PARIPOORNAN - (1.) THE State of Orissa and the authorities in the Mines Department of the State are the appellants in this batch of appeals. M/s. Mahanadi Coalfields Ltd., a Government company, in whom the lands in question vests in accordance with Section 11 of the Coal Bearing Areas (Acquisition and Development) Act, 1957 (Central Act 20 of 1957), and Union of India are the respondents in the main appeal. In the other appeals, the consumers of coal who purchase coal from Mahanadi Coalfields Ltd. for their own consumption as well as some traders in Coal are the respondents. THE Mahanadi Coalfields Ltd., the consumers of coal who purchase coal from Mahanadi Coalfields Ltd., and some traders in coal assailed the validity of the Orissa Rural Employment, Education and Production Act, 1992 (Orissa Act 36 of 1992), as amended, hereinafter referred to as 'the Act', before the High Court of orissa in a series of writ petitions. THE main controversy in the cases was regarding the levy of tax under the Act on "coal bearing lands". By a common Judgment dated 26-4-1994* the Division Bench of the High Court held that the State Legislature did not have the competence to levy the tax on coal bearing lands and struck down Section 3(2)(c) of the Act as well as the schedule attached to the Act levying tax of Rs. 32,000.00 per acre on coal bearing lands and also the consequential demand notices and certificate proceedings. As a sequel thereto, the demands raised by Mahanadi Coalfields Ltd. against the traders and consumers on account of additional burden of tax on lands were also quashed. THE High Court also took the view that the levy would be hit by Section 9A of Mines and Minerals (Regulation and Development) Act, 1957, (Act 67 of 1957) hereinafter referred to as 'M.M.R.D. Act' and the levy is also discriminatory and hit by Article 14 fo the Constitution of India. THE question of passing on the burden by Mahanadi Coalfields Ltd. was left open, though the High Court opined that if the tax is on lands, the burden cannot be passed on to the consumer or the trader. A few other pleas taken up by the petitioners were also negatived. THE High Court allowed the batch of writ applications. In S.L.P.(C) Nos. 12477-12751 of 1994, by an order dated 10-1-1995, a three Member Bench of this Court granted leave to appeal to the State of Orissa against the aforesaid Judgment of the High Court dated 26-4-1994. Apart from the competence of the Orissa Legislature to enact the law, M/s. Mahanadi Coalfields Ltd. raised various other pleas to assail the levy under Orissa Act 36/ 1992 as invalid. Important among such pleas, involved interpretation of Article 285 of the Constitution read with Ss. 9, 10 and 11 of Coal Bearing Areas (Acquisition and Development) Act. 1957 and the provision of Colliery Contract Order framed u/S. 3 of the Essential Commodities Act. THE said pleas were negatived by the High Court by the same common judgment of 26-4-1994 and M/s. Mahanadi Coalfields Ltd. have come up in appeals against that portion of the judgment, which repelled their pleas aforesaid, amongst others. THE appeals so filed are C.A. Nos. 42-43/94, 605/95 and 2660-2932/95. Accordingly the above Civil Appeals and special leave petitions have come up before this bench for hearing.
(2.) WE heard counsel for the appellants Sri B. Sen, Senior Advocate and counsel who appeared for the respondents, the learned Attorney General of India Sri M. K. Banerjee, Senior counsel Sri Shanti Bhushan, Sri A. K. Ganguli and others. Sri B. Sen, learned counsel who appeared for the appellants contended in the main that the High Court was in error in holding that Orissa Rural Employment, Education and Production Act, 1992, is without legislative competence and is also discriminatory and hit by Art. 14 of the Constitution of India. It was argued : (a) That the levy of tax in the instant case would squarely fall under Entry 49, List II of the Seventh 'Schedule (Taxes on land and buildings). It was alternatively contended that even if it is not so, the levy of tax in the instant case will fall under Entry 23 or 50, List II of the Seventh Schedule (Regulation of mines and mineral development; taxes on mineral and mineral rights.) (b) That the High Court erred in holding that the levy is discriminatory and so hit by Article 14 of the Constitution, since there is no material much less a finding to the effect that the levy is confiscatory. On the other hand, learned Attorney General Sri M. K. Banerjee and the other counsel who supported him, contended that in substance, the levy is on minerals and mineral rights alone and not a tax on land covered by Entry 49, List II of the Seventh Schedule. Since substantially the levy is on minerals or on mineral rights, even if the levy falls under Entry 23 or 50, List II of the Seventh Schedule (Regulation of mines and mineral development or Tax on mineral rights), it is subject to limitation imposed by Parliament under the law relating to regulation of mines and mineral development. Parliament has legislated on the subject under Entry 54, List I of the Seventh Schedule and has enacted the M.M.R.D. Act. which covers the field. In this view, the Orissa Act 36 of 1992 is ultra vires and beyond legislative competence. It was also contended that in effect and substance the levy is only on coal bearing lands without any basis, and so arbitrary and hit by Article 14 of the Constitution. Various other pleas taken up before the High Court to assail the levy were also taken up before us. In order to evaluate the merits of the rival pleas urged before us, it is necessary to bear in mind the relevant provisions of the Constitution of India, the Orissa Rural Employment, Education and Production Act, 1992 (Orissa Act 36 of 1992) as amended, and M.M.R.D. Act. The relevant provisions of the Constitution of India are as follows : "246. Subject matter of laws made by Parliament and by the Legislatures of States. ((1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the 'Union List'). