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2003 Supreme(SC) 600
2003(4) Supreme 459
SUPREME COURT OF INDIA
(From Andhra Pradesh High Court)
Mrs. Ruma Pal & B.N. Srikrishna, JJ.
Panyam Cements & Minerals Ltd. -Appellant
versus
Union of India & Ors. -Respondents
Civil Appeal No. 5576 of 1995
Decided on 7-7-2003
Counsel for the Parties :
For the Appellant : D. Ramakrishna Reddy and A.V. Velayudhan Nair, Advocates.
For the Respondents : Ms. Rekha Pandey and T.V. Ratnam, Advocates.
IMPORTANT POINT
Calculation of royalty on limestone in terms of Section 9(3) proviso (a) of Mines and Minerals Act has to be on basis of a national "average pit head sale price".
Headnote:Mines and Minerals (Regulation and Development) Act, 1957-Section 9(3) proviso (a)-Rate of royalty payable-Writ petition filed by petitioner-appellant disposed of by High Court holding that Govt. did not have power to enhance rate of royalty in excess of 20% of sale price of limestone at pit s head-Suit claiming refund of excess royalty alleged to have been paid by appellants-Suit decreed by Courts below holding that "pit head" referred to in proviso (a) to Section 9(3) of the Act meant common area where limestone was stacked in leased area after the area was excavated-Appellant s further claim that "pits head" must be taken as actual physical opening-Calculation of royalty or limestone has to be on basis of a national average pit head sale price-Decision of Court s below rejecting appellant s plea was not erroneous.
Held : Therefore, both in law and as a matter of fact the fixation of Rs. 1.25 per tonne by the 1970 Notification was held to be valid and in accordance with proviso (a) of Section 9(3) of the Act. The view in Saurashtra Chemical is in keeping with subsequent observations of this Court in State of M.P. v. Mahalaxmi Febric Mills Ltd. [1995 (Supp.) 1 SCC 642] that :
"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". (p. 663)
Strictly speaking therefore, since the substratum of the appellant s claim in the suit was the High Court s decision in WP 3276 of 1970, and since that decision is clearly not good law in view of the decision in Saurashtra Chemicals, the suit is liable to be dismissed. However, since the respondents had not impugned either the decision in WP 3276 of 1970 nor the decision of the High Court partly directing the appellants suit, we cannot follow what would, otherwise have been the legal course. However, having regard to the decision of this Court in Saurashtra Chemicals (supra) the appellant s submission that the words pits head in proviso (a) of Section 9(3) of the Act must be construed to mean the mouth of a particular excavation in a particular leased area is entirely unacceptable. When this Court has allowed the calculation of royalty on limestone on the basis of a national average pit head sale price, the decision of the Trial Court and High Court to reject the appellant s plea that the sale price at the pit head must mean the price of limestone at the opening of each excavation within the leased area cannot be held to be erroneous. (Paras 11 and 12)
JUDGMENT
Ruma Pal, J.-The appellant manufactures cement at its factory in Kurnool District, Andhra Pradesh. The main raw-material used for the manufacture of cement is limestone. The land on which the factory is situated is owned by the appellant in 1957 and 1959 the appellant was granted two mining leases by the State Government for extracting limestone covering a total area of 3597 acres and 85 cents. Under the lease deeds the appellant was liable to pay royalty in respect of the limestone quarried from the mines in the leased areas at "5% of the sale value at the pit s mouth subject to a minimum of 0.37 paise per tonne of limestone". The rate of royalty payable under the lease deeds was revisable under sub-sections (1) and (3) of Section 9 of the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter referred to as "the Act"), which as they then stood read :
"9(1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed by him from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral.
9(2) xxx xxx xxx xxx
9(3) The Central Government may, by notification in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification.
Provided that the Central Government shall not-
"(a) 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, or
(b) enhance the rate of royalty in respect of any mineral more than once during any period of four years".
2. Sub-section 3 of Section 9 has since been amended by the Mines and Minerals (Regulation and Development Amendment) Act, 1972, (Act 56 of 1972) by which inter alia the proviso to sub-section 3 was deleted and the only limit at present on the Central Government s power to enhance or reduce the rate of royalty is that the enhancement cannot be made more than once during any period of four years.
3. We are concerned with the royalty and cess payable by the appellant for the period prior to the 1972 amendment namely for the period 11.10.1962 to 10.12.1971. The present dispute has arisen out of a claim made by the appellant in a suit against the respondents, claiming refund of excess royalty alleged to have been paid by the appellant to the respondents between the period 11.10.1962 to 10.12.1971 together with the cess thereon as well as for interest on such excess payment. According to the claim in the appellant s plaint, the appellant had paid royalty at the agreed rate of 0.37 paise per tonne on the limestone quarried by it from the leased areas till November 1962. On 16.11.1962 the Central Government issued Notification No. M11-152 (26) 62 amending the Second Schedule to the Act with effect from 10.11.1962. The Notification sought to fix royalty on limestone at the rate of 0.75 p. per tonne subject to a rebate of 0.38 p. per tonne to be given on limestone beneficiated by froth floatation method. The rate of royalty was again revised by an amendment of the second Schedule by a second Notification dated 8.7.1968. According to this notification with effect from 1.7.1968, royalty of Rs. 1.25 paise per tonne was payable in respect of superior grade limestone and at the rate of 0.75 p. per tonne for inferior grade limestone. Since the limestone quarried by the appellant was of inferior grade, it continued to pay royalty at the rate of 0.75 p. per tonne. In 1970 the Central Government issued a third Notification in exercise of powers conferred by Section 9(3) of the Act. The third Notification No. GSR 200 dated 29.1.1970 did away with the difference in the rate of royalty on the basis of
