- (1.) These appeals raise a common question of law as to the constitutional validity of Sec. 9(3) of the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter referred to as the Act), inter alia on the ground that the levy of royalty on minerals is a tax and the Union Legislature does not have the powers under Entry 54 of List I to enact such a law which denudes the right of the State Legislature to levy tax on mineral rights under Entry 50 of List II. A further contention also has been advanced in some of these appeals that the enactment of the Act violates the provisions of Arts. 268, 269 and 270 of the Constitution, and therefore, Sec. 9(3) must be declared to be ultra vires. When the writ petition, challenging the vires of the provisions of Sec. 9(3) of the Act was filed before the Gujarat High Court, a Bench of the Gujarat High Court, dismissed the same, following the decision of the Supreme Court in the case of India Cement Ltd. v. State of T. N., 1990 (1) SCC 12 and following an earlier decision of the said High Court in Special Civil Application No. 6226 of 1994. Subsequent to the decision of this Court India Cement (supra) all the questions raised in these appeals have been considered by a three-Judges Bench in the case of State of M. P. v. Mahalaxmi Fabric Mills Ltd., 1995 Supp (1) SCC 642, and this Court in Mahalaxmi case (supra), rejecting the contentions raised by the consumers of minerals, upheld the validity of the Act and set aside the order of the High Court. Since the judgment of this Court in Mahalaxmi (supra) deals directly on all issues raised in this batch of appeals, Mr. Chidambaram, the learned Senior Counsel, submitted with force that this batch of appeals should be referred to a Larger Bench, as the Bench while disposing of Mahalaxmi case (supra), had assumed some legal position erroneously, to be the law laid down by this Court in India Cement (supra). Mr. Shanti Bhushan, the learned Senior Counsel appearing for the appellants in some other appeals, however contended that the constitutional validity of Sec. 9(3) of the Act has not been tested on the anvil of Arts. 268, 269 and 270 of the Constitution, and therefore, the matter remains wide open for being reconsidered by this Court notwithstanding the three-Judges Bench judgment in Mahalaxmi (supra).
(2.) Before dealing with the contentions raised by the learned Counsel appearing for the appellants, we think it appropriate to briefly notice how this Court has dealt with the law relating to the Mines and Minerals (Regulation and Development) Act, 1957 in different cases. The first decision which requires to be noticed in this connection is the case in Hingir-Rampur Coal Co. Ltd. v. State of Orissa, AIR 1961 SC 459 : 1961 (2) SCR 537. In the said case, the competency of the State Legislature to enact the Orissa Mining Areas Development Fund Act, 1952, was under consideration and one of the contentions in this Court was that such a legislation made by the State Legislature is ultra vires the law made by Parliament under Entry 54 of List I. The majority judgment answered the question and held that in the absence of requisite Parliamentary declaration necessary under Entry 54 of List I, the State Legislature cannot be denuded of its power under Entry 23 of List II and the competence of the State Legislature under Entry 23 read with Entry 66 of List II was not impaired in any manner. The Court, therefore, upheld the validity of the legislation made by the State Legislature. In elaborating the discussion, this Court had observed that the limitation imposed by the latter part of Entry 23 of List II is a limitation on the legislative competence of the State Legislature itself and the test whether a Statute passed by the State Legislature thereunder was ultra vires would be whether the requisite declaration under Entry 54 List I has been made by Parliament by law covering, the same field or not. Considering the effect of Entries 23 and 66 of List II and Entry 54 of List I, the Court observed : The effect of reading the two entries together is clear. The jurisdiction of the State Legislature under Entry 23 is subject to the limitation imposed by the latter part of the said entry. If Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union, to the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act, the impugned Act would be ultra vires, not because of any repugnance between the two Statutes, but because the State Legislature had no jurisdiction to pass the law.
(3.) In the case of State of Orissa v. M. A. Tulloch & Co., AIR 1964 SC 1284 : 1964 (4) SCR 461, the question for consideration before this Court was whether the continued operation of the Orissa Mining Areas Development Fund Act, 1952 and the continued exigibility of the fess leviable from mine-owners under the said enactment is legally and constitutionally permissible. The contention raised was that the Mines and Minerals (Regulation and Development) Act, 1957 called the Central Act was brought into force from 1-6-1953 and the Orissa Act which had been enacted by virtue of the legislative power conferred by Entry 23 of the State Legislative List ceased to be operative, once Parliament made a declaration and enacted the law. The High Court of Orissa had upheld the contention and came to hold that the Orissa Act should be deemed to be non-existent as from 1-6-1958 for every purpose, with the consequence that there was lack of power to enforce and realise the demands for the payment of the fee at the time when the demand was issued and was sought to be enforced. After noticing Entry 23 in List II and Entry 54 in List I, the Court observed that it does not need much argument to realise that to the extent to which the Union Government had taken under its control the regulation and development of minerals so much was withdrawn from the ambit of the power of the State Legislature under Entry 23 and legislation of the State which had rested on the existence of power under that entry would to the extent of that control be suspended or be rendered ineffective, for here we have a case not of mere repugnancy between the provisions of the two enactments, but of a denudation or deprivation of State legislative power by the declaration which Parliament is empowered to make and has made. It would, however, be apparent that the States would lose legislative competence only to the extent to which regulation and development under the control of the Union has been declared by Parliament to be expedient in the public interest. But having held so, as the liability to pay the fee, which was the subject of the notices of demand had accrued prior to 1-6-1958 the date on which the Central legislation occupied the field, the Court held that those notices were valid, and the amount due thereunder would be recovered notwithstanding the disappearance of the Orissa Act by virtue of the superior legislation by Union Parliament. In India Cement Ltd. v. State of T. N. (supra), the question for consideration was whether levy of cess on royalty is within the competence of the State Legislature? In the aforesaid case, under Sec. 115 of the Madras Panchayats Act, as amended by Madras Act 18 of 1964, the lessee of minerals was required to pay local cess @ 45 paise/rupee, as royalty. The contention on behalf of the State, relying upon the observation made by this Court in H.R.S. Murthy v. Collector of Chittor, AIR 1965 SC 177 : 1964 (6) SCR 666 was repelled and it was held : 30. It seems, therefore, that attention of the Court was not invited to the provisions of Mines and Minerals (Regulation and Development) Act, 1957 and Sec. 9 thereof. Section 9(3) of the Act in terms states that royalties payable under the Second Schedule of the Act shall not be enhanced more than once during a period of four years. It is, therefore, a clear bar on the State Legislature taxing royalty so as to in effect amend Second Schedule of the Central Act. In the premises, it cannot be right to say that tax on royalty can be a tax on land, and even if it is a tax, if it falls within Entry 50 will be ultra vires the State legislative power in view of Sec. 9(3) of the Central Act. The Court also rejected the contention on behalf of the State that under Entry 50 of List II, there is no limitation to the taxing power of the State and held that in view of express provisions of Sec. 9(2) of the Mines and Minerals (Regulation and Development) Act, 1957 the submission cannot be accepted and the field is fully covered by the Central legislation. In para 34 of the judgment, the Court concluded : [W]e are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature because Sec. 9 of the Central Act covers the field and the State Legislature is denuded of its competence under Entry 23 of List II. In any event, we are of the opinion that cess on royalty cannot be sustained under Entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax on land but a payment for the user of land.;