of Orissa & Ors Vs. M/S Steel Authority of
India Ltd.  INSC 402 (10 August 1998)
K. Venkataswami K. Venkataswami, J.
appeals raise a common question of law and the parties are same in both the appeals.
As a matter of fact, in Civil Appeal arising out of S.L.P. (C) No. 16665/92 the
High Court has simply followed its earlier judgment against which the Civil
Appeal arising out of S.L.P. (C) No.16718/91 has been filed. In the
circumstances, both the appeals are disposed of by this common judgement.
respondent, a manufacturer of iron, steel and allied products, entered into an
agreement of lease in respect of land measuring 569.6 acres with the State
Government in order to meet its own requirements of raw materials, namely,
limestone and dolomite. Under the agreement, it was agreed that the respondent
was liable to pay royalty on the minerals extracted. However, the dispute that
arises for consideration out of the two judgments of the High Court is whether
the respondent is liable to pay royalty on the quantity of mineral extracted as
it is or on the quantity arrived at after the said mineral had undergone a
processing to remove waste and foreign matters. It was the case of the
appellants that the respondent was liable to pay royalty on the mineral
extracted while the case of the respondent was that the liability was on the
quantity of mineral obtained after it had undergone the process.
process adopted by the respondent is given in the SLP paper book at page 11,
which reads as follows :- "In the Mechanised Section of the respondent's
quarry, after blasting, the blasted materials containing Limestone and other
foreign materials are loaded by mechanical shovels and are brought to the
crushing Plant by dumpers.
are called "Rum of Mines", for short R.O.M. The R.O.M. are fed into
the crusher, and when necessary stockpile is made, the same is fed into the
primary crusher whereafter it goes to the secondary crusher mechanically.
between he secondary crusher and the screening Plant is affixed the Weighto-meter.
From the secondary crusher the Limestone is moved into the screening Plant and
from the screening Plant to the stockpile.
stockpile is then transported and loaded into the Railway wagons.
recording mentioned hereinabove, is done as the workmen are paid their
incentives on the basis of production. This figure recorded by the Weighto-meter
is duly recorded in the books kept by the respondent-company in the regular
course of business as "production".
Senior Mining Officer is duly intimated of the weight recorded in the manner as
aforesaid." The High Curt, after referring to Section 9(1) f the Mines and
Minerals (Regulation and Development) Act, 1957 (hereinafter called "the
Act") and also clause 3 of Par V of the Lease Deed, held as follows :-
"A distinction has to be made between removal from the mine and removal
from the leased area. If after the mineral is extracted from the mine, it
undergoes some processing and during processing a part of the mineral is wasted
and the wasted remains on the leased area and is not removed therefrom, the
lessee cannot be asked too pay royalty on that portion f the wastage." On
that view of the matter, the High Court quashed the demands, which were levied
on the quantity of `unprocessed' minerals.
by the order of the High Court, the present appeals are filed by special leave.
learned counsel appearing for the appellants submitted that the High Court was
not right in making the distinction and concluding that the quantity of
minerals which had undergone certain process alone was liable to levy of
royalty. According to the learned counsel, this view runs counter to the view
already taken by another Division Bench of the same High Court in O.J.C. No.
909/74. The further case of the learned counsel was that the judgment on
O.J.C.909/74 was taken on appeal to this Curt by the aggrieved assessee in
Civil Appeal N. 807/76 [National Cal Development approved the view taken by the
High Court and dismissed the said Civil Appeal on 5.12.91. Learned counsel, in
support of his argument, placed reliance on the judgments of this Nadu &
Ors. [(1990) 1 SCC 12] and Saurashtra Cement and SCC 226]. Learned counsel
appearing for the respondent- assessee supported the judgments under appeal on
the basis of the distinction made by the High Court.
have considered the arguments and the reasonings contained in the judgments
9(1) of the Act reads as follows :- "The holder of a mining lease granted
before the commencement of this Act shall, notwithstanding anything contained
in the instruments of lease or in any law in force at such commencement, pay
royalty in respect of any mineral removed or consumed by him 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.
supplied) It is to be noted that the levy of royalty is in respect of minerals
removed or consumed by the contractor from the leased ares. We have seen
earlier the process that the mineral said to undergo before the same was
removed form leased area. Section 9(1) of the Act also contemplates the levy of
royalty on the mineral consumed by the holder of a mining lease in the leased
area. If that be so, the case of the appellants that such processing amounts to
consumption and, therefore, the entire mineral is exigible to levy of royalty
has t be accepted. We are unable to agree with the distinction made by the High
Court and the conclusion that the royalty can be levied only on the quantity of
mineral obtained after processing.
Division Bench of the Orissa High Court in National Coal Development
Corporation case (supra), while considering the question whether the coal
extracted by the workmen for their own domestic consumption is exigible to levy
of royalty, accepting the contention of t he Revenue, held "that removal
from the seam in the mine and extracting the same through the pits's mouth to
the surface satisfy the requirement of Section 9 in order to give rise to
liability for royalty". This view of the High Court found approval by this
Court in Civil Appeal No. 807/76 and this Court held that the lessee in that
case was liable to pay royalty for the coal supplied to its workmen for
India Cement's case (supra), a Constitution Bench, while considering the
constitutionality of levy of case on the royalty, held as follows :- "In
the Western India Theaters Ltd.
it was held that an entertainment tax is dependent upon whether there would or
would not be a show in the cinema house. If there is no show, there is no tax.
cannot be a tax on professions or calling. Professional tax does not depend on
the exercise of one's profession but only concerns itself with the right to
practice. It appears that in the instant case also on tax can be levied or is leviable
under the impugned Act if on mining activities are carried on. Hence, it is
manifest that it is not related to land as a unit which is the only method of
valuation of land under Entry 49 of List II, but is relatable to minerals
extracted. Royalty is payable on a proportion of the minerals extracted........
the reasons stated above, we hold that the High Court was not right in quashing
the demands, which were rightly calculated and levied. The impugned judgments
of the High Court are set aside and the O.J.Cs. filed by the respondent stand
appeals are allowed accordingly with no order as to costs.