S.H. Sheth, J.
1. The petitioner is a company engaged in the business of manufacturing cement. The Mines and Minerals (Regulation and Development) Act, 1957 came into force on 1st June 1958. It provides for the regulation of mines and the development of minerals in the country. Section 9, provides for charging royalty when a mining lease is granted. The petitioner is a holder of a mining lease and is required to pay royalty. Entry 8 in Second Schedule to the Act prescribes the rate of royalty in case of 'Limestone.' Originally it was five per cent of the sale price at the pit's head subject to a minimum of thirty-seven paise per tonne. Under sub-section (3) of S. 9, the Central Government has the power to enhance or reduce the rate of royalty in respect of minerals specified in the Second Schedule. On 31-10-1962 the Central Government published a notification under S. 9(3) of the Act whereby a new rate of royalty was substituted for the original one specified in the Second Schedule in case of limestone. That notification came into force on 10th Nov. 1962. The new rate was Re. 00-75 P. per tonne but subject to a rebate of Re. 00-38p. per tonne to be given on limestone beneficiated by froth floatation method. On 29th June 1968 another notification was issued. By that notification, a new rate was substituted for one which was made effective under the notification of 1962. The 1968 notification classified limestone into two categories. The first category consisted of superior grade with 45% or more of CaO Royalty of one Rupee and twenty-five paise per tonne was prescribed for this grade. These categories of limestone were of inferior grade with less than 45% of CaO. Seventy-five paise per tonne was the royalty prescribed for this grade. On 29th Jan. 1970, the third notification was issued which became effective on 7th Feb. 1970. By that notification, the categorization of limestone was done away with and royalty at the flat rate of Rs. 1.25 p. per tonne was levied. It is these notifications against which this petition is principally directed.
2. Mr. Patel who appears on behalf of the petitioner has raised the following five contentions for our consideration: -
I. Thirty-ninth Constitutional Amendment by virtue of which the Mines and Minerals (Regulation and Development) Act, 1957 was inserted in the Ninth Schedule is violative of the rule of law laid down by the Supreme Court in Kesava- nanda Bharati's case (AIR 1973 13C 1461).
II. The notification issued in 1970 was ineffective and void because it was published within four years from the earlier notification issued in 1968.
III. The notifications of 1962, 1968 and 1970 had been issued without authority and, therefore, void because sub-section (3) of S. 9 of the Act does not empower the Central Government -
(a) to revise the rates of royalty before a period of four years from the e last revision ;
(b) To impose more than 20 % of the sale price at the pit's head as royalty;
(c) To change the method of fixing the royalty be prescribing a fixed royalty;
(d) To classify and split the mineral for the purpose of charging different rates of royalty; and
(e) To give rebate.
IV. (a) No express power has been conferred upon the Central Government by the Act either: -
(i) To change the method of fixing royalty;
(ii) To give rebate; and
(iii) To split the minerals, because these matters pertain to the field of legislative policy.
(b) If such power is implied,
(i) No objective standards or norms have been provided in the Act and the matter is left to the arbitrary will of the Government;
(ii) The power has been unreasonably exercised; and
(iii) The rates fixed on the basis of gradation are discriminatory.
V. Section 9 of the Act is unconstitutional for want of legislative competence.
3. Turning to the first contention, which Mr. Patel has raised before us, it is difficult to appreciate the contention, which he faintly raised for being rejected. By Thirty-ninth Constitutional Amendment, the Mines and Minerals (Regulation and Development) Act, 1957 has been inserted in the Ninth Sch. It is now at Entry No. 90. Acts specified in the Ninth Sch. are protected against infringement or abridgement of fundamental rights conferred by any of the provisions in Part III of, the Constitution. Mr. Patel faintly and without substance tried to argue that Thirty-ninth Constitutional Amendment inasmuch as it pertains to the insertion of the Mines and Minerals (Regulation and Development) Act, 1957 violates equality clause incorporated in Art. 14 of the Constitution. He did not make good that contention of his by raising an argument in support thereof. Even otherwise, it is difficult to think how a constitutional amendment by which protection under Art. 31B is given to the said Act violates the concept of basic structure enunciated in Kesavananda Bharati's case AIR 1973 SC 1461 by the Supreme Court. In fact, he has stated this contention for being rejected and it is not necessary for us to examine it any more. The first contention raised by Mr. Patel is, therefore, rejected.
4. We now deal with the fifth contention raised by Mr. Patel. He has tried to argue that S. 9 of the Act is unconstitutional because it is a tax in a provision, which falls under Entry 50 of the State List. Mr. Nanavaty, on the other hand, has tried to argue that it falls under Entry 54 of the Union List. Entry 50 in State List reads: -
'Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development.'
