P. Kannadasan
Vs. State of Tamil Nadu & Ors [1996] INSC 862 (26 July 1996)
B.P.
Jeevan Reddy, Suhas C. Sen B.P. Jeevan Reddy, J.
ACT:
HEAD NOTE:
THE
26TH DAY OF JULY, 1996 Presents:
Hon'ble
Mr.Justice B.P. Jeevan Reddy Hon'ble Mr.Justice Suhas C.Sen M. Chandrasekharan,
Additional Solicitor General A.K. Ganguli, K.N. Shkula, T. Thiagarajan, K. Parasaran,
V.A. Bobde, Dr. A.M. Singhvi, P.S. Nair, B. Sen, Gulab Gupta, G.L. Sanghi, R.N.
Sachthey, Sr. Advs., V. Ramasubamaniam, V. Krishnamurthy, (Manish Mishra,) Adv.
for M/s. Fox Mandal & Co., V.A. Subba
Rao, A.D.N. Rao, Arvind Kumar Sharma, T. Harish Kumar, Krishnamurthi Swami,
K.K. Mani, Nikhil Nayyar, T.V.S.N. Chari, B.B. Singh, Mahabir Singh, Praveen
Kumar, Suman J. Khaitan, Shahid Rizvi, T.G.N. Nair, satish K. Agnihotri, Ashok Mathur,
Anip Sachthey, C.D. Singh, M. Munshi, B.B. Singh, Adhay Sapore, Vivek Gambir, Neeraj
Sharma, Ajit Kumar Sinha, P.R. Seetharaman. Advs. With them for the appearing
parties.
The
following Judgment of the Court was delivered:
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL
APPEAL NO 9847 OF 1996 (Arising out of S.L.P. (C) No. 177812 of 1994) WITH
C.A. NOS. ARISING OUT OF S.L.P NOS. 9849, 9780-81/96 11922-24/96 9905/96,
1761/96 9851/96 19147/94 9906,9907/96 25020,25076/95 9777/96 26137/95 W. P. (C)
NOS.269/95, 270/94 9908, 9909/96 28062,28064/95 9850, 9778/96 3315/95,3351/96
9910/96 3513/96 W.P. (C) NO.408/96 9911-12/96 4198-99/96 9913/96 4885/95
W.P.(C) No. 518/95 9914/15/96 5339,5362/96 9848, 9774-76/96 8109,8814-16/95
9916/96 9749/96 9917/96 15012/96 (D.No 11144/96) IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 1996 [ARISING OUT OF S.L.P.(C)
NO.17721 OF 1994] WITH
CIVIL APPEAL NOS. OF 1996 [ARISING OUT OF S.L.P.(C) NOS.11922-24/96,1761/96,
19147/ 94, 25020/95, 25076/95,26137/95,W.P.(C) NOS.269/95,270/94, S.L.P.(C)
NO.28062/95,28064/95, 3315/95,3351/96,3513/96, W.P. (C) NO.408/96, S.L.P.(C)
NOS.4198-99/96,4885/96,W.P.(C) NO.518/95, S.L.P.(C) NOS.5339/96,5362/96,W.P.(C)
NO. 688/92, S.L.P.(C) NOS. 8109/95, 8814-16/95, 9749/96 AND S.L.P.(C)
NO._____________ /96 [D.NO.11144/96] WITH I.As.
Leave
granted in the Special Leave petitions.
The
appellants-writ petitioners are challenging the validity of The Cess and Other
Taxes on Minerals (Validation) Act, 1992 [being Act 16 of 1992] enacted by
Parliament. The High Courts have repelled the attack.
It is
renewed here.
FACTUAL
CONSPECTUS:
Section
115 of the Tamil Nadu Panchayats Acts 1958 levied in every Panchayat
Development lock a local cess @ 0.45p on every rupee of land revenue payable to
the Government in respect of any land for every fasli. The explanation to the
section defined "land revenue" to include inter alia royalty and
lease amount payable in respect of the land. The validity of the levy was
challenged in the Madras High Court. A learned Single Judge dismissed the writ
petition-holding that being a tax on land, it is within the Legislative
competence of the State Legislature. The learned Judge followed the decision of
this Court in H.R.S. Murthy v. Collector Chittoor [1964 (6) S.C.R. 666]. A writ
appeal against the decision of the learned Single Judge was dismissed, again
following the decision in H.R.S. Murthy.
The
matter was brought to this Court. It was heard ultimately by a seven-Judge
Bench [ India, Cement Limited v.
State
of Tamil Nadu (1989 Suppl.(1) S.C.R. 692)] which held, the said levy to be
outside the legislative competence of the Tamil Nadu Legislature. This Court
held that
(1) the
levy cannot be sustained under and with reference to Entry 49 of List-Il of the
Seventh Schedule to the Constitution of India as a tax on land;
(2) the
levy is a levy on minerals and is relatable to Entries 23 and 50 of List-II
(3) that
on account of the declaration made by Parliament contained in Section 2 of -
the Mines and Minerals [Development and Regulation] Act, 1957, [M.M.R.D. Act],
the State legislatures have been denuded of the power to levy tax on minerals.
Regulation of mines and mineral development takes within its purview the levy
of tax on minerals. Section 9 of the M.M.R.D. Act, this Court held, provides
for levy of royalty/dead rent on minerals. The State legislatures cannot,
therefore, impose any tax on minerals. H.R.S. Murthy was wrongly decided.
Having so declared, this Court, however, directed that the said decision shall
only have prospective effect. This was for the reason that the States have been
levying and collecting the said cess on the basis of the decision of this Court
in H.R.S. Murthy. The decision in India Cement was rendered on 25th October,
1989.
Following
the decision in India Cement, a three-Judge Bench declared identical levies
imposed by the States of Orissa, Bihar and Madhya Pradesh as incompetent and
void [Orissa Cement Limited v. State of Orissa (1991 (2) S.C.R.105)]. Having
regard to the fact that decisions of the High Courts in Orissa, Bihar and
Madhya Pradesh [which were the subject-matter of appeals before this Court]
were rendered on different dates, the Bench directed that the said decision
shall be operative prospectively with effect from the date of the said
judgment, i.e., 4th April, 1991 in the case of State of Bihar, with effect from
December 22, 1989 in the case of Orissa and with effect from march 28, 1989 in
the case of Madhya Pradesh.
The
aforesaid decisions of this Court had serious impact on the revenues of several
State Governments. Not only were they barred from collecting the said cess,
quite a few of them were obliged to refund substantial amounts which has
already been collected. It is well known that the state Governments in this
country are perpetually strapped for funds. the decisions made their situation
more acute. The Parliament then came to their rescue and promulgated The Cess
and other Taxes on Minerals (Validation) ordinance, 1992 on February 15, 1992. The Ordinance has been replaced by
Act 16 of 1992, published in the Gazette of India on 4th April, 1992. the Act contains only three
sections. Having regard to the several submissions made with respect to its
validity, it is appropriate to read all the three sections including the
schedule appended thereto:
"An
Act to validate the imposition and collection of cesses and certain other taxes
on minerals under certain State laws Be it enacted by Parliament in the
Forty-third Year of the Republic of India as follows:- Prefatory Note Statement
of Objects and Reasons. --- Certain State Acts imposing cesses or other taxes
on minerals had been struck down by Courts including the Supreme Court of India
in different cases. As result of judgments in these cease, State Government
became liable to refund cesses and other taxes collected by them.
Since
refund was likely to have a serious impact on State revenues of the concerned
State Governments and having regard to the fact that it is extremely difficult
to ensure that the levies collected are refunded to the large number of end
users of minerals who have actually borne the burden of such levies, the Cess
and Other Taxes on Minerals (Validation) Ordinance, 1992, to validate
collection of such levies by State Governments up to the 4th day of April,
1991.
2. The
Bill seeks to replace the aforesaid Ordinance.
1.
