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1985 Supreme(SC) 96
SUPREME COURT OF INDIA
O. CHINNAPPA REDDY AND R.B. MISRA, JJ.
State of W.B., Appellant
Versus
Ghusick and Muslia Collieries Ltd., Respondent.
Civil Appeal No. 2265 of 1970, D/- 15-3-1985.
Advocates appeared
Mr. D. N. Mukherji, Mr. G. S. Chatterjee, Advocates for Appellant; Mr. H. K. Puri, Advocate, for Respondent.
D.N.MUKHERJI, G.S.CHATTERJEE, H.K.PURI
Headnote:
Bengal Cess Act, 1880 - Section 6 and 72 - Constitution of India, 1950 - Article 226 - Colliery - Mine - Percolated Water - Sale Price of Water - Respondent company is owner of a colliery - As usual with coalmines percolated water which accumulates in colliery has to be pumped out and discharged at surface to prevent inundation of colliery and for proper working of mine - Percolated water of mine of respondent company was pumped out and sold by company to a neighbouring glass factory, Hindustan Pilkington Glass Works Limited, which required such water for cooling and other purposes - Respondent company by such sale of water received for year a sum of Rs. 42,073.00. which amount was entered in their profit and loss account as miscellaneous income besides sum of Rs. 5,82,000.00 shown as sale price of coal of said colliery - Respondent company had been selling such percolated water in earlier years also and paying cess thereon - When cess Authorities assessed cess on this income for year respondent for first time claimed exemption from assessment of cess in respect of sale price of water amounting to Rs. 42,073.00, although respondent never claimed such exemption in respect of such sale proceeds of water in previous years - Whether water oozing out of mine was a mineral - Whether sale price of water pumped out and discharged from mine could be included in annual net profits from mine - Whether a person could in law be said to have derived profit from a mine when ore extracted is not sold by him as such but is utilised by him for purpose of manufacturing a finished product which he sells – Held, In court opinion therefore principle of apportionment resting on disintegration of ultimate profits realised by assess is implicit in a provision like that in S. 6 of Act under which profit derived from an initial activity is brought to charge where further activities are undertaken by an assessee with reference to ore won and a profit is realised by sale of end product - Principle laid down in this case fully supports contention of appellant in instant case - Facts of present case go a step further inasmuch as water pumped out from mine was separately sold for a price and, therefore, obviously it is covered by provisions of S. 6, read with S. 72 of Act - Contention on behalf of State has considerable force and must be accepted - Counsel for respondent on other hand contended that income by sale of water was only a casual income and not a regular permanent income and, therefore, it could not be assessed to cess – Court see no force in this contention - Section 6 does not make any distinction as to whether income is casual or a regular one - All that Court is concerned with is whether income derived by sale of water pumped out from mine is included in profit from mine or not – Court have not slightest doubt that income derived by sale of water pumped out from coal mine constitutes a profit derived from mine - Appeal allowed.
Judgment
MISRA, J. :- The present appeal by special leave directed against the judgment of the Calcutta High Court dated 10th October. 1969 involves, the interpretation of Ss. 6 and 72 of the Bengal Cess Act, 1880 and arises in the following circumstances.
2. The respondent company is the owner of a colliery situate at Ghusick, Kalapahari within the district of Burdwan. As usual with the coalmines the percolated water which accumulates in the colliery has to be pumped out and discharged at the surface to prevent inundation of the colliery and for proper working of the mine. The percolated water of the mine of the respondent company was pumped out and sold by the company to a neighbouring glass factory, the Hindustan Pilkington Glass Works Limited, which required such water for cooling and other purposes. The respondent company by such sale of water received for the year 1958-59 a sum of Rs. 42,073.00. which amount was entered in their profit and loss account as miscellaneous income. besides the sum of Rs. 5,82,000.00 shown as the sale price of coal of the said colliery. The respondent company had been selling such percolated water in the earlier years also and paying cess thereon. When the cess Authorities assessed cess on this income under the Bengal Cess Act, 1880 for the year 1958-59 the respondent for the first time claimed exemption from the assessment of cess in respect of the sale price of water amounting to Rs. 42,073.00, although the respondent never claimed such exemption in respect of such sale proceeds of water in the previous years.
3. The Cess Deputy Collector of Burdwan by his order dated November 26. 1959 disallowed the claim of exemption treating the said sum of Rs. 42,073.00 as lone of the items constituting the annual net profit derived from the mine in the process of extracting coal and by using the companys instruments equipments and staff.
4. The respondent company took up the matter. in appeal before the Collector of Burdwan. who found that the cess levied was not contrary to the provisions of the Act and the rules framed thereunder, as the income was derived by the employment of machinery and staff of the coal mine.
5. The respondent feeling aggrieved went up in revision before the Commissioner of Burdwan Division but that also met the same, fate. The Commissioner took the view that the water which is pumped out to save the colliery from drowning is then sold at vast profit and, therefore, it comes within the ambit of the term gross earnings and as such was liable to cess. The respondent went up in further revision before the Board of Revenue but the second revision was also dismissed. Undaunted by these failures the respondent took up the matter before the High Court under Art. 226 of the Constitution which was eventually allowed by the High Court. It took great pains to come to it conclusion that the water discharged from the mine was not a mineral. It was also not land within the meaning of S. 6 of the Bengal Cess Act. On these findings the High Court observed :
"The tenant of a mineral particularly of a coal mine, is normally under the vanishing expenses of sinking new pits, diving gallaries, pumping out water and the like and some of the expenses representing capital might be disallowed as working expenses of the colliery but that does not justify the authorities, as in this case, to impose cess oil the sale price of water and the sale price of such commodity does not form part of the annual net profit from the mine." The High Court referred to a large number of cases. English and American and the history of the Cess Act to arrive at the above conclusion.
6. We are of the opinion that the High Court has gone off the track. It was not at all necessary to enter into the complicated question whether the water oozing out of the mine was a mineral. In the present case we are concerned only with the interpretaion of Ss. 6 and 72 of the Bengal Cess Act. Section 6 at the material time, that is for the year 1958-5