5. Entry 54 in the Union List reads thus: -
'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.'
There is no dispute about the fact that the Act has been enacted under Entry 54 of the Union List. Mr. Patel has, however, contended that so far as S. 9 is concerned, it falls directly under Entry 50 of the State List. Entry 50 empowers the State Legislature to make law imposing taxes on mineral rights, subject indeed to any limitations which Parliament may impose by law in relation to mineral development. Entry 54 in the Union List empowers the Parliament to enact a law regulating mines and mineral development in public interest after declaring that it is expedient in public interest to do so. S. 2 of the Act specifically declares 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 provided in the Act. Having made this declaration in S. 2 of the Act, the Parliament passed the Act. The question, therefore, which has arisen for our consideration is whether royalty which the Union Government is authorized to charge under S. 9 is a tax on mineral rights within the meaning of Entry 50 of the State List. Mr. Patel has tried to argue that royalty is not a fee, firstly, because there is no service, which is rendered to the holder of a mining lease or to the community of the holders of mining leases. Secondly, it is not a fee because nothing is spent by the Central Government on the development of mines or minerals. He has next tried to show that the entire amount of royalty recovered by the Central Government from the holders of mining leases is appropriated to the Consolidated Fund of India and is spent for meeting the general purposes of the Union.
6. He has next tried to show from the petition that the payment of royalty produces no particular benefit to the payers. He has next tried to argue that it is a compulsory exaction of money by public authority and is, therefore, a tax. In this context, reference has been made to two decisions of the Supreme Court and one decision of Punjab and Haryana High Court. In H. R. S. Murthy v. Collector of Chittoor, AIR 1965 SC 177, the meaning of the expression 'royalty' used in S. 79(1) of the Madras District Boards Act, 1920, was considered by the Supreme Court. S 79 which has been reproduced in the report provided: -
'The annual rent value shall, for the purposes of S. 78, be calculated in the following manner: (i) In the case of lands held direct from Government on rotary tenure or on lease or licence, the assessment, lease amount, royalty or other sure payable to Government. For the lands, together with any water-rate which may be payable for their irrigation, shall b-taken to be the annual rent value.'
S. 79 (1), therefore, inter alia, used in juxtaposition the lease amount and royalty. It was contended in that case before the Supreme Court that since,
'the impugned land cess was payable only in the event of a mining lease winning the mineral and so paying the royalty and not when' no minerals were extracted, it was in effect a tax on mineral won and, therefore on mineral rights.'
The Supreme Court observed that 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 in substance is the nature of the tax. It was further observed in that decision that 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 oh the quantity of mineral extracted. But it does not stamp it as a tax on either the extraction of the mineral or on the mineral right. Royalty was construed to connote 'the payment made for the materials or minerals won from the land.'
7. The next decision to which reference has been made is in M. P. V. Sundararamier & Co. v. State of Andhra Pradesh, AIR 1958 SC 468. This decision has been pressed into service in order to show that in List I while entries 1 to 81 mention 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. Similarly, in List II, Entries 1 to 44 mention matters on which the States can legislate; Entries 45 to 63 enumerate taxes which the State legislatures can impose. In other words, the scheme of the two Lists is to specify the subjects on which the Parliament or the State Legislatures as the case may be, may legislate and then specifies the taxes in respect of which legislation can be passed by Parliament or the State Legislatures as the case may be, for imposing them. It has been argued that neither the Union List nor the State List empowers the Union or the States to levy royalty. Secondly, since royalty is a tax and since there is no legislative competence to levy it, it cannot be levied. We are unable to uphold the contention that, royalty is a tax. It may not be a fee but it is not a tax. S. 9 itself elaborates the nature of royalty, which can be levied. It, inter alia, provides that the holder of a mining lease shall pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area. This elaboration in S. 9 itself clearly shows that royalty is a payment for the mineral which is removed or consumed by the holder of a mining lease. The sub-soil property ordinarily belongs to the Union. When mining lease is granted in favour of a person, he wins minerals from a particular area by application of labour and by spending on winning the minerals. 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 expression 'royalty' used in S. 9 appears to us to be 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. No holder of a mining lease can say that what it lying beneath the soil becomes his own property merely by virtue of the fact that because of mining lease, he has won those minerals. Basically and fundamentally it is the property of the Union which is brought on the surface from beneath the soil by the lessee. In consideration of the labour and the enterprise which the holder of a mining lease applies for winning those minerals from sub-soil strata, he takes away a part; while the Union, the owner of those minerals, takes away another Part. Therefore, in our opinion, 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. Clause (28) of Art. 366 defines the expression 'taxation' so as to include imposition of any tax or impost, whether general or local or special, and states that 'tax' shall be construed accordingly. 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. In Dr. Shanti Saroop Sharma v. State of Punjab, AIR 1969 Punj and Har 79, the question as to the true nature and character of royalty arose in the context of this very Act and in the context of R. 20 of Punjab Minor Mineral Concession Rules. The view which the Punjab High Court has taken in this behalf is that royalty is neither a tax nor a fee but is more akin to rent. In that decision, several definitions of royalty have been examined by the Punjab High Court. In Wharton's Law Lexicon, Fourteenth Edition, royalty is stated to be payment to the owner of minerals for the right of working the same on every ton or other weight raised. In Stroud's Judicial Dictionary of Words and Phrases, Third Edition, it has been stated to be the reddendum, which is variable and, which depends upon the quantity of minerals gotten. In Mozley and Whiteley's Law Dictionary (7th Edition), it has been stated: -
'A pro rata payment to a grantor or lesson on the working of the property leased or otherwise on the profits of the grant or lease.'
