the minerals from the land parted by the government in favour of the mining
lessee. The cess is a levy on mineral rights with impact on the land and
quantified by reference to the quantum of minerals produced. The
distinction, though fine, yet exists and is perceptible.

In our opinion Ram Dhani Singh v. Collector, Sonbhadra and Ors. - AIR 2001
All. 5 has been correctly decided. We uphold and affirm the same. End
Result.

C.A. Nos. 1532-33 of 1993 (Coal Matters) are allowed. The decision by
Calcutta High Court [Kesoram Industries Ltd. (Textile Division) v. Coal
India Ltd. - AIR 1993 Calcutta 781 is set aside. The writ petitions filed
in the High Court of Calcutta shall stand dismissed.

Leave granted in SLP (C) Nos. 3986 of 1993, 11596 and 17549 of 1994.

C.A. Nos. 298, 229 & 297 of 2004 (Ambuja Cement Ltd. etc. and Anr. v. State
of West Bengal and Ors.) and C.A. Nos. 3518-3519, 5149-54 of 1992, C.A. No.
2350. of 1993, C.A. No. 7614 of 1994 (Coal Matters) are directed to be
dismissed.

W.P.(C) Nos. 262 of, 1997 (Tea matters) W.P.(C) Nos. 515, 641, 642 of 1997,
W.P.(C) Nos. 347, 360 of 1999, W.P.(C) Nos. 50, 553 of 2000, W.P.(C) Nos.
207, 288, 389 of 2001 and VV.P.(C) No. 81 of 2003 are directed to be
dismissed.

W.P.(C) No. 247 of 1995 and W.P.(C) No. 412 of 1995 (Brick Earth Matters),
are directed to be dismissed.

C.A.Nos.5027 of 2000, C.A. Nos. 6643, 6644, 6645, 6646, 6647, 6648, 6649,
6650, 6894 of 2000 and C.A.No. 1077 of 2001 (Minor Mineral Matters) are
dismissed. The decision by the Allahabad High Court (Ram Dhani Singh v.
Collector, Sonbhadra and Ors. - AIR 2001 Allahabad 5) is affirmed.
___________________________________________________________________________


S.B. Sinha, J.

INTRODUCTION:


'Coal' and 'Tea' play important roles in the development of economy of the
country. Coal has been subject matter of regulatory measures even under the
Defence of India Rules. Production, distribution, supply and price of coal
were controlled and regulated under the Colliery Control Order, 1945. The
said order continued under the Essential Commodities Act, 1955. Under the
Colliery Control Order, the Coal Controller was even authorized to allot
quotas of coal to the Central Government as well as the State Government
although the said procedure is not now in vogue, in view of decontrolling
notification issued by the Central Government under the Colliery Control
Order, 1945. The quality of coal and the quantity required by all the
consumers are regulated by the Coal Controller. Coal was the only mineral
which was subjected to nationalization, in terms of Coking Coal Mines
(Nationalization) Act, 1972 and Coal Mines (Nationalization) Act, 1973. The
coking coal mines mentioned in the 1972 Act and all the coal mines vested
in the Central Government under the Nationalization Acts. Coking Coal Mines
and Coal Mines except in certain cases belong to the public sector
undertakings which are companies subsidiary to Coal India Ltd. Even coal
mining leases granted to the lessees stood terminated by reason of Section
4A of Mines and Minerals (Regulation and Development) Act, 1957 in the year
1986. Coal is used as a primary raw-material in many core sectors which are
vital for the economy of the country, e.g., power, steel, oil, etc.
Fixation of price of coal by the Central Government, regard being had to
quality thereof, had all along been subjected to statutory orders. The
gradation of coal decedent upon the quality thereof was to be determined by
the 'Coal Board' constituted under the Coal Mines Conservation and Safety
Act. Quality of coal may depend not only on the location of the coal mines
but also from the particular seams wherefrom it is extracted. Requirement
of maintenance of price of coal on an All-India basis had all along been
considered to be imperative in the economic and industrial development of
the country.

Despite the same, price of coal produced in India is considered to be on
the high side as a result whereof it is imported also from other countries
despite its availability in abundance. With a view to reduce the price of
coal, the Central Government has recently even reduced the rate of custom
duty.

Tea is also one of the important commodities having regard to its export
potential. An agency of the Central Government even furnishes guarantees to
the exporters of tea for export thereof to several countries. [See ABI
International Ltd. and Anr. v. Export Credit Guarantee Corporation of India
Limited and Ors.] of tea has been the subject matter of international
treaties.

Necessity of regulation of price and quality of Coal and Tea having regard
to competitive International market, by the Central Government cannot
therefore, be minimized.

The constitutional significance involved in these matters is required to be
considered on the aforementioned backdrop.

SUBJECT MATTER:

The constitutionality of the Cess Act, 1880, West Bengal Primary Education
Act, 1973, West Bengal Rural Employment and Production Act, 1976 as amended
by the West Bengal Taxation Laws (Amendment) Act, 1992 whereby and
whereunder cess was levied on 'coal', 'tea', 'brick-earth' and 'minor
minerals' is in question in this batch of appeals and writ petitions.

The Calcutta High Court by reason of the impugned judgment in coal matters
declared the cess imposed on coal to be unconstitutional inter alia having
regard to the decisions of this Court in India Cement Ltd. and Ors. v.
State of Tamil Nadu and Ors. and Orissa Cement Cement Ltd. etc. v. State of
Orissa and Ors. etc. [1991 Supp (1) SCC 430].
166. The Terai Indian Planters' Association and another filed a writ
petition under Article 32 of the constitution of India questioning the
imposition of cess on 'Tea' in terms of the provisions of the impugned
Acts.

Brick Earth Matters:

The Bengal Brickfield Owners' Association filed a writ petition questioning
the validity of the impugned Acts inter alia on the ground that the field
relating to minor mineral is covered by the 1957 Act and as such the State
of West Bengal was denuded of its power to levy any cess on either
extraction of brick earth or on despatch of bricks.
168. It has been urged that the operations involved in the manufacturing of
bricks as set out in the writ petition are required to be considered by
this Court, as being relevant to show that the Cess Act, 1880 is not
applicable and that the notices issued demanding payment of cess are
arbitrary illegal and liable to be quashed being also in breach of the
fundamental rights of the petitioners guaranteed under Articles 14 and
19(1)(g) of the Constitution of India to run their business of manufacture
and sale of bricks.

It is averred that the brick earth extracted is mixed with sand, fibre and
water and bricks are shaped with the help of moulds; thereafter, the bricks
are sun-dried and put in the kiln for baking at the required temperature to
make finished marketable bricks. The fuel used is coal. All the operations
from quarrying to manufacture of finished marketable bricks are carried out
in the brick-field itself and brick earth is not removed from the quarrying
field so much so the element of despatch of this minor mineral for said or
for any other purposes contemplated by Section 6(1)(b) and defined in
Section 4 of the Cess Act, 1880 does not arise.

The writ petition was filed questioning a demand made it the rate of Rs.
12.50 paise per hundred cubit feet of extracted brick earth in relation
whereto the Collector. Hooghly in purported exercise of its power under
Section 72 of the Cess Act, 1880 directed each brick earth quarrier to file
returns in the prescribed form on the average of despatch of brick earth
for the previous three years failing which it was threatened that a daily
fine of Rs. 50 would be imposed. The said demand was referable to Section
6(1)(b) of the Bengal Cess Act, 1880.

The contention of the respondent is that the cess has been levied for
securing the welfare of the people of the State as enshrined in Part IV of
the Constitution of India. It is, however, accepted that cess is assessed
on annual despatches.

HIGH COURT JUDGMENTS:

Coal Matters:


Before the Division Bench of the Calcutta High Court the sole question
which was raised by the parties was as to whether the impugned statutes
imposing cess are in pari materia with the statutes which have been held
ultra vires by this Court in India Cement (supra) and Orissa Cement
(supra). The High Court in its impugned judgment in extenso referred to the
provisions of Orissa Acts. Madhya Pradesh Act. Bihar Acts and compared the
same with the impugned Acts, noticing that therein also the levy was
apparently claimed on the 'land', but were declared unconstitutional.

The findings of this Court in India Cement (supra) and Orissa Cement
(supra) were extensively quoted by the High Court. The High Court found
that all the three impugned acts provide that Cess shall be assessed or
levied on different types of lands. It observed that Section 6 of the Cess
Act dealts with three types of immovable properties namely "land", "in
respect of all mines, quarries" and "in respect of tramways, railways and
other immovable property", whereas the West Bengal Primary Education Act
divides the subject matter of the levy into broadly two categories "in
respect of Coal Mines and other mines", etc. The Division Bench further
observed that the impugned statutes having made those divisions, each of
them provide for assessment of cess in respect of coal mines on the value
of annual despatches of coal. While holding that the impugned Acts as ultra
vires in terms of decisions of this Court in India Cement (supra) and
Orissa Cement (supra), the High Court applied the tests of "real impact" or
"substance of the levy" holding that the levies in question after the
amendment of 1992 are directly upon coal. The High Court also relied upon
the decision of this Court in The Federation of Mining Association of
Rajasthan and etc. etc. v. State of Rajasthan and Anr. wherein a three-
Judge Bench of this Court in relation to a similar levy rejected a
contention that the Rajasthan Act provided for imposition of cess not only
with reference to royalty but also on dead rent and, thus, it is possible
to read that the State intended to impose the tax by reference to the
amount of dead rent (even if it is valid insofar as it purported to make
royalty the basis of the tax).

Minor Mineral Matters:

The State of U.P. enacted U.P. Special Area Development Authorities (SADA)
Act, 1986. Pursuant to and in furtherance of the power conferred upon it,
the State of U.P. framed rules under the said Act known as Shakti Nagar
Special Area Development Authority (Cess on Mineral Rights) Rules, 1997.
inter alia whereby and whereunder cess was levied on minerals on the ground
that the special area development authority had been conferred with the
powers of municipal corporation.

The writ petitions filed by Ram Dhani Singh and Ors. questioning imposition
of cess in terms of Shakti Nagar Special Area Development Authority (Cess
on Mineral Rights) Rules, 1997 was dismissed by the High Court of Allahabad
on the ground that the said rules can be upheld in terms of Entry 5 of List
II of the Seventh Scheduled of the Constitution of India.

SUBMISSIONS:

State of West Bengal has been represented by Mr. Dwivedi in the coal matter
and Mr. Reddy in the tea matter. Their submissions would, therefore, be
noticed separately. Writ Petitioners and the Respondents, however, have
been represented by a number of counsel.

RE : COAL MATTERS :

Drawing our attention to a comparative chart of the Cess Act, West Bengal
Primary Education Act, 1973 and West Bengal Rural Employment and Production
Act. 1976 as amended from time to time, Mr. Dwivedi would contend that as
by reason of the amendments carried out therein in terms of West Bengal
Taxation Laws (Amendment) Act, 1992; remedial measures as regard the
deficiencies pointed out by this Court in India Cement(supra) and Orissa
Cement (supra) were taken by the State of West Bengal , the High Court
committed a manifest error in declaring the same unconstitutional.

The learned counsel would urge that the decisions rendered by this Court in
India Cement (supra) and Orissa Cement (supra) would not be applicable in
these matters as the levy has been imposed on the value of 'coal' being
yield from the land and not on royalty. Contention of Mr. Dwivedi is that
the impugned levy would squarely come within the purview of Entry 49, List
II of the Seventh Schedule of the Constitution on the following grounds:
(i) The impugned enactments exclude consideration of royalty from the
"value of coal" and therefore royalty did not become part of cess.
(ii) Value of coal dispatched from coal mine is only a basis of measure of
cess as it has a direct and definable relation with value of land. Produce
of land has always been considered to have direct relevance in determining
the value of land.
(iii) That the quantum of levy is dependent upon production of coal being a
matter of collection machinery, the same has no relevance to the essence
thereof.
(iv) Post amendment levy of cess being on the annual value of coal which is
determined on the basis of sale price thereof but excluding royalty and
other taxes and charges, the depsatches of coal is not the determinative
factor for the purpose of judging the nature of import.

In the alternative it was submitted that cess imposed by reason of the
impugned enactments would be sustainable with reference to Entry 50 of List
II of Seventh Schedule of the Constitution of India as the same would be
tax on mineral rights.

By reason of the 1957 Act, the Parliament. Mr. Dwivedi would contend, is
only empowered to make a legislation so as to limit the State of its bower
but thereby the Parliament cannot arrogate unto itself the power to impose
tax on mineral rights. Royalty according to the learned counsel has wrongly
been held to be 'tax' in India Cement.

Submissions of the learned counsel appearing on behalf of the respondents,
on the other had, are:
(i) The impugned cess is beyond the legislative competence of the State
either in terms of Entry 49 or in terms of Entry 50 of List II of the
Seventh, Schedule of the Constitution.
(ii) As by reason of the impugned acts, cess has been levied on the value
of coal dispatched (before 1992) and on the value of coal produced (after
1992), they having been levied on minerals and, thus, not either on mineral
rights or on land.
(iii) Although mineral is extracted form land but therefore three things
are required viz.:
(a) land from which the mineral could be extracted;
(b) Capital for providing machinery, instruments and other requirements
(c) labour
Such a tax is neither a tax on land (Entry 49 of List II) nor on mineral
rights (Entry 50 of List II) but a hybrid tax on mines plus capital plus
labour. It, thus, could only be imposed by the parliament under Entry 97 fo
List I.
(iv) In any event, no tax on mineral right can be imposed as the entire
field of legislation is occupied by the parliament in view of Sections 9,
9A, 13, 18 and 25 of the Mines and Minerals (Regulations and Development)
Act 1957 and the declaration contained in Section 2 therein. Once it is
held that the field is covered by an act of Parliament the guidelines for
determining the constitutionality of the State Acts not only should be
considered with reference to the Parliamentary Act and the rules framed
thereunder but also upon taking into account, matters and aspects which can
be legitimately brought within the purview of the legislative competence of
the State.
(v) As imposition of tax will have a bearing on mineral rights, the
parliament in its wisdom has taken over the entire control thereover.
Whether royalty is a tax on minerals is not an issue although there is
substantial authority for the proposition that the royalty would be a tax.
The Parliament can impose tax not only under Entry 54 but also in terms of
Entry 97 of List I. When an entry is made subject to another entry the same
would mean that out of the scope of the former entry a field of legislation
covered by the later entry has been reserved to be dealt by the appropriate
legislature.
(vi) Tax on land and buildings can be imposed on land as unit and not on
the basis of product thereof. The impugned tax is on activity of land and
as all relevant provisions are required to be taken into account and the
essential substance thereof is required to be ascertained for determining
the true nature of the impugned legislation, and, thus, the standard on
which the tax is levied is a relevant consideration for determining the
nature thereof.

RE : TEA MATTERS

The submission of Mr. V.R. Reddy, learned Senior Counsel are :
(i) Even if it be held that the legislative fields of the State List and
the Union List overlap applying the doctrine of pith ad substance and
having regard to the history of legislation. Entry 49 must be held to be
applicable in these matters.
(ii) The State has a wide discretion in the matter of taxation
(iii) For the purpose of interpreting the respective legislative fields of
the Union and State Lists. competence of the State legislative must be seen
first so as to anable the Courts to find out as to whether it fails within
the residuary power of the Parliament on not.
(iv) The State's power to impose tax must be considered having regard to
the economic activities of the State.

The learned counsel would submit that the cases are squarely covered by the
decision of this court in Goodricke Group Ltd. v. State of W.B. [1995 Supp
(1) SCC 707] which in turn had relied upon Ralla Ram v. Province of East
Punjab [AIR 1949 FC 81] and Ajoy Kumar Mukherjee v. Local Board of Barpeta.
Mr. Reddy would urge that the principles emerging from the said decisions
are that - (i) what is relevant is the use of the land and annual value of
the property and not the real value of the property; (ii) the yield/income,
actual or potential productivity would be relevant factors; (iii) the
subject of a tax is different from the measure thereof.

It was pointed out that the municipal law relating to property tax would
also be relatable to Entry 49, List II and this Court in relation thereto
has held that actual value may be a relevant consideration.

According to the learned counsel green tea leaf is not a marketable
commodity and in that view of the matter, it cannot be said that there
exists a competing entry for levy of excise duty thereupon in terms of the
provisions of the Central Excise and Salt Act, 1944 and, thus, the State
must be held to have the legislative competence to impose the impugned tax.
Strong reliance, in this connection, has been placed on Union Carbide India
Limited v. Union of India and Ors.  and Ralla Ram's case (supra).

The learned counsel would submit that despite Entry 52, List I, this Court
has held that thereby the other taxing powers of the State have not been
taken away.

The learned counsel appearing on behalf of Writ Petitioners, on the other
hand, submitted:
(i) The Parliament in its wisdom has taken over the control of entire tea
industry including the manner and extent of cultivation, regulation of
production, regulation of sale and export of tea, increasing the
consumption in India and elsewhere in tea and propagandas to be made for
that purpose as would appear from Sections 10, 13, 15, 25 and 30 thereof.
(ii) Although agriculture is a State subject, the Tea Act having been
enacted by the Parliament in terms of Article 253 of the Constitution, the
State of West Bengal was denuded of its power to make any legislation
whatsoever.
(iii) Having regard to the declaration made in Section 2, of the Tea Act,
1953, the entire tea industry having been taken over in terms of Entry 52
of List I of the Seventh Schedule of the Constitution, the impugned
legislation must be held to be bad in law.
(iv) The purported levy is not relatable to Entry 49, List II of the
Seventh Schedule of the Constitution of India as in terms thereof the tax
is required to be levied directly on the land as a unit.
(v) The structure of the levy clearly indicates that it is directly on
production.
(vi) Whereas a small tea estate employing modern cultivation techniques may
produce a larger quantity of tea leaves and, thus, are required to pay a
higher amount of tax but a larger estate employing primitive methods and
thus producing smaller quantity of tea leaves would pay less amount of
cess.
(vii) Furthermore, the quality of tea leaves varies from place to place and
depend upon the quality and characteristics of the land.
(viii) As by reason of the impugned Act, a uniform cess on quantity of tea
leaves without regard to the quality, quantity or productivity of land has
been levied, the same is illegal.
(ix) Imposition of tax at a flat rate, it was urged, has nothing to do with
the potential productivity and thus the same is ultra vires Article 14 of
the Constitution of India.
(x) If measure of the tax is not in tune with reference to the value or
potential productivity, the same would be a pointer to the conclusion that
the legislative intent was not to impose tax on land but on the production
of tea.

BRICK EARTH AND MINOR MINERAL MATTERS:

The learned counsel appearing on behalf of the Brick Earth matters and
Minor Mineral matters would contend that although the State has the
requisite power to make rules in relation to minor minerals in terms of
Section 15 of the 1957 Act, but as the entire field is covered, no cess can
be levied by the State Government purported to be in exercise of its power
under Entry 5 of List II of the Constitution of India.
ISSUE:

The core issue with which this Court is concerned is as to whether the
legislative competence of the State to impose cess is traceable to Entries
49 and 50 of List II vis-a-vis Entries 52, 54 read with Entry 97 of List I
of the Seventh Schedule of the Constitution of India.

OVERVIEW OF THE STATUTES:
The impugned Acts:
Cess Act, 1880:

Under Section 4(Interpretation Clause) of the Cess Act, 1880 "immovable
property" and "land" have been defined as follows:
(i) "immovable property" includes lands and 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.
"land" means land which is cultivated, uncultivated covered with water and
does not include houses or buildings.

 "Despatch" in the said Act has been defined as:
"despatch" in relation to a coal mine, means the quantity of coke and coal
despatched from the coal mine and that, in relation to other mines and
quarries including sand quarries, means the quantity of minerals/ sand
despatched from such mine or quarry."

Section 5 of the Cess Act, 1880 inter alia imposes road cess and public
works cess on all immovable properties which in terms of Section 6 are
required to be assessed in respect of mines and quarries on annual
despatches subject to maximum of 50 paise on each tonne of coal and in the
case of coke, the same shall be counted as one and a quarter tonne of coal.
West Bengal primary Education Act, 1973:

Under Section 78(2)(b) of the West Bengal Primary Education Act, 1973, cess
is imposed at five per centum of the value of the coal on the despatches
therefrom. While determining the value of such coal, any sum separately
charged as tax, cess, duty, fee or royalty is to be excluded but in case of
despatches other than sale which may be for the purpose of its own
consumption or given to the workmen the cess shall be determined on the
prices chargeable by the owner of the coal mine for such coal as if they
were despatched for sale thereof. In case, however, more than one price is
charged for the same variety of coal, the maximum price chargeable for that
variety shall be the basis of valuation.
West Bengal Rural Employment and Production Act, 1976:

Under Section 4(2)(b) of the West Bengal Rural Employment and Production
Act, 1976, 35 per cent of cess is levied on each tonne of coal on the
despatches therefrom. The other provisions are, however, same as in
Education Act.
Amendments:

After the decision of this Court in India Cement (supra), the State of West
Bengal enacted West Bengal Taxation Laws (Amendment) Act, 1992 which came
into force with effect from 1.4.1992. The relevant amendments made
thereunder are:
"2. In the West Bengal Primary Education Act, 1973,
(1) in Section 78 for Sub-section (2), the following Sub-section shall be
substituted
(2) The education cess shall be levied annually
(a) in respect of land, except when a cess is leviable and payable under
Clause (b) or Clause (c) of Sub-section (2A) at the rate of ten paise on
each rupee of annual value thereof as assessed under the Cess Act, 1880;
(b) in respect of a coal-bearing land, at the rate of five per centum of
the annual value of the coal-bearing land as defined in Clause (1) of
Section 2 of the West Bengal Rural Employment and Production Act, 1976;
(c) in respect of a mineral-bearing land (other than coal-bearing land) or
quarry, at the rate of one rupee on each tonne of minerals (other than
coal) or materials despatched within the meaning of Clause (1b) of Section
2 of the West Bengal Rural Employment and Production Act, 1976, from such
mineral bearing land or quarry;
Provided that when in the coal-bearing land referred to in Clause (b) there
is no production of coal for more than two consecutive years, such land
shall be liable for levy of cess in respect of any year immediately
succeeding the said two consecutive years in accordance with Clause (a):
Explanation. For the purposes of this chapter, 'coal-bearing land' shall
have the same meaning as in Clause (1a) of Section 2 of the West Bengal
Rural Employment and Production Act, 1976. "

Similar provisions were inserted by reason of Section 3 of West Bengal
Rural Employment and Production Act and as such is not being reproduced
once over again.

However, it may be noticed that by reason of the said amendment, cess has
been imposed even on a mine when there has been no production of coal for
more than two consecutive yeas and in that event the coal bearing land
shall be subject to payment of cess for any year succeeding the said two
consecutive years. Similar provision has been made in Section 4 of the West
Bengal Rural Development and Production Act also.

Various amendments made in the said two acts will appear from the following
chart:
Changes in unit and rate of cess under the West Bengal Primary Education
Act, 1973 are as under :

Statute    Coat Tea

Act XLIII Of 1973* p. 1 at 2    S. 78(2)(b): Not exceeding Rs. 0,30 per
tonne on annual dispatches of coal    No separate section S. 78(2)(a);
Not exceeding Rs. 0.10 on annual value of the land
ACT IX of 1981 p.6    S. 6: Rs. 0.50 raised to Re. 1    No change
Act V Of 1982 p.9    S, 5: Re. 1 raised to Rs. 2 Word "annual" deleted
No change
Act XV of 1983 p. 14-15    S, 6: Rate changed to 2% of the value of coal
dispatched. (Value of coal defined in the Explanation)    No change
Act IV of 1984 p. 16-17    S. 5(l)(b)(iii): 2% raised to 3%    S. 5(l)(b):
Tec estates taken out of the ambit of S. 78(2)(a). New S.78(2)(aa): Not
exceeding Rs. 6 per kg of tea on despatches from fee tea estate
Act XX of 1989** p. 30 at 31    No change    S. 2: S. 78(2)(aa) omitted
and replaced by S. 78(2A) S. 78 (2A): Cess at the rate of Rs. 0.04 per kg
of green tea leaves produced (Effective from 14.4.1984 and validation
clause also passed.)
Act If of 1992 p. 37 at 38    S. 2(1): S. 78(2) replaced by a. new
section. New S. 78(2)(b): cess on coal-bearing lands @ 5% of the annual
value of the land, as, defined in S. 2(1) of Act XI V of 1976 (on the basis
of value of coal produced in the preceding two years).    No change
Act X of 19% D. 48    S. 5: 5% raised to 7%    No change
Ad VIII of 1998 p. 49    S. 2: 7% reduced to 5%    No change
*West Bengal Primary Education Act 1973
** West Bengal Taxation Laws (Second Amendment) Act 1989

Changes in unit and rate of cess under the West Bengal Rural Employment and
Production Act, 1976

Statute    Coal Tea

Act XIV of 1976* p. 3-4    S.4(2)(b): Not exceeding Rs. 0.50 per tonne on
annual despatches of coal    No separate section. S: 4(2 )(a): Not
exceeding Rs. 0.06 on development value of the land (Defined in S. 2(l) as
five times the annual value.)
Act XIV of 1978 p.5    S.5: Rs. 0.50 raised to Rs. 2.50    No change
Act IX of 1981 p. 6-7    S.7(b)(iii): Rs. 2.50 raised to Rs. 5    S. 7(b):
Tea estates taken out ofthe ambit of S. 4(2)(a). New S. -4(2)(sic): Not
exceeding Rs. 6 per kg of tea en despatches item the tea estate. (Proviso
that auction sales may be excluded.)
Act V of 1982 p. 9 at 11    S. 7(l)(a)(ii): Rs. 5 raised to Rs. 7.50,
Word "annual'' deleted    S. 7(I)(a)(i): Proviso deleted
Act VIII of 1983 p. 13    S. 8: Rs. 7.50 raised to Rs. 15    No change
Act XV of 1983 p. 14 at 15    S. 7(i): Rate changed to 15% of the value
of coal despatched. (Value of coal defined in the Explanation)    No change
Act IV of 1984 p. 16 at 19    S. 7: 15% raised to 17%    No change
Act I of 1986 p. 20 at 24    S. 8 (1):17% raised to not exceeding 25%"
No Change
Act III of 1988 p. 29    S. 6: 25% raised to 35%    No change
Act XX of 1989** p. 30 at 33-34    No change    S, 3; S. 4(2)(aa) omitted
and replaced by S. 4(2A). S. 4(2A): Cess at the rate of Rs. 0. 12 per kg of
green, tea leaves produced (Effective from 1.4.1981 and validation clause
also passed)
Act 11 of 1992 p. 37 at 42-43    S. 3(2): S.4(2) replaced by a newsection.
New S, 4(2)(b): Cess on coal-bearing lands @ 35% of the annual value of the
land, as defined in S.2(I) of the Act. (Inserted by S. 3( I)(a) of this Act
- annual value defined on the basis of value of coal produced in the
preceding two years    No change
Act XVI of 1994 p. 47    No change    S, 6: Rs. 0.12 reduced to Rs. 0.08
Act X of 1996 p. 48    S. 6:35% raised to 38%    No change
Act VIII of 1998 p. 49-50    S. 3: 38% reduced to 20%    No change
*West Bengal Rural Employment and. Production Act. 1976
* * West Bengal Taxation Laws (Second Amendment) Act 1989


The aforementioned charts go to show that in relation to Education Cess,
variation has been made from 0.50 p. per M.T. to 7% of the value of coal
and in relation to Rural Education, the rate of cess varied from 0.50 p. to
38% of the value of coal.

So far as tea is concerned, the following amendment has been made in the
Act:
    "(2A) The education cess shall be levied annually on a tea estate
    at the rate of four paise for each kilogram of green tea leaves
    produced in such tea estate.

Explanation to Section 2A provides that for the purpose of the said sub-
section, Section 78B and Section 78C -
(i) 'green tea leaves' shall mean the plucked and unprocessed green leaves
of the plant Camelia Sinensis (L) O. Kuntze;
(ii) 'tea estate' shall mean any land used or intended to be used for
growing plant Camelia Sinensis (L) O. Kuntze, and producing green tea
leaves from such plant, and shall include land comprised in a factory or
workshop for producing any variety of the product commercially known as
'tea' made from the leaves of such plant and for housing the persons
employed in the tea estate and other lands for purposes ancillary to the
growing of such plant and producing green tea leaves from such plant."

U.P. Special Area Development Authorities Act, 1986:
Section 35 of the Act provides as under:
"35. Cess on mineral rights:
(1) Subject to any limitations imposed by Parliament by law relating to
mineral development, the Authority may impose a cess on mineral rights at
such rate as may be prescribed.
(2) Any Cess imposed under this section shall be subject to confirmation by
the State Government and shall be leviable with effect from such date as
may be appointed by the State Government in this behalf."

