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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
MR.SUBHRO KAMAL MUKHERJEE And B.V.NAGARATHNA
NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED - PETITIONER
Vr.
STATE OF KARNATAKA - RESPONDENTS
Writ Petition Nos.2642/2009 (GMMMS) c/w
44793/2013, 13595/2008, 13516/2008, 13654/2008, 13803/2008, 14157/2008, 14802/2008, 30927/2008, 30928/2008, 30995/2008, 31128/2008, 31129/2008, 31141/2008, 31142/2008, 31143/2008, 31144/2008, 31145/2008, 31146/2008, 31147/2008, 31148/2008, 31149/2008, 31152/2008, 31181/2008, 31183/2008, 31188/2008, 31189/2008, 31191/2008, 31227/2008, 31228/2008, 31229/2008, 31230/2008, 31234/2008, 31235/2008, 31266/2008, 31327/2008, 31439/2008, 31577/2008 (GMMMS), 368/2009 (GMFOR), 863/2009, 6721/2009, 10712/2009, 16237/2009, 35251/2009 (GMMMS), 60230/2009 (GMFOR), 15782/2010, 15826/2010, 15984/2010, 15991/2010, 16147/2010, 17002/2010, 17580/2010, 17583/2010, 20215/2010, 32095/2010, 37210/2010, 15431/2010, 2776/2011, 15686/2011, 15691/2011, 31233/2008, 31185/2008 15795/2010, 15809/2010, 15825 15953/2010, 15985/2010, 16145/2010, 17000/2010, 17087/2010, 17581/2010, 18500/2010, 23901/2010, 37208/2010, 39190/2010, 15432/2010, 7337/2011, 15687/2011, 15692/2011, 31182/2008, (GMMMS) 15954/2010, 15990/2010, 16144/2010, 17001/2010, 17455/2010, 17582/2010, 18952/2010, 29222/2010, 37209/2010, 9960/2010, 545/2011, 13023/2011, 15689/2011, 15693/2011, 31184/2008 &
IN W.P.No.2642/2009
Decided On : 3-12-2015
KARNATAKA FOREST ACT, 1963 - Section 98-A: [Subhro Kamal Mukherjee, Actg. C. J. & B.V. Nagarathna, JJ] Levy of Forest Development Tax - Notification Dated 16-8-2008 - Validity - Obligation placed on leaseholders to collect tax - Held, Having regard to the context in which expression "a body" is used in Section 98-A, it would mean an artificial person created by a legal authority, such as a corporation, or an aggregate of individuals or groups or a body corporate. Thus, the expression "a body"can never have reference to an individual or a natural person. The expression "a body" need not be only a public authority or body; even a private body, comprising of natural or juristic persons, as an aggregate, having an independent legal persona, could be referred to as "a body". Thus, leaseholders of mines and quarries in forest areas, whether as individual persons whether natural or juristic entities, cannot be construed to be "a body", within the meaning of Section 98-A. The notification dated 16/08/2008 issued by the State Government under Section 98-A levying FDT is contrary to the expression "a body notified by the State Government" and is hence, ultra vires that section. Consequently, leaseholders or quarry holders in forest areas are not liable to collect FDT when they dispose minerals as a forest produce by sale or otherwise or even if they use it for captive consumption. The Notification dated 16/08/2008 and Communications dated 23/08/2008, 12/09/2008 and 22/10/2008 are quashed as far as leaseholders or quarry holders in forest areas are concerned.
KARNATAKA FOREST ACT, 1963 - Section 98-A: [Subhro Kamal Mukherjee, Actg. C. J. & B.V. Nagarathna, JJ] Levy of Forest Development Tax - Notification Dated 16-8-2008 - Petitioners purchasing forest produce/minerals from State Government directly or MML (Mysore Mineral Ltd.) or any other Government Corporation - Held, When sub-section (1) of Section 98-A refers to disposal of forest produce by the State Government or a corporation, owned or controlled by the State Government, in such an event, FDT is leviable. Therefore, as far as such of those petitioners, purchasers are concerned who have purchased forest produce from State Government directly or MML (Mysore Mineral Ltd.) or any other Corporation, owned and controlled by the State Government, FDT is leviable and they are bound to pay the tax. The petitioners, who have purchased mineral as a forest produce from MML or any other corporation, owned or controlled by the State Government must pay FDT. Such corporation do not require to be notified as the section clearly stipulates that they have to collect FDT when they dispose of minerals as a forest produce by sale or otherwise.
KARNATAKA FOREST ACT, 1963 - Section 98-A: [Subhro Kamal Mukherjee, Actg. C. J. & B.V. Nagarathna, JJ] Levy of Forest Development Tax - Notification Dated 16-8-2008 - Nature of levy Held, Forest Development Tax, FDT is a tax leviable under Entry 54, List II and it is not a fee within the scope of Entry 47 of List III. FDT being in the nature of a sales tax, it is neither compensatory nor regulatory in nature. It is compulsory exaction and not a fee.
Levy of Forest Development Tax is in nature of Sales Tax and is subject to Article 286 of Constitution. It is not applicable to sale made for purpose of exports or in course of inter State trade.