In Corpus Juris Secundum, Vol. 77, 'Royalty' has been stated to be a payment made to the landowner by the lessee of a mine in return for the privilege of working it. It is, therefore, clear that royalty is the price paid for the privilege of exercising the right to explore the minerals. It may be the whole or a part of the consideration of a mining lease. In our opinion, therefore, royalty specified in S. 9 is neither a tax nor a fee but is a payment made by the lessee to the lesson (in case of mining lease) for removing or consuming the sub-soil property which the lessee has won by the application of his labour and enterprise. Therefore, since royalty is not a tax, the subject-matter of S. 9 is not covered by Entry 50 in the State List. It falls squarely under Entry 54 of the Union List because a lessee who is authorised to operate a mine and win minerals there from, pays price of that property, is prescribed by Parliament, to the lesson or the owner of the minerals the Union of India. S. 9, therefore, is not ultra vires the legislative competence of Parliament. The fifth contention raised by Mr. Patel, therefore, fails and is rejected.
8. The second contention which Mr. Patel has raised is that the notification of 1970 was issued by the Central Government without authority and in violation of the limitations imposed by the Section itself upon the Central Government. In this behalf Mr. Patel has placed reliance upon proviso (b) to S. 9 which reads as under:-
'Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of four years.'
Now, in this case, the second Schedule to the Act with Entry 8 pertaining to 'Limestone' came into force on l st June 1958. S. 9 of the Act empowers the Central Government to enhance or reduce the rate specified in the Sch. The first notification was issued by the Central Government after the Act came into force and it became effective on 10th Nov. 1962. Obviously, therefore, it was issued after the expiry of four years. The second notification was issued in 1968 and it came into force on 1st July 1968. The second notification was also issued after the expiry of four years from the date of coming into effect of the first notification. So far as proviso (b) to S. 9 was concerned, it was not violated by the Central Government while issuing these two notifications. However, the third notification was issued within four years from the date of coming into force of the second notification. Whereas the second notification came into force on 1st July 1968, the third notification came into force on 27th Feb. 1970. It is clear, therefore, that it was issued within a period of four years and that, therefore, it violated proviso (b) to S. 9 of the Act. It was, therefore, unlawful. This notification on account of this reason has been struck down by the High Court of Delhi, the High Court of Mysore, Rajasthan High Court and this High Court. In Special Civil Appln. No. 2444 of 1971 decided on 14-12-1976 (Guj) a Division Bench of this Court following the decision of the High Court of Delhi in Writ Petn. No. 1343 of 1970 struck down the notification of 1970 because it was issued in violation of the provision contained in Proviso (b) to S. 9. In out opinion, therefore, notification of 1970 is liable to be struck down as it is in violation of proviso (b) to S. 9.
9. The next aspect which arises in this context relates to the effect of substitution. It has been argued that with the issuance of notification of 1970 the notification of 1968 stood cancelled and with the issuance of the latter-mentioned notification, notification of 1962 stood cancelled and that, therefore, with the striking down of notification of 1970, there is nothing which is left in the field and that vacuum is created. We will presently consider the effect of substitution. However, so far as liability to pay is concerned, it accrued with the coming into force of the Act on 1st June 19581 and it continued to accrue on that basis until the 1962 notification was issued. With the issuance of 1962 notification the liability to pay royalty accrued there under and continued to be in force until 1968 notification was issued. With the issuance of 1968 notification the liability to pay royalty accrued under that notification and remained operative until 1970 notification was issued. When a Court of law strikes down an Act, a section, a rule or a notification, it takes effect from the date of its issuance and makes it completely honest. The judicial declaration of invalidity of a notification is as if it was not issued and did not exist, Therefore, so far as the liability to pay royalty was concerned, in any case, it remained effectively until 1970 notification was issued. In our opinion, on this ground, the liability to pay royalty which accrued by virtue of notification of 1962 and 1968 cannot be called in question.