In exercise of the power conferred by Section 35 of the Act, the
Governor made the Shakti Nagar Special Area Development Authority (Cess on
Mineral Rights) Rules, 1997. Rule 2(b) and Rule 3(1) and (2) thereof read
as under:
"2. In these rules, unless there is anything repugnant in the subject or
context.
(a) xxx     xxx     xxx
(b) "Mineral Rights" means rights conferred on a lessee under a mining
lease granted or renewed for mining operations in relation to Minerals
(providing operation for raising, winning or extracting coal) as defined in
the Mines and Minerals (Regulation and Development) Act, 1957 (Act No. 67
of 1957).
"3.(1) The. Authority may, subject to Sub-rules (2) and (3) impose a cess
on mineral rights on such minerals and minor minerals and at such rates as
specified below:

Mineral/ Minor Mineral    Minimum Rate    Maximum Rate

(1) Cess on Coal    Rs. 5.00 per ton    Rs. 10.00 perton
(2) Cess on Stone, Coarse Sind/ Sand    Rs. 2.00 per cubic metre    Rs.
5.00 per cubic metre

(2) The rates shall not be less, than the minimum rates or more than the
maximum rates specified in Sub-rule (1) and shall be determined by the
Authority by a special resolution which shall, be subject to confirmation
by the State Government."

M.M.R.D. Act, 1957 - Purport and object:
While enacting the 1957 Act, it was stated:
"Amending Act 15 of 1958:-In view of its importance as basic fuel and the
position it occupies in the country's economy, coal has always been treated
differently from other minerals. It is in recognition of this that no rules
have been framed so far under Section 7 of the Mines and Minerals
(Regulation and Development) Act, 1948, in regard to modification of the
terms and conditions of mining leases for coal granted before the
commencement of that Act, though other minerals have been covered.
2. The Mines and Minerals (Regulation and Development) Act, 1957 (67 of
1957), which replaces the Act of 1948, however, specifically extends the
rate of royalty prescribed in the Second Schedule to mining leases granted
before the 25th October, 1949, in respect of coal also and makes it
obligatory for the other terms and conditions of such leases to be brought
into conformity with the provisions of the Act and the rules made under
Sections 13 and 18. It is considered that these changes will have numerous
undesirable consequences. The area covered by these mining leases are
principally in West Bengal and Bihar ,and they account for as much as 80
per cent, of the total coal production in the country. The royalties paid
on this coal vary over a wide range but are generally much below the rate
per ton prescribed in the Second Schedule. A sudden and uniform increase of
these royalties is likely to have an unsettling effect on the industry and
may retard the programme of coal production under the Second Five Year
Plan. The same adverse effect would be felt by a sudden modification of the
other terms and conditions.
3. The object of the present Bill is accordingly to exempt mining leases
for coal granted before the 25th October, 1949 from the operation of Sub-
section (1) of Section 9 and Sub-section (1) of Section 16 of the Act, with
powers to Government to extend these provisions to such leases at a future
date subject to such exceptions and modifications as may be considered
necessary. - See. Gaz. Of India, 28-5-1958, Pt. II, Section 2, Ext., p.
502."

The 1957 Act was enacted for regulation of mines and development of
minerals under the control of Union. Section 2 provides for the requisite
declaration which is as under:
    "Declaration as to expediency of control by the Union:- It is
    hereby declared that it is expedient in" the public interest that
    the Union should take under its control the regulation of mines and
    the development of minerals to the extent hereinafter provided. "
In the said Act, "minor minerals" is defined as:
"minor minerals" means building stones, gravel, ordinary clay, ordinary
sand other than sand used for prescribed purposes, and any other mineral
which the Central Government may, by notification in the Official Gazette,
declare to be a minor mineral;"

In terms of Section 4, mining operations either under a prospecting
licence or mining lease is to be carried out only under a licence or lease
to be granted in the manner prescribed by the rules made under Sections 13
and 15 thereof as the case may be. Section 9 of the said Act provides for
royalty. Section 9A provides for dead rent. Section 13 confers power on
Central Government to make rules in respect of major minerals. Rules may
provide for fixing and collection of rent, fees, charges, etc. for
prospecting licenses or Mining Leases.

Section 15 of the said Act provides for rule making power by the State
in relation to the minor minerals: pursuant to or in furtherance whereof
the State Government framed Minor Mineral Concession Rules for regulating
grant of quarry lease, mining lease and other mineral concessions in
respect of minerals and purposes connected therewith. Section 15(1-A)(g)
reads thus:
"1-A. In particular and without prejudice to the generality of the
foregoing power, such rules may provide for all or any of the following
matters, namely:-
(g) the fixing and collection of rent, royalty, fees, dead rent, fines or
other charges and the time within which and the manner in which these shall
be payable; "

Sections 17 and 17A grants special power to the Central Government to
undertake prospecting and mining operation in certain cases and reservation
of area for the purpose of conservation. Section 18 of the Act imposes a
statutory duty upon the Central Government to take all such steps as may be
necessary for the conservation and systematic development of minerals in
India and for the protection of environment by preventing or controlling
any pollution which may be caused by prospecting or mining Operations and
for such purposes the Central Government may, by notification in the
Official Gazette, make such, rules, as it thinks fit.
Sub-section (2) of Section 18 provides illustrations of some of the matters
which are to be governed by such rules. Section 21 provides for penalties.
The 1957 Act is a complete code providing for regulation of mine and
mineral development including the power to levy tax. Section 25 deals with
recovery of rent, royalty, tax, fee or other sums due to the Government
under the Act or the Rules framed thereunder which shall be a first charge
on the assets and recovery as an arrear of land revenue and, thus, by
necessary implication confers power to impose tax on the mineral.
TEA ACT, 1953

The Tea Act was enacted by the Parliament indisputably in exercise of
its legislative power contained in Entry 52, List I of the Seventh Schedule
of the Constitution of India. A requisite declaration to that effect also
finds place in Section 2 of the Act. The preamble of the Tea Act clearly
points out that the same was enacted to provide for the control by the
Union of the tea industry including the control, in pursuance of the
International Agreement now in force, of the cultivation of tea in, and of
the export of tea from, India and for the purpose of establishing a Tea
Board and levy a duty of excise on tea produced in India.

The Statement of Objects and Reasons, the report of the Select
Committee as also the various amendments made therein from time to time,
particularly Amending Act 21 of 1967, Amending Act 22 of 1970, Amending Act
75 of 1976, Amending Act 38 of 1983 and Amending Act 24 of 1986 leave no
manner of doubt that the tea industry had occupied a very important
position in the country and in that view of the matter alone the Union
Government took the industry under its control.

'Cess' has been defined in Section 3(c) to mean the duty of excise
imposed by Section 25.

'Owner' has been defined in Section 3(k) in the following terms :
"Owner" -
(i) with reference to a tea estate or garden or a sub-division thereof the
possession of which has been transferred by lease, mortgage or otherwise,
means the transferee so long as his right to possession subsists; and
(ii) with reference to a tea estate or a garden or a sub-division for which
an agent is employed, means the agent if and in so far as, he has been duly
authorised by the owner in that behalf; "

We may further note the definition of 'tea' as contained in Section
3(n) thereof which is in the following terms :
""tea" means, the plant Camellia Sinensis (L) O. Kuntze as well as all
varieties of the product known commercially as tea made from the leaves of
the plant Camellia Sinensis (L) O.
Kuntze including green tea;";
is in pari materia with the State Act.

Chapter II of the Act provides for constitution of the Tea Board.
Section 10 provides for the duties and functions of the Board which in no
uncertain terms states that it shall be the duty of the Board to promote by
such measures, as it thinks fit, the development under the control of the
Central Government of the tea industry. Sub-section (2)(a) of Section 10
unlike other Act provides for regulation of production and extent of
cultivation of tea. The Board has, inter alia, a duty to regulate the sale
and export of tea; increasing the consumption in India and elsewhere of tea
and carrying on propaganda for that purpose; and improving the marketing of
tea in India and elsewhere. The Board in terms of Sub-section (3) of
Section 10 is enjoined with a duty to act in accordance with and subject to
such rules as may be made by the Central Government. Chapter III provides
for control over the extension of tea cultivation. Section 12 prohibits
planting of tea on any land unless permission therefore is granted by the
Board. Section 13 provides for the limitations to the extension of tea
cultivation. Even the total area of land in respect of which such
permission may be granted shall be such as may be determined by the Board,
as is explicit from Sub-section (2) of Section 13 in terms whereof
information in relation to such matters are to be notified. Section 14
provides for the manner in which the applications for grant of permission
to plant tea are to be dealt with. Any decision taken by the Board in terms
of Sub-section (3) of Section 14 on such applications is not to be called
in question by any Court. Section 15, however, makes an exception for grant
of permission in special circumstances as specified therein. Section 16
empowers the owner of a tea estate to establish tea nurseries but even for
that purpose all areas of land utilized therefore shall be excluded when
computing for the purpose of Section 13 the total area of land in respect
of which the permissions referred to in Section 12 may be granted. Chapter
IIIA which was inserted by Act No. 75 of. 1976 provides for management or
control of tea undertakings or tea units by the Central Government in
certain circumstances specified therefore. Management of such tea
undertakings or tea units can be taken over in the event any
exigency/situation as referred to therein comes into being. The definition
of 'tea unit' as contained, in Chapter IIIA is also a pointer to the fact
that a tea unit would mean a tea estate or garden. Chapter IV provides for
control over the export of tea and tea seed. Chapter V of the said Act
deals with finance, accounts and audit. Section 25 of the Act has undergone
a substantial amendment by reason of Amending Act 24 of 1986, the Statement
of Objects and Reasons whereof reads thus :
"Amending Act 24 of 1986: Under Section 25 of the Tea Act, 1953 (29 of
1953), the Central Government is empowered to levy and collect as a cess, a
duty of excise on all tea produced in India at the rate of four paise per
kilogram. The Central Government is, however, empowered to fix a higher
rate of cess not exceeding 8.8 paise per kilogram. The present rate of cess
of eight paise per kilogram was made effective from August, 1978. Although,
this rate is almost at the maximum rate allowed under the Act, the amount
of cess collected has become insufficient to meet the expenditure of the
various developmental and other activities of the Tea Board. The gap
between the proceeds from the cess and the actual expenditure of the Tea
Board is likely to when further in view of the higher level of expenditure
envisaged in the Seventh Plan. The ceiling of 8.8 paise per kilogram,
therefore, needs to be revised. It is, accordingly, proposed to amend
Section 25 of the Act for providing higher ceiling of levy of cess at a
rate not exceeding fifty paise per kilogram as the Central Government may,
from time to time, fix by notification. It is also proposed to empower the
Central Government to empower the Central different varieties and grades of
tea having regard to the geographical, climatic and other circumstances
relating to the production of the different varieties and grades of tea. "

The said provision, therefore, enables the Central Government to
provide for imposition of cess on tea produced in India. Sub-section (1) of
Section 25 provides that "there shall be levied and collected as a cess for
the purposes of this Act a duty of excise on all tea produced in India at
the rate of four paise per kilogram".

Section 30 of the Act occurring in Chapter VI of the Act specifies the
area of control taken over by the Central Government. It reads thus :-
"30. Power to control price and distribution of tea or tea waste;
(1) The Central Government may, by order notified in the Official Gazette,
fix in respect of tea of any description specified therein -
(a) the maximum price or the minimum price or the maximum and minimum
prices which may be charged by a grower of tea, manufacturer or dealer,
wholesale or retail, whether for the Indian market or for export;
(b) the maximum quantity which may in one transaction be sold to any
person.
(2) Any such order may for reasons to be specified therein -
(a) fix prices for such tea differently in different localities or for
different classes of dealers, or for growers of tea or manufacturers;
(b) instead of specifying the price or prices to be charged, direct that
price or prices shall be computed in such manner and by reference to such
matters as may be provided by the order.
(3) The Central Government may, by general or special order -
(a) prohibit the disposal of tea or tea waste except in such circumstances
and under such conditions as may be specified in the order;
(b) direct any person growing, manufacturing or holding in stock tea or tea
waste to sell the whole or a part of such tea or tea waste so grown or
manufactured during any specified period, or to sell the whole or a part of
the tea or tea waste so held in stock, to such person or class of persons
and in such circumstances as may be specified in the order;
(c) regulate by licences, permits or otherwise the production, storage,
transport or distribution of tea or tea waste.
(4) Where in pursuance of any Order made with reference to Clause (b) of
Sub-section (3), any person sells the whole or a part of any quantity of
tea or tea waste, there shall be paid to him as price therefore -
(a) where the price can be fixed by agreement consistently with the order,
if any, relating to the fixation of price issued under Sub-section (i), the
price so agreed upon;
(b) where no such agreement can be reached, the price calculated with
reference to any such order as is referred to in Clause (a);
(c) where neither Clause (a) nor Clause (b) applies, the price calculated
at the market rate prevailing in the locality at the date of sale.
(5) Without prejudice to the generality of the power conferred by Sub-
sections (1) and (3), any order made thereunder may provide -
(a) for requiring persons engaged in the production, supply or distribution
of, or trade and commerce in, tea or tea waste to maintain and produce for
inspection such books, accounts and records relating to their business and
to furnish such information relating thereto as may be specified in the
order;
(b) for such other matters, including in particular the entering and search
of premises, vehicles, vessels and aircraft, the seizure by a person
authorized to make such search, of tea or tea waste in respect of which
such person has reason to believe that a contravention of the order has
been, is being or is about to be committed, the grant or issue of licences,
permits or other documents and the charging of fees " therefore."

The Central Government in exercise of its power conferred upon it
under Section 30 of the Tea Act made an order known as Tea (Marketing)
Control Order 2003 in terms whereof different types of tea had been brought
within the interpretation clause. Clause 2(q) of the Order defines "Bought
leaf tea factory" as follows:
"2(q) "Bought leaf tea factory" means a tea factory which sources not less
than two-thirds of its tea leaf requirement from other tea growers during
any calendar year for the purpose of manufacture of tea".

FEDERALISM:

Federalism is one of the basic pillars of the Indian Constitution. The
federal distribution of powers are one of its unique features. Having
regard to Articles 245, 248, 250, 256, 257, 356 and Entry 97 in list I of
the VII Schedule of the Constitution, it is not possible to say that India
is not a subscriber to federalism but although having unique federal
character it can, be said to be quasi-federal or hybrid federal State.
Constitutional courts have interpreted that India has a federal polity.
Each State has independent constitutional existence assigned with important
political role.

Having regard to the aforementioned principles in mind, the Center-
State relations as regards the distribution of legislative power must be
viewed.

We may notice that Livingston in his treatise 'Federation and
Constitutional Change, 1956, pp.6-7" has observed that federation is a more
functional than institutional concept and it is wrong to suppose that there
are certain inflexible features in the absence of which a political system
cannot be federal stating:
    "Such a set of criteria ignores the fundamental fact that
    institutions are not the same things in different social and
    cultural environments.... No two societies are the same and each
    will require very different instrumentalities in accordance with
    the complex of psychological and sociological determinants that is
    peculiar to it."

It is not in dispute that the founding fathers intended to create
strong Centre having regard to the historic background. Such a tilt in
favour of the Centre as regard distribution of legislative field was felt
to be a matter of necessity and that is precisely the reason why more
important heads of legislation are in the Union List. Even the residuary
power has been conferred upon the Parliament. The amendments made in the
Constitution whereby and whereunder a few entries in List II which were
either omitted or transferred to other lists also is a pointer to the said
fact.

In Florida Lime and Avocado Growers v. Charles Paul [373 US 132 : 10
Law. Ed. 2d 248], it is stated:
    "We have, then, a case where the federal regulatory scheme is
    comprehensive, pervasive, and without a hiatus which the state
    regulations could fill. Both the subject matter and the statute
    call for uniformity. The conflict is substantial - at least six out
    of every 100 federally certified avocados are barred for failure to
    pass the California test - and it is located in a central portion
    of the federal scheme. The effect of the conflict is to disrupt and
    burden the flow of commerce and the sale of Florida avocados in
    distant markets, contrary to the congressional policy underlying
    the Act. The State may have a legitimate economic interest in the
    subject matter, but it is adequately served by the federal
    regulations and this interest would be but slightly impaired, if at
    all, by the suppression of  792."

As would be discussed hereinafter in detail, the same principle would
apply in the instant case.

Latham, C.J. in The State of South Australia and Anr. v. The
Commonwealth and Anr., [(1942) 65 C.L.R. 373] explained the legalistic
feature stating:
    "The problem for the Court is a legal problem which is unknown in
    countries with a unitary form of government and a supreme
    legislature. It arises only when legislative powers of a law-making
    agency are limited. This is the case in Australia..If either the
    Commonwealth Parliament or a State Parliament attempts to make a
    law which is not within its powers, the attempt fails, because the
    alleged law is unauthorized, and is not a law at all... The law is
    not valid until a court pronounces against it...If it is beyond
    power. It is invalid ab initio. Thus the controversy before the
    Court is a legal controversy, not a political controversy...It has
    been argued that the Acts now in question discriminate, in breach
    of Section 51(ii) of the Constitution, between States. The Court
    must consider and deal with such a legal contention. But the Court
    is not authorised to consider whether the Acts are fair and just as
    between States...These are arguments to be used in Parliament and
    before the people. They raise questions of policy which it is not
    for the Court to determine or even to consider."

Importance of federalisam has recently been noticed by us in State of
Andhra Pradesh v. K. Purushotham Reddy [JT 2003 (3) SC 15] which has been
followed in Govt. of A.P. v. Medwin Educational Society and Ors., albeit in
a different context. It was held when the State acts in obedience of a
legislative policy formulated under the Parliamentary Acts in relation to
Higher Education, the State action would be intra vires.

Durga Das Basu in his celebrated work "Comparative Federalism" at pp.
175-176 states:
    "The strong Central bias has indeed been a boon to keep India
    together when we find the separatist forces of communalism,
    linguism and scramble for power playing havoc notwithstanding all
    the devices of Central control, even after more than three decades
    of the working of the Constitution. It also shows that the States
    are not really functioning as agents of the Union Government or
    under the directions of the latter, for then, events like those in
    Assam (over the language problem) or in Punjab (pp. 115ff., ante)
    could not have taken place at all. But, by reason of such
    centralizing trends, federalism cannot be said to be dead in India.
    A radical change in the background has taken place since 1967. So
    long as the Union and all the States in India were under the rule
    of one-Party under the strong leadership of a towering personality
    such as Pandit Jawaharlal or Mrs. Gandhi, there, could hardly arise
    any tussle between the Union and the States which could not be
    Settled by the Party leadership at Delhi, and, thus, Indian
    federalism came to work almost as a Unitary system. But in 1967,
    different parties came to power in a number of States, so that they
    would naturally refuse to act as dictated by the Party in power at
    Delhi.
    The frequent resort to the extraordinary power under Article 356 to
    keep recalcitrant Stats politics under Union control, the abuse of
    Governor's powers in some cases, and the like, have accelerated the
    forces of separatism.
    In such a situation, which is prevailing till the time of this
    Writing in 1986, the question of 'State powers under the provisions
    of the existing Constitution, as well as the question of their
    revision by amendment of the Constitution, are bound to raise their
    head and agitations over these questions have led to the
    constitution of the Sarkaria Commission (1983) to examine and
    revise, if necessary, the 'Centre State relations' under the
    Constitution."

In the said treatise at page 178 quoting Dicey, Law of the
Constitution, 10th Ed. P. 164, the learned author states:
"There are, according to Dicey, three, essential legal features in a
federal Constitution, namely,
(a) Supremacy of a written Constitution;
(b) Distribution of powers amongst the various organs of the federation and
of the regional units of the federation, by the provisions of that
Constitution; and
(c) Judicial review or enforcement of that supreme Constitution as law.
If these legal features are present in the Indian Constitution., it would
be immaterial to a lawyer whether academicians would classify it as 'quasi-
judicial' or 'a unitary constitution with subsidiary federal features,' or
the like."

In his book, Central Power in the Australian Commonwealth, Cassell,
London, Sir Robert Menzies states:
    "My central purpose has been to demonstrate a great truth about the
    study of a federal Constitution. That truth is that although it is
    a sound rule to go back to the language of the Constitution -
    melius est petere fonts quam sectare riulos - it is a mistake to
    think that a Constitution is something rigid and inflexible, to be
    interpreted like any ordinary statute, to have a meaning fixed for
    all time. I have defended leglism as something inherent in
    federalism. But it is not inconsistent with the legalistic approach
    to recognize that a written Constitution is an expressed scheme of
    government designed to give a basic structure in a changing world;
    not designed to inhibit growth in a growing world, nor to make the
    contemporary world subject to the political, social or economic
    ideas of a bygone age. "

The doctrine of federalism in the Indian context would mean proper and
effective interpretation of the Constitution in respect whereof political
or economic views have no role to play. Fields of legislation carved out
under Chapter I of Part XI clearly spells out that in more important
matters and the Parliament will have greater control thereover.

Tilt in favour of the Centre is required to be construed having regard
to the importance of the subject matter of Parliamentary legislation and
the impact and practical effect of the in road of the State Laws
entrenching upon the legislative field occupied by the Parliament.

It would, therefore, not be correct for the superior courts to
advocate the theory that while interpreting the Constitution, courts should
lean in favour of the State. Federal character of the Union of States in
India do not support the said theory.

LEGISLATIVE FIELD

The principles required to be deduced as regard field of legislation,
may not be much in dispute. The question, however, is that of its
application.

Before analyzing the relevant provisions, we may have an overview of
the constitutional scheme in this behalf. Articles 245 and 246 of the
Constitution of India read with Seventh Schedule and Legislative Lists
contained therein prescribe the extent of legislative competence of
Parliament and State Legislatures. Parliament has exclusive power to make
laws with respect of any of the matter enumerated in List I in the Seventh
Schedule. Similarly, State Legislatures have exclusive power to make laws
in respect of any of the matters enumerated in List II. Parliament and
State Legislatures both have legislative power to make laws with respect to
any matter enumerated in List III, the Concurrent List.

The various entries in the three Lists are fields of legislation. They
are designed to define and delimit the respective areas of legislative
competence of the Union and State Legislatures. Since legislative subjects
cannot always be divided into water tight compartments; some overlappings
between List I, II and III of the Seventh Schedule is inevitable. Hence,
though the State Legislature has exclusive power with respect to the
subjects specified in List II, some of the Entries in List II specifically
make the State power 'subject to' any law made by Parliament under the
specified Entry in List I.

Article 245 of the Constitution of India empowers the Parliament not
only to make laws for the whole or any part of the territory of India but
also indicate that no law made by the Parliament shall be deemed to be
invalid on the ground that it would have extra-territorial operation.
Clause (1) of Article 246 of the Constitution of India confers exclusive
legislative power upon the Parliament with respect to any of the matters
enumerated in List I in the Seventh Schedule whereas in terms of Clause (2)
thereof, the Legislature of any State also have power to make laws with
respect to any of the matters enumerated in List III in the Seventh
Schedule, subject of course to the legislative competence of the Parliament
as contained in Clause (1) but notwithstanding anything contained in Clause
(3) thereof. The power of the State Legislature in terms of Clause (3) of
Article 246 is subject to Clauses (1) and (2) in relation to the matters
enumerated in List II in the Seventh Schedule.
In Union and State Relations under the Indian Constitution by M.C.
Setalvad, upon noticing the expressions used in different clauses of
Article 246, it is stated:
    "In the United States and in Canada, judicial decisions have
    established that, where a federal law or a dominion law conflicts
    with a State law on the same subject, the relevant federal or
    dominion law must prevail. The same position has been achieved by
    an express provision in Section 109 of the Commonwealth of
    Australia Act. In the Indian Constitution, this is sought to be
    achieved in part by the language of Article 246. The purpose of the
    provisions which we have set out in Article 246(1), (2) and (3), is
    clearly to carve out not only two exclusive legislative fields for
    the Union and the States and a further field in which both the
    general and the regional, governments can operate, but also to
    provide by the language used in each of three clauses of the
    Article that the legislative power of the Union in List I is
    predominant. That power is exercisable "notwithstanding anything in
    Clauses (2) and (3)" of Article 246. The concurrent Union power of
    legislation conferred by Clause (2) of Article 246 is exercisable
    "notwithstanding anything in Clause (3)" which deals with the
    exclusive legislative power of the State. But the State's
    concurrent legislative power is "subject to Clause (1)", which
    deals with the exclusive Union power of legislation. The State's
    legislative power in the field carved out for it by List II is
    again exercisable "subject to Clauses (1) and (2)", which deal with
    the Union power and the Concurrent power, the first vested
    exclusively in the Union and the second in both the Union and the
    State."
                    [Emphasis supplied]

The Constitution makers found the need for power sharing devices
between the Central and the State having regard to the imperatives of the
State's security and stability and, thus, propelled the thrust towards
centralisation by using non obstante clause under Article 246 so as to see
that the federal supremacy is achieved.

A perusal of the provisions of entries in List II would show that
there are 17 entries in List II (Entries 1, 2, 12, 13, 17, 22, 23, 24, 26,
27, 32, 33, 37, 50, 54, 57 & 64) which are one way or the other 'subject
to' either provisions of Entries in List I and/ or List III or subject to
laws made by Parliament. There are four models of entries to that effect.
(i) Eight Entries (2, 13, 17, 22, 23, 24, 33, 54) out of the aforesaid if
entries have been made 'subject to' the provisions of Entries in List I.
(ii) Three Entries (26, 27, 57) have been made subject to provisions of
Entries in List III.
(iii) Four Entries (1, 12, 32, 63) out of the aforesaid 17 entries have
been given power to the State Legislatures to make laws on subjects 'other
than' those specified in List I and/ or dealt with by law made by
Parliament.
(iv) Only two Entries (37&50) have been made subject to the provisions of
any law made by Parliament.

Article 248 of the Constitution of India confers power upon the
Parliament to make any law with respect to any matter not enumerated in the
Concurrent List or the State List.

Article 253 of the Constitution of India reads thus :-
    "Legislation for giving effect to international agreements
    Notwithstanding anything in the foregoing provisions of this
    Chapter, Parliament has power to make any law for the whole or any
    part of the territory of India for implementing any treaty,
    agreement or convention with any other country or countries or any
    decision made at any international conference, association or other
    body. "

It can be seen that Article 253 contains non-obstante clause. Article
253, thus, operates notwithstanding anything contained in Article 245 and
Article 246. Article 246 confers power on the Parliament to enact laws with
respect to matters enumerated in List I of the Seventy Schedule to the
Constitution. Entries 10 to 21 of List I of the Seventh Schedule pertain to
International Law. In making any law "under any of these entries,
parliament is required to keep Article 51 in mind.

Article 253 of Constitution provides that while giving effect to an
international treaty, the Parliament assumes the role of the State
Legislature and once the same is done the power of the State is denuded.

Notwithstanding the fact that great care with which the various
entries in the three lists have been framed: on some rare occasions it may
be found that one or the other field is not covered by these entries. The
makers of our Constitution have, in such a case, taken care by conferring
power to legislate on such residuary subjects upon the Union Parliament
including taxation by reason of Article 248 of the Constitution.

We may notice that in the Government of India Act, 1935 no provision
of the nature of Entry 97 in List I existed. In terms of Section 104
thereof the Governor General could empower either the Dominion Legislature
or a Provincial Legislature to enact a law with respect to any matter not
enumerated in any of the Lists in the Seventh Schedule to the Act,
including a law imposing a tax not mentioned in any such list and the
executive, authority of the Dominion or of the Province, as the case may
be, shall extend to the administration of any law so made, unless the
Governor General otherwise directs. In Constitution, of India, however,
such a residuary power has expressly been conferred on the Parliament.

Once it is held that the State lacks legislative competence for
imposition of tax on any of the subject, indisputably the Parliament alone
will have legislative competence therefore.

CASE LAWS RE: LEGISLATIVE COMPETENCE :

Observation made by this Court in S.R. Choudhuri v. State of Punjab,
in this regard/ is apposite:
    "Constitutional provisions are required to be understood and
    interpreted with an object-oriented approach. A Constitution must
    not be construed in a narrow and pedantic sense. The words used may
    be general in terms but, their full import and true meaning, has to
    be appreciated considering the true context in which the same are
    used and the purpose which they seek to achieve."

In Attorney General for India v. Amratlal Prajivandas, the Smugglers
and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
(SAFEMA) made by Parliament was challenged inter alia as lacking
legislative competence. The Constitution Bench of nine Judges relying on
Union of India v. Shri Harbhajan Singh Dhillon observed as under:
"Be that as it may, it is not necessary to pursue this line of reasoning
since we are in total agreement with the approach evolved in Union of India
v H.S. Dhillon - a decision by a Constitution bench of seven Judges. The
test evolved in the said decision is this in short: Where the legislative
competence of Parliament to enact a particular statute is questioned, one
must look at the several entries in List II to find out (applying the well
known principles in this behalf) whether the sold statute is relatuble to
any of those(sic) and List III or by virtue of Article 248 read with Entry
97 of List I."

