1. Challenge to the constitutional validity of Section 9(3) of the Mines and Minerals (Regulation & Development) Act, 1957, and a notification enhancing royalty rates on coal. (Para 2 , 3 )
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1995 Supreme(SC) 181
SUPREME COURT OF INDIA
KULDIP SINGH, B.L. HANSARIA AND S.B. MAJMUDAR, JJ.
State of M.P. Petitioner / Appellant
Versus
Mahalaxmi Fabric Mills Limited and others, Respondents.
Civil Appeal No. 275 of 1994
Decided on 1-2-1995.
Advocates:
AJAI BHALLA, AMITABH VERMA, ANAND PRASAD, ASHOK MAHAJAN, ASHOK MATHUR, ASHOK SINGH, B.B.Singh, D.A.DAVE, D.N.Mishra, D.P.GUPTA, DIPAK DHINGRA, G.L.SANGHI, G.RAMASVAMY, GAUTAM KHAITAN, Jana Kalyan Das, K.N.RAVAL, M.KARANJAVALA, M.L.JAISWAL, M.L.Lahoty, Mukul Mudgal, P.CHAUDHARY, P.D.TYAGI, P.K.MULLICK, P.P.Rao, PALLAV SHISHODIA, PRAMOD SVARUP, PRAVIN KUMAR, Prem Sunder Jha, R.K.JAIN, R.K.Khanna, R.N.KARANJAWALA, R.P.SINGH PAL, RAJIV TYAGI, RANI CHHABRA, Ravindra Narayan, S.K.AGNIHOTRI, S.K.DHOLAKIA, S.K.Gambhir, Sakesh Kumar, SHANKAR GOPAL PAGIRE, SHIPRA KHAJANCHI, SOLI J.SORABJI, U.A.RAMA, Virender Kaushal, VIVEK AGRAWAL
AJAI BHALLA, AMITABH VERMA, ANAND PRASAD, ASHOK MAHAJAN, ASHOK MATHUR, ASHOK SINGH, B.B.Singh, D.A.DAVE, D.N.Mishra, D.P.GUPTA, DIPAK DHINGRA, G.L.SANGHI, G.RAMASVAMY, GAUTAM KHAITAN, Jana Kalyan Das, K.N.RAVAL, M.KARANJAVALA, M.L.JAISWAL, M.L.Lahoty, Mukul Mudgal, P.CHAUDHARY, P.D.TYAGI, P.K.MULLICK, P.P.Rao, PALLAV SHISHODIA, PRAMOD SVARUP, PRAVIN KUMAR, Prem Sunder Jha, R.K.JAIN, R.K.Khanna, R.N.KARANJAWALA, R.P.SINGH PAL, RAJIV TYAGI, RANI CHHABRA, Ravindra Narayan, S.K.AGNIHOTRI, S.K.DHOLAKIA, S.K.Gambhir, Sakesh Kumar, SHANKAR GOPAL PAGIRE, SHIPRA KHAJANCHI, SOLI J.SORABJI, U.A.RAMA, Virender Kaushal, VIVEK AGRAWAL
Section 9(3) of the Mines and Minerals (Regulation & Development) Act, 1957, is constitutionally valid under Entry 54 of the Union List. The delegation of power to the Central Government to revise royalty rates is not excessive, and such revisions are linked to the development of minerals.
Headnote:
Constitution Of India,1950 - Articles 268 and 269 - Mines and Minerals (Regulation & Development) Act, 1957 - Section 9(3) - Companies Act - Sections 58A and 642 - Rates of royalty Payable - claim for increasing the rates of royalty - Division Bench brought in challenge by State of Madhya Pradesh by after obtaining special leave to appeal against said order from this Court- Union of India has also challenged very same order after obtaining special leave- So far as Special leave Petition concerned filed Industries Ltd one of consumers of coal which has also felt aggrieved by hike in royalty of coal as imposed by impugned Notification- It raised very same contention in High Court by way of Misc writ petition filed - Industries - Petition was also partly allowed by High Court following its order was held that petitioner therein was entitled to same benefit on same lines as was available to writ petitioners in matter decided petitioner Industries Ltd by special leave has contended that High Court was in error in not granting refund of illegally collected royalty as impugned Notification was stuck down by High Court- In appeal pursuant State has brought challenge a similar order passed -Held, State Governments to Central Government- With respect court are not in a position to endorse view of High Court that impugned Notification was a devise and was issued for extraneous purpose- Equally court are not in a position to agree with contention that said Notification was issued for an alien purpose third point of our consideration is therefore answered in negative point is concerned it is true that even exercise of delegated power can be challenged on ground that it is highly arbitrary irrational and confiscatory in nature and would not stand test counsel for writ petitioners submitted that as compared to rates of royalty fixed present rates have gone up and therefore have become confiscatory in nature- It is not possible to agree with this contention as writ petitioners have laid evidence to show as to how this escalation of rates for different types of coal extracted by lessee of mines had adversely affected their business or that they are thrown out of business because of such heavy burden escalated royalty- not case of any of writ petitioners that their mining operations had to be closed down because of such high rates of royalty as enhanced impugned Notification- Also there is nothing on record to show whether burden of this enhanced rates of royalty is borne only by lessee of mines who have extracted minerals and has not been passed on to customers by adding it price coal- As all these are questions there should be clear pleading and proof- There is no such material on record from which on basis of such arguments any decision can be rendered- Only on this short ground court must hold that original writ petitioners have failed to show how enhanced rates of royalty as per impugned Notification have become unreasonable or confiscatory in nature therefore answered in negative - Order accordingly
Legal Category Hierarchy
- constitutional law
- administrative law
- taxation law
Table of Contents
2. Whether Section 9(3) constitutes excessive delegation or lacks legislative competence, and whether the royalty enhancement notification was issued for an alien purpose or is arbitrary. (Para 4 , 5 )
3. Royalty is a tax within Parliament's competence; Section 9(3) provides sufficient guidelines and parliamentary oversight, and uniform royalty rates are essential for mineral development. (Para 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 )
4. Parliament possesses exclusive legislative competence to regulate mineral royalties under Entry 54 of the Union List, overriding State powers under Entry 50 of the State List. (Para 12 , 13 , 14 )
5. Appeals allowed; High Court orders quashed; challenges to the statutory provision and the royalty enhancement notification dismissed. (Para 27 )