State Legislature is not denuded of its legislative competence to levy FDT on the disposal of minerals as a forest produce despite a declaration having been made by the Parliament under Section 2 of the MMDR Act. In the context of Entry 54 of List, of Constitution the general power of regulation and control of minerals under MMDR Act does not include the power of taxation. Further, FDT being in nature of a sales tax, is within the exclusive domain of the State Legislature under Entry 54 List II. That MMDR Act does not provide for any provision with regard to levy of tax on sale of minerals as a forest produce and in the absence of any express provision, such a provision cannot be implied. It is thus held that the State Legislature is fully competent to levy FDT on sale of minerals as a forest produce. Parliament has not reserved to itself the power to tax minerals as goods i.e., as forest produce, on its sale. Also imposition of sales tax on minerals as a forest produce is within the exclusive domain of the State Legislature, which is relatable to Entry 54 of List II. That entry is a taxation entry and only subject to Entry 92-A of List I and Article 286 of Constitution. It is not a tax on mineral rights as found in Entry 50 of List II, which is subject to List I, but on goods i.e., minerals as forest produce or any other forest produce. FDT is levied not on mineral rights, but on minerals as a forest produce i.e., goods, when they are sold. The taxation on mineral rights as envisaged in Entry 50 of List II is totally distinct from and mutually exclusive to tax on minerals as a forest produce at the time of sale. The latter is in the nature of a sales tax, which is in the exclusive domain of State Legislature, subject to Entry 92A of List I and Article 286 of the Constitution. Hence the State Legislature is not denuded of its power to levy FDT in the nature of a sales tax on the disposal of minerals as a forest produce despite the declaration made under S. 2 of the MMDR Act having regard to Entry 54 List I.
Levy of Forest Development Tax, is related to Entry 54 of List 2 of Schedule 7 of Constitution and has no relation to regulation of mines and development of mines. There is no encroachment on any other Central Act. There is no repugnancy. Doctrine of occupied field not attracted.
Demand for payment cannot be over and above what has been fixed by Act i.e., 8% on sale consideration and not higher than that. Any tax paid over and above 8% is liable to be refunded.
Levy of Forest Development Tax, FDT found to be ultra vires Section 98-A. Directions given for refund of tax collected.
(1) As common questions of law and facts arise in these writ petitions, they have been heard together and are disposed of by this common order.
(2) BACKGROUND FACTS:
The petitioners in these writ petitions are either lease holders of mines and quarries in forest areas; purchasers of minerals as a forest produce from the lease holders or from the State Government or Corporation, owned or controlled by the State Government; Public Sector Units such as National Mineral Development Corporation (NMDC), State Trading Corporation (STC) or Steel Authority of India Limited (SAIL). Thus, the petitioners could be categorized into two broad categories: the first category is, mining or quarrying lease holders who sell the minerals as forest produce extracted by them from the forest area to various traders or purchasers or make use of them for captive consumption. The second category is, purchasers of minerals as forest produce, either from the State Government or corporation, owned or controlled by the State Government or private mining or quarrying lease holders. These persons do not have any quarrying licenses or leases in their names, but are purchasing the minerals as forest produce for the purpose of trade either for export, inter state trade or domestic market. It is the purchasers of the minerals as a forest produce who have to pay the Forest Development Tax (‘FDT’ for the sake of brevity) along with the sales tax or value added tax, at the time of purchase on the sale consideration to their vendors. The vendors may be either the State Government or a corporation, owned or controlled by the State or a body notified by the State Government. Thus, in short both purchasers as well as the sellers of minerals as a forest produce have filed these writ petitions. The lease holders may be either individual person i.e. sole proprietorship concerns, companies, partnership firms or other associations of persons. Similarly, the purchasers of minerals as a forest produce could be individuals, companies, partnership concerns or such other juristic entities.
Public Sector units such as NMDC, STC, SAIL have also preferred their writ petitions. NMDC is a lessee in the State of Karnataka involved in mining vast extent of land including forest land and also involved in selling the extracted ore. STC inter alia, purchases minerals as forest produce for further trading and even for export purposes. SAIL purchases the minerals from State Government undertaking or even from private entities to be utilized in steel industry and thus for captive consumption.
(3) We have perused the pleadings and annexures in the writ petitions and statement of objections filed on behalf of the State and other respondents.
(4) BIRD’S EYE VIEW OF THE CONTROVERSY:
(a) In these writ petitions, petitioners have assailed Gazette Notification bearing No.248/FD 2006 dated 16/08/2008 issued by the State Government under Section 98A of the Karnataka Forest Act, 1963 (hereinafter referred to as ‘the Act’ for the sake of brevity).
(b) The centre of controversy in these writ petitions is as to whether the State Government can levy FDT on minerals, which is defined as a forest produce under Section 2(7) (b) (vi) of the Act, when such forest produce is disposed of by the State Government or by a Corporation, owned or controlled by or a body notified by the State Government by sale or otherwise, at the rate of 8% (since enhanced to 12%) on the amount of consideration paid at the time of sale or when it is otherwise disposed of.
(c) The main contention of the petitioners is that the impugned Notification dated 16/08/2008 issued under Section 98A of the Act, is contrary to the provisions of the said Act.
(d) The other reason as to why imposition of FDT under Section 98A of the Act has been assailed by the petitioners is on the legal competence of the State Legislature in incorporating Section 98A and 98B under Chapter XIA of the Act, having regard to the provisions of the Constitution
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