We may at this juncture also notice the decision of this Court in Naga
People's Movement of Human Rights v. Union of India, [AIR 1998 SC 431]
which states:
"While examining the legislative competence of Parliament to make a law
what is required to be seen is whether the 'subject-matter falls in the
State List which Parliament cannot enter. If the law does not fall in the
State List, Parliament would have legislative competence to pass the law by
virtus of the residuary powers under Article 248 read with Entry 97 of the
Union List and it would not be necessary to go into the question whether it
falls under any entry in the Union List or the Concurrent List. [See Union
of India v. H.S. Dhillon,  S.P. Mittal v. Union of India,  and Kartar Singh
v. State of Punjab. What is, therefore, required to be examined is whether
the subject-matter of the Central Act falls in any of the entries in the
State List. "

Yet again in Synthetic & Chemicals Ltd. v. State of U.P.,  it has been
held:
    "... It has also to be borne in mind that where division of powers
    and jurisdiction in a federal Constitution is the scheme, it is
    desirable to read the Constitution in harmonious way."

In State of A.P. v. K. Purushotham Reddy and Ors. reported in JT 2003
(3) SC 15, it was held:
    "The conflict in legislative competence of the Parliament and the
    State Legislatures having regard to Article 246 of the Constitution
    of India must be viewed in the light of the decisions of this Court
    which in no uncertain terms state that each Entry has to be
    interpreted in a broad manner. Both the parliamentary legislation
    as also, the State legislation must be considered in such a manner
    so as to uphold both of them and only in a case where it is found
    that both cannot co-exist, the State Act may be declared ultra
    vires..."

In India Cement Ltd. (surpa), it is stated :
    "...It is well settled that widest amplitude should be given to the
     language of these entries, but some of these entries in different
     lists or in the same list may overlap and sometimes may also appear
     to be in direct conflict with each other. Then, it is the duty of
     the court to find out its true intent and purpose and to examine a
     particular legislation in its pith and substance to determine
     whether it fits in one or the other of the lists."

In Bharat Coking Coal v. State of Bihar (1990) 4 SCC 557, it has been
held:
    "...No doubt under Entry 23 of List II, the State legislature has
    power to make law but that power is subject to Entry 54 of List I
    with respect to the regulation and development of mines and
    minerals. As discussed earlier the State legislature is denuded of
    power to make laws on the subject in view of Entry 54 of List I and
    the Parliamentary declaration made under Section 2 of the Act. "

The decisions of this Court, therefore, also lead to the conclusion
that in case the State for one reason or the other lacks legislative
competence, the court must proceed on the basis that Parliament alone has
the legislative competence and it would not be permissible to uphold the
State Act by leaning in favour of the State or by giving a broader meaning
to the entry in List II relating to the subject matter of legislation.

PITH AND SUBSTANCE:

Doctrine of pith and substance, however, is taken recourse to when
examining the constitutionality of an Act with respect to competing
legislative competence of the Parliament and the State Legislature qua the
subject matter. Incidental entrenchment however is permissible.

In D.C. & G.M. Co. Ltd. v. Union of India,  it has been held:
    "When a law is impugned on the ground that it is ultra vires the
    powers of the legislature which enacted it, what has to be
    ascertained is the true character of the legislation. To do that
    one must have regard to the enactment as a whole, to its objects
    and to the scope and effect of its provisions. To resolve the
    controversy if it becomes necessary to ascertain to which entry in
    the three Lists," the legislation is referable, the court has
    evolved the doctrine of pith and substance. If in pith and
    ubstance, the legislation falls within one entry or the other but
    some portion of the subject-matter of the legislation incidentally
    trenches upon and might enter a field under Another List, then it
    must be held to be valid in its entirety, even though it might
    incidentally trench on matters which are beyond its competence."

In Ishwari Khetan Sugar Mills (P) Ltd. v. State of U.P.,  it was held:
    "When validity of a legislation is challenged on the ground of want
    of legislative competence and it becomes necessary to ascertain to
    which entry in the three lists the legislation is referable to the
    court has evolved the theory of pith and substance. If in pith and
    substance a legislation falls within one entry or the other but
    some portion of the subject-matter of the legislation incidentally
    trenches upon and might enter a field under another list, the Act
    as a whole would be valid notwithstanding such incidental
    trenching."

The question which, therefore, is required to be posed and answered is
as to whether both the Acts can stand together or not.

While determining the question as to whether there exists any
conflict, the real test would be as to whether both the legislations
covering the field can stand together. For the purpose of determination
thereof, it may be necessary to look to the legislative history as also the
decisions of this Court.

In Kartar Singh v. State of Punjab this Court held:
    "67. In order to ascertain the pith and substance of the impugned
    enactments, the preamble, Statement of Objects and Reasons, the
    legal significance and the intendment of the provisions of these
    Acts, their scope and the nexus with the object that these Acts
    seek to subserve must be objectively examined in the background of
    the totality of the series of events ............"

Ascertainment of pith and substance is synonymous to ascertainment of
true nature and character of the legislative competence necessitated for
the purpose of determining whether it is a legislation with respect to one
of the matters of the list. Human expression and fallibility of legal
draftsmanship cannot be lost sight of. The principles of pith and substance
is, thus, required to be applied only in appropriate cases.

ANALYSIS : RE: LEGISLATIVE FIELD :

In the economic front, the country has to compete with the developed
countries. Global competition has reached such a stage that despite
adequate production of coal and steel, the same are imported from other
countries in India. In the international markets also the question of
import is going up as compared to export. The manner in which the revenue
is collected by the Centre and distributed to States falls for
consideration by the appropriate constitutional authorities in terms of the
provisions of the Constitution. It is not correct to say that while
interpreting the legislative field the country in case of conflict would
lean in favour of the State keeping in view the fact that taxes under
different heads are collected by the Centre and a part of revenue is made
available to the States from time to time. This Court is not concerned as
to whether the Centre consumes the lion's share of revenue or the same is
subject matter of criticism at the hands of the State or financial
observers. Such an approach would not only run counter to the doctrine of
federalism with a strong Centre but in the long run would prove to be
counter-productive. India is a signatory to various international treaties
and covenants and being a party to WTO and GATT, it is obligated to fulfill
its trans-national obligations. If for the purpose of giving effect to the
international treaties, it in exercise of its power under Article 253 of
the Constitution of India had taken over the legislative field occupied by
List II of the Seventh Schedule of the Constitution, no exception thereto
can be taken. While doing so, the Central Government shall give effect to
the will of the makers of the Constitution and would not act contrary
thereto or inconsistent therewith. The legislative fields of the Union and
the State vary from country to country depending upon the requirement of
the situation in which such provisions are made. Although a lot can be said
on the subject, keeping in view the fact that our job is confined to
interpretation of the legislative entries vis-a-vis the Parliamentary and
Legislative Acts, it may not be necessary to do so. But suffice however it
to point out that when such an approach is adopted, we would be more prone
to committing errors. We must proceed on the basis that neither the Union
nor the State is supreme on the Constitution, as both the Union and the
State will have to trace their power from the provisions of the
Constitution. We should treat the subject with caution and circumspection.

The interpretive principles whether leaning in favour of the Union or
the State may, in certain situations, depend upon the subject matter of
legislation, the importance thereof and its effect and impact within and
outside the country. Both mineral and tea deserve more control only by the
Union having regard to their importance in national economy.

In ascertaining the subject matter, or the scope or purpose of the
legislation, the Court is entitled to give due regard to its economic
effect. (See The King v. Barger (1908) 6 CLR 41 and Attorney-General for
Alberta v. Attorney General for Canada (1939) AC at pp. 130-132) The
aforementioned decisions have been referred to in The State of South
Australia and Anr. v. The Commonwealth and Anr., [(1942) 65 C.L.R. 373].

Distribution of taxes by the Central Government in favour of the State
Government is of no moment in the instant case as the entire royalty fixed
by the Central Government in terms of the 1957 Act is payable to the
States. The Union Government has nothing to do therewith.

If the Constitution as a living organ is not interpreted having regard
to the intention of the constitution makers and in case of conflict in the
legislative field contained in List I and List II, if an interpretation
that leans in the favour of the State is adopted without reference to the
subject matter thereof or national interest, the same would be subject to
judicial vagaries which cannot be countenanced.

The impairment of State's economic interest is of no moment even if
Parliament had taken over the entire legislative field by enacting Acts in
terms of Entry 52 or 54 of List I. As noticed by Brother Lahoti , J in
South Eastern Coalfields Limited v. State of M.P. and Ors. [2003 (7)
Supreme 539] the rate of 'royalty has been enhanced by the Central
Government from Rs. 6.5 per ton to Rs. 120/- per ton. All other States have
accepted the same. They are getting enhanced royalty but despite India
Cement (supra) and Orissa Cement (supra) the State of West Bengal alone
amended the impugned acts and had been insisting that it can levy cess on
minerals.

It may not be necessary for us to delve deep into the matter as to
whether there exists a distinction between a general subject of legislation
and taxation as such a question does not directly arise for consideration.
It may only be of some academic interest. It is, however, trite that there
is nothing in the Constitution to debar the Parliament to legislate under
Entry 54 read with Entry 97 of the List I of the Seventh Schedule of the
Constitution.

However, recourse to the residuary power must be taken as a last
resort i.e. only when all the entries in the three lists are absolutely
exhausted, that is to say, if the subject matter is beyond comprehension of
the entries contained in the aforementioned three lists. It is trite that
when two interpretations are possible resort to the residuary power may not
be taken recourse to.

But it is also trite that the entries have to be given a liberal
construction irrespective of the fact that as to whether they are in List I
or List II. (See South Eastern Coalfields (supra)).

There cannot be any doubt whatsoever that for the said purpose, the
main object as also the scope and purport of the Central legislation vis-a-
vis the State legislation must be kept in mind and, thus, there, cannot by
any question of examining the same with jaundiced eyes.

With the greatest respect, in Indian context it is difficult to follow
Morey v. Doud [(1957) 354 US 457] wherein Frankfurter, J. says "The Courts
have only the power to destroy, not to reconstruct." The Courts in India
generally leans in favour of upholding the constitutionality of the statute
whether enacted by the State Legislature or the Parliament. In this
context, reference may be made to the decisions of this Court in Indian
Handicraft Emporium v. Union Of India and Balram Kumawat v. Union of India,
wherein vires of Wild Life Protection Act has been upheld by applying the
principles of 'Purposive Construction".

It is relevant to note that in R.K. Garg v. Union of India [AIR 1981
SC 2138] in which reference of Morey (supra) has been made while judging
the constitutionality of Special Bearer Bonds (Immunities and Exemptions)
Ordinance, this Court rejected the argument that the said ordinance is
immoral stating:
    "It was then contended that the Act is unconstitutional as it
    offends against morality by according to dishonest assessee who
    have evaded payment of tax, immunities and exemptions which are
    denied to honest tax-payers. Those who have broken the law and
    deprived the State of its legitimate dues fare given benefits and
    concessions placing them at an advantage over those who have
    observed the law and paid the taxes due from them and this,
    according- to the petitioners, is clearly immoral and unwarranted
    by the Constitution. We do not think this contention can be
    sustained. It is necessary to remember that we are concerned here
    only with the constitutional validity of the Act and not with its
    morality."

It is, however, well-settled that although both the Union and the
State derive their power from the same Constitution, the States would not
have any legal right as against the overriding powers of the Union, because
of a general theory of paramountcy or superiority of the Union. The Union
can claim overriding powers or superior powers over the State in certain
situation because the Constitution itself provides therefore. (See State of
West Bengal v. Union of India, , Automobile Transport v. State of
Rajasthan, and Ref. Under Article 143,  I.T.C Ltd. v. Agricultural Produce
Market Committee and Ors.

The importance of the provisions of Article 249 to 253 has been
highlighted hereinbefore. The Court is required to interpret the
Constitution which is an organic ongoing document. For the said purpose, we
are not only required to take into consideration the experience we had had
keeping in view the socialistic pattern of the society but having regard to
the new vistas opened by reason of globalisation. (See for example, Kapila
Hingorani v. State of Bihar, Islamic Academy of Edn. and Anr. v. State of
Karnataka and Ors. etc. [(2003) 6 SCC 325], Liverpool & London S.P. Assn.
Ltd. v. M.V. Sea Success I and Anr. [2003 (10) SCALE 1] and State of Punjab
and Anr. v. Modern Breweries and Anr. [2003 (10) SCALE 202])

ENTRIES 52 AND 54 OF LIST I:

It may be that the interpretation of the legisiative fields of the
State List and Union List, should be construed in deference to the extent
of declaration made by the Parliament in terms of Entry 52 List I of the
Constitution of India. 274. It may also be true that ordinarily the
declaration contained in Section 2 of the Act in regard to this requirement
as contemplated in Entries 52 and 54 of List I of the Seventh Schedule of
the Constitution of India would not affect the legislative competence of
the State in relation to raw material.

Although a liberal construction of a State Entry is desirable but at
the same time the Court should guard against extending the meaning of the
word beyond a reasonable limit.

In Kerala State electricity Board v. Indian Aluminium Co. [(1976 (1)
SCC 468], it was held that the entire field of "Electricity" as
contemplated under Entry 38 of List III is covered under Indian Electricity
Act, 1910 and Electricity (Supply) Act, 1948.

For the purpose of finding out the true nature and character of the
Act and the legislative entry whereunder it was enacted, the Statement of
Objects and Reasons and the purport and object thereof may be referred to.
For that purpose even debates in the Constituent Assembly may be looked
into.

In Harakchand Ratanchand Banthia and Ors. v. Union of India and Ors.
this Court gave a broad meaning to Entry 52 holding that even preparation
of gold ornaments would come within the purview of Entry 52 stating:
    "But this contention was not accepted. It was contended by Mr.
    Daphtary that if the process of production was to constitute
    "industry" a process of machinary or mechanical contrivance was
    essential. But we see no reason why such a limitation should be
    imposed on the meaning of the word "industry" in the legislative
    lists. Similarly it was argued by Mr. Palkhivala that the
    manufacture of gold ornaments was not an industry because it
    required application of individual art and craftsmanship and
    aesthetic skill. But  mere use of skill or art is not a decisive
    factor and will not take the manufacture of gold ornaments out of
    the ambit of the relevant legislative entries. "

In P. Kannadasan and Ors. v. State of T.N. and Ors. , B.P. Jeevan
Reddy, J. speaking for the Bench held:
    "35. The fifth contention of the learned counsel for the
    appellants- petitioners is equally misconceived. Parliament has
    already denuded the State Legislatures of their power to levy tax
    on minerals inhering in them by making the declaration contained in
    Section 2 of the MMRD Act. Shri Sanghi argued that the denudation
    is not absolute but only to the extent provided in the MMRD 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 and also 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 MMRD Act, the States still retain the
    power to levy taxes upon minerals over and above those prescribed
    by the MMRD Act and that a fresh declaration is called for whenever
    such subsisting power of the State is sought to be further
    encroached upon. This supposition, however, flies in the face of
    the decisions of this Court in India Cement and Orissa Cement [1991
    Supp (1) SCC 430]. 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. It is
    for this reason that the State enactments were declared incompetent
    insofar as they purported to levy taxes/cesses on minerals. The
    denudation of the State is not partial. It is total. They cannot
    levy any tax or cess on minerals so long as the declaration in
    Section 2 stands. Once the denudation is total, there is no
    ccasion or necessity for any further declaration of denudation or,
    for that matter, for repeated declarations of denudation. "
                        (Emphasis supplied)

We are not oblivious of the fact that the said decision has been
overruled by a three-Judge Bench in District Mining Officer and Ors. v.
Tata Iron and Steel Co. and Anr.  on a different question as therein the
Court laid emphasis that Cess and Other Taxes on Minerals (Validation) Act,
1992 in so far as imposition and collection of cess on minerals extracted
upto 4-4-1991 on which date the Supreme Court delivered its judgment in
Orissa Cement case (supra) was valid as thereby the Parliament by legal
fiction injected legislative competence unto the laws enacted by the
Legislature. It was held that the Validation Act did not confer any right
to make levy and collection of tax and minerals which was collectable after
4-4-1991.

In Ch. Tika Ramji and Ors. v. The State of Uttar Pradesh and Ors.
(1956 SCR 393), the question which arose for consideration was as to
whether there existed a repugnancy between the U.P. Sugarcane (Regulation
of Supply and Purchase) Act 1953 which was enacted in terms of Entry 33 of
List III of the Seventh Schedule of the Constitution and the notifications
issued thereunder vis-a-vis the Industries (Development and Regulation)
Act, 1951, the Court referred to Nicholas's Australian Constitution, 2 Ed.
Page 303, in the following terms :
"(1) There may be inconsistency in the actual terms of the competing
statutes (R. V. Brisbane Licensing Court, (1920 28 CLR 23).
(2) Though there may be no direct conflict, a State law may be inoperative
because the Commonwealth law, or the award of the Commonwealth Court, is
intended to be a complete exhaustive code (Clyde Engineering Co. Ltd. v.
Cowburn, (1926) 37 C.L.R. 466).
(3) Even in the absence of intention, a conflict may arise when both State
and Commonwealth seek to exercise their powers over the same subject matter
(Victoria v. Commonwealth, (1937) 58 C.L.R. 618; Wenn v. Attorney-General
(Vict.), (1948) 77 C.L.R. 84).
Isaacs, J. In Clyde Engineering Company, Limited v. Cowburn laid down one
test of inconsistency as conclusive : "If, however, a competent legislature
expressly or implicitly evinces its Intention to cover the whole field,
that is a conclusive test of inconsistency where another Legislature
assumes to enter to any extent upon the same field"."

Applying the said tests, the Court upheld the validity of the said Act
only on the ground that although raw-material sought to be regulated under
the State Act would be essential in the process of manufacture of
production of articles in the Scheduled industries but would not be of the
same nature or description as the article or class of articles manufactured
or produced thereunder. It is in that context, this Court considered the
provisions, of Section 18-G of the 1951 Act.

A distinction must be borne in mind as regard "use of land" and
"activities on land". Use of land as a 'fair' or 'market' is permissible in
terms of Entry 26 of List II. Imposition of tax, however, would be
impermissible on 'activity of land' as it does not come within the purview
of any of the entries contained in List II.

Different considerations may arise as regard interpretation of
different entries keeping in view the lists in which they belong. The Court
may have to look from a different angle in a case where it relates to
interpretation of conflicting entries in List I vis-a-vis List II; and List
II vis-a-vis List III. In a case where both the State Act and the Central
Act have been enacted in terms of List III, the question of repugnancy as
envisaged under Article 254 would arise. In that type of cases, it is well-
settled that in absence of Presidential Assent, the Parliamentary Act would
prevail. (See Ch. Tika Ramji (supra) and M.P.A.I.T. Permit Owners Assn. and
Anr. v. State of Madhya Pradesh [2003 (10) SCALE 380])

The question, however, must be considered from a different angle where
an entry in List II is subject to entry in List I. The Court in such a
situation would compare the provisions of the two Acts so as to find out as
to whether the entire field has been occupied by the Parliamentary Act or
not. The situation may, however, be different where there is no apparent
conflict between an entry in List II and one in List I. As having compared
the provisions of the two Acts, if it is possible to determine that the
parameters of the State Legislation and the Central Legislation are
distinct and different, a broader meaning to one Entry or the other may be
given having regard to the "pith and substance" doctrine.

What would be the effect of a State entry dealing with the subject
matter vis-a-vis Entry 52 of List I came up for consideration before a
Constitution Bench of this Court in ITC Ltd. v. Agricultural Produce Market
Committee and Ors. The majority applied Tika Ramji v. State of U.P. both
having regard to the positive test and negative test evolved therein.
Sabharwal, J. proceeded to uphold the market fee levied on tobacco on the
basis that Parliament was not competent to pass legislation in respect of
sale of agricultural produce of tobacco covered by Entry 52 of the Union
List under which the Parliament can legislative only in respect of the
industries, namely, "the process of manufacture or production". It was in
that premise held that the activity regarding sale of raw tobacco as
provided in the Tobacco Board Act would not be regarded as "industry".

Ruma Pal, J. in her concurrent judgment observed :
    "To sum up: the word 'Industry' for the purposes of Entry 52 of
    List I has been firmly confined by Tika Ramji to the process of
    manufacture or production only. Subsequent decisions including
    those of other Constitution Benches have re-affirmed that Tika
    Ramji case authoritatively defined the word 'industry' - to mean
    the process of manufacture or production and that it does not
    include the raw materials used in the industry or the distribution
    of the products of the industry. Given the constitutional
    framework, and the weight of judicial authority it is not possible
    to accept an argument canvassing a wider meaning of the word
    'industry'. Whatever the word may mean in any other context, it
    must be understood in the Constitutional context as meaning
    'manufacture or production'."

Pattnaik, J., however, for himself and Bharucha, J. (as the learned
Chief Justices then were) observed:
    "In view of the aforesaid rules of interpretation as well as the
    Constitution Bench decision referred to above, it is difficult for
    us to accept the contention of Mr. Dwivedi that the word "industry"
    in Entry 52 of List I should be given a restricted meaning, so as
    to exclude from its purview the subject of legislation coming
    within entry 27 or Entry 14 of List II. Bearing in mind the
    constitutional scheme of supremacy of Parliament, the normal rule
    of interpretation of an Entry in any of the lists in the Seventh
    Schedule of the Constitution, the object of taking over the control
    of the tobacco industry by the Parliament, on making a declaration
    as required under Entry 52 of List- I and on examining the
    different provisions of the Tobacco Board Act, we see no
    justification for giving a restricted meaning to the expression
    "industry' in Entry 52 of List I, nor do we find any justification
    in the contention of the counsel appearing for the States and also
    different Market Committees that the provisions contained in
    Tobacco Board Act dealing with the growing of tobacco as well as
    making provisions for sale and purchase of tobacco, must be held to
    be beyond the legislative competence of Parliament, as it does not
    come within the so-called narrow meaning of the expression
    "industry" on the ground that otherwise it would denude the State
    Legislature of its power to make law dealing with markets under
    Entry 28, dealing with agriculture under Entry 14 and dealing with
    goods under Entry 27 of List II. Such an approach of interpretation
    in our considered opinion would be against the very scheme of the
    constitution and supremacy of Parliament and such an approach
    towards interpreting the power sharing devices in relation to
    entries in List I and List II would be against the thrust towards
    centralisation. In our considered opinion, therefore, the word
    "industry' in Entry 52 of List I should not be given any restricted
    meaning and should be interpreted in a manner so as to enable the
    Parliament to make law in relation to the subject mater which is
    declared and whose control has been taken over to bring within its
    sweep any ancillary matter, which can be said to be reasonably
    included within the power and which may be incidental to the
    subject of legislation, so that Parliament would be able to make an
    effective law. So constructed and on examining different provisions
    of the Tobacco Board Act, we do not find any lack of legislative
    competence with Parliament so as to enact any of the provisions
    contained in the said Act, the Act in question having been enacted
    by Parliament on a declaration being made of taking over of the
    control of the Tobacco industry by the Union and the Act being
    Intended for the development of the said Industry. 289. Even the
    majority opinion in I.T.C. Ltd. (supra) would not come on the way
    of giving a broad interpretation of 'tea' or 'mineral'.

In State of U.P. and Ors. v. Vam Organic Chemicals Ltd. and Ors. a
Division Bench of this Court held that having regard to the declaration
made in Section 2 of the 1951 Act the whole field of industrial alcohol and
its products being covered, the State Legislatures are constitutionally
incompetent to levy tax. (See also State of Bihar and Ors. v. Industrial
Corporation Pvt. Ltd. and Ors., 2003 (9) SCALE 169)

Tea Act, 1953, however, stands absolutely on a different footing vis-
a-vis Tobacco Act. Duties and functions of Tea Board is of wider amplitude
than Tobacco Board. Its control covers -from selection of seeds - to
cultivation - to production - to green tea leaves - the processing of tea -
to marketing both domestic and international. No legislative field has been
left untouched which can be entrenched upon by the State Legislature. It is
in the aforementioned backdrop the right of the State in terms of Entry 49
List II must be held to have been denuded.

Section 25 of the Act provides for imposition of cess on production of
tea. Production has a direct nexus with the activities of the Tea Board as
enumerated under the Tea Act. Imposition of levy of cess on production of
tea in terms of Section 25 of the Act is over and above the power to impose
excise duty under the Central Excise and Salt Act, 1944. Thus, to impose
cess on production of tea is the field occupied by the Parliament. We have
no manner of doubt that Section 25 has been enacted specifically for the
purpose of controlling the price of 'tea' both for the purpose of its
consumption within and outside the country. The State, therefore, must be
held to be denuded of its power to impose any tax on production of tea.
It is furthermore well-settled that for the purpose of determining the
extent of the field occupied by a Parliamentary legislation, it is not
necessary to find out as to whether any rule has been framed in terms of
the provisions of the Act or not. [See Bharat Coking Coal Ltd. (supra)
Indian Aluminium Company (supra).

The Parliament in enacting Tea Act has exercised its superior power in
the matter in terms of Article 253 of the Constitution of India. Such
superior power in certain situation can also be exercised in terms of Entry
33, List III as also overriding powers of the Parliament during National
emergency including those under Articles 249, 250, 251 and 252 of the
Constitution of India. (See I.T.C. Ltd. (supra)

Once it is held that the Parliament has exercised its superior power
which is conferred on it in terms of Article 248 of the Constitution of
India, the question of levy of any tax on the product would not arise.

It is not a case where tax is imposed by the State in exercise of its
power which has no direct nexus with Entry 52 of List I.

It is furthermore trite that the purport and object of the Act must be
taken into consideration while construing competing entries.

It is trite that a broad meaning to a word may be given having regard
to the purport and object of the Statute.

In Amrendra Pratap Singh v. Tej Bahadur Prajapati and Ors. , Lahoti,
J. speaking for a Division Bench assigned an extended meaning of the
expression "transfer of immovable property".

In State of A.P. etc. v. National Thermal Power Corporation Ltd. and
Ors. etc., Lahoti, J. speaking for the Constitution Bench has also given an
extended meaning of the word "sale" by holding that the same would mean
"use or consumption". It was held :
"...In C.P. Motor. Spirit Act, Re (Central Provinces and Berar Sales of
Motor Spirit and Lubricants Taxation Act, 1938, Re, AIR 1939 FC 1) it was
held that two entries in the lists may overlap and sometimes may also
appear to be in direct conflict with each other. It is then the duty of
this Court to reconcile the entries and bring about harmony between them.
The court should strive at searching for reasonable and practical
construction to seek reconciliation and give effect to all of them. If
reconciliation proves impossible, the overriding power of the Union
Legislature operates and prevails."

Even no extended meaning is given to the word "tea" both for the
purpose of Tea Act and the impugned Acts, as green tea leaves would
admittedly come within the purview thereof, having regard to the object and
purport the Tea Act seeks to achieve, in my opinion, no tax can be imposed
thereupon.

Keeping in view the constitutional scheme, the Entries 52 and 54 must
be given liberal meaning vis-a-vis Entries 49 and 50 of List II having
regard to importance of coal and tea which have an immediate and direct
bearing on the economic development of the country.

What is required to be kept in mind in a situation of this nature is
the object underlying the provisions of the 1953 Act and 1957 Act. Once it
is found that the object of the 1957 Act is to denude the State from
enacting a statute and it will have a direct impact on regulation of mines
and minerals development as also control of Tea industry, the Central Acts
would be construed liberally vis-a-vis the State Acts.

The discussions on the subject must revolve round keeping the
aforementioned factor in mind.

The importance as regard fixation of price of coal and tea has a
direct bearing with the regulation of mines and minerals development as
also the Tea Industry. The Central Government has also reduced the custom
duty on coal taking into the aforementioned consideration in view as would
appear from a notification issued by the Central Government on 8.1.2004
under the provisions of the Customs Act.

The importance of fixation of value of coal will also be noticed from
the Statement of Objects and Reasons of the 1957 Act as the State even did
not intend to increase the rate of royalty, which would have an adverse
effect on production of coal. The impact of value of coal by reason of
imposition of royalties and taxes had, therefore, all along been kept in
mind by the Parliament.

If a restricted meaning is given to Entries 52, 54 and 97 of List I
and a broad meaning is given to Entries 5, 23, 24, 49 and 50 of List II of
the Seventh Schedule of the Constitution of India, the same may result in
incongruity inasmuch as thereby the goal and object of the Constitution
makers would not be achieved. By enacting the 1953 Act and the 1357 Act,
the Parliament intended that nothing should come in the way of mineral
development or tea industry. The Courts while interpreting the statutes
should avoid such construction whereby the State Legislature would be
encroaching upon the areas covered by the Parliamentary Act indirectly
which they could not do directly.