Short title, extent and commencement---(1) This Act May be called the Cess and
Other Taxes on Minerals (Validation) Act, 1992.
(2) It
extends to the whole of the India.
(3) It
shall be deemed to have come into force on the 15th day of February, 1992.
2.
Validation of certain State laws and actions taken and things done thereunder.-
(1) The laws specified in the Schedule to this Act shall be, and shall be
deemed always to have been, as valid as if the provisions contained therein
relating to cesses or other taxes on Minerals had been enacted by parliament
and such provisions shall be deemed to have remained in force up to the 4th
April, 1991.
(2)
Notwithstanding any judgment, decree order of nay court, all actions taken,
things done, rules made, notifications issued or purported to have been taken,
done made or issued and cesses or other taxes on minerals realised under any
such laws shall be deemed to have been validly taken, done, made, issued or realised,
as the case may be, as if this section had been in force at all material times
when such actions were taken, Things were done, rules were made, notifications
were issued. or cesses or other taxes were issued, and no suit or other
proceeding shall be maintained or continued in any court for the refund of the cesses
or other taxes realised under any such laws.
(3)
For the removal of doubts, it is hereby declared that nothing in sub-section
(2) shall be construed as preventing any person from claiming refund of any
person from claiming refund of any cess of tax paid by him in excess of the
amount due from him under any such laws.
3.
Repeals and savings. -----(1) The Cess and other Taxes on Minerals (Validation)
Ordinance, 1992 (Ord. 7 of 1992 ) is hereby repealed.
(2)
Notwithstanding such repeal, anything done or any action taken under the said
Ordinance shall be deemed to have been done or taken under the corresponding
provisions of this Act.
THE
SCHEDULE (See Section 2 )
1. The
Andhra Pradesh (mineral Rights) Tax Act, 1975 (A.P. Act 14 of 1975).
2. The
Andhra Pradesh (Andhra Area) District Boards Act, 1920.
3. The
Andhra Pradesh (Telengana Area) District Boards Act, 1955.
4. The
Cess Act, 1880 (Bengal Act 9 of 1880) as applicable in the State of Bihar.
5.
Karnataka Zilla Parishads, Taluk Panchayat Samitis, Mandal Panchayat and Nyaya Panchayats
Act, 1983 (Karnataka Act 20 of 1985).
6. The
Karnataka (Mineral Rights) Tax Act, 1984 (karnataka Act 32 of 1984).
7. The
Madhya Pradesh karadhan Adhiniyam, 1982 (M.P. Act 15 of 1982)
8. The
Madhya Pradesh Upkar Adhiniyam, 1982 (M.P. Act 1 of 1982).
9. The
Maharashtra Zilla Parishads and panchayat Samitis
(amendment and Validation ) Act, 1981 ( Maharashtra Act 46 of 1981).
10.
The Orissa Cess Act, 1962 (Orissa Act II of 1962).
11.
The Tamil Nadu Panchayat Act, 1958 (Tamil Nadu Act xxxv of 1958).
The
Statement of Objects and Reasons appended to the bill states that cesses and
other taxes on minerals imposed by certain State governments were struck down
by this Courts on account of which they have become liable to refund cesses and
other taxes collected by them. Since such refund is likely to have serious
impact- on the revenues of the concerned State Governments and also because it
is extremely difficult to ensure that the levies collected are refunded to the
large number of end users of minerals who have actually borne the burden of
such levies, the said Act was being made by Parliament. The Preamble to the Act
states that it was an Act "to validate the imposition and collection of cesses
and certain other taxes on minerals under certain State laws". The Act is
deemed to have come into force on February 15, 1992, the date on which the
Ordinance of 1992 was promulgated by the President. Section which contains
three sub-sections the main provisions in the Act. Sub-section (1) says that
the provisions contained in the laws specified in the Schedule to the Act
relating to cesses anc other taxes on minerals, shall be and shall be deemed
always to have been as valid as if the provisions contained therein had been
enacted by Parliament and that such provisions shall be deemed to have remained
in force upto the 4th day of Aprils Sub-section (2) elaborates and elucidates
the content of sub-section ( Having regard to the decisions of this Court and
the High Courts on the question of validity of cesses and taxes on minerals
imposed by the States, the sub-section opens with a non-obstante clause
"notwithstanding any judgments decree or order of any court". The
sub-section then provide three things. It firstly says that "all actions
taken, things done, rules made, notifications issued or purported to have been
taken, done made or issued shall be deemed to have been validly taken done, made
or issued. as the case may be, as if this section had been in force at all
material times when such actions were taken, things were done, rules were made
and notifications were issued". Secondly, it says that "cesses and
other taxes on minerals realised under any such laws shall be deemed to have
been validly..... realised....... as if this section had been in force at all
material times when such...... cesses or other taxes were realised". The
third thing provided by the sub-section is the declaration that "no suit
or other proceeding shall be maintained or continued in any court for the
refund of the cesses or other taxes realised under any such laws". sub-section
(3) is clarificatory in nature. It starts with the words "for the removal
of doubts" and declares that nothing in, sub-section (2) shall be
construed as preventing any person from claiming refund of any cess or tax paid
by him in excess of the amount due from him under any of the laws mentioned in
the Schedule. It is a case of stating the obvious by way of abundant caution.
The
object and purpose of the Validation Act is self- evident. Since it was
declared by this Court [ and other High Courts] that the State legislatures
were not competent to levy cesses and taxes on minerals by virtue of the declaration
contained in Section 2 of the M.M.R.D. Act [made in terms of Entry 54 in List-I
of the Seventh Schedule to the Constitution ] the Parliament stepped in and
enacted the relevant provisions of the State enactments [mentioned in the
Schedule ] with retrospective effect from the date of the levy under each of
the said enactments. The power of the Parliament to levy such taxes cannot
really be disputed. If the States have no power to levy such cesses or taxes,
it follows that Parliament does have such power. By virtue of the deeming
clause contained in sub-section of Section 2, the relevant provisions of the
State enactments must be deemed to have been enacted on the date they were
enacted by the respective State Legislatures and they must be deemed to have
remained in force upto the 4th day of April, 1991. The device adopted by
Parliament is a well-known one. It may be called legislation by incorporation.
The effect is as the relevant provisions of 'Scheduled Acts are individually
and specifically enacted by Parliament; all those provisions must be read into
Section 2 (1). The necessary and logical consequence flowing therefrom is the
creation of levy of all the cesses and taxes, levied by the respective State
enactments, by Parliament itself. The provisions so enacted are, however,
declared to be in force upto the 4th day of April 1991.
CONTENTIONS
OF THE PARTIES:
S/Sri
K. Parasaran, G.L. Sanghi, A.K. Ganguli, B. Sen, V.A. Bobde, Abhishek Singhvi, Rohinton
F. Nariman and Ajit Kumar Sinha urged the following contentions in support of
their attack upon the validity of the Act:
1. The
impugned Act is a clear case of the Parliament seeking to over turn the
decisions rendered by this Court and the High Courts in exercise of their
constitutional power and are, therefore, incompetent and ineffective.
2. The
language in Section 2 does not achieve the purpose set out in the Preamble. The
Parliament must first make a law creating the levy before it can create a
fiction that the law must be deemed to have been made do on anterior date,
i.e., before giving it retrospective effect. The Parliament cannot relegate
even the law making function to the realm of fiction. In words, without making a
laws the Parliament cannot declare that the law shall be deemed to have been made
by it on an anterior date. Section 2 does not bring into existence any
levy/imposition. the language employed in Section 2 is wholly inadequate for
the purpose.
The
section is mere exercise in futility.
3.
Even if it is held by this Court for any reason that Section 2 has indeed
created the levy the creation of the said levy is for the limited purpose of
enabling the State Governments to retain what they have already collected.
Section
2 does not empower the Parliament or its agencies to collect taxes which were
not collected on or before the 4th day of Aprils 1991. In other word, after 4th
day of April, 1991, any tax or cess levied under the Act [ which means the
scheduled enactments] remaining uncollected/unrealised cannot be collected or realised.
