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2017 Supreme(Kar) 1276
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
SUBHRO KAMAL MUKHERJEE, P.S. DINESH KUMAR, JJ.
B. Rudragouda and Ors. – Appellants
Vs.
State of Karnataka and Ors. – Respondents
Writ Petition Nos. 43937-43938, 44100, 47228, 42980, 42981, 43924, 44104, 44105, 44106, 44729, 44993, 46466, 49495, 49694, 51110, 51350, 52678, 53173, 53986, 53987, 55478, 43706, 43871, 43941, 43948, 43949, 43950, 43951, 43969, 44107, 44206, 44233, 44253-44260, 44270, 44271, 44329, 44417, 44727, 45967, 46231, 46232, 46233, 46234, 46532, 46533, 46815, 46963 and 47713 of 2016 (GM-FOR)
858, 13744 of 2017
Decided On : 04-10-2017
Advocate Appeared:
For the Appellant :S. Ganesh, Senior Advocate for K.N. Srinivasa, Advocate
For the Respondents:S.K. Bagaria, Senior Advocate, A.S. Ponnanna, Additional Advocate General and Venkataswamy Gangadhar Bhanuprakash, Additional Government Advocate
Headnote:KARNATAKA FOREST ACT, 1964 – Section 98-A (as amended by Act (23 of 2016) & Constitution of India, Articles 14, 265, 245, Schedule VII, List II, Entries 54, 51, 62, 66, List III, Entry 47 – Constitutional validity – Levy of Forest Development Tax (FDT) on disposal of forest produce i.e. mineral by State Govt. – In amended provision word 'tax' substituted by word 'fee' – According to State, decision rendered in AIR 1981 Kar 216, holds field as on date and so levy imposed by State, prior to amendment, cannot be anything but 'tax' – State aware of fact that levy of tax held as constitutionally valid in Gurusiddappa Nurandappa Uppin & etc. vs State of Karnataka & anr., AIR 1981 Kar 216 – State imposing such tax since 1975, which remained in statute book for almost 35 years till amendment in 2016 – Royalty imposed upon extraction of minerals under MMDR Act – Subsequent imposition of levy by change of name from 'tax' to 'fee', impermissible – Contention of State that they were under assumption that levy was 'fee' and not 'tax', liable to be rejected – Amendment Act of 2016, held ultra vires Constitution.
CONSTITUTION OF INDIA, 1950 – Articles 14, 265, 245, Schedule VII, List II, Entries 54, 51, 62, 66, List III, Entry 47 – Karnataka Forest Act (5 of 1964), Section 98-A (as amended by Act (23 of 2016)) – Constitutional validity – Levy of Forest Development Tax (FDT) on disposal of forest produce i.e. mineral by State Govt. – In amended provision word 'tax' substituted by word 'fee' – According to State, decision rendered in AIR 1981 Kar 216, holds field as on date and so levy imposed by State, prior to amendment, cannot be anything but 'tax' – State aware of fact that levy of tax held as constitutionally valid in Gurusiddappa Nurandappa Uppin & etc. vs State of Karnataka & anr., AIR 1981 Kar 216 – State imposing such tax since 1975, which remained in statute book for almost 35 years till amendment in 2016 – Royalty imposed upon extraction of minerals under MMDR Act – Subsequent imposition of levy by change of name from 'tax' to 'fee', impermissible – Contention of State that they were under assumption that levy was 'fee' and not 'tax', liable to be rejected – Amendment Act of 2016, held ultra vires Constitution.
P.S. Dinesh Kumar, J.
1. In all these writ petitions, the petitioners are challenging, inter alia, the Constitutional validity of Act 23 of 2016, amending Chapter XI-A of the Karnataka Forest Act, 1963 (Forest Act for short).
2. Briefly stated the facts of the case are, the Forest Act was amended during 1976 inserting Chapter XI-A with effect from December 24, 1975, which provided for levy of forest development tax on disposal of forest produce by the State Government under Sections 98-A and 98-B of the Forest Act.
3. Further, in the year 1989, by Act 10 of 1989, the provision of Section 98-A was made applicable, with effect from February 14, 1978, to the Corporations owned or controlled by the State Government.
4. The validity of levy under Section 98-A of the Forest Act was challenged in this Court, contending inter alia that the said levy was in fact a fee, and such a fee could not have been levied as there was no quid pro quo with reference to the quantum of levy. This Court, in the case of Gurusiddappa Nurandappa Uppin and etc. etc. Vs. State of Karnataka and another etc. (AIR 1981 KAR 216), rejecting the contention of the petitioners therein, held that the levy under Section 98-A was not a ‘fee’, but answers the description of ‘tax’.
5. Thereafter, the State Government were collecting forest development tax under Section 98-A of the Forest Act at the rate of 8 % p.a. on the royalty amount paid by the lease holders by treating the same as a ‘disposal’ within the meaning of Section 98-A. Such collection of forest development tax was challenged by several mining lease holders. This Court, in a decision rendered on July 2, 1996 in Writ Petition No. 35525 of 1993 and connected writ petitions (R. Rampapathi Vs. State of Karnataka and others) held that the forest development tax was not leviable on the royalty. The writ appeals filed thereon, as also the Special Leave Petitions filed by the State Government before the Supreme Court of India in S.L.P. No. 3742-46 of 1999 (State of Karnataka V. R. Rampapathi) stood dismissed.
6. By a notification dated August 16, 2008, the State Government brought the holders of mines and quarries situated in forest area as body under the ambit of Section 98-A(1) of the Act, requiring them to pay forest development tax. In furtherance thereof, instructions were issued to the Principal Chief Conservator of Forests in Karnataka to recover forest development tax based on the value of minerals shown in bills and invoices. Official Memoranda were issued to the lease holders to pay tax at the rate of 8% p.a. on the invoice value or the price fixed by the National Mineral Development Corporation or Mysore Minerals Limited, whichever was higher. So far as the mines situated in the Ballari circle are concerned, by a communication dated October 13, 2008, the forest development tax was sought to be recovered at 12% p.a.
7. The aforesaid notification dated August 16, 2008, and consequential communications were challenged in writ petitions before this Court. In a decision rendered by a Division Bench of this Court, On December 3, 2015, of which one of us (the Chief Justice), is a party, in the case of National Mineral Development Corporation Limited, Bangalore Vs. State of Karnataka and another reported in 2016(1) AKR 642, held, inter alia, that forest development tax is a ‘Tax’ leviable under Entry 54 List II and it is not fee within the scope of Entry 47 List III of the Constitution.
8. The aforesaid decision in NMDC Case, is pending adjudication in Special Leave Petitions No. 6219 - 6313 of 2016 and other connected cases before the Supreme Court of India.
9. Now, by Act 23 of 2016, notified in the gazette on July 27, 2016, the State Government has again amended Chapter IX-A of the Forest Act, which is under chal