It must also be borne in mind that Entries 54 and 52 of List I stand
on different footings. In terms of Entry 54 List I, if a declaration is
made by the Parliament to regulate mines and minerals development the power
of the State Legislature to make any legislation in relation thereto is
denuded whereas in terms of Entry 52 List I of Seventh Schedule the
Parliament by law declares the control of industries to be expedient in
public interest. The power to make law by the State Legislature in respect
of such industries, thus, upon such declaration shall stand denuded.
Cultivation of tea would also come within the purview of tea industry
having regard to the provisions of the Tea Act is beyond any cavil.
Interpretation of General Entry vis-a-vis Tax Entries :

Principles of interpretation on the conflicting entries cannot be
placed in a strait jacket formula. Rule of interpretation will vary,
depending upon the subject matter of legislation. A view that power of
taxation may not be found in a general entry would be too simplistic to
bear the test of constitutional interpretation. Regulating statute may
contain taxing provisions. A statute, yet again, may contain both general
provisions as also the taxing ones.

The decisions of the Privy Council in Gov.-Gen. in Council v. Madras
[1945 FCR 179] on the question of interpretation as regard conflicting
legislative entries in general and tax entries in particular may not be
apposite in the instant case inasmuch herein we are concerned with only one
question, namely, whether the field of taxation of mines and minerals which
are extracted and ceases to be a part of the surface is wholly covered or
not. One of the principles for reconciling conflicting tax entries is to
ascertain as to whether a person, thing or activity is the subject matter
of tax and the amount of the tax to be levied. The question which has to be
answered on the basis of the aforementioned principle is, is it a tax on
land or tax on mineral. If having regard to the nature of tax and keeping
in view the history of the legislation to the effect that the State of West
Bengal has all along been trying to impose tax on minerals as opposed to
tax on land, is taken into consideration, it will be noticed that
endeavours have been made to continue to impose 'cess' on mineral and
mineral rights in the garb of 'land tax'.

The decisions of this Court as referred to hereinbefore including
India Cement (supra) must be judged from this angle and not in vacuum. It
may be true that taxation is regarded as a distinct matter and has
separately set out in List I or List II of the Seventh Schedule of the
Constitution of India but the what should be borne in mind is that the same
by itself is not determinative of the nature of the statute. There are
statutes and statutes; one statute may cover general entry as also a
taxation entry whereas another may be enacted only in terms of the general
entry and third in terms of a tax entry.

In M.P. Sundararamaier & Co. v. State of Andhra Pradesh and Anr. [1958
SCR 1422], this Court was concerned with the validity of imposition of tax
on inter-State sales under the Madras General Sales Tax Act and was not
dealing with a matter of this nature.

The fact that under the constitutional scheme taxation is regarded as
a distinct matter and is separately set out is not decisive for the purpose
of determining the validity thereof. There exist a large number of statues
and indeed the constitutional scheme permits imposition of tax to regulate
a particular trade.

The observation in Synthetics & Chemicals v. State of U.P. [(1991) SCC
109] that the tax may not be levied under a general entry although may be
correct but the same would not mean that a regulatory fee which is in the
nature of a tax cannot also be imposed. No hard and fast rule can,
therefore, be laid down and each case has to be considered on its own
merit.

Can it, therefore, be said that a regulating statute being a general
statute, no tax thereunder could be imposed. It. may not be necessary for
us to delve deep into the matter as to whether power of regulation and
control is separate and distinct from the power of taxation. Generally
speaking, it may be true that power to regulate would not carry with it the
power to impose tax but the same does not have an universal application.
The question which would arise for consideration is whether constitutional
scheme expressly permits such a legislation but the question which should
be posed is as to whether the constitutional scheme prohibits enactment of
such a statute. Such prohibition does not exist and in that view of the
matter, it is permissible for the Parliament to enact a statute both in
terms of a general entry as also a taxing entry. No decision has been
brought to our notice to suggest that the same is impermissible in our
constitutional scheme.

As regard Entry 97 of List I, this Court in Union of India v. Shri
Harbhajan Singh Dhillon  held:
    "47. The last sentence applied much more to the Constitution of a
    sovereign democratic republic. It is true that there are some
    limitations in Part III of the Constitution on the Legislatures in
    India but they are of a different character. They have nothing to
    do with legislative competence. If this is the true scope of
    residuary powers of Parliament, then we are unable to see why we
    should not, when dealing with a Central Act, enquire whether it is
    legislation in respect of any matter in List II for this is the
    only field regarding which there is a prohibition against
    Parliament. If a Central Act does not enter or invade these
    prohibited fields there is  no point in trying to decide as to
    under which entry or entries of List I or List III a Central Act,
    would rightly fit in."
            (See also Satpal & Co. (1979) 3 SCR 1031)

The Parliament can impose excise duty on coal in terms of Entry 86 of
List I. A regulatory fee which would also be in the nature of tax can also
be imposed under Entry 54 read with Entry 97. There is no limitation on the
power of the Parliament to make an Act under several entries, one of which
may be a tax entry.

This Court must also not forget that there exists a difference in
interpretation between an entry relating to fee and entry relating to tax.
Once it is held that the matters in the State List is to the extent of
declaration stand substracted from the scope and ambit of Entry 23 of the
State List, even no fee can be levied which will come in the way of Central
Government's power of regulation of mines.

Assuming royalty, deed rent and surface rent would not come within the
purview of definition of tax, this Court is merely required to consider as
to whether such a power exists in the Parliament or hot.

The validity of the Mines and Minerals (Regulations and Development)
Act is not in question. Section 25 of the 1957 Act in no uncertain terms
states that any rent, royalty, tax, fee or other impost under the said Act
or the rules made thereunder can be recovered as arrears of land revenue.

The very fact that the expression 'tax, fee or other sum due to the
Government' which could be imposed under the Act and the recovery thereof
is the subject matter of Section 25 of the Act, this Court, as noticed
hereinbefore, in a large number of decisions held that such a power to
impose tax exists under the Act. Question of recovery of tax would arise
only when it is imposed under the Act or the rules framed thereunder.

Section 25 of the M.M.R.D. Act, 1957 by necessary implication refers
to the taxing power of the Parliament. Imposition of taxes on minerals
rights would affect the development of mines and minerals. The Parliament's
authority to regulate and control mineral development would be seriously
impaired and affected if it is held that the matter relating to imposition
of tax on mineral is also vested in the State. The vires of Sections 9 and
9A of the 1957 Act has not been questioned. In fact, they have been held to
be intra-vires in State of M.P. v. Mahalaxmi Fabric Mills Ltd.  Saurashtra
Cement and Chemical Industries Ltd. v. Union of India [(2001) 1 SCC 91] and
South Eastern Coalfields Ltd. (supra). Unless power to levy compulsory
impost is held to be ultra vires the Constitution, it cannot be held that
the Parliament has encroached upon the States' power of taxation.

Furthermore, Entry 36 of List I of the Government of India Act, 1935
was the corresponding provision of Entry 54 of List I of the Constitution.
Similarly, Entries 23 and 44 were the corresponding provisions in the List
II in the Government of India Act containing identical provisions as in
Entries 23 and 50 of List II of the Constitution. Mines and Minerals
(Regulation and Development) Act, 1948 was enacted which was referable to
Entry 36 of List I of the 1935 Act. The said 1948 Act inter alia contains
provisions for levy of taxes. [See Section 6(2) of the 1948 Act]

The history of legislation as regard regulation of mine and
development of mineral is a pointer to the fact that Section 6(2) of the
1948 Act not only provided for prohibition of the mining, quarrying or
digging or the excavating or collecting of minerals from any mine or in any
area, but also provided for imposition of tax.

Nobody says that by reason of rule making power, a tax can be levied
under Section 13(2)(i) but what has been held by this Court is that the
field of imposition of tax, fee or any other sum has been conferred on the
Parliament under the Mines and Mineral (Regulation and Development) Act
itself by necessary implication or otherwise as otherwise there would not
have been any reason for the Parliament to say that such tax, fee or any
other sum due to the Government 'under this Act' meaning thereby '1957 Act'
or the rules framed thereunder would be recoverable.

It may also be true that by reason of rule making power as contained
in Section 13(2) and Section 15(1A) the Parliament has not delegated the
power to impose tax upon the Central Government or the State Government, as
the case may be. This might have been done considering the fact that the
Parliament would make use of it, as and when occasion arises therefore, the
Parliament by enacting Sections 25 both in the 1957 Act and the 1953 Act
reserved the authority unto itself to impose any other tax falling in List
I. The Parliament may also impose a tax which otherwise would not fall in
any one of the taxing entries but may fall under the residuary entry being
Entry 97. Only because in Section 13(2) or Section 15(1A) of the Act power
to impose tax has not been delegated, the same would not mean that the
field in relation thereto is not covered as the said expression
specifically finds place in Section 25 of the Act.

The expressions 'under this Act or the rules made thereunder' are
significant.

In Hingir Rampur Coal Co. Ltd. v. The State of Orissa and Ors. and
State of Orissa v. M.A. Tulloch, the interpretation of Section 25 under Act
No. 67 of 1957 Act did not fall for consideration.

Recovery of tax is an incident of imposition of tax. Tax has three
elements (i) taxing event; (ii) assessment; and (iii) recovery.

Recovery of a tax is a part of the taxing statute. The provision of
another Parliamentary Act cannot be resorted to for realisation of tax
imposed by the State or vice versa.

The power to impose tax, therefore, cannot be traced to Section 13
alone but must also be traced to Section 25. If that view is taken, it
would not be necessary to apply the principle of ejusdem generis for the
purpose of interpretation of Section 2((1) and 13(2)(i) of the Act, Those
taxes, fees and charges which would come in the way of regulation of mine
and mineral development should be held to have been forbidden. So read
Sections 13(2) and 25 can be given an appropriate meaning. It will,
therefore, not be correct to say that Section 25 can be construed to be
containing only a recovery provision. The question, it will bear repetition
to state, would be not that as to whether any tax, fee or any other charges
of whatever nature have been levied under the 1957 Act but the question
would be whether the field in respect thereof is covered or not. In that
view of the matter, the question of inference as regard the power to tax by
necessary implication or otherwise would not arise. For the aforementioned
purpose what would be required to be considered is to read Sections 13, 18
and 25 together harmoniously.

It may be true that in Section 25 the Parliament has not explicitly
stated as to tax would be due to whom; but that would not mean the
provision is vague. That would simply mean that whosoever would be entitled
to the impost can take recourse thereto. Under the 1957 Act, it is the
State Governments who are the beneficiaries but that is of not much
consequence.

M.A. Tulloch (supra) must be read in the aforementioned context and so
read the logical corollary would be that the field for levy of tax, fee or
other charges must be held to have been covered under the 1957 Act. Entry
97, List I of the Seventh Schedule of the Constitution of India
indisputably should be taken recourse to as a last resort but once it is
held that the Parliament has expressed its intention to cover the field of
taxation also under the 1957 Act, source of such power must be traced to
the appropriate entries in List I including Entry 97, whence if no other
source is traceable.

The matter may be considered from another angle. The States on their
own showing are entitled to levy, tax upon exercising the power which are
said to be in terms of Entries 49 and 50 of List II and in that view of the
matter Section 25 of the Act can be taken recourse to for the purpose of
recovery of tax imposed in terms of the statute enacted by the State. To
put it differently, the provisions of the Central Act which is said to be
meant for recovery of the tax, fee and other charges imposed in terms of
provisions thereof or the rules made thereunder cannot be resorted for
recovery of any tax made by the State in terms of its taxing power under
any of the entries contained in List II of the Seventh Schedule of the
constitution of India. Section 25 of the 1957 Act could have been taken
recourse to for the purpose of recovery of dues to the State provided the
State Act was Inter linked with the Parliamentary Act or the same was
otherwise permissible in terms of the constitutional scheme.

It is now a well settled principle of law that words in a statute
should be so construed so as not to be considered as surplages or
superfluous. Each would, as is well-known must be given its proper meaning.
If the aforementioned principle of interpretation of statute is applied, it
must be held that the Parliament made its intention clear so as to cover
the entire field including the field of taxation; as otherwise there is
absolutely no reason as to why consciously the words 'tax, fee or any other
charges' have been used in Section 25 of the Act.

The decision in Union of India v. Shri Harbhajan Singh Dhillon is also
relevant in this context. In the said decision this Court was concerned
with the provision of Section 24 of the Finance Act, 1969 whereby the
definition "net-wealth" in the Wealth Tax Act was amended including the
agricultural land in assets for the purpose of calculating tax on the
capital value of the net wealth. The High Court held the said provision as
unconstitutional.

The majority speaking, through Sikri, CJ, gave effect to Article 248
of the Constitution of India stating :
    "We must also mention that no material has been placed before us to
    show that it was ever in the mind of anybody, who had to deal with
    the making of the Constitution, that it was the intention to
    prohibit all the Legislatures in this country from legislating on a
    particular topic."

In the said decision, therefore, it was held that the Parliament in
certain situation has the legislative competence to impose tax touching
agricultural activities although 'agriculture' comes within the legislative
domain of the State legislature. Such a finding was arrived at having
regard to the fact that the Parliament was aware that specific provision
may not be found in the three Lists for the purpose of imposition of all
types of taxes and in that situation Entry 97 of List I could be taken
recourse to.

But the question as to why the Parliament did not confer any power to
tax the capital value of land as an asset either on the Central Government
or the State Government does not fall for our consideration in this case.
If an occasion arises, such a question has to be considered on its own
merits, but the fact remains that so far as mines and minerals are
concerned, levy of tax thereupon in any manner whatsoever is not within the
power of the State. The State cannot assume such power indirectly by
seeking to impose tax on land which it cannot do directly. So far as 'tea'
is concerned, power to impose excess duty on 'tea' is expressly conferred
on the Central Government in terms of Section 25 of the Tea Act.

The decision in Harbhajan Singh Dhillon (supra) was followed in Union
of India and Anr. v. Delhi High Court Bar Assn. and Ors..

The decision in His Holiness Kesavananda Bharati Sripadagalbvaru etc.
v. State of Kerala and Anr. cannot be read to mean that Entry 97 is non est
in the eye of law.

It will bear repetition to state that it is not a case where we are
concerned with the validity of the tax imposed by the Parliament but we are
only concerned with the interpretation of a statute in terms of the
constitutional scheme of distribution of legislative fields for the purpose
of ascertaining as to whether the entire field is covered by the parliament
Act or not.

Once it is held that the entire field of mines and minerals as also on
tea including the power to impose any tax as covered by the 1953 and 1957
Act, the impugned tax by way of levy of cess on coal and tea must be held
to be ultra vires.

The question as to, whether the power to impose tax must be express or
not is of no moment inasmuch it does not arise for our consideration. Levy
of excise duty on minerals is permissible in terms of Entry 86 of List I,
so is power to impose income tax on profits and gains from business of
mining. The question as to whether the power to tax must be express or not
could have been gone into; had the vires of taxing statute fallen for our
consideration and not otherwise.

The doctrine of enforcement of police power is not applicable in
India. Power to regulate the trade and for the said purpose imposition of
tax is well-known in India. Mines and Minerals (Regulation and Development)
Act is also a regulatory statute.

In the State of Punjab and Anr. v. Devans Modern Brewaries Ltd. and
Anr. [2003 (10) SCALE 202], majority of three Judges of a Constitution
Bench of this Court upheld the levy of import tax on liquor which
apparently was made by the State in terms of Entry 51, List II of the
Seventh Schedule of the Constitution of India as a valid piece of
legislation as if the same was enacted in exercise of the State's
regulatory power under Entry 8. In that case, taxing statute has been
upheld having been imposed by way of regulatory measure stating :
    "The High Court of Punjab proceeded to decide the case on a total
    wrong assumption that the import fee levied is in the nature of
    duty which cannot be imposed under the Excise Act, 1984 when, in
    fact, the import fee levied is the price for parting with the
    privilege given to the licensee to import beer into the State and,
    therefore, the same is within the competence of the State to impose
    import fee. I am of the view that the licensee besides the payment
    of duty etc. is to comply with such conditions as the State
    Government may impose while formulating the excise policy for the
    concerned year. The State, in my view, is competent and entitled to
    impose excise duty or countervailing duty. Besides there is no bar
    on the State to charge any other fees on account of consideration
    for the privilege provided to the licensee to trade in liquor which
    privilege he did not otherwise have. Therefore, the licensee is
    liable to comply with the other conditions imposed by the State
    Government from time to time. As held in many cases referred to
    supra the levy in dispute under challenge is an import levy..."

Imposition of tax by way of regulatory measures, therefore, is
permissible while enacting a regulatory statute.

Regulatory licence fee also has been held to be tax. The decision of a
Seven-Judge Bench of this Court in Synthetics and Chemicals Ltd. and Ors.
v. State of U.P. and Ors. is also an authority for the proposition that
such regulatory measures by imposing tax is permissible in law. It is also
for that purpose reference to Entry 97 of List I of the Seventh Schedule of
the Constitution of India assumes relevance.

In these matters, this Court is not concerned with an imposition of
tax as a result whereof the trade or commerce in the commodity in question
is affected. In this case, the court is concerned with interpretation of
statutes whereby the power of taxation on fixation of price thereof is
vested in the Central Government under the Parliamentary Act, viz. the 1957
Act and the Tea Act, 1953; and in that view of the matter the contention
that the State has a plenary power of taxation loses significance. Brother
Lahoti, J. has referred from Cooley on Constitutional Law and G.P. Singh's
Principles of Statutory Interpretation so as to emphasize the necessity of
strict interpretation of a taxing statute. Once a strict construction of a
taxing statute is applied it is possible to hold that the exercise of the
State's jurisdiction is really an act of fraud on the constitution inasmuch
while imposing tax on land it seeks to levy tax on mines and minerals or
tea in relation whereto it has even no regulatory power.

Furthermore, we have noticed hereinbefore that the cess imposed by the
State of West Bengal is not reasonable as the same will have a great
repercussion on the activities on coal bearing land.

It may not be proper for the Court to venture into an enquiry as to
whether the impugned tax would hamper mineral development or not but once
it is found that it tinkers with the subject, having regard to the
constitutional scheme the State would be denuded of its power. If despite
the same, a State chooses to exercise such power, its action will be
fraudulent and cannot be supported for any purpose whatsoever, even if
thereby a reasonable tax or fee has been levied.

With utmost respect, I may observe that this Court may be setting a
wrong precedent to ignore larger Bench decisions of this Court relying on
or on the basis of the comments made by an author, however, eminent he may
be, as judicial discipline mandates that we follow binding precedents. An
author is entitled to criticize a judgment but such criticism cannot be the
basis for ignoring binding decisions of larger benches.

The principles of reading a judgment is well-known. What is binding in
terms of Article 141 of the Constitution of India is the ratio of the
judgment. The ratio decidendi of a judgment is the reason assigned in
support of the conclusion. If the reasons contained in a judgment do not
appeal to a subsequent Bench, the matter may be referred to a larger Bench
but so long the same is not done, the ratio can neither be watered down nor
brushed aside. India Cement (supra), Orissa Cement (supra) and others
judgments of Coordinate Benches are binding on us. Correctness or otherwise
of the said judgments has not been questioned. It would, therefore, not be
proper for this Court to read something in the judgment which does not
appear therefrom or to exclude from our consideration reasonings on the
basis whereof, the conclusions of the judgment had been reached.

If imposition of a regulatory fee is permissible on mineral or tea
then the power therefore must be held to be in the Central Government
having regard to the 1957 Act and the 1953 Act. If the subject matter of
tax is land, the power is with the State Government unless its power is
denuded or otherwise limited. However, anything which entranches upon the
field of Regulation of Mines and Minerals Development or industrial
activities whether by reason of levy of any tax or impost, would
necessarily be forbidden.

ENTRY 49 LIST II - Interpretation of:
General

Entry 49 of List II confers legislative competence upon the State to
impose tax on 'Land' and 'Building'. Coal bearing land or mineral bearing
land for the purpose of Entry 49, however, may not be equated with the land
as ordinarily understood. Land in its ordinary meaning may be an
agricultural land or a non-agricultural land. It may also be a mineral
bearing land. Mineral bearing lands, however, are governed by the
provisions of the 1957 Act and the rules framed thereunder, so far as the
same is covered by the declaration contained in the statute. In terms of
the provisions of the said Act, cess, dead rent, as well as surface rent
are payable. Tea Industry is governed by 1953 Act.

The effect of the Union Legislation vis-a-vis the State Legislation on
the same subject recently came up for consideration before a Bench of this
Court. Despite holding that the State has the power to levy market fee,
this Court observed that 'seeds' which would otherwise come within the
purview of the definition of 'wheat' would not be subject to such levy
having regard to the provisions of Parliamentary Act known as the Seeds Act
1966. (See Krishi Utpadan Mandi Samiti and Ors. v. Pilibhit Pantnagar Beej
Ltd. and Anr. [2003 (10) SCALE 432] When, thus, the field is covered by
Parliamentary Legislations, an effort has to be made that a conflict with a
State Legislation is avoided.

ENTRY 49, LIST II VIS-A-VIS 1957 ACT:

In assessing the field covered by an Act of Parliament, one has to be
guided not merely by the actual provisions of the Act or the Rules made
thereunder, but should also take into account matters and aspects which can
be legitimately brought within the scope of the statute.

In this case, we are concerned with the Interpretation of two entries
in List I and List II of the Seventh Schedule of the Constitution of India.
The legislative competence in terms of Entry 49 List II is to be considered
in the light of Entry 54 List I. In a case of this nature, the court cannot
raise a presumption of constitutionality of the State Act as the ultimate
answer to the question will have to be ascertained as to which extent the
field is covered. If the tax on mines and minerals is a subject matter
which is covered under the 1957 Act, the power of the State must be held to
be denuded.

Entry 49 of List II, however, should be read in such a manner so that
the surface land must have a direct nexus with the sub-soil right which is
an inchoate right. Indisputably, sub-soil right would include mineral
right. Mining lease for winning of coal may be granted for huge area but
depending on the nature of mining activities to be carried on, necessarily
the mining lessee would not require the entire surf ape thereof except
where mineral is being extracted by adopting quarrying method.

A mineral can be extracted from beneath a town, village, national
highway, railway track etc., in any manner, without disturbing the surface
itself, subject of course upon carrying out the activities in such a
scientific manner so that proper and adequate support to the surface is
provided. Mineral right may extend to more than one town or village. Thus,
there can be separate owners for the surface and the underground. The right
of the owner of the surface would necessarily cast a statutory or a
contractual liability upon the mining lessee to provide the requisite
support to the surface so as not to cause subsidence thereof.

If a wide definition of coal bearing land is given so as to hold that
the State is entitled to levy tax on extracted mineral which is severed
from land, the same would lead to an incongruous result as thereby value of
part of the land itself would be a subject matter of measure of tax
although they do not remain 'land' as such. In any event, coal severed from
land cannot be said to be yield on coal bearing land so as to hold that the
value thereof can be determined only for the purpose of measure of tax vis-
a-vis the nature and character thereof.

A tax on land can be imposed so long a land exists. Where, however,
for the purpose of extraction of a mineral, the land was dug and the
restoration was sought to be made by imposition of a tax by reason of Bihar
Forest Restoration and Improvement of Degraded Forest Land Taxation Act,
1992, this Court in State of Bihar and Ors. v. Indian Aluminium Company and
Ors. distinguishing Goodricke Group Ltd. (supra) and following State of
Orissa v. Mahanadi Coalfields Ltd. [1995 Supp 2 SCC 636], Orissa Cement
(supra), India Cement (supra) and other cases observed:
    "14...While upholding the validity of the Act this Court held that
    Entry 49 of List II of the Seventh Schedule contemplates the levy
    of tax on lands and buildings or both as units. Tax on lands and
    buildings is directly imposed on lands and buildings and bears a
    definite relation to it...."
    15...Therefore, in order that a tax can be levied under Entry 49 of
    List II it is essential that 'land' as a unit must exist on which
    the tax is imposed..."
    16...Therefore, in pith and substance it is a tax on activity on
    land and not on land......itself.
                    (Emphasis supplied)

It was further held:
    "17. Mr. Sibal placed strong reliance on the decision in the case
    of Goodricke Group Ltd. v. State of W. B. [1995 Supp (1) SCC 707]
    in support of his contention that the levy was on land itself and
    that the Act would be covered by Entry 49. Goodricke case is
    clearly distinguishable. There education cess and rural employment
    cess were levied on certain lands and buildings in the State of
    West Bengal. The estates were carved out as a separate category and
    a different rate was prescribed therefore. The cess on tea estates
    was calculated on the basis of yield of tea whereas cess on other
    lands was determined having regard to the development value of the
    same. It was held that the tax was upon land though the cess was
    quantified on the basis of produce of the tea estate. In the
    present case, however, we do not find that the tax is on land. In
    fact what is sought to be taxed is in the absence of land.

It was opined:
    "18. One of the facets of tax being levied on land is that the
    primary responsibility of the payment of tax is on the owner of the
    land. In the instant case the levy is not on the general ownership
    of the land but is on the person who uses it and who may or may not
    be the owner. The primary liability is on the use by the occupier
    and if the occupier and the owner are two different persons the
    liability would be that of the occupier alone and not of the
    owner."

It was further held:
    "20. From the aforesaid discussion it is obvious that the present
    tax is one on the excavation and use of forest land and not on the
    forest land as such. Taxing of the undertaking of a non-forest
    activity in a forest land cannot be regarded as being covered by
    Entry 49 of the State List because what is sought to be taxed is
    not land but the tax is on absence of land or forest by reason of
    the activity of excavation and/or mining or use of forest land for
    a non-forest purpose. The High Court was, therefore, right) in
    allowing the writ petitions filed by the respondents."
                (Underlining is mine for emphasis)

It is, therefore, not correct to contend that while purporting to
impose tax on land and buildings a State has the legislative competence in
terms of Entry 49 of List II of the Constitution while in effect and
substance it will entrench upon Entry 52 or Entry 54 of List I thereof.

An impost on lands and buildings must be a tax directly imposed on
lands and buildings and must have a definite relation thereto. (See Sudhir
Chandra Nawn v. Wealth Tax Officer.

In Orissa Cement Ltd. v. State of Orissa and Ors. [1991 Suppl. 1 SCC
430] it is stated:
    "30. ....The former must be one directly imposed on land, levied on
    land as a unit and bearing a direct relationship to it...."

The tax on land must be a direct impost. Before making an endeavour to
deal with the validity of tax in question, certain general principles may
be noticed. Indisputably in all jurisdictions real estate which would
include land or building is subject to taxation unless the same is exempt
or by reason of any constitutional scheme or statutory provision no tax can
be imposed.

In Central Coalfields Ltd. v. the State of Bihar Cess on coal in terms
of Section 6 of the Bengal Cess Act, 1880 was to be measured on the basis
of pit mouth value of coal. The Division Bench noticed that the Cess Act by
reason of amendments carried out lay special emphasis on mines and quarries
including mineral development thereof irrespective of the fact as to
whether they are situate within the Municipal area or not, held:
    "59. Whenever a tax is based upon the mineral rights, the same
    would come within the purview of Entry 50 of List II. In India
    Cement, (supra), as indicated hereinbefore it has clearly been held
    by the Supreme Court that it is not permissible to read the
    Constitution in such a manner so as to make one Entry in any list
    redundant. The effect of the contention of the learned Advocate
    General that although a tax is imposed on the produce of mine, that
    is, in terms of Annexure 10 to C.W.J.C. No. 368 of 1990 r, 40% of
    its pit head value, the same would still retain the character of a
    tax on land in terms of Entry 49, List II, would render Entry 50
    thereof otiose and/or surplusage. This is against the decision of
    the Supreme Court in India Cement, (supra). Makers of the
    Constitution in their wisdom have classified the fields of the
    legislation and conferred power upon the State to impose tax on
    mineral rights but the same is subject to the limitation imposed by
    the Parliament by law relating to regulation of mine and
    development of mineral. Further the Supreme Court clearly held that
    for the purpose of upholding the validity of a tax on land or
    building it must be referable as a tax on the land as a unit and
    not on the basis of the minerals extracted from it."
                        [Emphasis supplied]

Although entries in the Lists are designed to define the area of
legislative competence of the Union and State Legislation, the matter has
to be considered having regard to the decisions rendered by this Court as
also other High Courts. [See Mahabir Prasad Jalan and Anr. v. The State of
Bihar and Ors. and State of Karnataka v. Vishwabarathi House Building Coop.
Society and Ors.

It has been held in Mahabir Prasad Jalan (supra) that the State is not
denuded of its power of acquisition. Therein only for that purpose Entry 14
and Entry 18 of List II was held to have not taken away the legislative
competence of the State. (See also Shri Krishna Gyanodya Sugar Ltd. v.
State of Bihar

The legislative competence of the State in relation to agricultural
land as also imposition of tax on land and buildings as contained in Entry
49 of List II must be considered having regard to Entry 52 or Entry 54 of
List I and Entry 33 of List III. The legislative competence of the State
having regard to Articles 246, 248 and 253 of the Constitution of India, it
is trite, would be subject to the legislative competence of the Parliament.