The idea was to close the chapter on 4th day of April, 1991: whatever is
collected shall not be refunded and whatever is not collected shall not be
collected thereafter.
4. The
effect of Section 2 is that cesses and minerals are levied in different States
at different rates. This is because the rate of tax/cess in each of the
concerned States was different. A Parliamentary enactment cannot levy the same
tax/cess at different rates in different States of the country. It would be
discriminatory and violative of Article 14 of the Constitutions No
justification has been put forward by the Union of India in support of such
discriminatory treatment. This discriminatory levy is antithetical to the basic
object underling M.M.R.D. Act, viz., levy of uniform royalties-taxes. Indeed
the Act does not extend to the entire country but only to certain States in the
country.
5. The
declaration made by Parliament in Section 2 of the M.M.R.D. Act is not an
absolute and unlimited one. The denudation of the State legislatures is only to
the extent provided in the said Act. Section 9 is one of the provisions of the
M.M.R.D. Act defining the extent of denudation. The impugned levy created by
Section 2 f the impugned Act is in addition to the levy under section 9. In
other word, the extent of denudation has been enhanced by the impugned levy.
It so,
such levy/denudation could have been effected only by making a fresh
declaration in term of Entry 54 list-I of the Seventh Schedule to the
Constitution. No such declaration has been made by Parliament and. therefore,
the levy is incompetent and ineffective.
6. The
levy in question can be related only to Entry 54 of List-I. It cannot be
related to Entry 97 of List-I If so, the levy of cess/tax should be for the
purposes of regulating the mines or mineral development. Absolutely no material
is placed before the Court to show that the levy of the impugned cess/tax is
for the said purpose.
7. The
impugned enactment is a temporary statute. Its effect is only upto 4th day of
April, 1991. On that date, the purpose of the Act comes to an end. Thereafter,
it is a dead-letter. Since Section 6 of the General Clauses Act does not apply
in the case of a temporary statute, no action can be taken and no recoveries
can be made after 4th day of April, 1991. Indeed, the relevant provision of the
enactments mentioned in the Schedule to the Act are enacted and kept alive only
upto 4th day of April, 1991 which means that even the provisions relating to
recovery also cease to have any force after the said date. Since the recovers
machinery is not available and is not in existence after the Said date, no
recoveries can be made after the said date.
The
sequence of events, the statement of objects and reasons and the language in
sub-section (2) all bear but the fact that the Act was intended merely to save
the collections already made and not to enable the union of India or its
agencies to recover the taxes of cesses not realised or recovered on or before
4th day of April, 1991. It is significant to note that the impugned Act does
not contain any provision corresponding to any of the clause in Section 6 of
the General Clauses Act.
Sri Chandrasekharan,
learned additional Solicitor General, Sri Gulab C. Gupta and Sri K.N. Shukla,
appearing for the Governments of Tamil Nadu, Madhya Pradesh and the Government
of India respectively disputed the correctness of the several contentions urged
on behalf of appellants- petitioners and submitted that section 2 of the
impugned enactment is perfectly adequate and effective to create the levy [by
Parliament] of cesses and taxes which were earlier imposed by the State
enactments but which enactments were declared to be incompetent by this Court
and the High Courts. They submitted that parliament was competent to and did
create a new levy with retrospective effect but limited its operation upto 4th
day of April, 1991. The learned counsel submitted that the impugned enactment
is not and cannot be described as a temporary statute. the impugned Act has not
expired. It is very much alive and continues to be on the statute book. Merely
because the levy created thereunder is confined to a particular period, it does
not mean either that the Act has expired or that it is a temporary statute.
Learned counsel also submitted that the different rates of levy created by
Section 2 cannot be described as discriminatory. Having regard to the context
in which the impugned Act came to be enacted historical factors it could not
have been otherwise. Levy of a tax at different rates in different States of
the country is not an unknown feature. Such a practice already exists. The
Parliament is competent to enact a law applicable only to part of the country.
Classification on the grounds of geographical division is a well-known and
well-accepted one. It is also not necessary, they submitted, that there should
be a fresh declaration in terms of Entry 54 of List-I whenever the rate of tax
or royalty is enhanced or any of the provisions of the M.M.R.D. Act are
amended. The impugned enactment is in the nature of addition or a proviso to
the M.M.R.D. Act. The States have already been denuded of the power to levy any
tax or cess on minerals. There is no fresh denudation now.
The
Parliament is only adding to the tax which it has already imposed and that too
for a limited period. Learned counsel submitted that identical provisions have
already been upheld by this Court and that there is no reason to take a
different view.
THE
RELEVANT PROVISIONS OF THE CONSTITUTION AND THE M.M.R.D. ACT:
For a
proper appreciation of the questions arising herein, it is necessary to notice
certain relevant provisions of the Constitution and the M.M.R.D. Act.
Entries
23 and 50 of List-II of the Seventh Schedule to the Constitution read thus:
"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.
50.
Taxes on mineral rights subject to any limitations imposed by Parliament by law
relating to mineral development.
These
entries which empower the States to make laws with respect to regulation of
mines and mineral development and to levy taxes on mineral rights ares however,
subject to the provisions of List-I with respect to regulation and development
under the control of the Union. Entry 54 of List-I empowers the Union to make
laws regulating the mines and mineral development to the extent such regulation
and development under the control of Union is declared by Parliament by law to
be expedient in the public interest.
Entry
54 of List-I reads:
"54.
Regulation of mines and mineral development 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."
Entry 97 List-I may also be set out:
97.
Any other matter not enumerated in List II or List-III including any tax not
mentioned in either of those Lists" The Parliament enacted the mines and
minerals [Regulation and development] Act, 1957, Section 2 whereof contains the
declaration in terms of Entry 54 of List-I. It reads:
"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. " The Act
regulates the prospecting and mining operations, prescribes the royalties
payable in respect of mining leases provides for development of minerals and
certain other miscellaneous and incidental provisions.
Section
9 read with second Schedule to the Act prescribed the rates of royalty payable
by the lessees in respect of each mineral. Section 9-A provides for payment of
dead-rent which is in the nature of A minimum royalty. We need not refer to the
other provisions in the Act for the purposes of this case.
P A
R T = II We may now
proceed to deal with the contentions urged by the learned counsel for
appellants-petitioners, in the order set out hereinabove.
The
first submission of the learned counsel for appellants-petitioners is that by
enacting the impugned Act, the Parliament has sought to annul and invalidate
the decisions of this Court in India Cement and Orissa cement But which it is
not competent to do. lt is submitted that this Court had issued a mandamus
directing certain State Governments to refund the taxes and cesses collected by
them under the invalid laws, Some of the States had also given undertakings to
this Court to - refund the taxes/cesses collected in the event of the success
of appellants- petitioners. The mandamus so issued cannot be invalidated by
making a law. The undertaking given by the State is binding upon it. Strong
reliance is placed upon the decisions of this Court in Madan Mohan Pathak v.