6. Does the Parliament have the legislative competence to impose royalty on minerals?
Yes. Royalty is a tax, and since Parliament has occupied the field under Entry 54 of the Union List, the State's competence under Entry 50 of the State List is denuded. Such imposition is covered by Entry 54 and residuary Entry 97 of the Union List. (Para 12 , 13 , 14 )
7. Does Section 9(3) of the Mines and Minerals (Regulation & Development) Act suffer from excessive delegation of legislative power?
No. The section provides guidelines regarding the frequency of enhancement and includes a safety valve under Section 28(1), requiring notifications to be placed before Parliament for oversight and potential modification, ensuring the delegate remains under legislative control. (Para 15 , 16 , 17 )
8. Is a notification enhancing royalty to compensate State revenue losses an exercise of power for an alien purpose?
No. Enhancing uniform royalty rates is linked to mineral development and price uniformity. Since minerals belong to the States, compensating their revenue losses through valid statutory mechanisms is a relevant consideration and not an alien purpose. (Para 19 , 20 , 21 , 22 , 25 )
9. Can a piece of subordinate legislation be challenged as a colourable exercise of power?
Yes. While the strict doctrine of colourable legislation primarily applies to plenary legislation, subordinate legislation can be questioned if it does not conform to the parent statute or is manifestly arbitrary. (Para 23 , 24 )
JUDGMENT
MAJMUDAR, J.:—Leave granted in both the petitions.
2. Two main questions are involved in these four appeals, namely, whether Section 9(3) of the Mines and Minerals (Regulation & Development) Act, 1957, (hereinafter referred to as the Act) is ultra vires the Constitution and secondly whether the Notification dated 1st August 1991 issued by the Central Government under Section 9(3) of the Act is ultra vires, illegal and inoperative in law. On these common questions we have heard learned counsel for the contesting parties and are, therefore, disposing of these appeals by this common judgment.
3. A few relevant facts leading to these cases may be stated at the outset. Appellants in C.A. Nos. 275/94 and 276/94 being State of M.P. and Union of India respectively, were respondent before the High Court is Special Civil Miscellaneous Petition No. 10/93. The respondent in these appeals were the original writ petitioners in the High Court. These respondents are purchasers of coal from Coal India Ltd. which was respondent No.3 in writ petition. The writ petitioners complained that the Notification dated 1st August, 1991 issued by the Union of India fixing new rates of royalty on various varieties of coal was illegal and inoperative in law on various grounds, that before 1-8-1991 royalty was payable at the rate of Rs.6.50 per ton vide earlier Notification but the same was sought to be increased to Rs.120/- per ton by the new Notification. Since the said Notification was issued under Section 9(3) of the Act, it was submitted that the said provision confers unguided, unchanennized and arbitrary discretion to the Central Government to increase the rates of royalty to any higher amount and as no guidelines were provided for effecting the said increases either under this Section or elsewhere in the Act, the Section itself is an instance of excessive delegation of essential legislative power and hence it was void, that royalty on various varieties of coals was fixed in the year 1981 vide earlier Notification issued by the Central Government under Section 9(3). Proviso to Section 9(3) permits revision of the rates of royalty once during every three years. In the year 1982, several coal producing States imposed coal development cess and started receiving revenue for effecting development of their mining areas, till they were challenged by consumers of coal by filing several writ petitions in the High Courts. The controversy ultimately came to be decided by this Court in Orissa Cement Limited v. State of Orissa (AIR 1991 SC 1676 : (1991 AIR SCW 1679) whereby such cess was held to be invalid and beyond the legislative competence of the State Government. It appears that soon after the aforesaid invalidation of the cess the coal producing States were faced with problem of refunding the amounts obtained by them that far. They, therefore, approached the Central Government for help in the matter. In pursuance to the said approach, the Parliament passed an Act validating the ceses paid by the coal consumers up to the date of the judgment by issuing an ordinance styled as The Cess and other Taxes on Minerals Validation Ordinance, 1992. We are not concerned with the said Ordinance and the subsequent Act in the present proceedings. It appears that since the State Government had suffered financial losses because of the invalidation of the cess, they also approached the Central Government for help in the matter. As a consequence thereof, a working group was constituted in this behalf. The said working group suggested an increase in the royalty to the extent of Rs.70/- per ton of coal. The working group also found sufficient justification for compensating the coal producing States to the extent of 100 per cent of the loss caused by the aforesaid judgment of this Court. Since the recommendation was accepted by the Central Government, the impugned Notification was issued by the Central Government. According to the writ petitioners before the High Court, th
