http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: STATE OF ORISSA & ORS.

       Vs.

RESPONDENT: M/S STEEL AUTHORITY OF INDIA LTD.

DATE OF JUDGMENT:       10/08/1998

BENCH: CJI, K. VENKATASWAMI

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T K. Venkataswami, J.      Special leave granted.      These 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.      The 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.      The 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.      These 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

    crusher whereafter  it goes  to the      secondary crusher mechanically.      In 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.      The stockpile  is then  transported      and loaded into the Railway wagons.      The     Weighto-meter     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".      The 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.      Aggrieved by  the order  of the High Court, the present appeals are filed by special leave.      The  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 Corporation Ltd.  Vs. State of Orissa & Ors.] and this Court 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 Court, namely,  India Cement  Ltd. & Ors. Vs. State of Tamil Nadu &  Ors. [(1990)  1 SCC  12] and  Saurashtra Cement  and Chemical Industries  Ltd. Vs. Union of India & Anr. [(1994)1 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.      We have  considered the  arguments and  the  reasonings contained in the judgments under appeal.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

    Section 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.           (Emphasis 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.      Another 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 consumption.      In 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.      Vs.   Cantonment    Board,    Poona      Cantonment  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.      It 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

    minerals  extracted.   Royalty   is      payable  on  a  proportion  of  the      minerals extracted........      ...................................      .........................      For 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 dismissed.      The appeals are allowed accordingly with no order as to costs.