Union of India [1978 (3) S.C.R. 334 ] and A.V. Nachane v. Union of India [1582
(2) S.C.R. 246]. It is not possible to agree. It must be remembered that our
Constitution recognises and incorporates the doctrine of separation of powers
between the three organs of the State viz., Legislatures Executive and the
Judiciary. Even though the Constitution has adopted the parliamentary form of
Government where dividing line between the Legislature and the Executive
becomes thins the theory of separation of powers still valid. Ours is also a
federal form of government. The subjects in respect of Which the Union and the States can make laws are separately set out
in List-I and List-II of the Seventh Schedule to the Constitution respectively [
List-III is, of courses a concurrent list.] The Constitution has invested the
Supreme Court and High Courts with the power to invalidate laws made by
Parliament and the State legislatures transgressing the constitutional
limitations. Where an Act made by a State legislature invalidated by the Courts
on the ground that the State legislature was not competent to enact it, the
judgment of the court shall not operate it cannot over-rule or annul the
decision of the court. But this does not mean that the other legislature which
is competent to enact that law. It can. Similarly, it is open to legislature to
alter the basis of the judgment as pointed out by this Court in Shri Prithvi
Cotton Mills v. Broach Borough Municipality [1970 (1) S.C.R. 388 ] - all the
while adhering to the constitutional limitations; in such case, the decision of
the court becomes ineffective in the sense that the basis upon which it is
rendered, is changed. The new low or the amended low so made can be challenged
on other grounds put not on the ground that it seeks to ineffectuate or
circumvent the decision of the court. This what is meant by "checks and
balances" inherent in a system of government incorporating the concept of
separation of powers. This aspect has been repeatedly emphasised by this Court
in numerous decisions commencing from Shri Prithvi Cotton Mills. Under our
constitution, neither wing is superior to the other. Each wing derives its
power its power and jurisdiction from the Constitution. Each must operate with
the sphere allotted to it. Trying to make one wing superior to other would be
to introduce an imbalance in the system and a negation of the basic concept of
separation of powers inherent in our system of government. Take this very case.
The
state legislatures enacted provisions levying cesses/taxes on minerals. They
thought that they were entitled to do so by virtue of Entry 50 of List-II of
the Seventh Schedule and that the enactment of the M.M.R.D. Act by the
parliament and the declaration contained in Section 2 thereof did not deprive
them of the legislative power conferred by the said entry. A Constitution Bench
of this Court in H.R.S. Murthy upheld their stand and affirmed their belief.
Several years later, a larger Bench of this Court overruled H.R.S. Murthy in
India Cement and ruled that by virtue of the declaration contained in Section 2
of the M.M.R.D. Act and the provisions of the said Act, the State legislatures
are denuded of their power to levy and tax on minerals. Entry 50 in List-II
became practically a dead letter. Provisions in several State enactments
levying cess/tax on minerals were accordingly invalidated with effect from
different dates. The decisions of this Court clearly meant that the power to
levy cess/tax on minerals vested exclusively with the parliament. Since this
Court is the final arbiter on the interpretation of the Constitution, everybody
was bound by the said declaration of law. In the circumstances, the Parliament
stepped in and enacted the impugned law, avowedly to bail out States of the
predicament aforementioned; the impugned enactment makes this objective clear
beyond any doubt. At the same time, it should be noted that Parliament does not
purport to clothe the State legislatures with the power which they do not
possess. The Parliament had already deprived the State legislatures of the
power to levy tax on minerals by making the declaration contained in Section 2
of the M.M.R.D. Act as far back as 1957. The said declaration remains intact
which means that the States have no power to levy any tax or cess on minerals
so long as the said declaration remains in force. The parliament, therefore,
adopted the only legislative course open to it in the circumstances. It created
those very levies with retrospective effect by enacting the impugned law.
Section 2 (1) say that the relevant provisions of the enactment mentioned in
the schedule to the Act shall be deemed to have been enacted by Parliament on
the date they were enacted by the respective legislatures and that such
provisions shall be deemed to have remained in force upto 4th day of April,
1991. It is not suggested that Parliament is not competent o levy a tax or cess
with retrospective effect. It is, however, suggested that the tax so levied
must also be operative and effective on the date the enactment is made. There
cannot be levy which is wholly and exclusively retrospective, it is argued, We
see no warrant for reading such restriction upon the power of the Parliament.
It the parliament is empowered to make is law with retrospective effect, it is
entitled to make the law effective for such anterior period as it think
appropriate.
It
cannot be said that unless the levy created with retrospective effect is also
kept alive on the date the law is enacted by Parliament, such a levy would be
incompetent.
This
would amount to evolving a principle unknown to law and would also amount to
creating a fetter on parliament for which there is not basis in principle. We
are also unable to see any substance in the submission that by virtue of the
impugned enactment, the Parliament has tried to annual the judgments of this
Court. On the contrary, the parliament has accepted the law declared by this
Court and has accordingly enacted the law itself, about whose legislative
competence there can be no serious question.
The
decisions in Madan Mohan Pathak and Nachane, we must say, have no bearing on
this question. Even so, having regard to the strong reliance placed thereon by
Sri G.L. Sanghi, it would be appropriate to deal with the facts and principle
of the said decisions, to illustrate how the said decisions are wholly
irrelevant to the questions concerned therein, First, the decision in Madan
Mohan Pathak.
In
June 1974, a settlement was arrived at between the life insurance Corporation
and its employees relating to the terms and conditions of service of Class III
and Class IV employees including the bonus payable to them. Clause 8(ii)
provided for payment of annual cash bonus, arrived at by applying a particular
formula. The settlement was valid for a period of four years and was to
continue until a new settlement was arrived at. After the coming into force of
the payment of Bonus (Amendment) Act, 1976, the Central Government decided that
the employees of establishments not covered by the payment of Bonus Act would
not be eligible for payment of bonus but an ex gratia payment in lieu of bonus
would be made to them. Life Insurance Corporation was one of the establishments
to whom the payment of Bonus Act did not apply. Pursuant to the said decision,
the Government of India advised the Corporation to stop paying bonus in
accordance with clause 8(ii) of the aforesaid settlement.
The
Corporation stopped the payment whereupon the employees approached the High
Court of Calcutta by way of a writ petition, A learned Single Judge allowed the
writ petition and issued a mandamus directing the corporation to pay bonus in
accordance wit clause 8(ii) of the Settlement. The Corporation preferred a
Letters Patent Appeal against the said decision. While the said appeal was
pending, Parliament enacted the Life Insurance Corporation (Modification of
Settlement) Act, 1976. When the Letters Patent Appeal was taken up, the
Corporation represented that in view of the said act there was no necessity for
proceeding with the appeal. The Division Bench accordingly dismissed the
Letters Patent Appeal with the result that the mandamus issued by the learned
Single Judge continued to be operative and effective. The employees of the
Corporation filed fresh writ petitions in this Court challenging the
constitutional validity of the Life Insurance Corporation (Modification of settlement
) Act, 1976 which were allowed. Three opinions were rendered by the learned
judges, Bhagwati, Krishna Iyer and Desai, JJ. rendered one opinion, Chandrachud,
Fazal Ali and Singhal, JJ. A separate short opinion and Beg, C.J. Another
opinion. We may notice the ratio of each of these three opinions. Bhagwati, J.
held that the impugned Act did not refer to and did not purport to supersede or
nullify the settlement between the Corporation and its employees. In the words
of Bhagwati, J., "unfortunately the judgment of the Calcutta High Court
remains almost unnoticed and the impugned Act was passed in ignorance of that
judgment.