Whenever a tax on land is imposed, the levy must be on the land as a
unit. (See India Cement (supra) paras 22, 23)

The impugned levies, however, having regard to nature of impost cannot
be said to be a tax on land as:
(a) the impost is not directly on land,
(b) the levy does not concern itself with any aspects of land i.e. extent
of land, nature, character, quality or location thereof. In the case of
mineral, it is already embedded in the earth and there is no question of
any yield in the sense that there would be an annual yield or annual
income. In case of tea, it is also not concerned with the productive
qualities of the land and
(c) the levy is not based on the land as a unit.

It must be noticed that the definition of coal bearing land or the tea
estate and/or tea is the same in both the State Acts and the Central Acts.
The impugned levy is entirely dependent upon the production of mineral
extracted or production of tea leaves which vary from mine to mine or
garden to garden or location to location and from year to year.

In the case of coal, the levy varies with the production of mineral
without any bearing on the surface land as such. An underground mining
lease in respect of 100 acres can be granted with one acre of surface land.
When the tax on land is imposed, the question would be to what extent the
underground mining right can in the aforementioned context be subject
matter thereof. Tax on land can be imposed only in respect of one acre of
land. Can the value of coal extracted from 100 acres of land be charged
when, in effect and substance, only one acre of surface land is being used
and 99 acres of surface land remain untouched.

The aforementioned example is also a pointer to the fact that tax on
land is not being imposed as a unit. What would be the unit for the purpose
of imposition of tax in the aforementioned context? On one acre of surface
land or one acre of surface land together with additional 99 acres of
underground mining right? Such impost, therefore, having regard to its
nature and character, in our opinion, cannot be sustained in law.

If the contention of the State of West Bengal is accepted the same
would lead to an incongruous result.

Cess is imposed having regard to the valuation of coal bearing land
but then in a situation of this nature the question would be as to what
would be the unit of land for the purpose of computing the annual value of
land; that is one acre of surface land or 100 acres of underground mining
right. Furthermore, again the mode of valuation in respect of coal bearing
land, namely, one acre of land having the mineral right with surface right
intact and other 99 acres of land having mineral right only without any
right to use the surface should be different. Yet again a situation may
arise where the holder of a mining lease in relation to an underground
mineral right has purchased or taken on lease the surface land for carrying
out mining operations for having offices or place, stock of coal or siding
a railway or transport yard wherefrom coal is transported. The impugned
statutes having not provided for computing the annual value of land in such
different situations and, thus, the tax on land being not measurable as an
independent unit of the land must be held to be not workable. No known
method of valuation has been shown to us which provides that although with
the extraction of mineral the value of the land would be going down, the
value of the coal extracted therefrom can be the method adopted for subject
matter of calculating tax on the basis of the land's purported annual
value. Computation or annual value of land may be on the basis of actual
income derived therefrom or the propensity therefore. But when mineral is
being taken out from the mineral bearing land, the value thereof would be
diminished and a stage may come where the market value therefore would be
zero or in fact the same may require further investments for compliance of
the terms and conditions of instrument granting mining lease or the
requirement of statutes.

Even a land may contain different minerals in different layers, i.e.,
at the surface as well as in the bowel of the earth. There are lands
consisting of hills or hillocks where minerals like iron ore, manganese ore
or where other minor minerals like stone-chips can be found; Whereas the
surface may contain brick-earth or other minor minerals like sand etc.
Furthermore, the different minerals may be contained in different layers of
the underground; major minerals or minor minerals or both. It is also
permissible under the 1957 Act and the Rules framed thereunder to grant
different mining leases for different minerals adopting different
procedures for grant of mining leases having regard to the nature of the
mineral, namely, major mineral or a minor mineral.

The impugned levies are, thus, taxes on coal or other minerals raised
in the mining areas and not a tax on land as contemplated under Entry 49 of
List II. Irrespective of imposition of tax on the land as a unit, the
impugned levies have only one consideration, i.e., production of coal which
would, thus fall outside the purview of Entry 49 of List II.

In Krishna Mohan (P) Ltd. v. Municipal Corporation of Delhi and Ors.
the Court while considering the provisions of the Delhi Municipal
Corporation Act, 1957 noticed the definition of 'building and land'
contained therein which are as under:
"9. The expression "building" is defined in Section 2(3) as under:
"2(3) 'building' means a house, outhouse, stable, latrine, urinal, shed,
hut, wall (other than a boundary wall) or any other structure, whether of
masonry, bricks, wood, mud, metal or other material but does not include
any portable shelter;"
"Land" has been defined in Section 2(24) as follows:
"2(24) 'land' includes benefits to arise out of land, things attached to
the earth or permanently fastened to anything attached to the earth and
rights created by law over any street;"

Noticing that the expressions 'land' and 'buildings' had separately
been-defined and a distinction had been drawn by the Legislature, this
Court held that the State could not levy a property tax on machinery in the
guise of levy of tax on lands and buildings.

The tax under the impugned acts has not been imposed on land as a unit
but on coal. The tax, therefore, is not directly upon the land but upon a
part of land, which is mineral and, thus, out of the legislative competence
of the State.

Applying the test laid down in several decisions of this Court, we are
of the opinion that the impugned cess is not a tax directly levied upon
land as a unit by reason--of the general ownership of the lands and
buildings.
Mineral Bearing Land vis-a-vis General Rights over Land:

Land may consist of several rights. The surface of the land may be in
actual possession of an occupier who has no right or under-raiyat or raiyat
or a person having only a right to cultivate thereupon. However, holders of
such right ordinarily would not have any right over minerals. Even if a
mineral is found on the surface, they must collect the same and keep it at
the corner of the land so that the same may be taken away by the owner
thereof, which in a case of mining lease, would be mining lessee.

Mineral may be found in the mineral bearing land. Mineral bearing land
may, thus, contain mineral as the product of the nature. Mineral may,
however, also be deposited on the surface by reason of certain activities
as for example, 'coal slurry' which has been held to be 'mineral' may come
out of the coal washing plants and deposited in the rivers, nalas or the
agricultural fields. Slurry has been held to be a mineral and, thus,
governed by provisions of the MMRD Act. (See Bharat Coking Coal Ltd.
(supra)).

Bheemagari Bhaskar and Ors. v. Revenue Divisional Officer, Bhonair and
Ors. [2002 (1) ALT 159] is another instance where a question arose as
regard sand deposited on the land of the Pattadars and claimed by them in
terms of the provisions of Andhra Pradesh Estates (Abolition and Conversion
into Ryotwari) Act, 1948. Such a claim was rejected by the Andhra Pradesh
High Court referring to Jagadish Chandra v. Kanai Lal, Kusum Kamini v.
Jagdish Chandra [AIR 1941 Patna 13] and Purnendu Narain Singh v. Narendra
Nath [AIR 1943 Patna 31], holding sand being a minor mineral, the
agriculturists have no right thereover. It was further held that grant of
lease in respect of the said minor mineral can be granted by the State and
in terms of the 1957 Act and the rules framed thereunder.

Some rights are capable of granted by holders of same or higher rights
and some only by the State. Even the State, having regard to the doctrine
of 'public trust', may not have any power to grant any right in relation to
certain matters, e.g., deep underground water.

Deep underground water belongs to the State in the sense that doctrine
of public trust extends thereto. Holder of a land may have only a right of
user and cannot take any action or do any deeds as a result whereof the
right of others is affected. Even the right of user is confined to the
purpose for which the land is held by him and not for any other purpose.
Even in relation to such matters, no prescriptive right under Section 25 of
the Limitation Act would be attracted. Further, even by reason of Section
25 of the Limitation Act, a person must exercise an easementary right
without interruption for a period of 30 years in relation to air, way or
watercourse or the use of any water or any other easement by enjoying it
peaceably and openly as an easement and as of right. Then only such
exercise of right to air, way, watercourse, use of water or other easement
becomes absolute and indefeasible.

A person who holds land for agricultural purpose may, therefore,
subject to any reasonable restriction that may be made by the State may
have the right to use water for irrigational purposes and for the said
purpose he may also excavate a tank, But under no circumstances, he can be
permitted to restrict flow of water to the neighbouring lands or discharge
the effluents in such a manner so as to affect the right of his neighbour
to use water for his own purposes. On the same analogy he does not have any
right to contaminate the water to cause damages to the holders of the
neighbouring agricultural fields. Large scale defoulment in the quality of
water so as to make it unusable by others or as a result whereof the water
is contaminated and becomes unpotable would be violative of Article 21 of
the Constitution. In M.C. Mehta v. Kamal Nath, , this Court has quoted with
approval an article entitled 'Public Trust Doctrine in Natural Resource Law
: Effective Judicial Intervention' of Joseph L. Sax, Professor of Law,
University of Michigan.

The High Court of Kerala recently by a judgment dated 16th December,
2003 in Perumatty Gram Panchayat Perumatty Vandithavalam P.O., Chettur
Taluk represented by its President Sri A. Krishnan v. State of Kerala and
Ors. [W.P. (C) No. 34292/2003 (G)] restrained Hindustan Coca Coal Beverages
Limited from using ground water for running its plant at Plachimada in
Palakkad district stating that the ground water was a national wealth and
it belongs to the entire society. It was observed that water was nectar
sustaining life on earth and, thus, the State has a duty to protect ground
water against excessive exploitation and inaction on its part tantamounts
to infringement of the fundamental rights guaranteed under Article 21 of
the Constitution.

The purpose of discussions aforementioned is that while imposing a tax
on land and in particular mineral bearing laid the Legislature must
exercise its power consciously. It must be borne in mind that power to
impose tax should not be exercised in a casual or caveliar manner. The
members of the legislature must be informed as regard the exact subject
matter of tax. It, while imposing a tax on the subject (A) cannot
indirectly levy an impost on subjects (B) and (C) and while the validity
thereof is challenged, the State cannot be heard to say that subject (B) or
subject (C) also come within the legislative power having regard to other
entries of List II of the Seventh Schedule of the Constitution of India.
Entry 50 authorises the State to tax mineral rights which has no co-
relation with the power to tax land. If both the entries are resorted
simultaneously, the statutes bear out the same. From the impugned acts, it
cannot be informed that the State intended to Ivy tax both on land and
mineral right. The entire gamut of argument, having regard to India Cement,
(supra) and Orissa Cement (supra) was confined to Entry 49 but Entry 50 of
List I has been taken recourse to in a half-hearted manner.

If a mining operation is carried out through digging incline or pits,
the area of the underground may be more than the surface. In that view of
the matter, a tax on land cannot be levied having regard to different
rights over the same surface unless it is so done on a unit. Only because
etymologically the land may mean from the surface to the center of the
earth, the holder of an agricultural right or non-agricultural right may
not have any right over the subterranean right. Such subterranean right may
be used only for the purpose public interest granted to the holder of land
under the relevant statute governing the field. The holder of a limited
tenancy right, thus, cannot construct a dam or take out all water or
mineral underneath.
1957 ACT VIS-A-VIS ENTRY 50 OF LIST II

The contour of the 1957 Act would clearly show that the Union had
taken over the entire control of mining industry.

The 1957 Act is a comprehensive Act. It is a self-contained Code.
Grant of mineral rights, undoubtedly, would come within the purview of
regulation of mine and mineral development in terms of the 1957 Act. The
entire field of legislation is covered by Parliamentary Act of 1957. When a
mining lease is granted, consideration for parting with the mineral right
would be a part of the terms and conditions thereof. The right to receive
royalty is also a mineral right. State indisputably receives royalty as a
consideration for grant of mining lease in terms of the 1957 Act.

Brother Lahoti referring to Black's Law Dictionary, 7th Edition also
noticed that a mineral right vests in the owner of the land and is capable
of being parted with. As discussed hereinbefore, such a right has vested in
the States exclusively and furthermore as grant of such right is governed
by the provisions of Parliamentary Acts, the same cannot be subject matter
of levy of tax imposed by a law made in terms of Entry 50 of List I.

The terms and conditions including the right to receive royalty, the
mode, manner and extent thereof; the limitations in relation thereto as
well as enhancement in the quantum thereof are fixed by the statutory
provisions, and, thus, the State would be denuded of its power to impose
any further levy, impost or tax thereupon. Entry 50 of List II is unique in
the sense that it is the only Entry in all the Entries in the three Lists
(List I, II and III) (apart from Entry 37) in the Seventh Schedule where
the taxing power of State Legislature has been subjected to "any limitation
imposed by Parliament by law relating to mineral development". Therefore
the moment Parliament makes any law relating to mineral development, the
State Legislatures are denuded of their legislative competence to impose
any tax or levy on minerals and/or minerals and/or mineral rights. Entry 50
of List II of the Seventh Schedule of the Constitution of India is subject
to law enacted by Parliament in terms of Entry 54 List I of the
Constitution of India, and, thus we have no doubt in our mind that a power
to levy of tax on mineral right or on despatch of mineral does not exist in
the State.

In Black's Law dictionary "mineral right" has been defined as "an
interest in minerals in land. A right to takes minerals or a right to
receive a royalty." Right to receive royalty is, thus, also a mineral
right.

In the same dictionary, "mineral" has been defined as "any valuable
inert or lifeless substance formed or deposited in its present position
through natural agencies alone, and which is found either in or upon the
soil of the earth or in the rocks beneath the soil".

The power to tax on mineral rights, therefore, would essentially be
different from a right to tax on mineral actually extracted.

Wanchoo, J. in Hingir Rampur Coal Co. Ltd. v. The State of Orissa and
Ors. observed:
    "Thus tax on mineral rights would be confined, for example, to
    taxes on leases of mineral rights and on premium or royalty for
    that. Taxes on such premium and royalty would be taxes on mineral
    rights while taxes on the minerals actually extracted would be
    duties of excise."

The learned Judge further observed:
    "There would be no difficulty where an owner himself works the mine
    to value the mineral rights on the same principles on which leases
    of mineral rights are made and then to tax the royalty which, for
    example, the owner might have got if instead of working the mine
    himself he had leased it out to somebody else. There can be no
    doubt therefore that taxes on mineral rights are taxes of this
    nature and not taxes on minerals actually produced."

If the intention of the Constitution maker was to confer an absolute
power upon the State Legislature to levy tax whether on mineral rights or
minerals, the same could have been worded differently. There was absolutely
no necessity to restrict the power to levy tax on mineral rights in State
and not to levy tax on minerals whether extracted or otherwise. Mineral
rights, therefore, cannot be construed as a mineral already extracted as
contradistinguished from being capable of extraction or otherwise in a
state or form when embedded in the earth. The State Legislature, therefore,
has no legislative competence to impose tax on minerals. In the present
context, in view of the 1957 Act, it has also no legislative competence to
levy tax on mineral rights which will have a direct impact on mineral
development.

In Hingir Rampur (supra), as noticed hereinbefore, the 1948 Act was
held to have occupied the entire field of regulation of mine and mineral
development. The 1957 Act having regard to Entry 54 of List I contains
substantially similar provisions. Even in State of Orissa v. M.A. Tulloch,
the 1957 Act was held to have occupied the entire field of mines and
mineral development. This Court rejected the contention that the 1957 Act
does not contain any provision for levy of tax having regard to Section 25
of the 1957 Act and held that the said provision, by implication, provided
for levy of tax. In India Cement (supra) also this Court held :
"30. It seems, therefore, that attention of the court was not invited to
the provisions of Mines and Minerals (Development and Regulation) 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
Section 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 legislative power
in view of Section 9(3) of the Central Act. In Hingir-Rampur Coal Co. Ltd.
v. State of Orissa, Wanchoo, J. in his dissenting judgment has stated that
a tax on mineral rights being different from a duty of excise pertains only
to a tax that is leviable for the grant of the right to extract minerals,
and is not a tax on minerals as well. On that basis, a tax oh royalty would
not be a tax on mineral rights and would therefore in any event be outside
the competence of the State legislature."

In Mahalaxmi Fabric Mills Ltd. (supra), the power of the Central.
Government to enhance new rates of royalty on various grades of coal was in
question.

The arguments as regard lack of legislative competence was repelled
referring to India Cement in the following words:
"11. In our considered opinion there is no substance in either of the twin
contentions for challenging vires, of Section 9(3). So far as competence to
enact Section 9 is concerned, the question is no longer res integra..."

In India Cement (supra), a 7-Judge Bench of this Court held that the
1957 Act and the declaration contained therein being a legislation
controlled by Entry 54 of List I the whole field is occupied and Entry 50
of List II is totally excluded.

In India Cement (supra), thus, this Court has held that no tax can be
imposed by the State which would have a direct impact on the quantum of
royalty.

Further, in Laxminarayan Mining Co. v. Taluk Dev Board [AIR 1972 MYS
299] which has been approved in India Cement, the Mysore High Court
observed that a combined reading of Entries 23 & 50 in List II and Entry 54
in List I establishes that as long as the Parliament does not make any law
in exercise of its power under Entry 54, the powers of the State
Legislature in Entries 23 and 50 would be exercisable by the State
Legislature. But once the Parliament makes a declaration by law that it is
expedient in the public interest to make regulation of mines and minerals
development under the control of the Union, to the extent to which such
regulation and development is undertaken by law made by the Parliament, the
field of the State Legislature is undertaken by law made by the Parliament,
the field of the State Legislature under Entries 23 and 50 of List II are
denuded. On this reasoning, in the Mysore High Court Judgment, a
Legislation by the State conferring power on the Taluk Board as per
impugned notification levy tax on mining activities was held to be
unauthorized.

It would not be correct to contend that this decision cannot be read
so widely. The power to tax in terms of Entry 50 is subject to a
Parliamentary Act. If a Parliamentary Act operates in the field the fight
of the State to levy tax or fee is completely taken out from their
legislative competence. The 1957 Act deals with mineral rights and
admittedly has occupied the entire field relating to regulation of mine and
mineral development. Any tax on mineral rights which would be counter
productive to mineral development is constitutionally impermissible.

Once it is held that the entire field of legislation is occupied by
the Parliament in view of the 1957 Act and the declarations contained
therein evidently Entry 50 of List II would not be attracted. This has been
held uniformly by this Court and some High Courts in a series of decisions.

The matter may be considered from another angle. Under the Coking Coal
Mines (Nationalisation) Act, 1972 and Coal Mines (Nationalisation) Act,
1973, as noticed hereinbefore, all coking coal mines mentioned in the
schedule appended to the 1972 Act and all coal mines vested in the Central
Government. In terms of Section 7 of the 1972 Act and Section 9 of the 1973
Act, the Central Government was empowered to transfer the said coking coal
mines and coal mines to any Government company, as may be notified.
Pursuant to or in furtherance of the said enabling provision, the Central
Government created various public sector undertakings and transferred the
Coking Coal Mines and the Coal Mines as the case may be, to one government
company or the other, as a result whereof all the public sector
undertakings have become mining lessees in relation thereto as if they had
been granted a mining lease in terms of the provisions of the Mines and
Minerals (Regulation and Development) Act and the rules framed thereunder
for the remainder of the term. All coking coal mines and coal mines except
a very few, thus, have become subject matter of statutory mining leases by
reason of a legal fiction created under the 1972 and 1973 Acts. In that
view of the matter too, Entry 50 of List II of the Seventh Schedule of the
Constitution of India may not have any application to such coking coal
mines and coal mines, as they have been taken over and are being run by the
Government companies in terms of the provisions of the Parliamentary Acts.

The expression 'any limitations' in Entry 50 of List II should not be
given a restricted meaning as contended by the appellant. In fact, the rule
of interpretation that the language of the entries should be given widest
scope, should equally apply to the interpretation of the said words. So
read, the limitations on 'taxes on mineral rights' could be in any form,
including occupying the entire field of. legislation under Entry 50 of List
II by a Parliamentary legislation and providing for levy of taxes. The MMRD
Act, 1957 precisely achieves the said objectives by occupying the entire
field of legislation covered by both Entries 23 and 50 of List II. (See
India Cement (supra))

In Orissa Cement (supra), this Court explained the scope of the MMRD
Act, 1957 thus:
    "...Section 25 implicitly authorizes the levy of rent, royalty,
    taxes and fees under the Act and the Rules. The scope of the powers
    thus conferred is very wide. Read as a whole the purpose of the
    Union control envisaged by Entry 54 and the MMRD Act, 1957 is to
    provide for proper development of mines and mineral areas and also
    to bring about a uniformity all over the country in regard to the
    minerals specified in Schedule I in the matter of royalties and
    consequently prices."

This objective would be totally defeated by the impugned levy of cess
on coal that has resulted in coal produced in the State of West Bengal
totally unremunerative and incompetitive the price of coal so produced
being much higher than the price of coal produced in the adjoining States
of Bihar, U.P., Orissa, M.P. and Maharashtra as shown in the comparative
chart given below:

       WEST BENGAL

Category/ Grade    Specification    Size    Base-price per Te.    Royalty per
MT.    Stoving Excise duty perMT    RE Cess (35% on task)    RE Cess (5%
on basic)    P. W. Road Cess per M.T.    AMBII Cess per Mt.
TOT. Stad Levies (Excl. St)    (A) Price Exel. CST.    (B) CST/MT @4% on A
(C) Price incl. CST (A+B)

Long A    6200    STEAM    645.00    6.50    3.50    225.75    32.25    1.00
1.00    270.00    915.00    36.60    951.60
Flame    Kilo    SLACK    638.00    6.50    3.50    223.30    31.90    1.00
1.00    267.20    905.20    36.21    941.41
Non    Calories;    ROM    635.00    6.50    3.50    222.25    31.75
1.00    1.00    266.00    901.00    36.04    937.04
Cooking    KG.-UHV
B    5600,    STEAM    392.00    6.50    3.50    207.20    29.60    1.00
1.00    248.80    840.80    33.63    874.43
    6200 Kilo    SLACK    585.00    6.50    3.50    204.75    29.52
    1.00    1.00    246.00    831.00    33.24    864.24
    Calories/ Kg.    ROM    582.00    6.50    3.50    203.70    29.10
    1.00    1.00    244.30    326.00    33.07    859.87
C    4940,    STEAM    522.00    5.50    3.50    182.70    26.10    1.00
1.00    219.80    741 .80    29.67    771.47
    5600 Kilo    SLACK    515.00    5.50    3.50    180.25    25.75
    1.00    1.00    217.00    712.00    29.28    761.28
    Calories/Kg    ROM    512.00    5.50    3.50    179.20    25.60
    1.00    1.00    215.80    727.80    29.11    756.91

  M.P. BIHAR U.P. ORISSA AND MAHARASHTRA

Category/ Grade    Specification    Size    Base Price per Te.    Royally Per
MT    Stoving Excise Duty- per MT.    (A) Price Excl. CST.    (B) CST/MT
@4% on A    (C) Price incl. CST (A+B)

Long A    6200    STEAM    645.00    120.00    3.50    768.50    30.74    799.24
Flame    Kilo    SLACK    638.00    120.00    3.50    761.50    30.46    791.96
Non    Calories/    ROM    635.00    120.00    3.50    758.50    30.34
788.84
Cooking    Kg.-UHV
B    5600,    STEAM    592.00    120.0    3.50    715.30    28.62    744.12
    6200 Kilo    SLACK    585.00    120.00    3.50    708.50    28.34
    736.84
    Calories/ Kg.    ROM    582.00    120.00    3.50    705.50    28.22
    733.72
C    4940,    STEAM    522.00    75.00    3.50    600.50    24.02    624.52
    5600 Kilo    STACK    515.00    75.00    3.50    593.50    23.74
    617.11
    Calories/Kg.    ROM    512.00    73.00    3.30    590.30    23.62
    614.12


The difference in the ultimate price of coal in the State of West
Bengal and other States would, thus, be around 25% of the base price. The
submission of Mr. Dwivedi to the effect that the cess imposed is not
excessive, therefore, does not appear to be correct. From the
aforementioned chart, it is evident that no substantial difference can be
culled out so far as the price of coal on despatch vis-a-vis at the pit
head is concerned, inasmuch by reason of the amendments made in the
impugned Acts only the amount of royalty and other taxes were be deducted,
which would only be a sum of Rs. 10/- whereas in lieu thereof sums of Rs.
225.75, Rs. 32.25, Re. 1 and further sum of Re.1 would be levied on the
base value of coal by way of rural employment cess, education cess, road
cess and other cesses amounting to Rs. 270/- per M.T. The Parliament, on
the other hand, haying regard to the decision in India Cement (supra)
thought it expedient to increase the rate of royalty from Rs. 6.50 to Rs.
120/- per M.T. The effect of imposition of cess on coal by the State of
West Bengal would bring about a radical change in the price of coal in the
State of West Bengal vis-a-vis the other States, the effect whereof may
lead to crippling of several industries situate in the State of West Bengal
or the industries depending upon supply of coal produced therein. It is
necessary to consider the effect of the imposts on the price of coal in the
context of the legislative competence of the State vis-a-vis the Parliament
having regard to the fact that the Parliament in terms of enactments made
both under List I and List III is entitled to fix the ultimate price of
coal.

We do not intend to lay down any proposition of law that the effect of
impost on the price of a commodity which is the subject-matter of
legislation will be determinative of the nature and character of the impost
but what we intend to say is that the same would be a relevant
consideration not only for the purpose of finding out as to whether the
same is excessive but also for determining the dispute as to whether the
impost would fall within the purview of one or the other entries contained
in List I or List II of the Seventh Schedule of the Constitution of India.

It is not correct to contend, as has been done by Mr. Dwivedi that
taxing entries and general entries form two separate categories and the
power to tax cannot be claimed as power ancillary to general power.

It is not in dispute that grant of mining lease by the State is
governed by the provisions of the 1957 Act. It is also not in dispute that
payment of royalty and interest thereupon is also governed by some
principles which have bearings on the price of coal.

Mahalaxmi Fabric Mills Ltd. (supra) has recently been noticed in South
Eastern Coalfields Ltd. (supra) wherein Lahoti, J. speaking for the
Division Bench observed :
    "Here it is clear from the several provisions of the Act and the
    rules quoted hereinabove, no mining operation is permissible except
    in accordance with the terms and conditions of a mining lease and
    the rules made under the Act. The rules clearly provide for payment
    of interest."

Having regard to the provisions contained in Sections 2 and 18 of the
Mines and Minerals (Regulation and Development) Act, 1957 the Parliament
has taken over the entire control of regulation of mines and mineral
development. Once such a right of extracting mineral is conferred, even if,
the mineral comes out of the mine, say while washing coal in a coal washery
or manufacturing coke in a Coke Plant ('coal washery' and 'coke washing
plant' are mines under several Parliamentary Acts as also orders and rules
governing the field) the State would have no right to deal with the same.

"Mining lease" as defined in Section 3(c) of the Act means "a lease
granted for the purpose of undertaking mining operations, and includes a
sub-lease granted for such purpose." "Mining Operations" as defined in
Section 3(d) means "any operations undertaken for the purpose of winning
any mineral" Section 5(1) imposes restriction on the grant of mining leases
by a State Government. The essence of mining operation is that it must be
an activity connected with mineral whether under the surface or on the
earth.

Once the right of winning mineral is conferred in terms of the 1957
Act, the State would be denuded of any power to impose any tax in respect
thereof in any form and at any place, even if the mineral is found outside
the mineral bearing lands. [See Bharat Coking Coal Ltd. v. State of Bihar
and Ors. (1990) 4 SCC 557.]

Under the three impugned Acts, as would be discussed in details
hereinafter, taxes have been levied on minerals and not on mineral rights
and, thus, the State Legislations cannot be supported in terms of Entry 50
of List II.

The levy even otherwise cannot be said to be referable to Entry 50
since:
(a) It is a levy only on minerals extracted or produced from the coal
mines;
(b) It is on quantity of minerals produced from the mining lease;

The charging section is directly referable to production of coal. The
claim, thus, would amount to a colourable exercise of Power.
(See K.C.G. Naravan Deo v. State of Orissa 1954 SCR 1 and Central
Coalfields Ltd. and Ors. v. the State of Bihar and Ors.

'Mineral rights' and 'mineral' connote two different things. A mineral
may be embedded in earth or is extracted. When it is extracted, it may be a
culmination of the right to deal in mineral but the mineral rights would
not include a right to despatch extracted minerals.

In India Cement (supra), it is stated that:
    "In any event, royalty is directly relatable only to the minerals
    extracted on the principle that the general provision is excluded
    by the special one, royalty would be relatable to Entries 23 and 50
    of List II, and not Entry 49 of List II. But as the field is
    covered by Central power under Entry 23 or Entry 50 of List II, the
    impugned legislation cannot be upheld"

In Ajit Singh v. Union of India Ors. [(1995) Supp. (4) SCC 224], the
question which arose was as to whether upon revocation of a mining lease,
the area becomes available for regrant and, therefore, whether it is
permissible to issue an administrative order fixing a date therefore. It
was held that such an administrative order would not be inconsistent with
the Rajasthan Minor Mineral Concessions Rules, 1977.

