State Of Bihar vs Indian Aluminium Company LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1997 Supreme(SC) 1261

1997(8) Supreme 428
SUPREME COURT OF INDIA
(From Patna High Court)
J.S. Verma, CJI., B.N. Kirpal, S.P. Kurdukar, JJ.
State of Bihar & Ors. -Appellants
versus
Indian Aluminium Company & Ors. -Respondents
Civil Appeal Nos. 2406-25 of 1994
Decided on 24-9-1997
Counsel for the Parties :
Appearing for the Parties, Kapil Sibal, K.K. Venugopal, Raju Ramachandran, D.P. Gupta, R.F. Nariman, Sr. Advocates, Ranjit Kumar, B.B. Singh, Ms. Anu Mohla, Kumar Rajesh Singh, Chander Bhushan, S.S. Rizvi, Darshan Singh, Sumant J. Khaitan, Dileep Goswami, M.K.D. Namboodiri, A.K. Panda, Jaideep Gupta, R.P. Wadhwani, J.B. Dadachanji, S. Sukumaran, Sunil Kr. Jain, Ejaz Maqbool, D.P. Mukherjee, M.C. Dhingra, Krishnanand Pandeya, Advocates.

Headnote:Constitution of India-Art. 136-Appeal-Bihar Forest Restoration and Improvement of Degraded Forest Land Taxation Act, 1992-Validity of-Challenged on the ground that it was beyond the legislative competence of State Legislature of Bihar-State Government placed reliance on provisions of Entry 49 List II stating that what was sought to be levied by impugned act was tax on land and not a tax on or in relation to any mining activity-High Court quashed the Act by holding that it was beyond the legislative competence of the State Legislature as it was not a tax on land-State Appeal against-Whether the tax in question can be regarded as tax on land as envisaged by Entry 49 of List II, Constitution of India ?-(No).
       Held : Entry 49 of List II has been interpreted to mean the levy of tax directly on land as a unit. The land has been regarded as meaning the land on surface and also below the surface. 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. In the instant case the tax is, in effect, being levied not on land but on the absence of land. The levy is on the void which has been created. The forest land which is being used is not subjected to tax. The schedule to the Act itself shows that the assessment of tax is on excavation and use of forest land for non-forest purpose. The schedule further says that the rate of tax to be levied, in the case of mining or excavation varies with the extent of the land voided. In case the land has been rehabilitated no tax is to be levied. The tax is levied in effect on the activity of the removal or excavation of land. In other words the tax is squarely on the activity of mining because it is under the mining lease that mechanized and non-mechanized excavation as well as underground excavation takes place and this is what is referred to in column 1 of the Schedule to the Act while determining the amount of tax leviable. Levy in other words is on the activity of removal of earth and not on the land itself and is, therefore, outside the ambit of Entry 49 of List II. (Para 13)
       Section 3 read with the Schedule (and clauses (a), (b) and (c) of the Act says that the tax is not on the surface of the land but is on the extent to which destruction has taken place. It is with reference to the extent of the empty space or the void which has been created as a result of the mining activity that the tax is levied. Tax, in effect, is levied on the absence of land and not on land itself. At the most this may be regarded as a tax in respect of land but it is certainly not a tax on land. The existing land or trees are not taxed the tax is leviable only when a non-forest activity takes place and the land is not rehabilitated. Therefore, in pith and substance it is a tax on activity on land and not on land itself. (Para 14)
       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. (Para 16)
       The provisions of clauses (d), (e) and (f) of the Schedule to the Act, in effect and substance, amount to levy of tax on the use of forest land for non-forest purposes and for rehabilitating the forest land. The Forest Conservation Act, 1980 and the rules and guidelines made thereunder contain complete provisions for reclamation and rehabilitation of such land. Planting and re-planting trees thereon is a matter clearly covered by the said Act, 1980 and therefore, the said clauses (d) to (f) of the Schedule in the impugned Act directly impinge on analogous provisions of the Forest Conservation Act, 1980. 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. (Paras 17 & 18)

JUDGMENT

Kirpal, J.-The common question which arises for consideration in these appeals on special leave being granted, is about the validity of the Bihar Forest Restoration and Improvement of Degraded Forest Land Taxation Act, 1992 (hereinafter referred to as the said Act ). The Patna High Court, on writ petitions having been filed by the respondents in these appeals, having upheld the challenge to the validity of the said Act, the State of Bihar has filed these appeals challenging the correctness of the High Court s decision.

2. The facts which are essential for the decision of these appeals are similar and lie in a very narrow compass, therefore, it is not necessary to refer to the facts of each case. It will be sufficient to refer to the facts in the appeal pertaining to Indian Aluminium Company Ltd. The said company, like all the respondents, had been granted by the State of Bihar leases for different areas under the provisions of Mines and Minerals Regulation Act, 1957. These leases pertained to various tracts of land situated in different villages but all the said leases related to lands in the forest areas. These leases had been granted long prior to the promulgation of the ordinance which led to the passing of the aforesaid Act. The respondents, on the basis of the leases which had been granted to them, worked on the said lands and extracted the minerals for which the leases had been granted.

3. As far as Steel Authority of India is concerned the State of Bihar became interested in setting up a steel plant in its State. Certain Government land including forest land was given to the Hindustan Steel Ltd. (later re-named as Steel Authority of India) and a steel plant including a township was set up at Bakaro. The land which was made available to this plant included forest land in ten villages which was transferred to the respondent company on 24th May, 1962. According to the respondents, and this is not disputed, it had paid compensation for the trees which it had acquired on the transfer of forest land, the amount paid being Rs. 28.5 lacs. According to the respondents several lacs of trees in various parts of the township have been planted and this process is still continuing.

4. On 29th February, 1992 the Governor of Bihar promulgated the Bihar Forest Restoration and Improvement of Degraded Forest Land Taxation Ordinance under Article 213 of the Constitution so as to take immediate action for the purpose of providing resources and restoration of degraded land and improvement of forest area. This Ordinance was subsequently replaced by the Act. Pursuant to the promulgation of the said Ordinance, rules were notified on 5th June, 1992. Consequent upon the promulgation of the ordinance and the rules thereunder several writ petitions were filed, including those by the respondents herein, before the Patna High Court challenging the ordinance and the rules, inter alia, on the ground that it was beyond the legislative competence of the State Legislature of Bihar. It was also contended that the said Act which replaced the Ordinance was repugnant to the Indian Forest Act 1927 and the rules framed thereunder and that it was ultra vires Articles 14, 19, 240, 265 and 300A of the Constitution. With regard to the legislative competence it was contended by the respondents that in view of Entry 54 of List 1 providing for regulation of mines and mineral development, the State Government had no authority or jurisdiction to promulgate the Act, the field being occupied by the Parliament alone.

5. On behalf of the State Government reliance was placed on the provisions of Entry 49 List II in support of its contention that the State Legislature had the legislative competence to enact this law. Shortly put the case of the appellants herein was that what was now sought to be levied by the impugned act was tax on land which was covered by Entry 49 List II and the tax was not on or in relation to any mining activity.

6. The High Court by a common judgm