Section
3 of the impugned Act provided that the provisions of the settlement insofar as
they relate to payment of annual cash bonus to Class III and Class IV employees
shall not have any force or effect from Ist April, 1975..... This right under
the judgment was not sought to be taken away by the impugned Act. The judgment
continued to subsist and the Life Insurance Corporation was bound to pay annual
cash bonus....". the learned Judge remarked that the Corporation committed
a grave error in withdrawing the Letters Patent Appeal in view of the impugned
enactment. Had they persisted with the appeal and brought the aforesaid Act to
the notice of the Court, the Letters Patent Appeal would certainly have been
allowed. But as a result of the erroneous course adopted by the Corporation. the
learned Judge remarked, the mandamus issued by the learned Single Judge
remained effective and became final. The learned Judge, it is relevant to note,
cited with approval the law laid down by this Court in Shri Prithvi Cotton
Mills but distinguished it by pointing out that the 1976 Act concerned before
them [in Madan Mohan Pathak] purported to merely deny the benefit of settlement
to the employees which settlement was directed to be implemented by means of a
mandamus issued by the Calcutta High Court and hence, the principle in Shri Prithvi
Cotton Mills did not help the Life Insurance Corporation. This is what the
learned Judge said:
"It
is difficult to see how this decision given in the context of a validating
statute can be of any help to the Life Insurance Corporation. Here, the
judgment given by the Calcutta High Court, which is relied upon by the
petitioners, is not a mere declaratory judgment holding an impost or tax to be
invalid, so that a validation statute can remove the defect pointed out by the
judgment amending the law with retrospective effect and validate such impost or
tax." The learned Judge then proceeded to examine the validity of
enactment on the footing that it did take away the benefit of bonus vesting in
the employees of the Corporation by virtue of clause 8(ii) to the Settlement
and held it to be violative of Article 31 (2) of the Constitution. He declared
it void that ground. Chandrachud, Fazal Ali and Singhal, JJ. delivered a
two-line order agreeing with the opinion of Bhagwati, J. that the impugned
enactment was violative of Article 31(2) and saying further that they do not
think it necessary to express any opinion on the effect of the judgment of the
Calcutta High Court aforementioned. Beg, C.J. observed, in the first instance,
that though Section 11(2) of the Life Insurance Corporation Act empowered the
Central Government to alter the conditions of service of the employees, the
Central Government. did not choose to resort to that provision but instead
parliament chose to enact the Act impugned therein, depriving the employees of
their bonus. The impugned Act took away the benefit conferred by the mandamus issued
by the Calcutta High Court upon the employees. This amounts to exercise of
judicial power by Parliament which has been held to be bad in Indira Nehru
Gandhi v. Raj Narain (1976 (2) S.C.R.347). The learned Chief Justice then held
the impugned enactment to be violative of Article 19(1) (f) of the Constitution
and not saved by Article 19 (6).
While
appreciating the ratio of the said opinions, it is necessary to bear in mind
that it was not a case where the High Court either struck down a statutory
provision was it a case where a statutory provision was interpreted in a
particular manner or directed to be implemented. It was also not a case where
the statutory provision on which the judgment was based, was amended or altered
to remove/rectify the defect.
Now of
the seven learned Judges, only Beg, C.J. put as forward as one of the grounds
for allowing the writ petition the theory that the mandamus issued by the
learned Single Judge of the Calcutta High Court having become final could not
be nullified by Parliament. No other learned Judge adopted that reasoning. As
pointed out hereinabove, three learned Judges for whom Bhagwati, J. spoke, held
that the settlement remained untouched by the impugned Act and, therefore
settlement continued to be in forces and that if the Act is taken as nullifying
the settlement, the Act is bad being violative of Article 31(2). Three other
learned Judges, Chandrachud, Fazal Ali and Singhal, JJ. agreed with Bhagwati,
J. only to the extent that the Act was violative of article 31(2).
The
observations of Bhagwati, J. extracted hereinabove - upon which Sri Sanghi
places strong reliance - indeed emphasise the fact that the 1976 Act was passed
in ignorance of the mandamus issued by High Court and that the Act did not
touch the decision of the High Court in any manner.
These
observations cannot be read to support the contention that where a mandamus
issued is premised on the footing that State legislatives have no legislative
power to impose the disputed levy the Parliament [which is undoubtedly
competent to impose the said levies] cannot make a law imposing the said
levies. As pointed out earlier, the majority Judgment of Bhagwati, J. did
indeed affirm the statement of law in Shri Prithvi Cotton Mills, which we may
quote here only with a view to emphasise the principle.
Hidayatullah,
C.J., speaking for the Constitution Bench held:
"When
a legislature sets out to validate a tax declared by a court to be illegally
collected under an ineffective or invalid laws the cause for ineffectiveness or
invalidity must be removed before validation can be said to take place
effectively. The most important condition is that the legislature must possess
the power to impose the tax, for if it does not, the action must ever remain
ineffective and illegal. Granted legislative competence it is not sufficient to
declare merely that the decision of the court shall not bind, for that is
tantamount to reversing the decision in exercise of judicial power which the
legislature does not possess or exercise, A Court's decision must always bind
unless the conditions on which it is based are so fundamentally altered that
the decision could not have been given in the altered circumstance." The
mandamus issued by this Court was against the States and not against the Union
or the Parliament. This Court did not say that Parliament had no power to
impose the said levies. We are also of the opinion that the decision in Madan
Mohan Pathak must be read and understood in the particular facts of that case
and that it would not be reasonable to read that decision as militating
against, or as over-turning the series of decisions of this court on the
subject including Rai Ramakrishna v. State of Bihar 1964 (1) S.C.R. 897), Shri Prithvi
Cotton Mills and Joara Sugar Mills, v. state of Madhya Pradesh (1966 (1)
S.C.R.523).
Now,
coming to the decision in Nachane, it is indeed a sequel to the decisions in Madan
Mohan Pathak and Life Insurance Corporation v. D.J. Bahadur (1981 (1)
S.C.C.315) and its ratio has to be understood in the right of the background
facts set out in Paras 1 to 5 of the said judgment. Having regard to the
identity of the subject- matter, it was held in Nachane that the decisions in Madan
Mohan Pathak and D.J. Bahadur being decisions between the same parties their
ratio is binding upon them. It cannot be said that any new principle was
enunciated.
We may
mention that we have dealt with the decision in Madan Mohan Pathak at some
length because we find that it is being frequently relied upon as laying down a
principle at variance with Shri Prithvi Cotton Mills and the host of decisions
affirming it. In our opinion the effort is a futile one, as demonstrated
hereinabove. Another decision rendered by one of us, Suhas C. Sen, J. sitting
with N.P. Singh, J. has also understood the decision in Madan Mohan Pathak in
precisely the same manner. [See Comorin Match Industries (P) Limited v. State
of Tamil Nadu [J.T. 1996) (5) S.C. 167]. We respectfully agree with all that
has been said in the said judgment with respect to the decisions in Madan Mohan
Pathak and Nachane. It is needless to re- produce those observations over again
here.
We
must also say that the fact-situation and the ratio of Madan Mohan Pathak and Nachane
is totally at variance with the fact-situation in the case before us. They are
worlds apart in every sense of the term. The first contention of the appellants
is accordingly rejected.
The
second contention of the learned counsel for appellants- petitioners is that
Section 2 of the impugned enactment does not achieve the purpose set out in the
Preamble and that the language employed in Section 2 is not adequate to create
any fresh levies. It is submitted that the Parliament must first create the
levy and then give it retrospective effect. But it cannot relegate both the making
of law and giving it retrospective effect to the realm of fiction, it is
argued. The Parliament cannot say that it must be deemed to have made a law
without actually making it. It is submitted that in sub-section (1) of Section
2, there are no words saying that the Parliament is levying the various taxes/cesses
mentioned in the said subsection read with the Schedule. By way of contrast,
our attention is invited to the language of Section 3 of the Sugarcane Cess
(Validation) Act, 1961 which was enacted by Parliament in view of the decision
of this Court in Diamond Sugar Mills Limited v. State of Uttar Pradesh [1961
(3) S.C.R.243] and the decision of the Madhya Pradesh High Court following it
and declaring that the levy of cess on sugarcane under the provisions of the
Madhya Pradesh sugarcane (Regulation of Supply and Purchase) Act, 1958 was
beyond the legislative competence of the Madhya Pradesh legislature. Several
States had levied similar cesses. To meet the situation To meet the situation
arising from the decisions aforesaid, the parliament enacted the Sugarcane Cess
(validation) Act, Section 3 whereof reads:
"3.
Validation of imposition and collection of cesses under state acts.
(1)
Notwithstanding any judgments, decree or order of any court, all cesses
imposed, assessed or collected or purporting to have been imposed, assessed or
collected under any State act before the commencement of this Act shall be
deemed to have been validly imposed, assessed or collected in a accordance with
law, as if the provisions of the State Acts and of all notifications, orders
and rules issued or made thereunder, in so far as such provisions relate to the
imposition, assessment and collection of such cess had been included in and
formed part of this section and this section had been in force at all material
times when such cess was imposed. assessed or collected; and accordingly,--
(a) no
suit or other proceeding shall be maintained or continued in any court for the
refund of any cess paid under any State Act;
(b) no
court shall enforce a decree or order directing the refund of any cess paid
under any State Act; and
(c)
any cess imposed or assessed under any State Act before the commencement of
this act but not collected before such commencement may be recovered (after
assessment of the cess, where necessary) in the manner provided under that Act.