10. Now, what is the effect of striking down of notification of 1970? Does it leave a void in the field or does 1968 notification continue to operate? This takes us to the consideration of the question of substitution of one notification for another. Quite a few decisions have been shown to us in this context. Mr. Patel has invited our attention to the decision of the Supreme Court in Firm Mehtab Majid and Co. v. State of Madras, AIR 1963 SC 928. In that case, Rule 16 of Madras General Sales Tax Act (Turnover and Assessment) Rules, 1939, was substituted by another rule made in 1955. The substituted rule was declared invalid. The question which arose was whether the old rule continued to occupy the field. The principle which the Supreme Court laid down is that once the old rule has been substituted by the new rule, the old rule ceases to exist and does not get automatically revived when the new rule is held to be invalid. The next decision is in Koteswar Vittal v. K. Rangappa Baliga and Co. AIR 1969 SC 504. In that case, a prohibition order was issued by the Government of Travancore-Cochin which continued to be in force right up to 30th Mar. 1958. The Act as originally passed continued the prohibition order of 1119 with the qualification that it was to remain in force unless it was superseded or modified by the competent authority under the provisions of the Act. When the Prohibition Order of 1950 was issued on 8th Mar. 1950 it was not laid down that it was being issued so as to supersede the earlier Prohibition order of 1119. The question which arose for the consideration of the Supreme Court was whether on the issuance of Prohibition Order of 1950 the Prohibition order of 1119 ceased to exist and whether it got revived when the Prohibition Order of 1950 was struck down. The Supreme Court followed the principle, laid down in the earlier decision to which we have just referred, that once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid. Ex facie these two decisions support the proposition which Mr. Patel has raised before us.
11. Mr. Nanavaty has invited our attention to two more decisions on the subject. In State of Maharashtra v. Central Provinces Manganese Ore Co. Ltd., AIR 1977 SC 879, a similar question arose. Adverting to the connotation of the word 'substitution' the Supreme Court observed that substitution does not necessarily and always connote two severable steps that is to say, one of repeal and another of a fresh enactment even if it implies two steps. The natural meaning of the word 'substitution' is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails, it is totally ineffective so as to leave intact what was sought to be displaced. In that decision, it has been further stated:-
'It could not be inferred that what was intended was that, in case the sub-situation failed or proved ineffective, some repeal, not mentioned at all, was brought about and remained effective so as to create what may be described as a vacuum in the statutory law on the subject-matter.'
In the opinion of the Supreme Court,
'Primarily, the question is one of gathering the intent from the use of words in the enacting provisions seen in the light of the procedure gone through. Here, no intention to repeal, without a substitution, is deducible. In other words there could be no repeal if substitution failed. The two were a part and parcel of a single indivisible process and not bits of a disjointed operation.'
12. The next decision to which our attention has been invited is in Mulchand Odhavji v. Rajkot Borough Municipality, AIR 1970 SC 685. A similar question in that case arose under the Saurashtra Terminal Tax and octroi Ordinance, 1949. In that case, under Octroi Rules framed by the Government, the Municipality could collect octroi duty. The municipality could also frame independent rules on the coming into force of which the rules made by the Government would stand withdrawn. Under that Ordinance, the Government issued the octroi rules. Thereafter the Rajkot municipality made its octroi rules and promulgated them. Ex facie, on the promulgation of the octroi rules made by Rajkot Municipality, Government rules stood withdrawn. The rules made by the Rajkot Municipality were later held to be invalid. The question which arose was whether the octroi rules made by the Government continued to be in force on account of the fact that the octroi rules made by Rajkot Municipality were declared to be invalid. The question was whether Rajkot municipality could levy and recover octroi duty under the rules made by the Government because the Municipal rules had been held to be illegal. It was submitted in that case that the Government rules which were withdrawn on the coming into force of the octroi rules made by the Municipality could not be revived and that no octroi duty could be levied or recovered hereunder with effect from the date on which the Municipal rules, declared illegal, were brought into force. The Supreme Court turned down that submission and observed as follows: When the octroi rules made by the Government were withdrawn the intention obviously was that once the Municipal rules came into operation, the Government rules in so far as they pertained to that municipality would cease to operate. The Government rules, in fact, provided that they would cease to operate 'from the date the said Municipality put into force their independent bye-laws.' Therefore, the Government rules could cease to apply from the day the municipality brought into force its own bye-laws and the rules under which it could validly impose, levy and recover the octroi duty. The withdrawal of the Octroi rules made by the Government never intended a hiatus when neither the Government rules nor the municipal rules would be in the field. Therefore, if the bye-laws made by the municipality could not be legally enforced for some reason or the other, the Government rules continued to- operate because the municipality could not be said to have put into force their independent bye-laws. In reply to these two decisions upon which Mr. Nanavaty has placed reliance, two more decisions have been referred to by Mr. Patel.
