Andhra Pradesh High Court Sets Aside Demand Notice for Seigniorage Fee, Citing Violation of Natural Justice - 2025-03-24

Legal Information & Analysis.

Andhra Pradesh High Court Quashes Demand Notice for ₹12.9 Crore Seigniorage Fee, Emphasizing Right to Hearing

Amaravati, Andhra Pradesh – In a significant ruling, the High Court of Andhra Pradesh has set aside a demand notice of approximately ₹12.9 crore levied on M/s. Siva Sai Constructions by mining authorities. The court, presided over by Justice Dr. K ManmadhaRao , quashed the demand and a subsequent seizure notice, citing a violation of the principles of natural justice. The judgment underscores the importance of affording a fair hearing to parties before issuing punitive orders, even in matters of revenue collection.

Case Overview: Demand and Seizure Challenged

The case arose from a writ petition filed by M/s. Siva Sai Constructions , challenging a demand notice issued by the 5th respondent, levying a hefty sum towards seigniorage fee, penalty, and other charges under the Andhra Pradesh Minor Mineral Rules, 1966 (APMMC Rules). The demand notice, amounting to ₹12,89,99,926/-, was followed by a seizure notice for the petitioner's stone crushing unit.

M/s. Siva Sai Constructions , holding a quarry lease for Road Metal and Building Stone, argued that the demand and seizure notices were issued arbitrarily, illegally, and without considering their explanation. They contended that the actions violated their fundamental and constitutional rights.

Arguments Presented

Petitioner's Contentions:

Represented by Senior Counsel Sri O. Manohar Reddy, the petitioner argued that they are a Class-I Special State Contractor involved in numerous government projects. A significant portion of the excavated mineral was for self-consumption in these government works, for which deductions for seigniorage fees are typically made at the departmental level. They emphasized that the demand notice was issued without adequately considering their explanation or providing a proper hearing. The petitioner cited government guidelines (G.O.Ms.No.94 and No.63) and a letter from the Mines Department (No.502/SCC-ATP/2023-1) supporting the practice of departmental deductions for self-consumed minerals in government projects.

Respondent's Contentions:

The Government Pleader for Mines and Geology defended the actions, stating that inspections revealed discrepancies in the quantity of minerals excavated and dispatched permits. The respondents argued that the petitioner had unauthorizedly excavated and transported a substantial quantity of road metal without valid transit permits, violating Rule 34(1) of the APMMC Rules. They maintained that the petitioner failed to provide sufficient documentary evidence to substantiate their claim of self-consumption in government works. The respondents also pointed to an alternative remedy available under Rule 35 of the APMMC Rules, arguing against the maintainability of the writ petition.

Court's Reasoning: Emphasis on Natural Justice

Justice Rao , after reviewing the material, observed that the 5th respondent issued the demand notice "without giving any opportunity of hearing and without considering the explanation submitted by the petitioner." The court highlighted that the demand notice was "devoid of reasons and bereft of following the principles of natural justice."

The judgment referenced the Supreme Court's ruling in Whirlpool Corporation Vs. Registrar of Trade Marks , reiterating that the availability of an alternative remedy does not bar writ jurisdiction when there is a violation of natural justice, lack of jurisdiction, or infringement of fundamental rights. The High Court found the present case to fall within the exception of violation of natural justice.

Key Excerpt from the Judgment:

> "In view of a close scrutiny of the impugned demand notice dated 13.09.2024 shows, as rightly argued by learned Senior counsel for the petitioner, the 5th respondent has issued the demand notice, without giving any opportunity of hearing and without considering the explanation submitted by the petitioner. Therefore, it is needless to emphasize the order is devoid of reasons and bereft of following the principles of natural justice."

Final Decision and Implications

The Andhra Pradesh High Court allowed the writ petition, setting aside both the demand notice dated 13.09.2024 and the seizure notice dated 16.09.2024. The matter was remanded back to the 5th respondent with a directive to conduct a fresh inquiry and pass reasoned orders after granting a personal hearing to the petitioner, within three months.

The court clarified that Rules 26(1) and 26(2) of the APMMC Rules, 1966, were not applicable in this instance. Consequently, related contempt cases and other writ petitions connected to the initial demand and seizure were also closed.

This judgment serves as a reminder to authorities to adhere to procedural fairness and the principles of natural justice, particularly when issuing orders with significant financial and operational implications for businesses. It reinforces the right of individuals and entities to be heard and have their explanations duly considered before adverse actions are taken against them.