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2013 Supreme(Bom) 955
In the High Court of Bombay at Goa
V.M. KANADE & U.V. BAKRE, JJ.
Salitho Ores Pvt Ltd. & Others
Versus
The Captain of Ports Captain of Ports Department & Others
Writ Petition No.735 of 2010 With Civil Application Nos.220 of 2010 & 164 of 2011 With MCA No.939 of 2010
Decided on : 08-05-2013
For the Petitioners:M.S. Sonak, J.P. Supekar, A.F. Diniz, Dhruv Mehta, Senior Advocate with Saket Sikri, Ms. Swati Kamat, Advocates.
For the Respondents:R1 to R3, M. Salkar, Government Advocate, R4, M. Amonkar, Central Government Standing Counsel.
Headnote:GOA, DAMAN & DIU PORTS RULES, 1983 - Rules 38, 41, 42 and 43 - Mines and Minerals Act, 1957, Section 9 - Issuance of a condition for port clearance.
Issuance of a condition precedent by Captain of Ports, to obtain NOC from Directorate of Mines and Geology for Port clearance, is not illegal. - Under Sections 38, 41, 42 and 43 contained in Chapter IV of Goa, Daman and Diu Port Rules, 1983, the Captain of Ports has to grant outward clearance to vessels upon compliance of various conditions contained in the said Rules. The Government has right to safeguard the revenue as well as prevent unregulated exploitation of natural resources and, accordingly, to prevent illegal mining and transportation of such illegally obtained iron ore and in order to ensure that there is no evasion of payment of royalty, it has given directions to the Captain of Ports and accordingly the Captain of Ports has given intimation to all the exporters/ shippers. There is no merit therefore in the said submissions made by the counsel for the petitioners.
Mines and Mineral (Development and Regulation) Act, 1957 - Schedule 2 Entry 22, Section 9(3) - Compensation of Royalty on Iron Ore.
Amendment in Entry 22 made by Central Government, changing basis of computation of Royalty rate payable on Iron Ore, not ultra vires Section 9(3) of Act. - At relevant time in respect of some minerals royalty was made payable on fixed rate per tonne basis and in respect of other minerals on percentage of sale price on ad valorern basis. However, that does not mean that the Central Government’s power is restricted and that the Central Government cannot alter the mode of payment of royalty from fixed rate per tonne basis to percentage of sale price on ad valorem basis.
As observed by the Apex Court in Mahalaxmi Fabric Mills Limited, (1995) Supp 1 SCC 642, Parliament had delegated power of fixing the price to the Central Government and had ensured that the said amendment made by the Central Government in Second Schedule is placed before the Parliament so as to give its approval to the amendment suggested by the Central Government and only after the Parliament had approved those rules, those amendment could, be brought into force. In the present case also, it is an admitted position that the amendment which was made by the Central Government to Entry No. 22 in respect of the iron ore of changing royalty payable from "per tonne basis" to "ad valorem basis" was placed before the Parliament and it was duly approved. In the affidavit in reply filed by the Central Government, they have pointed out that the study group was appointed who had made in depth study in respect of the loss of revenue caused to the Central Government and after instances of illegal mining were brought to their notice and in order to pluck the said loophole which had permitted the mining companies to cause loss of revenue to the Government the said amendment was suggested and which was accepted by the Central Government and approval to the said amendment was given by the Parliament.
The contention of the petitioners that the said rate which was arrived at by this method which was adopted by the Central Government was a floating rate and was not uniform rate is also without any substance. The Central Government had suggested a fixed percentage of ad valorem duty on the sale price. The said duty was fixed @ 10%. The rationale behind calculating the average of top ten iron ore mining companies was to ensure that average sale price would take care of all the fluctuations and various factors which could give rise to iron ore being sold at different rates. By taking average of top ten iron ore mining companies, the said anomaly was taken care of. Therefore, the submission of the petitioners that the amendment to Entry No. 22 is ultra vires Section 9(3) is without any substance.
The concept of levy on ad valorem basis is not new. It has been in vogue in respect of other minerals for quite some time. If Second Schedule to the Act is examined, There are number of other minerals on which levy is based on certain per cent of sale price on ad valorem basis. The Central Government, therefore has discretion to charge the tax on ad valorem basis. There is no foundation to the argument that commonly available minerals such as Asbestos, China Clay, Graphite, Iron Ore, Quarts Silica are to be charged on per tonne basis and i.e. are minerals are to be charged on ad valorem basis. Firstly, there is no such provision either in the Act or Rules. Secondly, discretion has been given to the Central Government to determine the price of royalty which has to be paid. Therefore, it cannot be said that the Central Government has changed the method of levy of tax and that they are not permitted to do so under sub-section (3) of Section 9 of the said Act which speaks about enhancing or reducing the rate once in three years. Respondents have given valid reasons for the purpose of effecting such change.
Mines and Mineral (Development and Regulation) Act, 1957 - Section 9(3), Proviso.
Mineral Concession Rules, 1960, Rule 64-D - Notification dated 13.8.2009 - Constitution of India, Articles 226 and 227 - Writ petition - Challenging vires of Notification dated 13.8.2009 amended Rule 64-D of Rules, 1960 and direction dated 10.12.2009 issued by respondents - Contentions that Notification dated 13.8.2009 amending second schedule to MMDR Act to prescribe royalty at 10% of sale price is on ad voleram basis in Entry-22 of Second Schedule and direction dated 10.12.2009 amending Rule 64-D on ground that it was contrary to proviso to Section 9(3) of Act, illegal being violative of Articles 14, 19(1)(g) of Constitution - Not tenable - Impugned Notification amended Rule 64-D and directions neither ultra vires Section 9(3) nor ultra vires proviso to Section 9(3) of Act - Petitions dismissed.