13. The first decision is in B. N. Tewari v. Union of India, AIR 1965 SC 1430. In that case, it was held that the 'carry-forward' rules made in respect of communal representation in Central services for Scheduled Castes and Tribes became honest by substitution thereof by a new 'carry-forward' rule, The first 'carry-forward' rule was made in 1952. It was later on substituted by a new 'carry-forward' rule in 1955. On coming into force of the new 'carry-forward' rule of 1955 the 'carry-forward' Rule of 1952 ceased to exist because its place was taken by a new rule. Thus, by promulgating the new rule in 1955, the Government of India itself cancelled the 'carry-forward' Rule of 1952. When, therefore, the Supreme Court struck down the 'carry-forward' Rule of 1955 it did not mean that the carry-forward Rule of 1952 which had already ceased to exist because the Government of India had cancelled it and had substituted a modified rule in its Place was automatically revived. It was a case of substitution of 'carry forward' Rule of 1952 by the new 'carry forward' rule of 1955. The promulgation of the new 'carry forward' rule which was later on struck down by the Supreme Court was interpreted by the Supreme Court as having the effect of canceling the earlier 'carry -forward' rule of 1952.
14. The last decision to which reference has been made is in Premchand Jechand v. K. G. Sanghrani, (1968) 9 Guj LR 777. In that case, Clause 14-A of the Cotton Control Order, 1955 made under the Essential Commodities Act, 1955 was substituted by new Clause 14-A. This, Court held that the effect of substituting new Clause 14-A for the original Clause 14-31 was that the original clause ceased to exist and that, therefore, delegation of power under original Clause 14-A did not continue to operate so as to comprise delegation of power under new Clause 14-A. It may be stated that the new Clause 14-A became ineffective on account of the findings recorded by this Court that it violated Art. 19(1)(f) and 19(1)(g).
15. On a cumulative consideration of these decisions to which our attention has been invited, we are of the opinion that the latest view of the Supreme Court in the matter comprises within its ambit two constituent elements. The first principle is that when a new provision is substituted for the old provision, the old provision does not necessarily cease to operate if the new provision is found to be invalid because what is unlawful or invalid cannot have the force of law and cannot, therefore, substitute the old provision. The second principle, which we deduce, is whether there is, substitution of the old by the new leading to the final cancellation or abrogation of the old depends upon the insertion. In the instant case, the Judicial declaration that the 1970 notification was invalid because it was issued in violation of the proviso (b) to S. 9 means that! 1970 notification had never core into existence lawfully and that, therefore, it was non est in law. Therefore in law's it could not have the effect of substituting itself for the 1968 notification, therefore, 1968 notification continued to be in force even after the 1970 notification was issued because the judicial declaration of invalidity of 1970 notification relates back to the date of its issuance as a judicial declaration always does. Secondly, the intention of: the Central Government while issuing 1970 notification was not to exempt mining leases in respect of limestones from payment of royalty but its intention was to net in more royalty from the holders of mining leases. It is clear, therefore, that if 1970 notification was held to be invalid or unlawful, there was no intension to cancel the 1968 notification. The position which, therefore, emerges can be stated thus: Between the date of coming into force of the Act with Schedule appended to it and the date of coming into force of the 1962 notification, the petitioner was required to pay royalty in terms of the provisions relating to limestone made in the original Schedule as enacted by Parliament. Between the date of coming into operation of 1962 notification and the date of coming into operation of the 1968 notification, the petitioner rendered himself liable to pay royalty in terms of the provisions made in the Schedule by 1962 notification From the date of coming into force of the 1968 notification, the petitioner became liable to pay royalty in terms of the provision made in respect of limestone by 1968 notification. His liability to pay in terms of 1968 notification continued without, in any way, being affected by 1970 notification. The contention raised by Mr. Patel that by the declaration of invalidity of 1970 notification the liability of the petitioner to pay royalty under the earlier notifications, ceased to exist, does not have any force and is, therefore, rejected.