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1) the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the 'Concurrent List'). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the 'State List')." "SEVENTH SCHEDULE (Aricle 246) List I - Union List xxx xxx xxx xxx xxx xxx 54. Regulation of mines and mineral development to the extent to which such regulation and development under the control of Union is declared by Parliament by law to be expedient in the public interest. xxx xxx xxx xxx xxx xxx 97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists." "List II -State List xxx xxx xxx xxx xxx xxx 23. Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. xxx xxx xxx xxx xxx xxx 49. Taxes on lands and buildings. 50. Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development." The relevant provisions of the Orissa Rural Employment, Education and Production Act, 1992 (Orissa Act 36 of 1992) which came into force on 1-2-1993, are as follows : "ORISSA ACT 36 OF 1992 THE ORISSA RURAL EMPLOYMENT, EDUCATION AND PRODUCTION ACT, 1992 AN ACT TO PROVIDE FOR ADDITIONAL RESOURCES FOR PROMOTION OF EDUCATION AND EMPLOYMENT IN RURAL AREAS AND FOR IMPLEMENTING RURAL EMPLOYMENT, EDUCATION AND PRODUCTION PROGRAMMES. Be it enacted by the Legislature of the State of Orissa in the Fortythird Year of the Republic of India as follows :- ... ... ... ... ... ... ... ... ... ... ... ... 2. In this Act, unless the context otherwise requires - (a) "annual value" in relation to a financial year means - (i) in relation to land held by a raiyat, the rent payable by such raiyat to the landlord immediately under whom he holds the land: ... (a-1) 'coal-bearing land' means any land acquired or declared from time to time inder any law for the purpose of obtaining coal; ... (c) 'land means land of whatever description which is cultivated, uncultivated or covered with water, and includes all benefits to arise out of land and things attached to the earth or permanently fastened to anything which is attached to the earth, but does not include crops of any kind, or houses, shops or other buildings; (d) 'mineral-bearing land' means mineral-bearing land or quarry held for carrying on mining operations; (e) 'prescribed' means prescribed by rules;" "3(1) On and from the commencement of this Act, all lands shall be liable to payment of rural employment, education and production tax assessed in the prescribed manner subject to provisions hereinafter contained. Provided that any land which is liable to payment of cess under the Orissa Cess Act, 1962 shall not be liable to payment of rural employment, education and production tax. (2) The rate per year at which such tax shall be levied shall be - (a) in the case of land other than mineral-bearing land, fifty percentum of the annual value thereof; (b) in the case of any mineral-bearing land other than coal-bearing land, the rate as may be prescribed from time to time in respect thereof; (c) in the case of coal-bearing land, the rate as specified in the Schedule, and (3) The State Government may, by notification, amend the Schedule from time to time so as to enhance or reduce the rate of tax specified therein; Provided that every such notification shall, as soon as it is published, be laid before the State Legislature for a total period of fourteen days which may be comprised in one or more sessions. (4) The rate of tax that may either be prescribed in pursuance of clause (b) of sub-section (2) or enhanced or reduced by amendment of the Schedule under sub-section (3), shall be so prescribed or, as the case may be, enhanced or reduced that the rate fixed in the case of - (i) any mineral bearing land other than coal bearing land, does not exceed the average annual income from all such mineral bearing lands in the State during the two consecutive years immediately preceding the year in which the rate is so fixed; and (ii) coal-bearing land, does not exceed, in the aggregate, fifty per cent of the rate specified in the Schedule on the date of publication of this Act in the Gazette." "SCHEDULE [Clause (c) of sub-section (2) of section 3] JUDGEMENT_686_SUPP2_1995Html1.htm Description of mineral bearing landRate of tax per year per acre (1)(2) I. Coal bearing landRs. 32.000" It may be noted at this juncture that Government of Orissa constituted a Committee to recommend rates of taxes on mineral bearing lands (other than coal-bearing lands) levied under Section 3(2)(b) of the Act, as per Notification dated 4-3-1993 and in pursuance to the report of that Committee, the Government promulgated Notification dated 26-9-1994, No. 12372-VII(A)SM-23/94/SM, adding Schedule C prescribing rates of taxes for various mineral bearing lands (Annexure-B, page 270 of Paper Book). (This is subsequent to the decision of the High Court). Schedule C is as follows : "SCHEDULE-C (See Rule 2 -A) JUDGEMENT_686_SUPP2_1995Html2.htm The relevant provisions of the Mines and Minerals (Regulation and Development) Act, 1957 (Act 67 of 1957) are as follows : "An Act to provide for the regulation of mines and development of minerals under the control of the Union... .. 