The main legal point established in this judgment is that the State Government does not have the jurisdiction to frame rules regarding payment of differential royalty on minerals, as it falls under the exclusive domain of the Central Government. The court held that the impugned rule was unconstitutional and struck it down.

ORDER :

These writ petitions are filed challenging the constitutional validity of Rule 4(10) of the Karnataka (Prevention of Illegal Mining, Transportation & Storage of Minerals) Rules, 2011 (hereinafter referred to as ‘the Rules of 2011’ for short) and also sought for a mandamus directing the respondents to refund the amount of royalty collected on differential grade of one ore from the petitioner along with interest.

2. Brief facts leading rise to filing of this petition are as under:

The petitioner in W.P.No.19773/2018 has been into mining business for more than 5 decades. The petitioner is a lessee under a subsisting mining lease for mining iron ore (M.L.No.2416 of Vyasankere Village, Hospet Taluk in Ballari District) and the mining lease is valid upto 2022. The petitioner has undertaken forward integration of mining activities and in the process has established iron ore “pellet” manufacturing plant at Halawarthy Village in Koppal Taluk & District. The pellet plant of petitioner is buying the iron ore required for its production through e-auction. It is mandatory to register pellet plant as a mineral base industry under the provisions of the Rules of 2011. The iron ore may be in the form of ‘fines’ or ‘lumps’ or both. When iron ore is a mix of both fines and lumps, i.e., run of mines, the pellet plant after processing the uses only fines and lump ore is separated and sold. After processing the grade of fines is lower and the grade of lump is higher than ROM grade. The weightage average grade of fines and lumps is more than for which royalty is paid while transporting from lease area, the State Government issues permit to the transport, the same only after collecting royalty on such differential grade under the Rules of 2011, the petitioner aggrieved by the levy of royalty on iron ore to the extent of differential grade, filed this writ petition challenging the enactment of the Rules of 2011, regulating the transporting of minerals and issue of permits for transportation, etc. Rule 4(10) of the Rules of 2011 provides for collection of royalty. The said provision has been introduced by the State Government in order to extract additional royalty which is neither found in the MMDR Act nor in MC Rules which alone have all the powers to control, regulate and manage the iron ore. The iron ore mineral is considered to be a major mineral and therefore the State Government cannot have control over the same by way of introducing State Rules. The tenor of Rule 4(10)(b) of the State Rules creates an additional liability to the lease holder/processing company by imposing a royalty for the differential higher grade of ore after beneficiating process. When the ore is transported to the plant, the iron ore is bifurcated into fines and lumps. When the lumps which is a waste for pellet plant, is transported outside the plant. The State insist pellet plant to pay additional royalty for differential grade and the pellet plant has been constrained to pay such additional royalty solely on account of the said Rule which is without authority of law and unconstitutional. The petitioner being not liable to pay differential royalty, requested Senior Geologist, Department of Mines & Geology, Koppal to refund differential royalty collected vide letter dated 14.11.2017 and the Senior Geologist did not respond to the said representation. The State has no power to promulgate the impugned Rule as the entire field of royalty is covered by Central Legislation. Action of collection of additional royalty is arbitrary, illegal and unconstitutional. Hence the petitioner aggrieved by the impugned Rules, filed this writ petition.

The petitioners in W.P.No.8022/2022 and W.P.No.8134/2022 have installed benefication plant which carries out the process of miling, scrubbing, magnetic separation, hydro-cyclone, jigging, tabling and thickening of iron ore and manganese ore. The petitioner carries out the process of upgrading low grade iron and manganese ore mineral and carri