16. We now turn to the third contention, which Mr. Patel has raised before us. The first part of his contention is that all the three notifications issued in 1962, 1968 and 1970 were bad in law because sub-section (3) of S. 9 did not empower the Central Government to revise the rates of royalty before the expiry of a period of four years from the last revision. We have already stated that this contention holds good only in respect of 1970 notification but not in respect of 1962 and 1968 notifications.
17. The next part of this contention is that these notifications were bad because under S. 9(3), the Central Government has no power to impose by way of royalty more than twenty per cent of the sale price of mineral at the pit's head. This contention, in our opinion, is based upon the misreading of proviso (a) to S. 9. Proviso (a) lays down that the Central Government shall not fix the rate of royalty in respect of any mineral so as to exceed twenty per cent of the sale price of the mineral at the pit's head. Proviso (a) places the limitation upon the power of the Central Government to fix the rate of royalty in respect of any mineral. It does not deal with the actual liability, which a holder of a mining lease may incur from time to time under the Act by virtue of fluctuating price of the mineral. The expression 'shall not fix the rate of royalty' clearly suggests that whenever the rate of royalty is fixed by the Central Government, in exercise of the powers conferred upon it by Section 9, it has to take into account all the factors obtaining then and to so fix the royalty that it does not exceed twenty per cent of the sale price of the mineral at the Pit's head. To accede to the argument that it deals with limitation in respect of the accrual of actual liability is to take the view that the rate of royalty fixed by the Central Government from time to time may be, at least during the four years which would elapse between the two notifications, be valid in those cases where it did not exceed twenty per cent of the sale price and would be invalid in respect of cases where it exceeded twenty per cent of the sale price depending upon the fluctuating market price of the commodity or the mineral. The Parliament has steered clear of this difficulty by using appropriate language in the proviso (a) which limits the power of the Central Government, while issuing a notification, to fix the royalty at twenty per cent of less of the sale price of the mineral at the pit's head.
18. It has next been argued that while proviso (a) to S. 9 contemplates fixation of royalty in terms of percentage of the sale price, the Central Government has fixed it otherwise. In other words, a fixed amount of royalty introduced by the Central Government militates against the concept of royalty in terms of percentages contemplated by proviso (a) to S. 9. Therefore, it is contended that what the Central Government has done by 1962 and 1968 notifications is bad in law and is ultra vires proviso (a) to S. 9. It cannot be gainsaid that if the Parliament or a Legislature has adopted one method, then the subordinate authority which has been given power to modify the Schedule cannot introduce a new method. The argument is based upon the proposition that a subordinate amending authority cannot, in exercise of power of amendment given to it by the parliament do something which derogates from the legislative policy or is contrary to it. In this context, our attention has been invited to the decision of the Supreme Court in Rajnarain Singh v. Chairman, Patna Administration Committee, (1955) 1 SCR 290. The principle which has been laid down in the matter of delegation of legislative power in the context of Patna Administration Act, 1915 is as follows: 'An executive authority can be authorised by a statute to modify either existing or future laws but not in any essential feature.' It has also been observed in that decision: -
'Exactly what constitutes an essential feature cannot be enunciated in general terms but it is clear that modification cannot include a change of policy. Essential legislative function consists in the determination of the legislative policy and its formulation as a binding rule of conduct. Modifications which are authorised are limited to local adjustments or changes of minor character and do not mean or involve any change of policy or change in the Act.'
19. The question which has, therefore, been canvassed before us is whether, by issuing 1962 and 1968 notifications, the Central Government acted against the legislative policy in so far as the method and mode of levying royalty in case of mining leases were concerned. So far as proviso (a) to S. 9 as it was at the material time was concerned, the Central Government was authorised to enhance or reduce the rate at which royalty shall be payable in respect of any mineral subject to two conditions specified in the proviso. The principal part of sub-section (3) of S. 9. Did not specify the mode and method of levying royalty. However, it was proviso (a), which stated in negative terms that the rate of royalty in respect of any mineral exceeding twenty per cent of the sale price of the mineral at the pit's head shall not be fixed. Does language of proviso (a) show that the Parliament had adopted as a matter of legislative policy the method of levying royalty in terms of percentage? In order to answer the question, we cannot look merely to the proviso as it was at the material time but we must read the proviso in light of the Schedule which Parliament originally enacted. Entry 8 in the Second Schedule relating to limestone as originally enacted by Parliament read thus: -
'Five per cent of the sale price at the pit's mouth subject to a minimum of 00.37 p. per tonne.'
