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PUNJAB & HARYANA HIGH COURT
Shamsher Bahadur and Gurdev Singh JJ.
Shanthi Saroop Sharma
Versus
State Of Punjab
Civil Writ No. 2198 of 1966,
Decided On : MAY 20, 1968
Whether the demand of royalty by the State on brick-earth used by the petitioners in the course of their business of manufacturing bricks is valid and legal.
Fact of the Case:
The petitioners are engaged in the business of manufacturing bricks. The State Government demanded royalty on brick-earth used by the petitioners in the course of their business. The petitioners challenged the validity of the demand of royalty on the ground that brick-earth is not a minor mineral and is thus outside the purview of the Punjab Minor Mineral Concession Rules, 1964, that royalty demanded from the petitioners is, in fact, a tax which cannot be imposed by a rule-making authority but only by the legislature making an express provision for the same, that Section 15 of the Act which permits the States to make Rules for regulating the grant of prospecting licenses and mining leases in respect of minor minerals cannot be deemed to authorize the rule-making authority of levy the tax in the nature of royalty, that it is well settled that imposition of tax is essentially legislative function and same cannot thus be delegated to the Executive, that the power to frame rules for regulation cannot cover within its ambit the substantive power to impose a tax like the royalty, which is demanded from the petitioners, that the Rules with regard to the imposition of royalty do not apply to the petitioners as they either the owners or lessees from private parties of lands from which they are excavating brick-earth for manufacture of bricks, and no royalty can be charged from them, that in any case, royalty can be demanded only in respect of minor minerals which vest in the State, and since the minor minerals found in the land held by the petitioners for manufacture of bricks do not vest in the State, the demand for royalty is illegal, that even if Rule-20 is held to be valid, no demand for royalty can be made from the petitioners as none of them holds any mining lease or license from the Government.
Finding of the Court:
The Court held that the demand of royalty by the State on brick-earth used by the petitioners in the course of their business of manufacturing bricks is valid and legal. The Court found that brick-earth is a minor mineral and is thus within the purview of the Punjab Minor Mineral Concession Rules, 1964. The Court also found that royalty demanded from the petitioners is not a tax but a charge made by the owner of the property for exploitation or excavation of the mineral wealth contained therein. The Court further found that Section 15 of the Act which permits the States to make Rules for regulating the grant of prospecting licenses and mining leases in respect of minor minerals can be deemed to authorize the rule-making authority of levy the tax in the nature of royalty. The Court also found that the power to frame rules for regulation can cover within its ambit the substantive power to impose a tax like the royalty, which is demanded from the petitioners. The Court also found that the Rules with regard to the imposition of royalty apply to the petitioners as they either the owners or lessees from private parties of lands from which they are excavating brick-earth for manufacture of bricks, and royalty can be charged from them. The Court also found that royalty can be demanded in respect of minor minerals which vest in the State, and since the minor minerals found in the land held by the petitioners for manufacture of bricks vest in the State, the demand for royalty is legal. The Court also found that even if Rule-20 is held to be valid, demand for royalty can be made from the petitioners as none of them holds any mining lease or license from the Government.
Issues: 1. Whether brick-earth is a minor mineral and is thus outside the purview of the Punjab Minor Mineral Concession Rules, 1964? 2. Whether royalty demanded from the petitioners is, in fact, a tax which cannot be imposed by a rule-making authority but only by the legislature making an express provision for the same? 3. Whether Section 15 of the Act which permits the States to make Rules for regulating the grant of prospecting licenses and mining leases in respect of minor minerals cannot be deemed to authorize the rule-making authority of levy the tax in the nature of royalty? 4. Whether it is well settled that imposition of tax is essentially legislative function and same cannot thus be delegated to the Executive? 5. Whether the power to frame rules for regulation cannot cover within its ambit the substantive power to impose a tax like the royalty, which is demanded from the petitioners? 6. Whether the Rules with regard to the imposition of royalty do not apply to the petitioners as they either the owners or lessees from private parties of lands from which they are excavating brick-earth for manufacture of bricks, and no royalty can be charged from them? 7. Whether in any case, royalty can be demanded only in respect of minor minerals which vest in the State, and since the minor minerals found in the land held by the petitioners for manufacture of bricks do not vest in the State, the demand for royalty is illegal? 8. Whether even if Rule-20 is held to be valid, no demand for royalty can be made from the petitioners as none of them holds any mining lease or license from the Government?
