http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 24  

PETITIONER: P.KANNADASAN ETC. ETC.

       Vs.

RESPONDENT: STATE OF TAMIL NADU & ORS. ETC. ETC

DATE OF JUDGMENT:       26/07/1996

BENCH: B.P. JEEVAN REDDY, SUHAS C. SEN

ACT:

HEADNOTE:

JUDGMENT:                  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.                       J U D G M E N T      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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 24  

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.                       J U D G M E N T B.P. JEEVAN REDDY, J. 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 24  

[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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 24  

    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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 24  

    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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 24  

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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 24  

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:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 24  

    "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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 24  

    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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 24  

    thereunder 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 24  

    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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 24  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 24  

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.