(2)
For the removal of doubts it is hereby declared that nothing in subsection (1)
shall be construed as preventing any person- (a) from questioning in accordance
with the provisions of any State Act and rules made there under the assessment
of any cess for any period; or (b) from claiming refund of any cess paid by him
in excess of the amount due from him under any State Act and the rules made thereunder.
(Emphasis
added) The validity of Sugarcane Cess (validation) Act was questioned in this
Court in Joara Sugar Mills Private Limited but was upheld. The contention of
the learned counsel for appellants-petitioners is that if the parliament wanted
to impose the levies which levies were earlier imposed by State enactments but
declared incompetent, the Parliament must impose the levy as has been done by
it in Section 3 of the Sugarcane Cess (Validation) Act, 1961.
Section
2(1). it is contended. does not impose the levies and, therefore there is no
levy and there is no imposition.
It is
not possible to agree with this contention either. The State enactments
mentioned in the Schedule to the impugned enactment did contain provisions
creating the levy. It is he very provisions which are enacted by Parliament
now.
section
2(1) says that the said provisions must be deemed to have been enacted and must
be deemed always to have been enacted by Parliament. In such a situation, it is
idle to contend that Section 2(1) does not create the levy or the impost. It
does. We are also unable to find any qualitative difference between Section 3
of the Sugarcane Cess (Validation) Act Section 2 of the impugned Act. The
relevant words are the same, viz., "shall be deemed to have been....
".
With necessary adaptations, both the provisions are quite alike. We need not,
however, dilate upon this contention of appellants-petitioners for the reason
that an identical provision enacted to meet an identical situation has already
been upheld by this Court in Krishnachandra Gangopadhyaya v. Union of India
[1975 Suppl. S.C.R. 151]. In Baijnath Kedia v. State of Bihar [1970 (2) S.C.R.
100], this Court had declared the second proviso to Section 10(2) of the Bihar
Land Reforms Act, 1950 unconstitutional on the ground that Bihar legislature
had no legislative competence to enact it and that Parliament alone was
competent to legislate in that behalf. It was also held that Rule 20(2) framed
by the Bihar Government as delegate of the Parliament under Section 15 of the
M.M.R.D. Act was unconstitutional since the rule- making power conferred by
Section 15 did not contemplate alteration of terms of leases already in
existence before the Act was passed. In view of the judgment of this Court in Baijnath
Kedia, the Parliament enacted the Validation Act in the year 1969. The Preamble
to the said Act stated that it was "an act to validate certain provisions
contained in the Bihar Land Reforms Act, 1950, and the Bihar Minor Mineral
Concession Rules, 1964, and action taken and thing done in connection
therewith." Section 2 of the said Act read thus:
"2.
Validation of certain Bihar State laws and action taken and things done connected therein.
(1)
The laws specified in the Schedule shall be and shall be deemed always to have
been as valid as if the provisions contained therein had been enacted by
Parliament.
(2)
Notwithstanding any judgment, decree or order of any court, all actions taken
things done, rules made notifications issued or purported to have been taken,
done, made or issued and rents or royalties realised under any such laws shall
be deemed to have been validly taken, done, made, issued or realised, as the
case may be, as if this section had been in force at all material times when
such action were taken, things were done, rules were made, notification were
issued or royalties were realised, and no suit or other continued in any court
for the refund of rents or royalties realised under any such laws.
(3)
For the removal of doubts, it is hereby declared that nothing in subsection (2)
shall be construed as preventing any person from claiming refund of any rents
or royalties paid by him in excess of the amount due from him under any such
laws."
lt was
contended before this Court that language of Section 2 is not sufficient to
bring about a levy. It was contended that no liability to levy rent or royalty
can be created retroactively without two clear stages or steps: firstly, a law
must be enacted creating the liability; next, such provision should be made
retrospective. This two- stage procedure is absent in the statute under attack
and therefore the purpose, whatever it be, has misfired". lt may be
noticed that this is precisely the contention urged before us now. The said
contention was, however, rejected by this Court. It observed: "the Bihar
Legislature is not is not legislating into validity by a deeming provision,
what has been declared ultra vires by the Court. It is Parliament whose
competency to legislate on the topic in question is beyond doubt, that is
enacting the 'deeming' provision". The Court held further that the
language of Section 2 is clear and unmistakable and that by enacting the said
provision the "Parliament desired to validate retrospectively what the
Bihar legislation had ineffectually attempted. It has used words plain enough
to implement its object and therefore the validating Act as well. as the
consequential levy are good.
A
perusal of Section 2 of the impugned enactment and Section 2 of the 1969
validation Act considered in Krishnachandra Gangopadhyaya would show that
Section 2 of the impugned enactment is a faithful re-production and repetition
of Section 2 of the 1969 Validation Act, word to word. The only additional
words are in Section 2(l), viz.," and such provisions shall be deemed to
have remained in force upto the 4th day of April, 1991." Sri Parasaran
contended that these additional words in Section 2(i) do make a qualitative
difference and distinguish the present case from the one considered in Krishanchandra
Gangopadhyaya. We cannot agree. The said words merely limit the levy upto 4th
day of April, 1991 and in no manner detract from the content and effect of the
preceding words employed in sub-section (1) of Section 2.
So far
as reliance upon the language employed in Section 3 of the Sugarcane Cess
(Validation) Act is concerned, all that we need say is, there is no set or
standard formula to which all Validation Acts should conform. The Parliament is
not bound to adopt identical language every time it enacts a Validation Act. It
is open to it to employ such 1 language as it chooses. All that the court
should see is whether the language employed achieves the purpose which the
Parliament set out to achieve. The language employed in Section 2 of the
impugned enactments, we are satisfied, does achieve the purpose and we are
fully fortified, in our opinions, by the decision in Krishnachandra Gangopadhyaya.
The second contention too accordingly fails.
The
third contention which has been urged by every counsel appearing for
appellants-petitioners with great vehemence is this: the impugned Act is
designed to and provides only for validating the taxes and cesses already
recovered under the relevant provisions of the enactment mentioned in the
Schedule. The impugned Act does not, however, empower or authorise the Parliament
or its agencies to recover taxes and cesses which are payable under the said
provisions but have not been recovered on or before 4th day Aprils, 1991. The
Statement of Objects and Reasons and the language in sub-section (2) of Section
2 are relied upon in support of this contention. It is also pointed out that
Section 2 does not contain a clause or words corresponding to clause (c) in
sub-section (1) of Sections 3 of the Sugarcane Cess (Validation) Act, 1961,
referred to hereinbefore. It is not possible to accede to this contention,
either. Section 2 enacts the relevant provisions of the enactments mentioned in
the Schedule with retrospective effect. The provisions so enacted do create the
levy. Indeed, unless the levy is validated recoveries already made cannot be
validated. It is for this reason that the Preamble to the Act says that it is
an Act "to validate the imposition and collection of cesses and certain
other on minerals under certain state laws". Once the provisions, which
create the Ievy, are deemed to have been enacted by Parliament, the levy is
very much there with retrospective effect. Once there is a valid levy, not only
the taxes already collected need not be refunded but the taxes and cesses which
have not already been collected can also be collected. It is impossible to see
any distinction in principle between both. Merely because sub-section (2) inter
alia state that "cesses or other taxes on minerals realised under any such
laws shall be deemed to have been validly...realised....as if this section had
been in force at all material times when such....cesses or other taxes were realised",
it does not mean that the axes which were levied but not collected cannot be
collected. The said words in sub-section (2) are not words of limitation; they
are words of validation and put in by way of abundant caution in view of the
Judgments and orders of the Courts. On the language of Section 2 which enacts
with retrospective effect, the relevant provisions levying cesses and taxes on
minerals and also validates the rules and notifications issued thereunder, we
find it impossible to say that the levy is validated only for the limited
purpose of saving the taxes already collected, i.e., to sty the refund of taxes
already collected. Indeed, if the section were so construed, it would lead to
discriminatory consequences. Take two persons 'A' and 'B'. Both are equal
liable to pay the cess on minerals levied by say the Madras legislature. One
pays the tax according to law and the other does not. If the argument of appellants
petitioners is to be accepted, the man who paid will be worse off than the
person who did not pay because no tax can now be collected from the person who
did not pay. No such unreasonable intention can be attributed to Parliament. It
would not be reasonable to assume that the Parliament intended such
discriminatory treatment between two similarly placed persons and for no
reason. Some of the counsel for appellants-petitioners sought to that the above
situation cannot be described as discriminatory.