In Inderjeet Singh Sial and Anr. v. Karam Chand Thapar and Ors., this
Court was interpreting a deed of assignment. While noticing that royalty
refers to 'jura regalia' or 'jura regia' i.e. royal rights and prerogatives
of a sovereign in the primary sense, but it was held to signify, as in
mining leases, that part of the reddendum, variable though, payable in cash
or kind, for rights and privileges obtained. However, having regard to the
tenor of the covenants contained in the deed of assignment, it was held :
    "...The word 'royalty' thus, in the deed was used in a loose sense
    so as to convey liability to make periodic payments to the assignor
    for the period during which the lease would subsist; payments
    dependent on the coal gotten and extracted in quantities or on
    despatch. We have therefore to construe document x. D-5 on its own
    terms and not barely on the label or description given to the
    stipulated payments. Conceivably this arrangement could well have
    been given a shape by using another word. The word 'royalty' was
    perhaps more handy for the authors to be employed for an
    arrangement like this, so as to ensure periodic payments. In no
    event could the parties be put to blame for using the word
    'royalty' as if arrogating to themselves the royal or sovereign
    right of the State and then make redundant the rights and
    obligations created by the deed."

In Quarry Owners' Association v. State of Bihar [(2000) 8 SCC 655],
the royalty is the tax while agreeing thereto, it was observed :
    "In considering this submission we have to keep in mind, tax on
    this royalty is distinct from other forms of taxes. This is not
    like a tax on income, wealth, sale or production of goods (excise)
    etc. This royalty includes the price for the consideration of
    parting with the right and privilege of the owner, namely, the
    State Government who owns the mineral. In other words, the
    royalty/dead rent, which a lessee or licensee pays, includes the
    price of minerals which are the property of the State. Both royalty
    and dead rent are integral parts of a lease. Thus, it does not
    constitute usual tax as commonly understood but includes return for
    the consideration for parting with its property. In view of this
    special nature of the subject under consideration, namely, the
    minerals, it would be too harsh to insist for a strict
    interpretation with reference to minerals while considering the
    guidelines to a delegatee who is also the owner of its minerals. In
    the present case, we are not considering any liability of tax on
    the assessee but whether delegation to the State by Parliament with
    reference to minor minerals is unbridled."

As by reason of a Parliamentary legislation in terms of Entry 54 of
List I, (1957 Act) a provision has been made in terms whereof the State is
compensated for parting with this mineral rights; by necessary implication,
it must be held that the powers to levy tax on such rights would also stand
denuded.

If a statutory impost would come within the purview of the definition
of tax as contained in Clause 28 of Article 366 of the Constitution of
India, Entry 54 read with Entry 37 of List I by necessary indication must
be held to include the power of taxation also. So viewed, it cannot be said
that Entry 54 is a general entry which does not deal with tax in that sense
and particularly having regard to the fact that there does not exist any
provision that the State can levy tax on extracted minerals, Parliament
must, thus, also be held to have power to impose tax on extracted mineral,
de'hors the right to impose tax on mineral right, in terms of Entry 97 of
List I.

In Union and State Relations under the Indian Constitution by M.C.
Setalvad at page 54, the learned author states:
"The exercise of this power has not only helped the Union to legislate for
its own purposes, but enabled it to come to the rescue of the States. We
may point to the Gifts Tax Act, 1958, the tax on building contracts even
though no sale is involved in them; a collection of annuity deposits under
the Income-tax Act, 1961, Chapter XXII-A inserted by Section 44 of the
Finance Act, NO. 5 of 1384; the Himachal Pradesh Legislative Assembly
(Constitution and Proceedings) Validation Act, 1958, removing the
disability of members of a Legislative Assembly of a Part C State, which
have all been enacted by the Union in the exercise of its residuary power."

Taking any view of the matter, it cannot be said that impugned "cess"
under the State Acts is referable to Entry 50 of List II.

In Quarry Owners' Association v. State of Bihar [(2000) 8 SCC 655],
imposition of royalty on mines and minerals by the State of Bihar in
exercise of its power conferred upon it under Section 15 of the 1957 Act
was in question; while considering as to whether the State has exceeded its
delegated power in levying excess royalty. Interpreting the expression
'regulation of mines and minerals development' occurring in Entry 54 List I
and Entry 23 List II of the Seventh Schedule of the Constitution of India,
it was observed :
"...The word "regulation" may have a different meaning in a different
context but considering it in relation to the economic and social
activities including the development and excavation of mines, ecological
and environmental factors including States' contribution in developing,
manning and controlling such activities, including parting with its wealth,
viz., the minerals, the Fixation of the rate of royalties would also be
Included within its meaning..."

Referring to the decision of this Court in State of Tamil Nadu v. Hind
Stone that such regulation may amount to prohibition it was observed that
in regulating mineral development, the royalty/dead rent is the inherent
part of it. It was observed that provision of Section 18 of the 1957 Act is
not excluded from its' application to the mines and minerals development.
Therein this Court in no uncertain terms observed:
"It is also significant to record that minor minerals are used in the local
areas for local purposes while major minerals are used for the industrial
development for the national purpose...'

The entry has been copied in verbatim from Entry 44 of List II of the
Seventh Schedule of the Government of India Act, 1935. Such an entry was
evidently necessary when mineral rights remained vested in private persons
by reason of any grant or otherwise. Even now in certain situations, a
mineral right may be vested in an individual.

The taxing power of the State in terms of Entry 50, List II of the
Seventh Schedule of the Constitution of India must also be viewed from the
context that all the mineral rights as also the right to receive royalty by
reason of the West Bengal Estates Acquisition Act, 1953 and U.P. Zamindary
Abolition Act vested in the State. Section 5(1)(a)(i) of the West Bengal
Estates Acquisition Act reads thus:
"5.(1) Effect of notification - Upon the due publication of a notification
under Section 4, on and from the date of vesting -
(a) the estates and the rights of intermediaries in the estates, to which
the declaration applies, shall vest in the State free from all
incumbrances; in particular and without prejudice to the generality of the
provisions of this clause, every one of the following rights which may be
owned by an intermediary shall vest in the State, namely:-
(i) rights in sub-soil, including rights in mines and minerals,...."

The State is, thus, the owner of the mineral right. It is, thus, only
for the State which can grant mining lease. Its right to impose tax is
exhausted as soon as a mineral right is conferred. In certain circumstances
the State may impose tax if and when a mining lessee grant a sub-lease but
the same also would be subject to control in terms of 1957 Act and Rule 37
of the Mineral Concession Rules, 1960. Thus, a transfer of mineral right
includes a regulation or prohibition on creation of a subordinate interest
in relation thereto. Regulation of transfer of such mineral right is also
therefore governed by Parliamentary legislation. The State thus can not
impose a tax on its own right.

Indisputably, requisite declaration in terms of Entry 54 has been made
in Section 2 of the 1957 Act.

Any legislation by the State after such declaration entrenching upon
the field disclosed in the declaration must necessarily be held
unconstitutional because that field is abstracted from the legislative
competence of the State Legislature. (See Baijnath Kedia etc. v. The State
of Bihar and Ors.

The word 'control' has been defined in Black's Law Dictionary in the
following terms:
"Control-power or authority to manage, direct, superintend, restrict,
regulate, govern, administer, oversee."

In Bank of New South Wales v. Common Wealth, [76 CLR 1], Dixon, J.,
observed that the word 'control' is 'an unfortunate word of such wide and
ambiguous import that it has been taken to mean something weaker than
'restraint', something equivalent to 'regulation'. Having regard to the
purport and object of the 1957 Act, the said expression must be held to be
of wide import.

Entry 50 of the Seventh Schedule of the Constitution of India provides
for tax on mineral rights. The question which arises for consideration in
these cases is as to whether the power to tax on 'mineral rights' and power
to tax 'mineral' is synonymous? It is not.

Entry 50 of List II of the Seventh Schedule of the Constitution of
India is as under:
"50. Taxes on mineral rights subject to any limitations imposed by
Parliament by law relating to mineral development."

Taxes on mineral rights must be different from taxes on minerals which
are goods produced. A tax on mineral would be in the nature of excise duty.
Thus, there exists a difference between taxes on mineral rights and duties
of excise imposable in terms of Entry 84 of List I.

WHETHER ROYALTY IS A TAX ?:

Such a question may not strictly arise for consideration in this case
as royalty is a statutory impost. Royalty stricto sensu and in common
parlance may not be a tax.

Whether royalty is a tax or not is required to be deliberated upon
only for a limited purpose, namely, as to whether Section 25 of the 1957
Act covers the field of taxation and not for any other purpose. We shall
advert to this aspect of the matter at some details a little later.

But having regard to the definition of taxation contained in Clause 28
of Article 366 of the Constitution of India, there may not be any dispute
that royalty being a statutory impost would come within the purview
thereof.

Criticisms had been made as regard finding in India Cement (supra)
that royalty is not a tax which in the fact situation obtaining therein to
the effect that except for 5% of the land, royalty was to be paid to a
private owner and, thus, the impost was not a statutory one may be correct.

A royalty may not be a tax in its usual sense as has been held in
Quarry Owners' Association v. State of Bihar and Ors. [(2000) 8 SCC 655]
but the question as to whether it will come within the purview of Clause 28
of Article 366 of the Constitution of India or not has not been considered
in any of the judgments.

The Second Schedule appended to the 1957 Act states that the royalty
would be payable at the rates specified on each tonne of coal. It is,
therefore, a levy on the extraction or produce by weight. When the cess is
levied on the royalty, the levy, which remains on extraction by weight, is
enhanced or incremented. It is, thus, an incremental addition to the
royalty. Its nature and character is the same as that of royalty. The value
of the coal or for that matter of green tea has a direct nexus with the
weight thereof. Thus, there may not be any significant distinction in
principle between the levy in India Cement's case and levy in the present
one.

The rate of royalty etc. under the 1957 Act is fixed by the statute
and not by agreement between the parties. Rate of royalty may be revised
subject to the limitation contained in Sub-section (3) of Section 9 of the
1957 Act in respect whereof the lessees have no say in the matter. Even the
principles of natural justice are not required to be complied with. The
lessee even cannot surrender the leasehold. The amount of 'Royalty'
received by the State is expended as general revenue.

In D.K. Trivedi & Sons and Ors. v. State of Gujarat and Ors., [1986
(Supp.) SCC 20], it is stated:
"39. In a mining lease the consideration usually moving from the lessee to
the lessor is the rent for the area leased (often called surface rent),
dead rent and royalty. Since the mining lease confers upon the lessee the
right not merely to enjoy the property as under an ordinary lease but also
to extract minerals from the land and to appropriate them for his own use
or benefit, in addition' to the usual rent for the area demised, the lessee
is required to pay a certain amount in respect of the minerals extracted
proportionate to the quantity so extracted. Such payment is called
"royalty". It may, however, be that the mine is not worked properly so as
not to yield enough return to the lessor in the shape of royalty. In order
to ensure for the lessor a regular income, whether the mine is worked or
not, a fixed amount is provided to be paid to him by the lessee. This is
called "dead rent." "Dead rent" is calculated on the basis of the area
leased while royalty is calculated on the quantity of minerals extracted or
removed. Thus, while dead rent is a fixed return to the lessor, royalty is
a return which varies with the quantity of minerals extracted or removed. "

But the power to fix surface rent, dead rent or royalty is conferred
in terms of the 1957 Act or the rules framed thereunder and not on the
basis of any State Act as the same would come within the term Mineral
Development. Royalty ordinarily, although conceptualizes a contract between
parties, but as by way of the 1957 Act a statutory mining lease is granted;
and the terms and conditions thereof would be governed by statutes.
Furthermore, a unilateral statutory power has been conferred upon the
Central Government which is not the owner of the mineral right, to enhance
royalty, subject of course to the limitations provided for under Section 9
of the Act. Ordinarily, royalty would not be a tax. But in a situation of
this nature and particularly having regard to the fact that the Central
Government has the requisite power to fix royalty and not the owner of the
mineral right, - it would be an impost within the meaning of Clause 28 of
Article 366 of the Constitution of India which reads as under:
"Article 366...
(28) " taxation" includes the imposition of any tax or impost, whether
general or local or special and "tax" shall be construed accordingly."

The impost by reason of the impugned orders may come within the
purview of the aforesaid definition being a special impost on a class of
citizens who are the mining lessees. The amount collected by way of royalty
is also expended like ordinary revenue. (See Corporation of Calcutta v.
Liberty Cinema, Gasket Radiators (P) Ltd. v. E.S.I. Corporation and
Hindustan Times and Ors. v. State of U.P. and Anr.

BRICK EARTH MATTERS


Brick earth although is a minor mineral, the same under certain
tenancy laws can be used by the raiyats for building their own houses.

By way of example, we may notice Sub-section (2) of Section 21 of the
Chota Nagpur Tenancy Act, 1908 which reads thus:
"(2) Notwithstanding anything contained in any entries in the record of
rights or any local custom or usage to the contrary, the following shall
not be deemed to impair the value of the land materially or to render it
unfit for purposes of the tenancy, namely :-
(a) The manufacture of bricks and tiles for the domestic or agricultural
purposes of the raiyat and his family;
(b) the excavation of tanks of the digging of wells or the construction of
bandhs and ahars intended to provide a supply of water for drinking,
domestic, agricultural or piscicultural purposes of the raiyat and his
family; and
(c) the erection of buildings for the domestic or agricultural purposes or
for the purposes of trade or cottage industries of the raiyat and his
family."

The State of West Bengal has issued notices for submission of return
on despatches of brick earth for the previous three years. The very fact
that royalty on minor mineral is required to be paid on despatches, any
imposition of tax at the point of despatch must be held to be bad in law
particularly having regard to the decisions of this Court in Buxa Dooars
Tea Co. Ltd. v. State of West Bengal. Despatches of Brick earth from the
Raiyati field for manufacture of brick having regard to the process of
brick manufacturing as stated in the writ petition would be clearly ultra
vires as what is being despatched is not brick earth but bricks
manufactured on the raiyati lands. Bricks so manufactured cannot be the
subject matter of land tax. A tax imposed on the finished product would be
excise duty. Furthermore, the 1957 Act having covered the entire field, the
minor minerals also would come within the purview thereof. Once the
quantification of tax is made by reference to quantity of brick-earth or
brick despatched, measure of tax would be based on total value of the
mineral despathed or the material despatched. It is not correct to contend
that expression 'despatched' and 'removed' are synonymous. The place or
point of despatch in a particular case may be different from the place
wherefrom the mineral is raised. The mineral may have to be carried to a
distant place where a railway siding is situate or to a place having
motorable road. The cost of transport in such cases would be added to the
pit head value of the mineral. In case of despatch of mineral from the
despatch point as contra-distinguished from the pit head where from the
mineral is removed, that is the land itself. It may be noticed that in
determining the value of the mineral for the purpose of calculating the
amount of cess, the cost of transport is not excluded.

For the purpose of upholding the validity of a statute, it is well-
known, the doctrine of reading down thereof may not always be taken
recourse to. [See Delhi Transport Corporation v. D.T.C. Mazdoor Congress
and Ors. Furthermore, the very fact that the methodology of royalty or cess
is the same is also a relevant factor for the purpose of ascertaining the
nature of tax. Tax is, thus, being imposed on the activities on the land
and not on the land itself.

The measure of cess on brick earth on the despatches of bricks which
is a finished product would not be on despatches of minerals but on the
materials produced from minor mineral and, thus, must be held to be bad in
law being beyond the purview of Entry 49 of List II of the Seventh Schedule
of the Constitution. Brick earth and other minor minerals also being
subject to Parliamentary control and regulation in terms of the 1957 Act,
the State is denuded of its power to impose any tax thereupon or a product
therefrom.

MINOR MINERAL MATTERS:

Section 3 of the U.P. Act in no uncertain terms provides for
imposition of cess on mineral rights. Such a cess has been imposed subject
to limitations imposed by Parliament by law relating to mineral
development.

It is not in dispute that in terms of the provisions of Zamindary
Abolition Act, the mineral right has vested in the State. Mineral right,
therefore, cannot be subject matter of taxation as the State cannot impose
a tax on itself. Once the 1957 Act has been made, the power of the State to
grant lease on the terms and conditions which being provided under the
statutes; the State, over and above the amount by way of royalty, surface
rent, dead rent, fees etc. cannot realize any other sum. Such an impost
would directly come in the way of mineral development. Rule 3 of the
Special Area Development Authority (Cess on Mineral Rights) Rules, 1997
clearly states that whereas cess on coal would be Rs. 5 to 10 per ton, cess
on stone, coarse sand etc. would be Rs. 2 to 5 per cubit metre. The
imposition of cess on mineral right, as noticed hereinbefore, has been held
to be bad in law in several decisions of this Court and several High
Courts. By reason of the said Rule, even no pretence is made that cess
which is a tax has been levied on the mineral and the same has got nothing
to do with the land. It may be true that the authority has been conferred
with the power of State in relation to a municipality to levy tax but even
on that ground tax cannot be imposed unless and until the State Government
is held to have the requisite legislative competence therefore. In terms of
Entry 5 of the State List, the State cannot be held to have the legislative
competence to levy tax on major mineral or minor mineral, as the case may
be, as the field is covered by the 1957 Act and the rules framed thereunder
and, thus, it cannot delegate the said power in favour of the statutory
authority.

The object underlying the legislative enactment is relevant for the
purpose of upholding the validity of a statute; but before doing so what is
required to be taken into consideration is the legislative competence. The
court must at the outset address itself if and when such a question is
raised as to whether the State legislature had the requisite competence
having regard to the Parliamentary law. Once it is held that the field
sought to be legislated upon by the State stands covered by a Parliamentary
legislation, no further question ought to be asked. Once a liberal and wide
interpretation is given to Entry 54, List I, the extent of regulation of
mines and minerals development under the control of the Union must be
considered keeping in view the same vis-a-vis the impact thereupon by
reason of the State legislation. The State Act refers to mineral
development which indisputably is the subject-matter of the 1957 Act.
Section 15 of the 1957 Act confers power on the State for making rules
thereunder. The State while doing so acts as a delgatee and not in its
independent right of making a legislative enactment. Both power of the
State are not akin to each other. They are completely different. The
authority under the SADA Act might have been constituted for a laudable
object but the same by itself would not be a relevant factor for coming to
the conclusion that it may impose a tax on mine and mineral or a mineral
right. A local authority has no right over the mineral or the mineral
right. The power to impose tax upon the said authority by delegation of
power or otherwise on mineral right or mine and mineral cannot be bestowed
by the State. The power to tax on mineral right cannot be delegated by the
State to any other authority. The said power per se does not fall within
the purview of Entry 5. The statutory authorities having regard to the
provisions contained in Entry 5 may be delegated with the power to impose
tax on land and buildings etc. which would have a direct nexus for which
such authority has been constituted but not on 'mineral right' which is
vested in the State. Nobody questions or has any reason to question the
validity of constitution of the authority but what is being questioned is
its power to impose tax on mineral right or mines and minerals.

Apart from what has been said hereinabove, even the State is denuded
of its power to impose any tax on mineral right or mines and minerals
having regard to the provisions of the 1957 Act. If it is held otherwise,
the same would render India Cement (supra), Central Coalfields Ltd. (supra)
and a large number of decisions following the same wholly nugatory.

No material has been brought on record to justify the levy of fee or
compensatory tax. In any view of the matter, if the State is denuded of its
power to levy any tax the validity of the impost cannot be upheld on the
ground that thereby a fee or a compensatory tax has been levied. The impost
is termed as a cess on mineral right and once the validity thereof cannot
be upheld under Entry 50, List II, the invalidated statute would not be
validated by changing the subject-matter of the tax i.e. from mineral right
to land.

Conceptually fee and tax stand on different footings; whereas the
element of tax is based on the principle of compulsory exaction; the
concept of fee relates to the principle of quid pro quo. The validity of
tax cannot, therefore, be upheld on the ground that the same would be a
fee. In any event, for the said purpose requisite pleadings in that behalf
ought to have been made by the State. The impugned cess, therefore, cannot
be upheld by reference to Entry 66 read with Entry 5, List II of the
Seventh Schedule of the Constitution of India.

It is beyond any cavil that the cess levied under SADA Act will have a
direct effect on royalty and ultimately the value of the mineral.

It is beyond anybody's comprehension that SADA Act can be held to have
been validly enacted in terms of Entry 50, List II keeping in view a large
number of decisions of this Court, beginning from Hingir Rampur Coal Co....
Ltd (supra) as also several High Courts. (See for example Central
Coalfields Ltd. (supra)) In that view of the matter once levy on mineral
right contravenes the limits imposed by the Parliament, the question of
upholding its validity in terms of Entry 50 or for that matter in terms of
Entry 49, would not arise.

No argument has been advanced before us on behalf of the State of U.P.
that the activities carried out by the authorities have any direct nexus
with the levy of cess on coal. The High Court also did not advert to the
said question. Whether there exists any given relation between amount
realized and amount scent has not been demonstrated. How and in what manner
the doctrine of 'quid pro quo' has been applied had neither been adverted
to before us nor the State has shown that substantial amount of the fees
realized are spent for special benefits of its payers which was imperative.
Furthermore, the decision of the Western Coalfields Limited v. Special Area
Development Authority, Korba and Anr. cannot be said to be a good law in
view of the subsequent decisions of the larger bench of this Court in India
Cement (supra).

The validity of a provision imposing tax on a mineral cannot be upheld
in terms of Entry 5, List II of the Seventh Schedule of the Constitution of
India at the instance of a statutory authority. No material having been
brought on record that any services invoking the principles of quid pro quo
are rendered to the owners of the mine, the impose cannot also be upheld on
the ground that the same is a fee within the meaning of Entry 66, List II
of the Seventh Schedule of the Constitution.

It may be noticed that a Division Bench of this Court in Jindal Stripe
Ltd. and Anr. v. State of Haryana and Ors. referred the question of concept
of compensatory tax which had been evolved as an exception to the
provisions of Article 301 of the Constitution doubting the propositions of
law enunciated in Bhagatram Rajeev Kumar v. CSI [1995 Supp. (1) SCC 673]
and State of Bihar v. Bihar Chamber of Commerce.


The levy of cess in terms of SADA Act cannot be justified as a fee
keeping in view the fact that the tax is sought to be imposed in terms of
Entry 50 of List II of the Seventh Schedule of the Constitution of India.

Section 35 of the SADA Act clearly states in no uncertain terms that
imposition of tax is subject to the regulation of mines and minerals
development. It is, therefore, clearly purported to be a tax in terms of
Entry 50 and not a fee; nor can it be said to be a tax under Entry 49 List
I, in the aforementioned situation. The rules even make no pretence that
the tax is imposed on a mineral having regard to the fact that even mineral
right has been defined under the Act.

The discussions made herein would clearly show that keeping in view
the enactments made by the State legislature the rights of the zamindars,
tenure-holders and intermediaries in mines and minerals had vested in the
State, the impugned levy, cannot be upheld.

ENTRY 49 vis-a-vis TEA ACT, 1953

Sections 10 and 30 of the Tea Act clearly go to show that not only the
production of tea by way of manufacture in a factory but also cultivation
thereof is under the Union control. The fields of legislature relating to
agriculture and imposition of tax on land which, as noticed hereinbefore,
belong to the State legislature, have been taken away by Entry 52 List I of
the Seventh Schedule of the Constitution of India read with Article 253 of
the Constitution. The very fact that the preamble refers to an
International Treaty itself is a pointer to the fact that the 1953 Act was
enacted by the Parliament not only in exercise of its powers conferred on
it under List III of the Seventh Schedule but also in terms of List II
thereof.

It is, thus, not correct to contend, as has been submitted by Mr.
Reddy, that by reason by Article 253 of the Constitution of India, the
State's power is not denuded. Article 253 of the Constitution of India
begins with a non-obstante clause and by reason of the said provision the
legislative power of the State is taken over by the Parliament and once the
field of legislation is taken over; (unless the Act is repealed or suitably
amended by a Parliamentary Act itself), the State will have no jurisdiction
to legislate in relation thereto.

Tea industry is probably the only industry which is not only a
controlled industry but also a declared one. It being a controlled and
declared industry and the Tea Act being a law referable to Article 253 of
the Constitution of India, the State's power to make any law dealing with
tea including levy of any tax on any types of tea which would include green
tea leaves would completely be denuded as a tax either in terms of Entry
14, 18 or 49 would affect the said commodity.

In Maganbhai Ishwarbhai Patel v. Union of India and Anr. this Court
held:
    "The effect of Article 253 is that if a treaty, agreement or
    convention with a foreign State deals with a subject within the
    competence of the State Legislature, the Parliament alone has,
    notwithstanding Article 246(3), the power to make laws to implement
    the treaty, agreement or convention or any decision made at any
    international conference, association or other body. In terms, the
    Article deals with legislative power: thereby power is conferred
    upon the Parliament which it may not otherwise possess."

In State of Bihar and Ors. v. Bihar Chamber of Commerce and Ors., this
Court held :
    "...The impugned Act is also not relatable to any of the Articles
    249 to 253 which are in the nature of exceptions to the normal rule
    that Parliament can make no law with respect to the entries in List
    II. If so, it follows that the State Legislatures are not denuded
    or deprived of their power to make a law either with reference to
    Entry 52 or with reference to Entry 54 in List II. That power
    remains untouched and unaffected. All that Parliament has said by
    enacting the ADE Act is that it will levy additional duties of
    excise and distribute a part of the proceeds among the States
    provided the States do not levy taxes on sale or purchase of the
    scheduled commodities.

It is useful to refer at this juncture to Articles 249 and 252 of the
Constitution of India. Once the Parliament in exercise of its
aforementioned jurisdiction takes upon itself the field of legislation
which is otherwise exclusively within the domain of the State, the latter
is completely denuded of its legislative power; he effect of such
Parliamentary, legislation would be the same as if the legislation had been
enacted by the State Legislature.

For the purposes of the Cess Act 'owner' was with reference to a Tea
Estate, the possession of which has been transferred by lease or mortgage
or otherwise mean the transferee so long as his right to possession
subsists. It will, therefore, appear that the cess is levied not on land as
a unit by reason of general ownership of land which may belong to a legal
owner but the cess may be levied even upon a person who is in possession of
a Tea Estate by lease or mortgage or even by a licence or permission. If,
for example, the legal owner allows somebody else to be in possession of
the Tea Estate temporarily for the purpose of plucking the green tea
leaves, the cess is levied upon such person not by reason of the general
ownership of the land but because he is in temporary possession by a
permission or licence.

It would be noticed that whereas any house or other buildings do not
come within the purview of the definition of immovable properties under the
Cess Act, 1880; factories or workshops or housing for the persons employed
in the Tea estate had been brought under the impugned Acts. As cess is not
payable under the Cess Act, 1880 in respect of land on which building and/
or factory stands; in terms of the charging Section under the impugned
Acts, the same would be payable which being self-contradictory cannot be
sustained. Similarly, tea bushes or standing crops, green tea leaves, would
also not come within the purview of the definition of "immovable property"
or land as contained in the Cess Act, 1880. It is also doubtful as to
whether the Cess Act, 1880 and consequently the impugned levies would be
applicable throughout, the State as the levy would be attracted at the
places where "road and public work cess" is payable.

The definition of land, immovable property as contained in the Cess
Act, 1880 play an important role insofar as in terms of Section 78 of the
West Bengal Primary Education Act and Section 4 of the West Bengal Rural
Employment and Production Act, 1976, cess would be levied on all immovable
properties on which road and public work cesses are assessed. Section 5 of
the Cess Act, 1880 provides that all immovable properties to be liable to
road cess and public works cess. The immovable property which is,
therefore, not liable to a road cess and public works cess, a fortiorari,
cannot be subjected to education cess or rural employment cess.

In Buxa Dooars (supra) primary education cess and rural employment
cess levied on tea had been held to be ultra vires Article 301 of the
Constitution of India. The said decision applies in all fours in the
present case. In Buxa Dooars (supra) it was not necessary for this Court to
advert to a detailed discussion on Entry 49, List II of the Seventh
Schedule of the Constitution of India having regard to the fact that its
finding that in effect and substance the legislation impugned therein
related to despatches of tea and, thus, the legislative source was required
to be found therefore with reference to some other entry but the State had
not been able to show any. Entry 49 of List II was not held applicable as
it was found that under the Tea Act the entire legislative field was
covered.