When the language of Proviso (a) which places a limitation upon the power of the Central Government is read in light of the original Entry 8 in the Second Sch. no doubt is left in our minds that the Parliament had adopted the method of fixing royalty on the basis of percentage of sale price subject to a certain minimum. By the 1962 notification it was fixed at 00-75 p. per tonne which was subject to a rebate of 00.38 p. per tonne in case of a certain quality of limestone specified therein. 1968 notification splits limestone into two grades and fixes for one grade royalty at the rate of Rs. 1.20 p. per tonne and in case of another at 00.70 p. per tonne. It is not necessary for us to deal with 1970 notification in this respect because it has already been declared to be invalid.
20. Now, the legislative policy in the matter of fixing royalty as disclosed by Entry 8 in the Second Sch. is twofold. Firstly, the royalty is to be computed at five per cent of the sale price at the pit's mouth. Secondly, it is to be computed at the rate of 00.37 p. per tonne and the holder of a mining lease becomes liable to pay whichever is higher. It is wrong, therefore, to contend that the Legislature enacted the policy of charging royalty on the basis of a certain percentage of the sale price only. The 1962 notification adopted one of these two modes only and laid down that royalty shall be payable at the rate of 00.75 P. per tonne subject to a certain rebate in case of a certain quality of limestone with which we are- not concerned in this case at this stage. The 1968 notification also disclosed the same policy, namely, charging royalty at a certain rate per tonne of limestone. What, therefore, the Central Government did any issuing 1962 and 1968 notifications was to adopt one of the two methods prescribed by the Parliament in Entry 8 in the Second Schedule. It is difficult to say, therefore, that the Central Government by adopting one of the two formulae specified by Parliament originally in Entry 8 in the Second Sch. militated against the legislative policy of Parliament and derogated from it. In other words, what the Parliament did by enacting Entry 8 in the Second Sch. was to adopt the yardstick of value as well (as) weight in the matter of levying royalty. By 1962 and 1968 notifications the Central Government adopted the yardstick of weight alone and gave up the yardstick of value. We, therefore, do not think that the Central Government by adopting one of the two yardsticks acted against the legislative policy enunciated by Parliament. Assuming that such a selection left some weakness, then, in our opinion, it was cured by Section 28. Section 28, inter alia, provides that all rules made and notifications issued by the Central Government under the Act shall be laid for not less than thirty days before each House of Parliament while it is in Session, as soon as may be after they are made and issued, and shall be subject to such modifications as the Parliament may make in the same session or the session following. It is clear, therefore, that, subject to the modifications, if any, which the Parliament may make in a notification which, after its issuance, will be laid before it at least for thirty days, the notification issued by the Central Government would stand approved by the Parliament. Logically, therefore, it would mean that the Parliament approved the selection of one of the two methods adopted by the Central Government while amending or modifying an Entry in the Second Sch. Once such a notification received the concurrence or the approval of the Parliament it cannot be said that the Central Government did something contrary to the legislative policy of Parliament. Therefore, the contention raised by Mr. Patel that notifications of 1962 and 1968 were bad in law because they militated against the legislative policy of Parliament disclosed by the statute is without any substance and must fail.
21. He has next argued that the power of the Central Government under subsection (3) of S. 9 extends to amending the Schedule for the purpose of enhancing or reducing the rate of royalty and does not extend to splitting up of the mineral into two as the Central Government did by 1968 notification. The 1962 notification treated all limestones as one commodity for the purpose of levying royalty. The 1968 notification split limestone into two categories: (i) Superior Grade with 45 % or more of CaO, (ii) Inferior Grade with less than 45% CaO and prescribed different rates of royalty for them. In 1970 (we state it for the purpose of completing the narrative), limestone was again treated as one single commodity without any distinction between its grades. The question, therefore, which we are required to consider is whether under sub-section (3) of S. 9 of the Act, the Central Government had the power to split limestone into different grades for the purpose of levying royalty at different rates. Our attention in this connection has been invited by Mr. Nanavaty to the decision in V. Venugopala Ravi Varma Rajah v. Union of India, AIR 1969 SC 1094. It was a decision under the Expenditure Tax Act, 1957. The principle which has been laid down is that it is open to the Legislature to select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the Legislature does so reasonably. It has been also laid down that if the classification is rational, the Legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject different classes of property to tax in different ways and adopt different modes of assessment. In such a case, a taxing statute does not contravene Art. 14 of the Constitution. That decision turns upon the competence of the Legislature to draw distinction between different classes of persons or different types of objects consistent with the equality clause enshrined in Art. 14. It does not turn upon the exercise of power by a subordinate authority which has been empowered by the Legislature to amend certain provisions of the Act.
22. The next decision to which our attention has been invited is in Hiralal Ratan Lal v. S. T. 0., Section III, Kanpur, AIR 1973 SC 1034. It was a case under the U. P. Sales Tax Act, 1948. The State Government was given power by the Legislature to select any transaction in respect of such goods or class of goods as the Government might choose to levy a single point sales tax or purchase tax. In that context, it has been laid down by the Supreme Court:-
'It is open to the legislature to define the nature of the goods, the sale or purchase of which should be brought to tax.'