According
to them, there is a reasonable classification between the person who does not
pay, comes to the court and succeeds in his challenge and the person who does
not come to the court but quietly pays the tax and sits at home. This
illustration proceeds on the assumption that only a person not paying the tax
comes to the court. That may not always be true. A person may pay the tax
demanded and then come to court challenging the demand and collection. There
may also be a situation, where tax is collected from him even before he comes
to court. It is also possible that in a given case, stay is not granted by the
court and he is obliged to pay. There may also be a situation where both 'A'
and 'B' in the above illustration may not come to court. We are, therefore, of
the clear opinion that once the levy is created or validated as the case may
be, distinction can be drawn between the person who has paid and the person who
has not paid. We are also unable to find any words in Section 2 or anywhere
else in the impugned enactment limiting the levy only to the extent of the
taxes/cesses already collected on or before 4th day of April, 1991. Nor are we
satisfied that absence of a clause or words corresponding to clause (c) in
Section 3(1) of the Sugarcane Cess (Validation) Act makes any difference. The
said clause merely sets out the consequence flowing from he validation
contained in the main limb of Section 3(1), by way of abundant caution. It
cannot be treated as a substantive provision. Sri K. Parasaran then submitted
that the words "imposition and collection" in the Preamble do
evidence the intention to confine the imposition to amounts already collected.
It is not possible to agree. By reading them conjunctively, their meaning
cannot be cut down. On the contrary, the said words indicate the intention to
validate the imposition as well as collection. "Collection" does not
mean what is a already collected alone. It means future collection as well.
Neither the Preamble nor Section 2 say that what is already collected alone is
validated. This contention too accordingly fails.
The
fourth contention of the learned counsel for appellants petitioners is
unsustainable in law and is misconceived. The Parliament is competent to enact
a law applicable only to a part of the country or to some States in the
country, as the case may be. It is not necessary that every law made by
Parliament must necessarily apply to the entire country as such. Not only this the
Parliament is equally entitled to prescribe different rates of tax in different
States if such different rates are called for in the given circumstances. This
is not unknown to law. Take, for instance, sub-section (2A) of Section B of the
Central Sales Tax Act. Sub-sections (1) and (2) of the said Act levy tax at
uniform rates throughout the country. But sub-section (2A) brings about a
distinction between state and State. It says that notwithstanding the
provisions in Section 6 (A) or Section 8(1) or Section 8(2)(b), so much
turn-over of a dealer as pertains to goods, the sale or purchase of which is
under the Sales tax law of the appropriate State, exempt from tax generally or
subject to tax generally at a rate which is lower than four percent Central
Sales tax shall also be charged on such turn-over either at the nil rate or at
such lower rate, as the case may be. This provision clearly recognizes and
gives effect to different rates of tax in different States of the country on
identical transactions of sale. In State of Madras v. N.K. Nataraj Mudaliar
[1968 (3) S.C.R.829], this difference in rates of tax between different States
was challenged as discriminatory and hence, violative of Articles 301, 302, 303
and 304 of the Constitution of India. The challenge was repelled by a
Constitution Bench of this. It was held that the said provision does not bring
about any discrimination between one State and other within the meaning of
Article 303. This Court quoted with approval the observations of the Australian
High Court in King v. Barger [1908 (6) C.L.R.41] with respect to the meaning of
the expression "discrimination between States or part of States" used
in Section 51 of the Australian Constitution:
"......the
pervading idea is the preference of locality merely because it is particular
part of a particular State. It does not include a differentiation based on
other considerations, which are dependent on natural or business circumstances,
and may operate with more or less force in different localities; and there is
nothing in my opinion, to prevent the Australian Parliaments, charged with the
welfare of the people as a whole, from doing what every State in the
Commonwealth has power to do for its own citizens, that is to say, from basing
its taxation measures on considerations of fairness and justice, always
observing the constitution injunction not to prefer States or parts of
States." At the same time we must say that where Parliament imposes
different rates of tax in different States, lt is under an obligation to
justify the same. It must satisfy the court that such a distinction does not
amount to discrimination and that it is reasonable in the circumstances and has
a purpose behind it. Now, let us see us see whether there is any justification
for imposing different rates in different States in the present case. We think
there is. If one only remembers the background and the context in which the
impugned enactment was made by Parliaments the reason behind such different
rates would immediately become clear. Each State had imposed its own rate. The
challenge in India Cement and Orissa cement was not to different rates being
levied by different State legislatures but to the very legislative competence
of the State legislatures to impose the said levy. When the parliament is
re-enacting those very provisions it could not but adopt those very rates. This
is the historical justifications if we can describe it that way. It is really
not a case where the Parliamentary enactment is creating the distinction or
different treatment. Distinction and different treatment was already there over
several decades; each State was prescribing its own rate on the same mineral; nobody
ever questioned it as discriminatory; indeed it could not be so questioned; the
decisions of the courts had declared the levy by the State legislatures as
competent;
The Parliament
has intervened and by enacting the impugned law in exercise of its undoubted
power, validated the levy and all that flows from it. In such circumstances,
there was no other way except to do what has actually been done. The question
is one of power and legality of the exercise and not its desirability - apart
from the fact that test of desirability may vary form person to person. In our
opinion, the exercise cannot be faulted on the ground of violation of Article
14 of the Constitution.
It is
then argued that the very idea behind enacting the M.M.R.D. Act was to bring
about uniformity in taxes and royalties through the country. True it is. But
does that mean that Parliament cannot create an exception to the rule it itself
has created. uniformity in the rates of tax is an objective set out by
Parliament in the M.M.R.D Act It is a pre-condition to a law made by Parliament
under Entry 54 in List-I nor it a limitation upon Principle, it can also create
an exception thereto in appropriate circumstances or to meet an exigency. This
is precisely what has been done in the instant case. The impugned enactment is
both an addition and an exception to Section 9 of the M.M.R.D Act.
The
fifth contention of the learned counsel for appellants-petitioners is equally misconceived.
The Parliament has already denuded the State legislatures of their power to
levy tax on minerals inhering in them by making the declaration contained in
Section 2 of the M.M.R.D. Act. Sri Sanghi argued that the denudation is | not
absolute but only to the extent provided in the M.M.R.D.Act. Section 9, learned
counsel submitted, is one of the facets of the extent of denudation. Section 9,
it is submitted, sets out the rates of royalty levied states that such rates of
royalty can be revised only once in three years. If Section 9 is sought to be
amended, whether directly or indirectly, the learned counsel says, a fresh
declaration in terms of Entry 54 of List-I is called for.
This
contention assumes that notwithstanding the declaration. contained in Section 2
of the M.M.R.D. Act, the States still retain the power to levy taxes upon
minerals over and above those prescribed by the M.M.R.D. Act and that a fresh
declaration is called for whenever such subsisting power of the State is sought
to be further encroached upon.
This
suppositions however. flies in the face of the decisions of this Court in India
Cement and Orissa Cement.