GOODRICKE GROUP:

Whether the green tea leaves is marketable as such or not does not
appear to be of much relevance. Such a contention has also no factual
basis. It is conceded at the Bar that some tea estates may not have
factories attached thereto and some factories may be functioning
independent of any tea estate. Thus, those factories which process green
tea leaves into tea would purchase green tea leaves. It is difficult to
assume, as has been done by the Bench deciding "Goodricke Group" (supra)
that green tea leaves are not marketable. It proceeded on the basis that
'green tea leaves' has no nexus with the control over production of tea. If
it is held that 'green tea leaves' is a raw material for production of tea
or use thereof is necessary for processing it, the same would be a
marketable commodity. It appears that the Tea Board had made a scheme for
grant of price subsidy to the small owners which would also be a pointer to
the fact that the Tea Board exercised its control over green tea leaves.

In Goodricke Group (supra) it has, thus, wrongly been recorded that
generally speaking no tea estate market green tea leaves. The writ
petitioners have stated that there are about 50 Bought leaf factories in
West Bengal. Bought Leaf Factories function within a statutory scheme, viz.
Tea (Marketing) Control Order, 2003.

Furthermore, once it is found that the definition of 'tea' both in the
Tea Act and the impugned Acts is the same, the court cannot keep the effect
of Sections 25 and 30 of the Act out of its consideration for the purpose
of ascertaining the true scope and purport thereof.

It is relevant to note that in Goodricke Group (supra), no opinion was
expressed on Section 25 of the Act or the notification dated 30.10.1986
issued thereunder. Once it is conceded that green tea leaves would come
within the purview of definition of 'tea', it is inconceivable as to how
impost of excise duty on tea in terms of Sub-section (2) of Section 25 of
the Act will have no bearing on the subject. By reason of Sub-section (2)
of Section 25, additional excise duty is levied. Excise duty in terms of
the Central Excise Act, it is trite, can not only be levied on finished
products but also the products at intermediary stages.

Unfortunately, in Goodricke's case (supra), the learned Judges did not
consider the matter from this angle.

'Goodricke' also runs counter to India Cement as also Kannadasan.
Effect of the expression "immovable property" in Cess Act, 1880 was also
not brought to its notice and had the same been done, there would not have
been a conclusion that tea estate would be treated as an unit as therefrom
the standing crops and structures were required to be excluded. Goodricke
Group of case dos not, therefore, lay down a good law and should be
overruled.

INTERPRETATION IN THE LIGHT OF INTERNATIONAL TREATIES :

It is true that the doctrine of 'Monism' as prevailing in the European
countries does not prevail in India. The doctrine of 'Dualism' is
applicable. But, where the municipal law does not limit the extent of the
statute, even if India is not a signatory to the relevant International
Treaty or Covenant, the Supreme Court in a large number of cases
interpreted the statutes keeping in view the same.

A treaty entered into by India cannot become law of the land and it
cannot be implemented unless Parliament passes a law as required under
Article 253.

The executive in India can enter into any Treaty be it bilateral or
multilateral with any other country or countries.

As regard Article 253 vis-a-vis Article 51 of the Constitution, we may
notice that in the case of Kesavananda Bharati v. State of Kerala, Sikri CJ
referred to Article 51 in the following words:
"It seems to me that, in view, of Article 51 of the Directive Principles,
this Court must interpret language of the Constitution, if not intractable,
which is after all a Municipal Law, in the light of the United Nations
Charter and solemn declarations subscribed to by India."

The learned Chief Justice also relied on the observation made by Lord
Denning in Corocraft v. Ram American Airways (1969) All ER 82), that it is
the duty of the courts to construe our legislation so as to be conformity
with International Law and not in conflict with it. It is one thing to say
that legislation may be interpreted in conformity with international
principles but is entirely a different thing to give effect to a treaty
provision in the absence of Municipal Laws.

In Reference by President of India, it has been held that cession of
national territory involve a foreign state which can be done by the Central
Government in exercise of its treaty making power. (See Union of India v.
Azadi Bachao Andolan 2003 (8) SCALE 287)

In Vishaka and Ors. v. State of Rajasthan and Ors. it has been held :
14. The meaning and content of the fundamental rights guaranteed in the
Constitution of India are of sufficient amplitude to encompass all the
facets of gender equality including prevention of sexual harassment or
abuse. Independence of judiciary forms a part of our constitutional scheme.
The international conventions and norms are to be read into them in the
absence of enacted domestic law occupying the field when there is no
inconsistency between them. It is now an accepted rule of judicial
construction that regard must be had to international conventions and norms
for construing domestic law when there is no inconsistency between them and
there is a void in the domestic law. The High Court of Australia in
Minister for Immigration and Ethnic Affairs v. Teoh [128 Aus LR 353] has
recognised the concept of legitimate expectation of its observance in the
absence of a contrary legislative provision, even in the absence of a Bill
of Rights in the Constitution of Australia."
(See also Liverpool & London S.P. Assn. Ltd. (supra)

In Salomon v. Commissioner of Customs and Excise [(1966) 3 All E.R.
871], it was held that when the statute is in compliance with international
conventions then it must be interpreted in conformity therewith

MEASURE OF TAX:

It is no longer in dispute that for the purpose of determining the
nature of tax, the measure with reference to which a tax is calculated is a
relevant factor although not conclusive. (See R.R. Engineering Co. v. Zilla
Parishad Bareilly (1983) SCC 330, Hingir Rampur Coal Co. Ltd. v. State of
Orissa, Bombay Tyre International Ltd. v. Union of India, Buxa Doors Tea
Co. Ltd. (supra) at 218-219 para 10 and 11]

In Byramjea Jejibhoy v. Province of Bombay reported in [I.L.R. (1940)
F.C.] it is stated :
"In determining the nature of the tax, consideration may be given to the
standard on which tax is levied but that is not the determining fact. The
measure of tax is not the sole test."

Various decisions cited before us including the 7-Judge Bench judgment
in India Cement's case lead only to one conclusion that the power of the
State to impose tax on land in terms of Entry 4-9 List II can be exercised
when the land is taken as a unit. For the purpose of ascertaining the true
nature as also the scope and extent of legislation what is required to be
seen is the substance thereof.

In Buxa Dooars Tea Co. Ltd. v. State of West Bengal this Court struck
down the cess levied under the earlier Acts on each kilogram of tea on the
despatches from the tea estate of tea grown therein. This Court held that
the standards laid down for measuring the liability under the levy must
bear the relationship to the nature of the levy.

This Court observed :
"If the levy is regarded as one in respect of tea estates and the measure
of the liability is defined in terms of the weight of tea dispatched from
the tea estate there must be a nexus between the two indicating a
relationship between the levy on the tea estate and the criteria for
determining the measure of liability. If there is no nexus at all it can
conceivably be inferred that the levy is not what is purports to be."
507. The tea estate comprises of any land used for cultivation of tea or
intended to be used for growing plant Camelia Sinensis (L) O. Kuntze and
producing green tea leaves from such plant, and shall include land
comprising a factory or workshop for producing any variety of the product
known as 'tea' made from the leaves of such plant and for housing the
persons in the tea estate and other lands which are required for ancillary
purposes.

In that case, this Court pointed out that the nexus with the tea
estate is lost altogether by the provision for exemption or reduction of
the levy and that throughout the nexus is confined to despatches of tea
rather than related to tea estates. In that case also it was sought to be
argued that the cess is a tax on land which is measured by the tea grown in
the tea estate and despatched therefrom. This argument was repelled by this
Court. According to this Court, there was no relationship or nexus between
the tea estate and the varied treatment accorded in respect of despatches
of different kinds of tea. In the present case also cess has no nexus with
tea estate which comprises not only the lands on which the green tea are
grown but also the factory or the workshop where the green tea leaves are
manufactured into black tea, the houses of the employees where the
employees reside, other construction and also on lands which are ancillary
to the tea estate.

In S.C. Nawn v. W.T.O., Calcutta [1969 SCR 108] this Court was
considering the validity of the Wealth Tax Act of 1957 on the ground that
as if it fell within Entry 49 of List II. It was held that Entry 49 of List
II contemplated a levy on land as a unit and the levy must be directly
imposed on land and must bear a definite relationship thereto. As the
Wealth Tax Act fell under Entry 86 of List I, it was held to be a valid
piece of legislation. The said decision has been referred to with approval
in India Cement (supra).

This Court also referred to the case of Second Gift Tax Officer,
Mangalore etc. v. D.H. Mazareth etc. [1971 (1) SCR 200]. In that case this
Court held that the tax on gift of land is not a tax imposed directly on
land as a unit but only on a particular use, namely the transfer of land by
way of gift.

In Bhagwan Das Jain v. Union of India, this Court made a distinction
between levy on income from house property which would be an income tax and
the levy on the house property itself which would be referable to Entry 49
of List II.

Land taxes are imposed in different countries. In the sovereign
countries or the countries following the unitary system, the question of
conflict in the legislative competence of the Parliament and the State
Legislature would not arise. The dispute, however, as to whether the impost
in effect and substance is an income tax or tax on land has been the
subject matter of various decisions. The said decisions are pointers to the
fact that in different countries in different situations levy calculated on
the annual value of the land or annual rental value received different
considerations at the hands of the courts.

In Cooley Taxation Vol.2 Fourth Edition, P. 558 & 564, it is stated:
"558. In general in all jurisdictions real estate situated within the
territorial limits of the taxing district is subject to taxation unless
exempted either expressely or by implication; and by implication is meant
the exemption of federal property from state taxation and the exemption of
state property from state taxation, etc. Furthermore, the separate estates
which different persons may own in the same land, such as where one owns
the surface, another the timber growing on it, and still another the
mineral underground, may each be subject to taxation."

But at Section 564, the learned author states that minerals severed
and brought to the surface are taxable as personal property. ( Palmer v.
Corwith, 3 Chand.(Wis.) 297.), although real estate. (Emphasis supplied)

It is, therefore, evident that minerals extracted and brought to the
surface would be treated as personal property and, thus, cannot be the
subject-matter of tax on land.

In The London County Council and Ors. v. The Attorney General, [1901
Law Report, Appeal Cases 26], (which is a converse case) the House of Lords
while considering the provisions of income-tax payable while repelling a
contention that the fundamental distinction between the other schedules and
Schedule D, in that the words annual value are introduced, into the statute
not as the subject of taxation but only as the measure of the taxation to
which the property shall be subjected, observed:
"In my opinion, this construction of the section is entirely wrong.
Grammatically I think it wrong. I think that the words "charged with income
tax under Schedule D" mean "charged under Schedule D with income tax," and
the words "such tax" mean the tax which is called in the Act "income tax."
It is said that the tax imposed on property within Schedule A is not
strictly an income tax, because it is levied on the annual value of
property and not on the profits received by the owner. That, no doubt, is
so, and if one were writing a treatise on taxation it would be proper to
refer to this distinction. But the question is, What do the words "income
tax" mean in the language of the Legislature, and in this Act?" (P.44)

The learned Law Davey observed:
"Again, it is said (if I understood Mr. Danckwerts rightly) that the
expression "profits and gains" has a technical, or almost technical,
meaning as descriptive only of the taxable subjects comprised in Schedule
D. No doubt from the nature of the case the words "gains" is more
frequently, though not exclusively, used in Schedule D. But, unluckily for
the argument, the word "profits" is the word selected by the Legislature
for describing generally the subjects of taxation under the Income Tax
Acts. The title to as well the Act of 1842 as that of 1853 is "An Act for
granting to Her Majesty duties on profits arising from property,
professions, trades, and offices." I have already drawn attention to the
language of Section 102, and to the use of the words "profits or gains
arising from lands, tenements, hereditaments, and heritages" in Section 104
of the Act of 1842. The truth is that the income tax is intended to be a
tax upon a person's income or annual profits, and although (for conceivable
and no doubt good reasons) it is imposed in respect of the annual value of
land, that arrangement is but the means or machinery devised by the
Legislature for getting at the profits." (P.45)

The aforementioned decision is, therefore, an authority for the
proposition that tax calculated on the basis of annual value of land may in
a given situation be held to be 'income tax'.
Griffith, CJ in Solomon v. New South Wales Sports Club Ltd. [19 Co. L.
Rep. 698] held:
"I am unable to see any reason for thinking that the term "land tax" has
ever been used in New South Wales... in any other sense then a tax on land
directly imposed by the State."

The Supreme Court of United States in Hylton. Plaintiff in Error v.
The United States [US SCR 1 Law. Ed. Dallas 169] while considering a
question as to whether a tax upon carriages is a direct tax observed:
"It was, however, obviously the intention of the framers of the
constitution, that Congress should possess full power over every species of
taxable property, except exports. The term taxes, is generical, and was
made use of to vest in Congress plenary authority in all cases of taxation.
The general division of taxes is into direct and indirect. Although the
latter term is not to be found in the constitution, yet the former
necessarily implies it. Indirect stands opposed to direct. There may,
perhaps, be an indirect tax on a particular article, that cannot be
comprehended within the description of duties, or imposts, or excises, in
such case it will be comprised under the general denomination of taxes. For
the term tax is the genus, and includes,
1. Direct taxes.
2. Duties, imposts, and excises.
3. All other classes of an indirect kind, and not within any of the
classifications enumerated under the preceding heads.
The question occurs, how is such tax to be laid, uniformly or
apportionately? The rule of uniformity will apply, because it is an
indirect tax, and direct taxes only are to be apportioned. What are direct
taxes within the meaning of the constitution? The constitution declares
that a capitation tax is a direct tax; and, both in theory and practice, a
tax on land is deemed to be a direct tax. In this way, the terms direct
taxes, and capitation and other direct tax 177) are satisfied. It is not
necessary to determine, whether a tax on the product of land be a. direct
or indirect tax."
[P.174-175]

Tax on land must be direct tax, but a tax on mineral severed from land
would not be a direct tax. The question has to be considered having regard
to the legislative competence as well as the nature of the product.

Normally, a tax which is measured in terms of the profit arising out
lands being in nature of a tax on income would be a direct tax. A tax,
however, which is levied on the product would be an indirect tax.

Excise duty is considered to be an indirect tax. When a legislation
having regard to the entries in List I provides for imposition of excise
duty or additional duty, the same must necessarily be held to be a
'manufactured a processed product' which by necessary implication would be
deemed to be not a product of land whereupon a tax by the State can be
imposed.

In State of Orissa v. Mahanadi Coalfields Ltd [1995 Supp 2 SCC 686],
this Court held:
"19. The above aspect can be looked at from a different angle also. The
Orissa Rural Employment, Education and Production Act, 1992 (Orissa Act 36
of 1992) provided that all lands shall be liable to the payment of tax
under the Act. Land is defined in Section 2(c) of the Act to mean, "land of
whatever description ... and includes all benefits to arise out of land".
Lands held for carrying on mining operations would be taken in by the said
definition. It is patently clear that 'minerals', which are benefits
arising 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 as 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 para 3
(supra), by adding Schedule C as per notification dated 26-9-1994 (Annexure
B, p. 270 of the 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 Rs. 32,000 per
acre. We have already seen that lands other than mineral-bearing lands and
coal-bearing lands will fall outside the purview of the impugned Act since
they are dealt with under the Orissa Cess Act, 1962. It is only the "coal-
bearing land" and "mineral-bearing land", as defined in Section 2(a-1) and
Section 2(d), which have to bear the brunt of taxation. In the light of the
above, we have no doubt in our mind that the substance of the levy under
the Orissa Rural Employment, Education and Production Act, 1992 is really
on "mineral-bearing land" and "coal-bearing land".
20... We have already held that levy of tax under Orissa Act 36 of 1992 is
in substance on minerals and mineral rights, which has nothing to do with
surface characteristic of the land. In this view of the matter, the levy of
tax, on mineral-bearing lands and coal-bearing lands, under Section 3 read
with Section 2(a)(1) and Section 2(d) of the Act is beyond the competence
of the State Legislature and is ultra vires."

The State of West Bengal had carried out amendments in the impugned
Acts after the India Cement (supra) by inserting coal bearing lands instead
and in place of coal mines but the definitions of mines within the meaning
of several Parliamentary Acts including Mines Act, 1952 and the coal
bearing lands are in pari materia. Even the definition of despatch under
the impugned Acts and the Parliamentary Acts make no significant
difference. We may notice that even in relation to mines and minerals, a
cess @ 0.50 paise per tonne is levied on minerals or materials despatched
from the land. These provisions go to show that the materials which are
produced on the land, as for example bricks, which can be said to be a
material and which has no bearing with the minerals extracted therefrom
became the subject-matter of tax. The impugned Acts do not show that as to
how bricks manufactured from the agricultural land by extracting brick-
earth have a rational connection with the annual value of the land.

Measure of tax is an indicia for determining the character and nature
of tax.

Furthermore whether an impost would be tax on 'income' or 'gross
receipts' fell for consideration before the Bombay High Court in Unit Trust
of India and Anr. v. P.K. Unny and Ors. [(2001) 249 ITR 612]. The High
Court, inter alia, framed the following question :
"(A) Whether the interest-tax under the Interest-tax Act, 1974, is a tax on
income and, if so, whether interest accruing to the UTI from loans advanced
by it stands exempted in view of Section 32 of the UTI Act, 1963.

Kapadia, J.(as the learned Judge then was) speaking for the Division
Bench noticed that the tax on interest under the Interest-tax Act is
payable even if there is no income and that it is a tax on gross receipts
of interest.

The contention raised therein which was negatived by the High Court,
inter alia, was that Interest-tax Act like Income-tax Act also seeks to
levy tax on gross receipts and the provisions of the Income-tax Act are in
pari materia with the provisions of the Interest-tax Act. Such a contention
was raised having regard to the fact that in terms of the Interest-tax Act
read with the circular issued by the Reserve Bank of India, the burden of
such tax would be passed on to the borrowers but CBDT issued a circular
disabling UTI from recovering interest tax from the borrowers.

It will, therefore, be noticed that measure of tax was considered to
be an indicia for determining the nature and character thereof, namely, as
to whether such tax is an income or gross receipts of interest.

In Hoechst Pharmaceuticals Ltd. v. State of Bihar and Ors., a question
arose whether the tax on gross turnover would amount to a tax on income?
Gross turnover and gross receipts are relevant for the purpose of
determining the income of a person but despite the same, the measure of tax
on gross receipts or gross turnover was held to be not an income so as to
attract tax on income. These decision, amongst others, is indicative of the
fact that the Court had considered the measure of tax for determining the
nature thereof.

If a tea estate is taken to be a unit and green tea leaves are taken
as the measure of tax on land comprising the Tea Estate, as contended, the
levy of cess can never be uniform and will have no nexus with the land as
the land used for factory, workshop and the houses for persons employed in
the tea estate have no contribution to the production of tea leaves which
have nexus only with the land where tea plants are grown and which produce
green tea leaves. Apart from this, in a tea (c)stats, there are fallow
land, nursery and other areas apart from the factory, workshop, house where
cultivation of tea bushes or plant are not possible. By use of the so
called measure of production of tea leaves, such lands would remain outside
the levy of cess.

A distinction exists between a capital value as a measure of tax and
capital value as assets. The validity of levy can be upheld where taxes on
buildings are levied having regard to a percentage of capital value
provided the same is not unreasonable or confiscatory in nature.
Municipalities which ordinarily provide for compensatory tax may also be
delegated with the power of levying tax or on building the measure whereof
may be on the annual value of the building. However, what is converted into
Income can reasonably be regarded as income. Save and except tax on
profession or callings etc. as contained in Article 276 of the
Constitution, the State has no legislative competence to impose tax on
income.

Subject of a tax and the measure of a tax have some relationship to
determine the question as regard character of legislation.

It is also well-settled that for the aforementioned purpose only
permissible methods of valuation can be adopted. Even in D.G.Gose & Co. Vs.
State of Kerala, , prima facie, it appears, such permissible method had not
been adopted. The method of valuation for imposition of tax on land or
building, furthermore, must be a known one. A mode to calculate tax on the
basis of value of a part of land which is itself being taken away or on the
basis of annual yield having regard to the definition of tea estate may not
be held to be a permissible or known method of valuation.

Tax sought to be assessed on the floorage of the building and whence
the amount of it is varied according to the number of buildings owned by
the person charged has been held to be ultra vires. (See Bhuvaneshwariah v.
State, [AIR 1965 Mys. 170])

The impost having regard to the definition of tea estate may be held
to be irrational as the same tea estate may contain a large number of
factories, houses and other structures with little open land for tea
plantations whereas a tea estate comprising the same area may have tea
plantation only with no factory or houses situate thereupon.

It is thus evident that the impugned levy has no nexus with land as
such but is a tax only on production of tea leaf and hence beyond the
competence of the State.

There are, thus, several reasons why the nexus between the levy and
the measure of the levy is lost in the present case.
(a) "Green tea leaves" which is adopted as the measure of the levy is
defined to mean the plucked and unprocessed green leaves of the tea plant.
In defining "tea estate" several categories of land have been clubbed
together. Firstly, there is the land used for producing green tea leaves.
Secondly, there is the land intended to be used for growing tea plants (but
which is not being so used). Thirdly, there is land comprised in a factory
or workshop for producing commercial tea. Fourthly, there is the land
comprised in housing estates within the tea estate; and fifthly, there are
lands used for ancillary purposes (not production of green tea leaves).
(b) It is thus seen that the measure of tax is related to the produce of
only one portion of the land purported to be defined as the unit of
taxation.
(c) Additionally, the land comprised in a factory or workshop for producing
commercial tea has no nexus whatsoever with the growing of tea plants
because by definition, green tea leaves for the purpose of the levy means
unprocessed green leaves of the tea plant. The factory and workshop land
therefore has no connection whatsoever with the production of green tea
leaves. Similarly, the levy on the land used for housing estates and those
used for ancillary purposes also have no rational connection with the
production of green tea leaves.
(d) In any event the productivity or yield value of all the areas of a tea
estate other than that portion which is currently being used for
cultivation of the tea plants has been totally ignored for the purpose of
fixing the alleged measure of tax.

Whether the measure of tax provided in the Act bears a rational nexus
with the levy itself, has been considered in the case of Buxa Dooars Tea
Co. Ltd. (supra). In paras 10 & 11 of the said judgment the following
propositions have been elucidated:
(a) The statutory provisions for measuring the liability on account of the
levy throws light on the general character of tax.
(b) The method of determining the rate of levy would be relevant in
considering the character of the levy.
(c) The standard on which the tax is levied is a relevant consideration for
determining the nature of tax although it could not be regarded as the
conclusive in the matter.
(d) Any standard which maintain a nexus with the essential character of the
levy can be regarded as a valid basis of the assessing the measure of the
levy.

It was observed:
"It is apparent that the standards laid down for measuring the liability
under the levy must bear a relationship to the nature of the levy. In the
case before us, however, we find that the nexus with the tea estate is lost
altogether..."

Measure of tax by way of levy of cess must also have a direct nexus
with the point of taxation. In the instant case, tax is levied on green tea
leaves which is produced out of an activity on land and which has no
bearing with the tax on land as a unit. Thus, the point at which such tax
is levied may also provide for a relevant factor for the purpose of Judging
the legislative competence of the State. [See Diamond Sugar Mills Ltd., and
Anr. v. The State of Uttar-Pradesh and Anr.

The definition of tea is "for the purpose of the Act" which would mean
for all the purposes of the Act.

In H.L. Sud. Income Tax Officer, Companies Circle 1(1). Bombay Vs.
Tata Engineering and Locomotive Co. Ltd. [AIR 1969 SC 319 at 319], this
Court held:
"The expression "for all purposes", used in S. 43 only indicates that when
an appointment is made for a particular assessment year it is stood for all
purposes as far as that assessment is concerned i.e., for all purposes for
imposing tax liability, determining the quantum of the liability and for
recovering it. The expression does not extend the liability to any other
assessment excepting the liability for the assessment year for which the
appointment is made."

In M.K. Kochu Devassy v. State of Kerala etc., it is stated:
"13. We find ourselves wholly unable to accept any of the contentions. The
terms of Section 2 of the 1947 Act as substituted by Section 3 of the
Kerala Act are absolutely clear and unambiguous and when they lay down that
the expression "public servant" shall have a particular meaning for the
purposes of the Act, that meaning must be given to the expression wherever
it occurs in the Act. "For the purposes of the Act" surely means for the
purposes of all and not only some of the provisions of the Act. If the
intention was to limit the applicability of the definition of the
expression "public servant" as contended, the language sed would not have
been "for the purposes of the Act" but something like "for the purposes of
the Act insofar as they relate to the offences under Sections 161 to 165A
of the Indian Penal Code".
[See also Ashok Leylands v. State of Tamil Nadu (C.A. Nos. 976-979 of 2001
disposed of on 7.1.2004]

In Central Coalfields Ltd. (supra), it was held:
"45. In this case, it is clear that so far as imposition of cess on mines
and minerals is concerned, the same has not been levied taking the land as
a unit or the annual value thereof, but on the basis of royalty payable on
the minerals raised therefrom or on the price of the value of coal raised
from the mines which have no direct bearing with the imposition of cess on
land as a unit. "

It was further noticed therein:
"47. In Commissioner of Income tax, Banglore v. B.O. Srinivasa Setty,  the
Supreme Court held as follows (at page 975):
"The character of the computation provisions in each case bears a
relationship to the nature of the charge. Thus the charging section and the
computation provisions together constitute an integrated code. When there
is a case to which the computation provisions cannot apply at all, it is
evident that such a case was not intended to fall within the charging
section."
Proceeded further, the Supreme Court observed (at page 975):
"It must be borne in mind that the legislative intent is presumed to run
uniformly through the entire conspectus of provisions pertaining to each
head of income. No doubt there is a qualitative difference between the
charging provision and a computation provision. And ordinarily the
operation of the charging provision cannot be affected by a construction of
a particular, computation provision. But the question here is whether it is
possible to apply the computation provision at all if a certain
interpretation is pressed on the charging provision. That pertains to the
fundamental integrality of the statutory scheme provided for each head."
                [Emphasis supplied]

Furthermore, when a provision is laid down in a statute, the same
should be construed having regard to the decisions which had been rendered
by this Court.

In Goodyear India Ltd. v. State of Haryana,  it was held that taxing
statute has to be construed strictly. It was opined that a tax imposed by
the State Legislature on despatch on manufactured goods outside its
territory is ultra vires.
It was further held that:
"It is well settled that while determining the nature of a tax, though the
standard or the measure on which the tax is levied may be a relevant
consideration, it is not the conclusive consideration. One must have regard
to such other matters as decided by the Privy Council in Governor General
in Council v. Province of Madras, (AIR 1956 PC 98)(supra), not by the name
of tax but to its real nature, its pith and substance which must determine
into what category it falls."

In Central Coalfields Ltd. (supra), it was observed:
"52. From the conspectus of the aforementioned decisions it is, therefore,
clear that the measure of the tax throws light on the nature of the tax and
it may be considered for the purpose of finding out as to whether the
impost has any nexus with the tax or not. It is evident that the true
character of the levy in Cess Act is that although it appears to be tax on
land, in effect, and substance, it is a tax on minerals extracted
therefrom."

In Krishi Utpadan Mandi Samiti & Ors. (supra), it was held:
"...It is trite that fiscal statute must not only be construed literally,
but also strictly. It is further well known that if in terms of the
provisions of a penal statute a person becomes liable to follow the
provisions thereof it should be clear and unambiguous so as to let him know
his legal obligations and liabilities thereunder.
The matter may be considered from another angle, "Expressio unius (persone
vel rei)est exclusio alterius", is a well known maxim which means the
express intention of one person or thing is the exclusion of another. The
said maxim is applicable in the instant case. [See Khemka and Co.
(Agencies) Pvt. Ltd. etc. v. State of Maharashtra etc. ].
Having regard to the fact that in the event it is held that buying of seeds
which is a commodity governed by a Parliamentary Act would attract payment
of market fee in terms of the said Act, a conflict would arise. In ordinary
parlance at particular stages in which seeds are grown from breeder seeds
pay take the form of wheat but the said production which is bought by the
respondents is also governed by the provisions of the Seeds Act and the
Rules framed thereunder. The definition of 'seed' as noticed hereinbefore
is of wide amplitude. It includes seedling of food crops. It is, thus,
necessary to construe both the statutes harmoniously. Both, the Statutes
must be given proper effect and allowed to work in their respective fields.
Even if there is some over-lappings, the same should be ignored."

An endeavour, it is trite, shall be made to avoid such a conflict,
particularly when one of the two possible constructions shall be in
consonance with the purport and object of a Parliamentary Act.

In District Council of the Jowai Autonomous Distt. v. Dwet Sinah Rymbi
[(l986) 4 SCC 38], royalty imposed on timber removed from private forests
was held to be a tax not on land on the ground that the royalty payable has
no reference to the extent of land and the nature of land and its
potentialities and, thus, a tax on timber which is brought from private
forests. It was held:
"18... The notification in unambiguous terms says that the royalty shall be
on the squared log pines. It has no reference to the land on which those
trees have grown. In pith and substance it is a tax on forest produce grown
on private lands. The District Council has no power to levy such a tax on
forest produce under paragraph 8 of the Sixth Schedule to the Constitution.
Reliance was, however, placed on the minority judgment of Justice Sarkar in
K.T. Moopil Nair v. State of Kerala in support of the plea that lands on
which forests grew could be taxed under entry 'tax on lands and buildings'.
The impugned levy being not a tax leved on land as we have pointed out
above, the said observation in the above decision is not useful to the
appellants. We may add that the very same learned Judge has observed at
page 106 that no tax could be levied by a State Legislature on forests as
such while tax may be levied on the land on which forests grew. But we are
convinced that the levy in question is not a levy on land..."