However, if such a commodity or goods was separated in two parts such as the processed or split pulses from the un-split or unprocessed pulses and treat the two as separate and independent goods for the purpose of levying tax, it could not be called in question under law. The next decision to which our attention has been invited is in Secy. to Govt. of Home Department, Tamil Nadu v. Salem Dharmapuri Omnibus Association, AIR 1975 SC 1006. It was a case of levying higher tax on contract carriages under the Madras Motor Vehicles Taxation Act, 1931, There is nothing useful in that decision to which reference needs be made. It is clear, therefore, that when Parliament has treated a particular mineral as one commodity for the purpose of taxation in order to earn more royalty, it is open to the Central Government to classify it into two grades and to specify different rates of royalty for them. In our opinion, the power to modify the rates of royalty conferred upon the Central Government carries with it the power to charge royalty at different rates on different kinds of the same mineral. The contention raised by Mr. Patel that S. 9(3) of the Act does not empower the Central Government to classify them and treat them as different commodities, is, therefore, without any substance and is rejected.
23. The next contention which he has raised under this head is that by 1962 notification the Central Government permitted a rebate at the specified rate on the royalty collected on the limestone. 1962 notification shows that the Central Government for the purpose of allowing rebate, excluded from the category of limestone, limestone beneficiated by froth floatation method. The policy of granting rebate can hardly be called in question because to grant rebate is to give some concession. Indeed the concession must be founded on some rational basis. By 1962 notification what the Central Government did was to give a certain rebate on a particular quality of limestone in order to encourage it s development. The primary object of the Act is the development of minerals. In order to carry into effect that policy, if the Central Government, in exercise of their power to amend the rates of royalty, prescribed a particular rate for the limestone and allowed rebate on a particular kind of limestone at a prescribed rate, all that it did was to exercise its power of fixing the rate of royalty. To fix a rate of royalty does not mean one rate on a single commodity or on different kinds of its quality. Different rates may be fixed and rebate may be given in case of certain kind and quality. These are different facets of power conferred upon the Central Government to alter the rate of royalty. We do not think, therefore, that by allowing rebate upon the particular quality of limestone the Central Government, exceeded its amending power under S. 9(3). In any case, the Parliament under S. 28 had approved that notification. Therefore, no infirmity in the exercise of that power by the Central Government existed. We are unable to uphold the third contention raised by Mr. Patel in its several aspects and it is, therefore, rejected.
24. The last contention is that no express power has been conferred upon the Central Government by the Act either to change the method of fixing royalty, to give rebate and to split the mineral because they are the matters which pertain to the policy of the Legislature. We have found in the foregoing paragraphs of this judgment that the power which the Central Government has exercised under the two notifications is fully implicit in its power to amend the rates of royalty in regard to limestone, Therefore, nothing turns upon whether express power has been conferred or not Mr. Patel has further tried to argue that if power to do all these things is implied in S. 9(3), then it is excessive delegation of power because no objective standards or norms have been provided in the Act and its exercise is left to the arbitrary will of the Government. He has also tried to argue that the Central Government may exercise its power unreasonably and unduly discriminatory rates may be prescribed for different grades of limestone. If, as we have found, the power to do all these things is implicit in the amending power conferred upon the Central Government by Section 9(3), then, we cannot assume that the Central Government will exercise its power capriciously and arbitrarily in all cases. If there are norms which can be deduced from the parliamentary enactment, it is always better. But, if no norms can be deduced, then the Court assumes that the Central Government will exercise its power reasonably and in public interest. That the Central Government will exercise its powers reasonably and not capriciously is ensured by the enactment of S. 28 which subjects the exercise of such a power to parliamentary check and review. Therefore, we do not find that there is any excessive delegation of power in this behalf. However in actual exercise of its power, if the central Government acts capriciously or arbitrarily in any given case, it is open to the aggrieved person to call that action in question. However, merely because the Central Government may exercise the power capriciously or arbitrarily in some cases, it cannot be said that the power which is implicit in S. 9(3) of the Act has been delegated to the Central Government in excessive form. The last contention raised by Mr. Patel also fails and is rejected.
25. Except that 1970 notification is ultra vires Section 9(3), all the contentions which Mr. Patel has raised fail. In the result, the petition is partly allowed and it is declared that the 1970 notification is void and unenforceable at law. Rule is made absolute to the above extent with no order as to costs in the circumstances of the case.
26. Petition partly allowed.