The
said decisions are premised upon the assumption that by virtue of the said
declaration, the States are totally denuded of the power to levy any taxes on
minerals. rt is for this reason that the State enactments were declared
incompetent insofar as they purported to levy taxes/cesses on minerals. The
denudation of the States is not partial. It is total. They cannot levy any tax
or cess on minerals so long ac the declaration in Section stands. Once the
denudation is totals there is no occasion or necessity for any further
declaration of denudation or, for that matters for repeated declarations of
denotations. Indeed if Sri Sanghi's arguments were to be accepted a fresh
declaration would be required every time the Parliament increases the rate af
royalties. No such requirement can be deduced from the relevant constitutional
provisions as interpreted by this Court. This contention also accordingly
fails.
The
Sixth contention of the learned counsel for appellants-petitioners is premised
upon the supposition that the Parliament is bound to utilise the taxes realised
under the impugned Act only for the purpose of regulation of mines and mineral
development. It is on this suppositions it is argued that inasmuch as the
Union. has not established that the impugned levy is required for the purpose
of the said regulation and developments the imposition is incompetent.
In our
opinion, the very supposition is misplaced. What is under the impugned
enactment is a tax/cess and not a fee.
Even
in the matter of fees, it is not necessary that element of quid pro quo should
be established in each and every cases for it is well-settled that fees can be
both regulatory and compensatory and that in the case of regulatory fees the
element of quid pro quo is totally irrelevant. [See Corporation of Calcutta v.
Liberty Cinema (A.I.R.1965 S.C.1107)]. Taxes are raised for augmenting the
general revenues of the State and not for any particular purpose - much less
for rendering a particular service.
We may
now deal with the last contention urged by appellants-petitioner, It has
several facets. We may first deal with the submission that the impugned act is
a temporary statute and that it has come to an end with the 4th day of April,
1991. Since Section 6 of the General Clauses Act does not apply to a temporary
statute and also because the impugned act does not contain a saving clause in
terms of said Section 6 it is argued no proceedings for recovery of unrecovered
taxes/cesses can be taken after the 4th day of April, 1991 our opinion, the
submission is totally misconceived. temporary statute is one which expires on
the expiry of the specified period. The impugned act was indeed enacted and
published in April, 1992 and Section 1(30 says that the Act shall be deemed to
have come into force on February 15, 1992. It is, therefore, meaningless to say
that it has expired or it ceased to have any effect on the 4th day of April,
1991. There are no words anywhere in the impugned Act indicating that it
expires on the expiry of a particular period or on a particular date. Merely
because the cesses and taxes imposed by it are made effective upto a particular
date (4th April, 1991), it does not mean that the statute itself expires on
that date. We may in this connection refer to the decision of this Court in Maganti
Subrahmanyam (dead) by L.Rs. v. The State of Andhra Pradesh [ 1969 (2)
S.C.C.96]. The Madras legislature had enacted the Madras Estates Communal,
Forest and Private Lands (Prohibition of Alienation) Act, 1947 with a view to
prohibit the alienation of Communal, Forest and Private Lands in the estates in
the province of Madras. The Preamble to the Act stated that it was enacted to
prevent alienation of the several lands in the estates in the Province of
Madras Pending enactment of legislation for acquiring the interests of land
holders in such estates and introducing Ryotwari Settlement therein. In 1984,
the Madras legislature enacted the Madras Estates [Abolition and Conversion
into Ryotwari] Act providing for acquisition of the rights of land holders in
permanently settled estates. It was contended before this Court that in view of
the statement in the Preamble to the 1947 Act, the said Act must be deemed to
have come to an and with the enactment of the 1948 Act. On this basis, it was
contended that the 1947 Act must be deemed to be a temporary statute. The
contention was roundly rejected by this Court observing that since no fixed
duration of the Act was specified, it cannot be called a temporary statute.
Indeed, the decision of this Court in Madurai Distt. Central Cooperative Bank
Ltd. v. Third Income-Tax Officer, Madurai [1976 (1) S.C.R.135] indicates that
even the Finance Acts which are passed every year, are not transitional or
temporary enactments.
It is
also necessary to say that merely because the levy created by an enactment is
limited to a particular period, the Act itself cannot be said to be a temporary
statute. The duration of the levy created by the Act and the life of the Act
are two different things; they are not necessarily co-extensive. We, therefore,
reject the argument that merely because the levies created by Section 2(1) of
the impugned Act are to remain in force only upto 4th April, 1991, the impugned
Act very much continues in force even today and will remain in force till the
Parliament chooses to repeal it. In the circumstances, the argument regarding
the inapplicability of Section 6 of General Clauses Act or the alleged absence
of a saving clause in terms of Section 6 are misplaced.
The
next facet of this contention is that inasmuch as the provisions validated
under the impugned Act not only pertain to levy but also to collection and
recovery and because all those provisions cease to have effect on and with the
4th day of April, 1991, it must be held that there is no machinery in existence
after April 4, 1991, for realising and collecting the uncollected\unrealised
taxes\cesses. There is no levy and there is no machinery to realise the levy
after April 4, 1991, it is contended. This argument is urged in support of the
contention that the Act merely purports to validate the recoveries already made
but does not empower or authorise realisation\recovery of taxes\cesses not
already collected. This submission ignores the crucial circumstance that the
levy is created by the impugned Act continues in force. Sub-section (3) of
Section 2 is a firm indication that notwithstanding the cessation of levy after
the 4th day or April, 1991, the machinery created to recover and refund the
said cesses\taxes is kept alive.
Sub-Section
(3) of Section 2 reads:
"(3)
For the removal of doubts, it is hereby declared that nothing in sub-section
(2) shall be construed as preventing any person from claiming refund of any cess
or tax paid by him in excess of the amount due from him under any such laws.
Take a
case where excessive collection is made sometime before April 4, 1991. What is
the remedy of the person concerned. If the appellants argument were to be
accepted, the person would be helpless; there would be no machinery to examine
his claim. But then what does sub-section (3) mean and signify? It must,
therefore, be held that notwithstanding the cessation of levy created by Section
2(1) with April 4, 1991, the machinery requisite for realising and refunding
the taxes\cesses yet to be collected or wrongly collected, as the case may be,
is kept alive. It cannot also be suggested with any reasonableness that the
said machinery is kept alive only for the purposes of refunding the excessively
collected taxes but not for collecting\recovering the uncollected\unrecovered
taxes and cesses. The last contention of the appellants-petitioners also fails
accordingly.
Sri
G.L. Sanghi addressed a separate argument specific to the petitioners from the
State of Madhya Pradesh. It is submitted that, in the first instance, cess on
minerals was levied by the Madhya Pradesh Karadhan Adhiniyam, 1982 [being M.P.
Act 15 of 1982]. The levy was declared incompetent and void by the Courts,
whereupon, it is stated, the Madhya Pradesh Legislature amended in 1987, the
Madhya Pradesh Upkar Adhiniyam, 1981, levying the same cess. Even this levy was
invalidated by the Courts, it is submitted. Sri Sanghi's apprehension is that
the impugned parliamentary enactment validates the relevant provisions of both
the 1982 Madhya Pradesh Act as well as the 1981 Madhya Pradesh Act (as amended
in 1987), with the result that appellants- petitioners may be called upon to
pay the cess on minerals twice over i.e., under both the 1982 Act as ell as
under the 1981 Act [as amended in 1987] simultaneously. We see no basis for
such an apprehension. Be that as it may, Sri Gulab C. Gupta, learned counsel
appearing for the State of Madhya Pradesh, stated clearly that no such double
levy will take place and that there would be only one levy of cess on minerals
in any given year or any given quantity removed.
The
said statement should allay any aprehensions on the part of
appellants-petitioners from Madhya Pradesh.
For
the above reasons, the appeals and writ petitions are dismissed with costs.
Advocate's fee quantitied at Rs.2,500/- in each appeal and writ petition.
No
orders are necessary in Interlocutory Applications.
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