A distinction must be borne in mind as regard the approved method of
valuation for the purpose of imposition of tax on land and building. We
should not be under any elusion or suffer any confusion in this behalf.
Methods of determining annual value of a land or building is distinct from
the value of the mineral bearing land. Annual value of a land or building
is determined by applying one or the other approved or known method of
valuation, but the same cannot have any application for determination of
the total value of the mineral bearing land. The valuation of mineral
bearing land would be dependent upon so many factors which would include
the geographical condition, quality and quantity of the mineral which can
be removed, the capital required to be invested and various other factors.
Once the mineral is removed from the mineral bearing land, the surface may
not either remain in existence and, thus, the value of the land would
gradually come down. The value of a land with minerals and without minerals
would be different. As and when mineral is taken out of the land, the value
is diminished. The method of imposing tax with reference to the minerals
produced from the land, thus, cannot be a criterion for determining the
value of the land and, thus, the said method of valuation should not made
to apply which is applicable for the purpose of determining the annual
value of land or building. This aspect of the matter has again not been
considered in Goodricke Group (supra).

In Goodricke Group (supra) this Court noticed Ajoy Kumar Mukherjee
(supra) and Kunnathat Thathunni Moopil Nair v. State of Kerala. It was
held:
"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 yield, it does
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 buildings -
indeed there can be no such standardization. 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 and so long as the character of levy remains
the same, i.e., within the four corners of the particular entry, no
objection can be taken to the method adopted. In the cases before us, the
cess is no doubt is calculated on the basis of the yield - for every
kilogram of tea leaves produced in a tea estate, a particular cess is
levied. But that is a well - accepted mode of levy of tax on land. The tax
is upon the land - upon the "tea estate" which is classified as a separate
category, as a separate unit, for the purpose of levy and assessment of the
said cess quantified on the basis or the quantum of produce of the tea
estate. It cannot be characterized as a tax on production for that reason.
As pointed out in Moopil Nair - "a tax on land is assessed on the actual or
potential productivity of the land sought to be taxed". There cannot be
uniform levy unrelated to the quality, character or income/yield of the
land. Any such levy has been held to be arbitrary and discriminatory."

With utmost respect, the approach in the legal situations obtaining
herein may not be correct. The said opinion stares on the face of India
Cement(supra), Orissa Cement(supra) and P. Kannadasan (supra). India Cement
(supra) came to be interpreted correctly in Kannadasan but the same learned
Judge appears to have taken a different view in Goodricke, Group (supra).

The Court therein did not consider the Moopil Nair's case in its
proper perspective where a flat rate of tax imposed on lands was held ultra
vires Article 14 of the Constitution of India.

In Moopil Nair (Supra), this Court held:
"...Ordinarily, a tax on land or land revenue is assessed on the actual or
the potential productivity of the land sought to be taxed. In other words,
the tax has reference to the income actually made, or which could have been
made, with due diligence, and, therefore, is levied with due regard to the
incidence of the taxation. Under the Act in question we shall take a
hypothetical case of a number of persons owning and possessing the same
area of land. One makes nothing out of the land, because it is arid dasert.
The second one does not make any income, but could raise some crop after, a
disproportionately large investment of labour and capital. A third one, in
due course of husbandry, is making the land yield just enough to pay for
the incidental expenses and labour charges besides land tax or revenue. The
fourth is making large profits, because the land is very fertile and
capable of yielding good crops. Under the Act, it is manifest that the
fourth category, in our illustration, would easily be ale to bear the
burden of the tax. The third one may be able to bear the tax. The first and
the second one will have to pay from their own pockets, if they could
afford the tax. If they cannot afford the tax, the property is liable to be
sold, in due process of law, for realisation of the public demand. It is
clear, therefore, that inequality is writ large on the Act and is inherent
in the very provisions of the taxing section.

Moopil Nair (supra), therefore, states about the productivity as a
basis for taxation and not the actual production or yield by weight. Yield
from year to year would depend on a large number of factors including the
expertise and financial health of the company managing the estate, costs
incurred in development and maintenance of the garden and many other
factors. It would not, therefore, be correct to deduce relying on or on the
basis of Moopil Nair (supra) as has been sought to be done in Goodricke
Group (supra) that tax on land can be measured by the "yield" of land and
then translate it to the weight of the tea produced.

The yield of tea from old tea estates may be qualitatively and
quantatively less than the new tea estates Quality and quantity of the
yield of tea may not only depend upon the age of the tea plants but also
the quality of the land and thus, the yield both quality or quantitywise
would depend upon several factors, namely, quality of the soil,
geographical as well as climate conditions and several other factors.

As cess has not been imposed on the leasehold in respect of sub-soil
mineral right vis-a-vis surface land as a unit, the impugned tax must be
held to be beyond the legislative competence of the State in terms of Entry
49 of List II of the Constitution of India. So far as tea is concerned as
even agricultural activities thereof had been taken over and as in terms of
Section 30 of the Tea Act the value of tea is to be determined by the
Central Government, no tax can be imposed on tea which will have a direct
impact on the value thereof.

As coal is also an essential commodity in terms of Essential
Commodities Act, 1955, its distribution, marketing as also price is
regulated and controlled by Colliery Control Order 1945 made under the
Essential Commodities Act. As the price of coal is to be determined by the
Central Government or the Coal Controller under the Colliery Control Order
1945 which was continued under Essential Commodities Act, 1955 and thus
being covered by Entry 33 List III of the Seventh Schedule of the
Constitution of India, no tax on coal can be imposed which will have a
direct nexus on the value thereof. The impugned Acts must be construed
having regard to the other statutes operating in the field.

A statute will not be valid unless the defects pointed out are
removed. Such removal of the defects must be done keeping in view the
principle of 'legislative competence'. Even the Parliament could not
validate an Act which was enacted without proper legislative competence. As
the measure of tax levied led to the declaration of the law invalid being
in truth and substance to be beyond the competence of the State Legislature
by reason of the impugned Acts, the levy cannot be said to have been
revalidated. They were required to be reenacted but such reenactment must
also be in tune with any or other entries made in List II of the
Constitution of India.

The definition of mineral is wide. A coal washing plants or coke-oven
plants are collieries or coal mines and 'washed coal', 'slurry', sludges
and cokes of different grades would also come within the definition of
'coal'. Thus, the owners of the industries like coke-oven plants or coal
washeries which may be set-up either within the precincts of a coal mine or
outside the same, would be subject to payment of tax on their products
although carrying out such operations is controlled and governed by
Parliamentary regulatory statutes. Having regard to the definition of a
mine vis-a-vis that of "immovable property" and "land" contained in Cess
Act, 1880, reconciliation of imposition of tax on 'coal' and 'tea' is not
possible. By way of example we may notice that coke produced from a coke-
oven plant has specifically been included as a subject matter of tax and
the weight thereof is measured on the basis that one tonne of coke would be
equivalent to 11/2 tonne of coal. Coke is an industrial product,
manufactured in coke-oven plants, some of which are highly sophisticated
ones but even such a material has not been exempted from the purview of the
statutory imposts.

As any building, factory or standing crops would not come within the
purview of definition of "immovable property" under the Bengal Cess Act,
1880; "tea estate" as such having regard to its definition cannot be
treated to. be one unit so as to capable of being levied any land tax. Tax
on land is leviable only upon the owner of the and not upon those who have
no right thereover. Tea estate as such cannot be treated as a unit under
the Bengal Cess Act and consequently under the impugned statutes.

I, therefore, am of the opinion that the in the instant case tax has
been imposed not on the tea estate as a unit but on the activities of land
inasmuch as growing of tea would be such activity which having regard to
the provisions of the Tea Act squarely falls within the purview of Entry
52, List I.

AN OVERVIEW OF SOME OF THE DECISIONS OPERATING IN THE FIELD:

We may now briefly consider amongst others the decisions, relied upon
by the learned counsel appearing on behalf of different States.

In The Anant Mills Co. Ltd. etc. etc. v. State of Gujarat  this Court
was considering the validity of the provisions of the conservancy charges
levied by Municipal Corporation wherefor classification of property had
been made for the purpose of computation of conservancy charges at "higher
rates on certain special classes of properties like factories, textile
mills etc. vis-a-vis other properties. The questions which have been raised
herein were not raised in that case. The core question which was posed
therein was as to whether having regard to the affidavit filed on behalf of
the respondent Corporation the classification could be upheld on the basis
that total expenses to be incurred for conservancy service is required to
be found out first whereafter, different rates of conservancy tax fixed for
a particular class of property must be related to the cost involved in
supply of conservancy service to that class. The Court held that a broad
and general estimate of the cost of conservancy service and the tax
receipts after taking into account the relevant factors would satisfy the
requirement of law. If a broad meaning of land for the purpose of
imposition of conservancy tax is required to be given, the same would
include mineral which would, empower the State to levy tax on mineral. Such
a finding would lead to an absurd result and make Entry 54 of List I
otiose.

Therein the fact situation was absolutely different insofar as the
definition of land contained in Clause 30 of Section 2 of the Corporation
Act was wide enough. The Cess Act defines land and immovable property
differently. Keeping in view the activities carried on the land itself
although the same was beneath the surface, this Court held that the mains
buried in the soil being in the possession of the company would come within
the purview of the definition of land stating:
"These mains are fixed capital vested in land. The company is in possession
of the mains buried in the soil, and so is de facto in possession of that
space in the soil which the mains fill, for a purpose beneficial to itself.
The decisions are uniform in holding gas companies to be rateable in
respect of their mains, although the occupation of such mains may be de
facto merely, and without any legal or equitable estate in the land where
the mains lie, by force of some statue."

In State of Karnataka v. Drive-In Enterprises, [2001 (4) SCC 60], it
is observed:
"Whereas in the present case, the vires of an enactment is impugned on the
ground that the State Legislature lacks power to enact such an enactment,
what the court is required to ascertain is the true nature and character of
such an enactment with reference to the power of the State Legislature to
enact such a law. While adjudging the vires of such an enactment the court
must examine the whole enactment, its object, scope and effect of its
provision. If on such adjudication it is found that the enactment falls
substantially on a matter assigned to the State Legislature, in that event
such an enactment must be held to be valid even though nomenclature of such
an enactment shows that it is beyond the competence of the State
Legislature. In other words, when a levy is challenged, its validity has to
be adjudged with reference to the competency of the State Legislature to
enact such a law, and while adjudging the matter what is required to be
found out is the real character and nature of levy."
[Emphasis supplied]

Imposition of cess calculated on value of coal, tea etc. for the
reasons stated hereinbefore has been found to be beyond the legislative
competence of the State.

Furthermore, it is, one thing to say that a land is being used as a
hat as was in, the case of Ajoy Mukherjee (supra) or forest as was the case
of Moopil Nair (supra) but it is another thing to say that a tax is imposed
on activities of land confined to extraction of mineral which is clearly
beyond the power of the State Legislature. On the same analogy levy of
house tax is permissible having regard to the nature and object thereof
wherefor there can be a valid classification. The annual valuation of the
house on the basis of income must be considered for the purpose of
quantifying the tax. But the said principle would not apply in the case of
tax on production of minerals.

We, having regard to the decisions of this court in Buxa Dooars and
India Cement which are directly on the point, do not think that the
approach to the questions involved in the instant case should be different.
In imposing tax. having regard to political or economical consideration it
may be permissible to allow some concession to the small owners or income
arising from the land may be taken into consideration but as would be
noticed from the decisions the validity of such taxes have been upheld in
relation to the land or the structures standing thereupon or a tax on
circumstances and properties.

We may notice that in District Board of Farrukhabad v. Prag Dutt and
Ors. [AIR 1948 Allahabad 382] a distinction was made between a tax on
circumstances and properties and tax on incomes saying that the fundamental
difference being that income tax can be levied for their own income and if
there is no income no tax is payable. But in the case of circumstances and
property tax, where a man's status has to be determined his total business
turnover may be considered for purposes of taxation, though he may not have
earned any taxable income. The question posed therein was considered from
the angle that the business turnover may be a relevant factor for
determination of man's status.

Similarly, in Assistant Commissioner of Urban Land Tax Madras and
Ors., etc. v. Buckingham and Carnatic Co. Ltd. etc, it has been held that
tax directly imposed on land and buildings must have definite relation
thereto.
                        [Emphasis supplied]

Herein there does not exist any such relation.

In Union Carbide India Ltd. v. Union of India, the question which
arose for consideration was as to whether the Aluminium Cans which are used
only for the purpose of manufacturing flashlights, would attract excise
duty. The marketability of Aluminium cans came up for consideration for
determination of the question as to whether any excise duty can be levied
on such aluminium cans and not for any other purpose. We have noticed that
green tea laves are marketable.

In D.G. Gose and Co. v. State of Kerala, while upholding the validity
of the Kerala Building Tax Act, this Court considered the nature thereof,
namely, it was on recurring tax, observing that the method of fixing annual
value on the basis of the figures mentioned in the assessment books of
local authorities is valid as adequate procedure for determination thereof
had been laid down. The opinion expressed by Singhal, J. with utmost
respect is doubtful.

Herein, the amount of cess required to be determined on coal and tea
will have a direct nexus with the productivity thereof which has got
nothing to do with annual valuation of the land as no procedure therefore
can be or has been laid down. The mineral is a part of the land and thus
price of a mineral, having regard to the decisions of this Court, cannot be
said to be a valid method for determination of the annual value of the cost
being levied.

Under Section 30 of the Tea Act, the Central Government has the power
to fix the market price. Fixation of an uniform market price by the Central
Government would not be possible if it is held that a different rate of
cess can be levied, by different States which will have a direct impact on
the sale price thereof.

In State of Rajasthan v. Vatan Medical & General Store, this Court
upheld the power of the State to make a law with respect to manufacture of
intoxicating liquor, which power evidently exists in the State under
Entries 8, 1, 6 and 51 List II of. Seventh Schedule of Constitution of
India read with Article 47 thereof. Having recorded that finding, it was
observed that once the act come within the four corners of the State
entries, no Central Law made further in terms of List I or List III can be
held to be valid. The said decision has no application in instant case.

In Ralla Ram v. Province of East Punjab, [1948 FCR 207], annual value
of the buildings and lands was to be ascertained by estimating the gross
annual rent at which such land or building with its appurtenances and any
furniture that may be left for use or enjoyment with such building might
reasonably be expected to let from year to year. In that case, therefore,
gross annual rent so fixed or expected reasonable rent was made the
criteria, wherefor a procedure had been laid down. It may be noticed that
in Ralla Ram (Supra), also the Federal Court stated that measure of tax
throw light on the general character of the tax. The levy was upheld
observing that the encroachment into the federal field is not so great as
to characterize it as a colourable piece of legislation. In the instant
case, however, as we have noticed hereinbefore that the encroachment of the
State Legislation into the Parliamentary Legislation is grave in nature.

By reason of the impugned legislations, only the mode of collection of
tax has been altered to the effect that instead and place of price of tea
and on despatches of coal and tea; the same is to be levied on value
thereof, excluding the elements of royalty, tax etc. Pit-head value of the
coal wherefor expenses were required to be incurred which would include the
income from the coal mine, whereas value of coal at the points of despatch
from coal mine would also include the amount of royalty or other taxes paid
thereupon. Thus, the value of coal is to be determined when the same was at
the pit-head or dispatch would not make any determinative changes in the
nature and character of the tax. Nor as indicated hereinbefore, makes any
substantial difference in the value of coal.

In Ralla Ram (supra) citing Lord Atkin in Gallahagar v. Lynn, it was
held:
"It is well established that you are to look at the true nature and
character of the legislation", Russell v. The Queen, the pith and substance
of the legislation. If on the view of the statute as a whole, you find that
the substance of the legislation is within the express powers, then it is
not invalidated if incidentally it affects matters which are outside the
authorized field. The legislation must not under the guise of dealing with
one matter in fact encroach upon the forbidden field. Nor are you to look
only at the object of the legislator. An Act may have a perfectly lawful
object, e.g., to promote the health of the inhabitants, but may seek to
achieve that object by invalid methods, e.g., direct prohibition of any
trade with a foreign country. In other words, you may certainly consider
the clauses of an Act to see whether they are passed 'in respect of the
forbidden subject."

In Ajay Kumar Mukherjee v. Local Board of Barpeta,  imposition of tax
on land used as a market was upheld on the ground that the use to which the
land is put, can be taken into account. In the instant case, the use of
land is extraction of coal or production of tea. Having regard to the
Parliamentary Acts, any tax on the activities of land is forbidden. In the
case of Ajay Kumar Mukherjee (Supra), the State even could impose tax in
terms of Entry 26 of List II as was observed in I.T.C. Ltd. (supra).

In Goodricke Group (Supra), Jeevan Ready, J., in no uncertain terms
held that overlapping of two fields may be permissible but the conflict has
to be determined having regard to the fact whether it is slight as well as
the basis as to whether such overlapping is on fact or is on law. Despite
slight overlapping which is permissible, distinctiveness of the nature of
levy under the State Act vis-a-vis the Parliamentary Act must exist.
However, once an overlapping takes place in law, the State Legislation in
view of the declaration made in the Parliamentary Legislations would be
unsustainable. Reasoning adopted in Goodricke Group (supra) is contrary to
those assigned in Kannadasan (supra)

In H.R.S. Murthy (Supra), the argument that the expression "Royalty"
does not signify royalty as commonly understood but was confined to the
rent payable for the beneficial use of the surface of the land was repelled
stating:-
"It is therefore obvious that "royalty which follows the expression "lease
amount" is something other than the return to the lessor or licensor for
the use of the land surface and represents as it normally connotes the
payment made for the materials or minerals won from the land."

In India Cement (supra), Murthy was overruled holding that therein
this Court did not notice Section 9(2) of 1957 Act. It was held that there
is a clear distinction between tax levied directly on land and tax on
income arising from land.

In New Manek Chowk Spinning & Weaving Mills Co. Ltd. v. Municipal
Corporation of the City of Allahabad, this Court after referring to the
several decisions observed that Entry 49 of List II of the Seventh Schedule
only permitted levy of tax on land and building. It did not permit the levy
of tax on machinery contents (sic) in or situated on the building even
though the machinery was there for the use of the building for a particular
purpose. Similar view has been taken recently in Krishna Mohan (P) Ltd
(supra).

Referring to a large number of decisions, some of which have been
noticed herein in before, this Court in India Cement (supra) held that as
no tax was leviable under the Act impugned therein, if no mining activities
were carried on; hence, it was manifest that the same was not related to
land as a unit which was the only method of valuation of land under Entry
49, the tax being related to minerals extracted and thus was held to be bad
in law. It was held "royalty is payable on a proportionate basis of the
minerals extracted. It may be mentioned that the Act does not use dead rent
as a basis on which land is to be valued." Royalty may not be the produce
of the land or the yield of the land, but it is directly linked with the
income of the land or the value of the minerals extracted.

In Orissa Cement (Supra), Section 5(2) of the Orissa Cess Act, 1962
read as follows :
"(2) The rate per year at which such cess shall be levied shall be
(a) in case of lands held for carrying on mining operations in relation to
any mineral, on such per centum of the annual value of the said lands as
specified against that mineral in Schedule II;

In Orissa Cement (Supra), therefore, annual value was to be determined
not only on the basis of royalty but also on the basis of the dead rent.
Even then, Section 5(2) of the said Act was declared ultra vires. [See also
Federation of Mining Association (supra)]

Only because cess is levied on annual rental value, the same by itself
would not be determinative of the character of the levy. Royalty levied on
the mineral under Section 9 of the 1957 Act must be held to have a direct
relation with the income derived from the mineral bearing land. Royalty is
measured in terms of the amount of coal extracted. The value of the coal
will, thus, have a direct nexus on the royalty being the lessor's share on
the demised land. Thus, any tax imposed on extracted minerals would be
prohibited as the same will have an adverse effect/impact on the mineral
development. For levying any tax on land in terms of Entry 49 of List II,
it must have a direct bearing on the land as a unit.

Any attempt on the part of the State to impose tax on mineral or tea
indirectly may not be construed to be a simple overlapping on the subject
but overlapping in law having a direct bearing on the competing entries
contained in different lists in the Seventh Schedule of the Constitution of
India. India Cement has approved Buckingham and Carnatic Co. Ltd. (Supra)
which is an authority for the afore-mentioned proposition but the same was
sought to be distinguished in Goodricke's case, only on the premise that
therein the levy was on the tea estate. In Goodricke Group (Supra), the
Court did not take into consideration the question that the power to levy
any cess on 'tea' has been taken away in view of the Parliamentary
Legislation having regard to Article 253 of the Constitution of India.

Goodricke Group Ltd.(supra), thus, with utmost respect, cannot be said
to have laid down the correct law.

The state is denuded of its power to levy any tax on 'Tea' whether
processed or unprocessed as tax imposed thereupon will have a direct impact
on the power of the Union Government to fix the value thereof. However, the
same does not mean the State cannot impose any tax on the land. It can but
the same must conform to its legislative competence vis-a-vis relevant
entries of List I.

CONCLUSION:

Under the Nationalization Acts, except some collieries which belong to
the companies engaged in the business of manufacture of steel, all other
mines for all intent and purport belong to the public sector companies
which are subsidiaries of Coal India Limited. It will be a matter of great
concern if the price of coal becomes higher in the State of West Bengal
than in other States.

Despite India Cement (supra) and Orissa Cement (supra) as also various
decisions of this Court, tax has not been imposed taking the land as a
unit. An endeavour has been made to levy cess only by changing the measures
thereof. The State has not taken recourse to measures for removing the
deficiencies in the Acts pointed out by this Court. By reason of the
impugned amendment, the State could not have ignored various decisions of
this Court, as has been pointed out in The Workmen of Firestone Tyre &
Rubber Co. of India P Ltd. and others v. The Management and Ors. wherein it
was held that despite insertion of the proviso appended to Section 11-A of
Industrial Disputes Act the right of the employer to adduce evidence
justifying his action for the first time in such a case is not taken away
by the proviso to Section 11-A. It was held that legal position as existing
prior thereto and changes thereby shall continue stating:
"Another aspect to be borne in mind will be that there has been a long
chain of decisions of this Court, referred to exhaustively earlier, laying
down various principles in relation to adjudication of disputes by
industrial courts arising out of orders of discharge or dismissal.
Therefore, it will have to be found from the words of the section whether
it has altered the entire law, as laid down by the decisions, and, if so,
whether there is a clear expression of that intention in the language of
the section."

A Bench of this Court in Dharam Dutt and Ors. v. Union of India and
Ors. (2003 (10) SCALE 141)observed:
"65. Welfare Association A.R.P., Maharashtra and Anr. v. Ranjit P. Gohil
and Ors.,  is a decision to which both of us are parties. Therein we have
held that it is carmissible for the legislature, subject to its legislative
competence otherwise, to enact a law which will withdraw or fundamentally
alter the very basis on which a judicial pronouncement has proceeded and
create a situation which, if it had existed earlier, the Court would not
have made the pronouncement. Very recently in People's Union for Civil
Liberties (PUCL) and Anr. v. Union of India and Anr.,  in the leading
opinion recorded by M.B. Shah, J. (the other two learned Judges having also
recorded their separate but concurring opinions), the legal position has
been summarized thus:-
"the Legislature can change the basis on which a decision is rendered by
this Court and change the law in general. However, this power can be
exercised subject to constitutional provisions, particularly legislative
competence and if it is violative of fundamental rights enshrined in Part
III of the Constitution, such law would be void as provided under Article
13 of the Constitution. The legislature also cannot declare any decision of
a court of law to be void or of no effect."

Keeping in view that the State has no legislative competence to impose
cess on mineral, the ratio of the said decision shall apply in the instant
case also.

This Court while interpreting binding judgments cannot in effect and
substance overrule the same or read down the principles of law enunciated
therein.

SUMMARY OF OUR FINDINGS:
(i) The federalism under the Indian context points out to the supremacy of
the Parliament and the legislative entries contained in different Lists of
the Seventh Schedule must be construed accordingly.
(ii) The interpretation of the legislation will depend upon the legislative
entries to which it relates and intent and purport of the makers of the
Constitution and no principle of interpretation can be introduced to the
effect that the Court should lean towards a State.
(iii) Tea and coal being subjects of great importance, the Parliament have
taken over the complete control of the entire field in respect thereof and
other minerals in terms of the Tea Act, 1953 and Mines and Minerals
(Regulations and Development) Act respectively.
(iv) Having regard to the purport and object of the said Parliamentary Acts
and the declarations contained in Section 2 of the 1957 Act and the 1952
Act, the State must be held to be denuded of its power to levy any tax on
coal or tea, particularly, having regard to the provisions of Sections 9,
9A, 13, 18 and 25 of the 1957 Act and Sections 10, 13, 15, 25 and 30 of the
Tea Act. Field of taxation on mineral is also covered by Section 25 of the
1957 Act. The field of taxation under the Tea Act is specifically covered
by Section 25 thereof.
(v) The State being owner of the minerals and grant of mineral right being
controlled by the Parliamentary statute, the State is denuded of its power
to impose any tax on mineral right in terms of Entry 50 of List II of the
Seventh Schedule of Constitution of India.
(vi) Having regard to the underlying object of the 1953 Act and the 1957
Act, even if the doctrine of pith and substance is applied, it may not be
possible to hold that the State legislature has only incidentally
encroached upon the legislative field occupied by the Parliament.
(vii) Levy of tax on coal bearing lands and mineral bearing lands where
mining operations are being carried out through the process of incline or
digging pits is illegal, inasmuch as the underground mining right would be
larger in area than the surface right and, thus, it is not possible to
uphold the validity of, such statute with reference to the extent of the
surface right as mineral is being extracted from a larger underground area.
Different rights may belong to different persons over the same surface land
and similarly different rights may belong to different persons in respect
of or over underground rights end the impugned statutes having not made any
provision of different method of levy, the impugned statutes are ultra
vires.
The impugned provisions do not specify who would be liable to pay in
relation to different rights and who would be considered to be the owner of
the land and to what extent. If the extent of surface land is treated to be
the unit, the same having regard to different mining rights granted to
different persons over different minerals would all be liable to pay cess
although they may not have any right over the surface at all or exercise
such right thereover only over a part thereof.
As minerals bearing lands cannot be treated as an independent unit in
respect of which tax can be invoked, the impugned Acts must be held to be
unconstitutional.
(viii) Tax on lands and buildings in terms of Entry 49 of List II of the
Seventh Schedule of the Constitution of India can be levied on land as a
unit and not otherwise.
(ix) As green tea leaves is marketable, the decision in Gcodricke group
(supra) having mainly been rendered on the premise that green tea leaves is
not marketable must be held to have passed subsilentio and, thus, does not
lay down correct legal position.
(x) In view of the definitions of 'land' and 'immmovable property'
contained in the Bengal Cess Act, 1880, as no road cess or public works
cess can be imposed on standing crops or any kind of structures, houses,
shops or other buildings which would include factories and workshops for
processing tea, no levy by way of cess can be imposed by reason of the
impugned Acts either on the mining leasehold or the tea estate containing
standing crops as also houses and buildings.
(xi) Measure of a tax although may not be determinative of the nature
thereof, the same will play an important role in determining the character
thereof particularly keeping in view the purpose and object the
Parliamentary Acts seek to achieve. In determining the legislative
competence the taxing event also plays an important role.
(xii) The Tea Act having been exacted in terms of Entries 10 and 14 of List
I as also Article 253 of the Constitution, the State is completely denuded
of its legislative power in relation thereto. The expression 'Tea' should
be given a broad meaning and Entry 52 of List I of the Seventh Schedule of
the Constitution should be interpreted in relation to tea having regard to
the purport and object it seeks to achieve.

For the aforementioned reasons, I respectfully dissent with the
opinion of Brother Lahoti, J.

I would dismiss the appeals of the State of West Bengal and allow the
writ petitions as also the appeals including C.A. No. 5027 of 2000. No
costs.

ORDER

Leave granted in the Special Leave Petitions.

In view of the majority opinion delivered by Hon'ble Mr. Justice R.C.
Lahoti, on behalf of himself, Hon'ble the Chief Justice, Hon'ble Mr.
Justice B.N. Agrawal and .Hon'ble Dr. Justice AR. Lakshmanan, the Civil
Appeals, except 'Civil Appeal Nos. 1532-33 of 1993, and Writ Petitions are
dismissed. Civil Appeal Nos. 1532-33 of 1993 are allowed.


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