2. Declaration as to expediency of Union control :- It is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided. 3. Definitions :- In this Act, unless the context otherwise requires - (a) 'minerals' includes all minerals except mineral oils; ... (b) 'mining operation' means any operations undertaken for the purpose of winning any mineral;" "9. Royalties in respect of mining leases:- (1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral. (2) The holder of a mining lease, granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral. (2-A) The holder of a mining lease, whether granted before or after commencement of the Mines and Minerals (Regulation and Development) Amendment Act 1972 (56 of 1972), shall not be liable to pay any royalty in respect of any coal consumed by a workman engaged in a colliery provided that such consumption by the workman does not exceed one-third of a tonne per month. (3) The Central Government may, by notification in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification; Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years." "9-A. Dead rent to be paid by the lessee:( (1) The holder of a mining lease, whether granted before or after the commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972 (56 of 1972), shall, notwithstanding anything contained in the instrument of lease or in any other law for the time being in force, pay to the State Government, every year, dead rent at such rate as may be specified for the time being, in the Third Schedule, for all the areas included in the instrument of lease. Provided that where the holder of such mining lease becomes liable, under Section 9, to pay royalty for any mineral removed or consumed by him or by his agent, manager, employee, contractor, or sublessee from the leased area, he shall be liable to pay either such royalty or the dead rent in respect of that area; whichever is greater. (2) The Central Government may, by notification in the Official Gazette, amend the Third Schedule so as to enhance or reduce the rate at which the dead rent shall be payable in respect of any area covered by a mining lease and such enhancement or reduction shall take effect from such date as may be specified in the notification : Provided that the Central Government shall not enhance the rate of the dead rent in respect of any such area more than once during any period of three years." (Emphasis supplied) "THE SECOND SCHEDULE RATES OF ROYALTY JUDGEMENT_686_SUPP2_1995Html3.htm "THE THIRD SCHEDULE (See Section 9A) Dead Rent (1) The rates of dead rent applicable to the leases other than those obtained for supply for raw material to the industry owned by the concerned lessee : (RATES OF DEAD RENT IN RUPEES PER HECTARE PER ANNUM) JUDGEMENT_686_SUPP2_1995Html4.htm Category of the Mining LeaseIst year of the lease 2nd to 5th year of the lease 6th to 10th year of the lease 11th year of the leases and onwards 12345 1.Lease area upto 50 hectaresNil306090 2.Lease area (above 50 hectares but not exceeding100 hectares.)Nil4080120 3.Lease area above 100 hectares.Nil60100150 (2) In the case of lease obtained for the supply of raw material for the industry owned by the concerned lessee, the rates of dead rent would be applicable as given in respect of item No. 1 above, irrespective of the lease area." During the course of arguments, it was fairly agreed by all parties that if the Orissa Rural Employment, Education and Production Act, 1992 (Orissa Act 36 of 1992) as amended, is without legislative competence, it is unnecessary to adjudicate upon the other points raised before the High Court and reiterated before us. Therefore, we shall first go into the question as to whether Orissa Act 36 of 1992 is within the legislative competence. According to the appellants the Act in question would fall under "Entry 49," List II of the Seventh Schedule (Taxes on buildings), and even if it is not, so it will fall under "Entry 23 or 50", List II of the Seventh Schedule. The respondents emphatically contend that in reality and substance the levy is on mineral lands and particularly on coal bearing lands and mineral rights. The legislation has no nexus with land. It concerns only minerals. The legislation purports to be one on "lands" and the nomenclature states so; but it is only a colourable device. The legislation being one on mineral lands and mineral rights and Parliament having enacted The Mines and Mineral (Regulation and Development) Act, 1957, the field is entirely covered and Orissa State Legislature is incompetent to enact Orissa Act 36 of 1992. To substantiate their respective pleas, emphasis was placed on the following three decisions of this Court : (1) Indian Cement Ltd. v. State of Tamil Nadu, 1989 Supp. (1) SCR 692 : 1990 (1) SCC 12 : AIR 1990 SC 85, (2) Orissa Cement Ltd. v. State of Orissa, 1991 (2) SCR 105 : AIR 1991 SC 1676 : 1991 Supp. (1) SCC 430, (3) Buxa Dooars Tea Company Ltd. v. State of West Bengal 1989 (3) SCR 793 : 1989 (3) SCC 211 : AIR 1989 SC 2015.