Ratio Decidendi: 1. Brick-earth is a minor mineral and is thus within the purview of the Punjab Minor Mineral Concession Rules, 1964. 2. Royalty demanded from the petitioners is not a tax but a charge made by the owner of the property for exploitation or excavation of the mineral wealth contained therein. 3. Section 15 of the Act which permits the States to make Rules for regulating the grant of prospecting licenses and mining leases in respect of minor minerals can be deemed to authorize the rule-making authority of levy the tax in the nature of royalty. 4. The power to frame rules for regulation can cover within its ambit the substantive power to impose a tax like the royalty, which is demanded from the petitioners. 5. The Rules with regard to the imposition of royalty apply to the petitioners as they either the owners or lessees from private parties of lands from which they are excavating brick-earth for manufacture of bricks, and royalty can be charged from them. 6. Royalty can be demanded in respect of minor minerals which vest in the State, and since the minor minerals found in the land held by the petitioners for manufacture of bricks vest in the State, the demand for royalty is legal. 7. Even if Rule-20 is held to be valid, demand for royalty can be made from the petitioners as none of them holds any mining lease or license from the Government.
Final Decision: The petitions were dismissed, leaving the parties to bear their own costs.
Gurdev Singh, J.
1. This order will dispose of 14 petitioners under this Articles 226 and 227 of the Constitution (Civil Writ Nos. 2198 of 1966 and 159, 206, 416, 438, 439, 443, 484, 517, 518, 636, 2547 and 2720 of 1967), in which common questions of law have been raised. Dr. Shanthi Sarup Sharma and other petitioners have been engaging in and carrying on the business of manufacture and sale of bricks in various parts of the State of Punjab, as it stood before its reorganization in the year 1966. All of them hold valid licences to carry on this trade in accordance with the provisions of the Punjab Control Bricks Supplies Order, 1956, and they are running brick-kilns for manufacture of bricks in the lands, of which some of the petitioners are owners, and the other lessees.
2. In the year 1957 the Parliament enacted the Mines and Minerals (Regulation and Development) Act LXVII of 1957 (hereinafter called the Act ) for regulation of mines and development of minerals under the control of the union . ;In section 3 of the Act "minerals" are defined to include all minerals except mineral oils. Provisions regarding the prospecting licences and mining leases are contained in Sections 4 to 12. Section 13 empowers the Central Government to make rules the regulating grant of prospect of minerals and for purposes connected therewith. By Section 14 prospecting licences and mining leases in respect of minor minerals have been excluded from the operation of Sections 4 to 13 and the authority to make rules in respect of minor minerals has been given to the State Governments under Sections 18 of the Act, which is in these words:-
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"15 (1) The State Government may, by notification in the Official Gazette, make rules for regulating the grant of prospecting licences and mining leases in respect of minor minerals and for purposes connected therewith.
(2) Until rules made under sub-section (1), any rules made by a State Government regulating the grant of prospecting licences and mining leases in respect of minor minerals which are in force immediately before the commencement of this Act shall continue in force."
3. The expression "minor minerals" is defined in Section 3 of the Act in these words:-
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"3(e) "minor minerals" means building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral."
4. Availing of the powers delegated under section 15, the governor of the Punjab promulgated the Punjab Minor Minerals Concession Rules, 1964 (hereinafter referred to as the Rules), Published in the Punjab Gazette, on 2nd May,. 1964. Rule 2 (b) thereof defined the "Minor Minerals" in the same words as in the Central Act LXVII of 1957. The Central Government by its notification, dated 1st June, 1958 (Annexure R-1) had, however, extended the definition of the Minor Minerals" so as to include brick-earth and several other items.
5. Provision for charging royalty was made in Rule 20 and payment of royalty was made one of the conditions of mining leases under Rules 21 and 37, providing inter alia that the lessee shall pay royalty on minor minerals despatched from the leased area at the rates specified in; the First Schedule. Availing of these provisions , the Punjab Government decided to charge from the brick kiln owners royalty on brick-earth with effect from the 22nd April, 1965, at the rates prescribed in the First Schedule to the rules which came to 0.87 N. P. per thousand bricks. Instructions were, accordingly, issued by the director of Industries to all District Industries Officers and Assistant District Industries Officers to recover royalty at that rate from the various brick-kiln owners. These instructions are contained in the letter of the Director of Industries , Punjab, dated 25th June, 1965 (marked Annexure R-2 in Civil Writ No. 2198 of 1966), relevant portion of which is rep
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