Important Point
Royalty in payable by respondent-lessee on ‘unprocessed’ minerals to the State. High Court was wrong in holding that it was payable on the quantity of ‘processed’ minerals.

Judgment

K. Venkataswami, J.-Special leave granted.

2. These appeals raise a common question of law and the parties are same in both the appeals. As a matter of fact, in Civil Appeal arising out of S.L.P. (C) No. 16665/92 the High Court has simply followed its earlier judgment against which the Civil Appeal arising out of S.L.P. (C) No. 16718/91 has been filed. In the circumstances, both the ap­peals are disposed of by this common judgment

3. The respondent, a manufacturer of iron, steel and allied products, entered into an agreement of lease in respect of land measuring 569.6 acres with the State Government in order to meet its own requirements of raw materials, namely, limestone and dolomite. Under the agreement, it was agreed that the respondent was liable to pay royalty on the minerals extracted. However, the dispute that arises for consideration out of the two judgments of the High Court is whether the respondent is liable to pay royalty on the quantity of mineral extracted as it is or on the quantity arrived at after the said mineral had undergone a processing to remove waste and foreign matters. It was the case of the appellants that the respondent was liable to pay royalty on the miner­al extracted while the case of the respondent was that the liability was on the quantity of mineral obtained after it had undergone the process.

4. The process adopted by the respondent is given in the SLP paper book at page 11, which reads as follows :-

“In the Mechanised Section of the respondent’s quarry, after blasting, the blasted materials containing Limestone and other foreign materials are loaded by mechanical shovels and the brought to the crushing Plant by dumpers. These are called “Run of Mines”, for short R.O.M. The R.O.M. are fed into the crusher, and when necessary stockpile is made, the same is fed into the primary crusher whereafter it goes to the secondary crusher mechanically.

In between the secondary crusher and the screening Plant is affixed the Weighto-meter. From the secondary crusher the Limestone is moved into the screening Plant and from the screening Plant to the stock­pile. The stockpile is then transported and loaded into the Railway wagons.

The Weighto-meter recording mentioned hereinabove, is done as the workmen are paid their incentives on the basis of production. This figure recorded by the weighto-meter is duly recorded in the books kept by the res­pondent-company in the regular course of business as “production”.

The Senior Mining Officer is duly intimated of the weight recorded in the manner as aforesaid.”

5. The High Court, after referring to Section 9(1) of the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter called “the Act”) and also clause 3 of Part V of the Lease Deed, held as follows :-

“A distinction has to be made between removal from the mine and remov­al from the leased area. If after the mineral is extracted from the mine, it undergoes some processing and during processing a part of the mineral is wasted and the wastage remains on the leased area and is not removed therefrom, the lessee cannot be asked to pay royalty on that portion of the wastage.”

6. On that view of the matter, the High Court quashed the demands, which were levied on the quantity of ‘unprocessed’ minerals.

7. Aggrieved by the order of the High Court, the present appeals are filed by special leave.

8. The learned counsel appearing for the appellants submitted that the High Court was not right in making the distinction and concluding that the quantity of minerals which had undergone certain process alone was liable to levy of royalty. According to the learned counsel, this view runs counter to the view already taken by another Division Bench of the same High Court in O.J.C. No. 909/74. The further case of the learned counsel was that the judgment in O.J.C. 909/74 was taken on appeal to this Court by the aggrieved assessee in National Coal Development Corporation Ltd. v. State of Orissa & Ors.1 and this Court approv