(3.) AT this juncture, it will be useful to remember the following well settled principles in Constitutional Law. In Harakchand Ratanchand Banthia v. Union of India, AIR 1970 SC 1453, a Constitution Bench of this Court stated thus : "The power to legislate is given to the appropriate legislatures by Article 246 of the Constitution, The entries in the three lists are only legislative heads or fields of legislation; they demarcate the area over which the appropriate legislatures can operate. It is well established that the widest amplitude should be given to the language of the entries. But some of the entries in the different lists or in the same list may overlap or may appear to be ibe in direct conflict with each other. It is then the duty of this Court to reconcile the entries and bring about a harmonious construction. In in re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, 1939 FCR 18 : AIR 1939 FC 1, Sir Maurice Gwyer proceeded to state : 'Only in the Indian Constitution Act can the particular problem arise which is now under consideration; and an endeavour must be made to solve it, as the Judicial Committee have said by having recourse to the context and scheme of the Act, and a reconcilation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying, the language of the one by that of the other." In K. C. Gajapati Narayan Deo v. State of Orissa, 1954 SCR 1, the Constitution Bench of this Court stated thus : "If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case has or has not, in respect to the subject matter of the statute or in the method of enacting it, transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguised, covert and indirect and it is to this latter class of cases that the expression 'colourable legislation' has been applied in certain judicial pronouncements. The idea conveyed by the expression is that although apparently a legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be a mere pretence or disguise." ". . . it is the substance of the Act that is material and not merely the form or outward appearance, and if the subject matter in substance is something which is beyond the powers of the legislature to legislate upon, the form in which the law is clothed would not save it from condemnation. The legislature cannot violate the constitutional prohibitions by employing an indirect method. In cases like these the enquiry must always be as to the true nature and character of the challenged legislation and it is the result of such investigation and not the form alone that will determine as to whether or not it relates to a subject which is within the power of the legislative authority. For the purpose of this investigation the Court could certainly examine the effect of the legislation and take into consideration its object, purpose or design. But these are only relevant for the purpose of ascertaining the true character and substance of the enactment and the class of subjects of legislation to which it really belongs and not for finding out the motives which induced the legislature to exercise its powers." (Emphasis supplied) Speaking for the Constitution Bench in A. S. Krishna v. State of Madras, AIR 1957 SC 297 Venkatarama Ayyar, J., stated thus : "When a law is impugned on the ground that it is ultra vires the powers of the legislature which enacted it, what has to be ascertained is the true character of the legislation. To do that, one must have regard to the enactment as a whole, to its objects and to the scope and effect of its provisions. If on such examination it is found that the legislation is in substance one on a matter assigned to the legislation, then it must be held to be valid in its entirety, even though it might incidentally trench on matters which are beyond its competence." (Emphasis supplied) In Buxa Dooars Tea Company Ltd. (AIR 1989 SC 2015) (supra) a Bench of two Judges of this Court held that in order to determine the true nature of a levy, the substance of the legislation should be ascertained from the relevant provisions of the statute. In K. P. Varghese v. Income Tax Officer, Ernakulam AIR 1981 SC 1922, in explaining the extent to which external aid can be resorted to in the interpretation of a statute, this Court held thus : "... ..the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation, and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible." (Emphasis supplied) In Diwan Brothers v. Central Bank of India, Bombay AIR 1976 SC 1503, the learned Judges took the view that a perusal of the speech of the Minister, who introduced the Bill in Parliament, will give a clear insight into the various objects of the Act and the main purposes which the legislation sought to achieve. It was further held that this will have an important bearing on the interpretation of the provisions of the Act. In Shashikant Laxman Kale v. Union of India, AIR 1990 SC 2114, Verma, J., speaking for a Three Member Bench, stated : "For determining the purpose or object of the legislation, it is permissible to look into the circumstances which prevailed at the time when the law was passed and which necessitated the passing of that law. For the limited purpose of appreciating the background and the antecedent factual matrix leading to the legislation, it is permissible to look into the Statement of Objects and Reasons of the Bill which actuated the step to provide a remedy for the then existing malady." It is in the light of the above principles of law laid down by this Court, we have to scan the provisions of the Orissa Act 36 of 1992 and adjudicate as to whether it really falls within "Entry 49" or "Entry 23 or 50" of List II of the Seventh Schedule of the Constitution, as contended by the appellant, and the legal effect flowing therefrom.;