MINERAL CONCESSION RULES, 1960 - Rule 64-D [as amended in 2009] - Mineral Conservation and Development Rules, 1988, Rule 45.
Amendment made by Central Government in Rule 64-D of Rules 1960 by inserting Iron Ore in Rule 64-D and rendering computation of royalty based on average sale price published by IBM every month, not illegal. - In the present case an objection has been raised that Central Government has delegated its power to determined sale price to the IBM (Indian Bureau Mines) which is a third party and that such ligation is not permissible as it amounts to sub-delegation.
Firstly, this is not the first time when the period is to be determined by a third agency. Perusal of the Second Schedule clearly own that in respect of several minerals price is fix ed by International Body such as London Bull ion Market Association, commonly referred to as "London Price’ or on percentage of London Metal Exchange Copper Metal Price.
In the past, therefore, reliance has been placed on International standard sale price in respect of certain minerals. In the case of iron ore since there is no standard International price available, Central Government has permitted IBM which has the entire statistical data available with it to determine the realistic sale price after taking into consideration the average of top ten non-captive producers which is evident from the affidavit in reply filed by the respondents.
As a result of mandate of Rule 45 of Mineral Conservation and Development Rules, the statistical data in respect of declaration made by every mining company in respect of sale price of iron ore of each grade is available with the IBM not only from month-to- month but also from annual returns which are filed. The IBM is therefore in possession of all statistical data on the basis of which realistic figure of the sale price can be determined.
Though average sale price may vary from tine to time, percentage of royalty which is charged is fixed which is 10% of the sale price. The contention of the petitioners, therefore, that there is a floating price and there is violation of provision to sub-section (3) of Section 9 of the said Act is without any substance.
Rule 64-D(1) gives formula for the calculation of the royalty. The said rule clearly indicates that the rate of royalty in percentage is uniform and is not changed. The submission that by this method, the prices of royalty would change practically every month is without any substance because in respect of other minerals also, the ad valorem duty is charged on the sale price. The sale price in respect of these minerals also changes and varies from time to time. Had the rate of ad valorem duty changed i.e. if the percentage of 10% is changed within three years, in that case it would be violation of Section 9(3).
(V.M. Kanade, J.)
1. All these Petitions can be disposed of by a common judgment since the Petitioners in these Petitions are challenging the vires of Notification dated 13/08/2009, amended Rule 64D of the Mineral Concession Rules, 1960 and are challenging the instruction dated 10/12/2009 which had been issued by Respondents on the ground that it is contrary to the proviso to section 9(3) of the Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as “MMDR Act”).
2. Petitioners in these Petitions have been granted mining lease of various plots of lands mentioned in respective Petitions and pursuant to the said lease which has been granted, they have been carrying on mining activities and are selling ore of various grades. The royalty payable by Petitioners in respect of the said mining lease is covered by provisions of section 9 read with Second Schedule to the MMDR Act The contention of the Petitioners in these Petitions is that the said royalty which was payable prior to the amendment of Rule 64D was at a fixed rate. The grievance of the Petitioners is that on 13/08/2009, Notification was issued amending the Second Schedule to the MMDR Act to prescribe royalty at 10% of sale price on ad-valorem basis in Entry No.22 of the Second Schedule. Further grievance of the Petitioners is that on 10/12/2009, the Central Government amended old Rule 64D of the Mineral Concession Rules and the said amended Rule 64D provided that the Indian Bureau of Mines (“IBM”) shall publish sale price for computation of royalty and that the royalty shall be computed as per formula “Royalty = sale price of mineral (grade-wise and State-wise published by IBM X Rate of royalty (in percentage) X total quantity of mineral grade produced/dispatched.
3. Petitioners have also challenged the directions issued by Respondent No.1 dated 10/12/2009 to the Controller General, IBM with regard to method to be followed by IBM to determine the sale price to be published by IBM for each month in respect of each State. IBM was to take into account weighted average price per metric tonne of Pit Mouth Value (“PMV”) of the mineral ore as reported by the top 10 non-captive producers, or actual number of non-captive producers, whichever is less in monthly returns under the Mineral Conservation and Development Rules, 1988 (hereinafter referred to as “MCDR Rules”). Some of the Petitioners have also challenged the other orders passed by the Goa Port Trust.
4. We have heard the learned Counsel appearing on behalf of the Petitioners in each of these cases and the learned Counsel appearing on behalf of Respondents at length.
5. Following questions fall for our consideration in this group of Petitions:-
(1) Whether the Notification issued by the Central Government dated 13/8/2009 is ultra vires Section 9(3) of the MMDR Act?
(2) Whether the amended Rule 64D is ultra vires of sub-section (3) of Section 9 of the MMDR Act?
(3) Whether the directive dated 10/12/2009 is ultra vires of the provisions of Section 9(3) of the MMDR Act?
(4) Whether the Order dated 16/6/2010 issued by the Captain of Ports is illegal and invalid?
6. Petitioners in all these Petitions have been granted mining lease and pursuant to the terms and conditions of the said lease, they have been mining ore and selling it in the local market or exporting it to other countries. Principal grievance of the Petitioners is that Rule 64D which was substituted by G.S.R. 883(E) included iron ore for the purpose of calculating the manner of payment of royalty on minerals on ad valorem basis. Their contention is that the IBM has been authorized to publish royalty figure on the basis of fixed formula mentioned in the said Rule. Their contention is that Respondent No.1 issued directions to the Controller General of IBM by letter dated 10/12/2009 directing them to follow the method to determine sale prices which were to be published by IBM for each month in respect of each State. By the said
