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PETITIONER: STATE OF ORISSA AND ORS.

       Vs.

RESPONDENT: MAHANADI COALFIELDS LTD. AND ORS.

DATE OF JUDGMENT24/04/1995

BENCH: A.M. AHMADI, CJI..,S.P. BHARUCHA &K.S. PARIPOORNAN, JJ.

ACT:

HEADNOTE:

JUDGMENT: PARIPOORNAN, J.: 1.The  State  of  Orissa and the authorities  in  the  Mines Department of the State are the appellants in this batch  of appeals.   M/s.   Mahanadi  Coalfields  Ltd.,  a  Government company,  in whom the lands in question vests in  accordance with  section 11 of the Coal Bearing Areas (Acquisition  and Development)  Act, 1957 (Central Act 20 of 1957), and  Union of  India  are the respondents in the main appeal.   In  the other appeals, the consumers of coal who purchase coal  from Mahanadi  Coalfields Ltd. for their own consumption as  well as  some traders in coal are the respondents.  The  Mahanadi Coalfields  Ltd.,  the consumers of coal who  purchase  coal from  Mahanadi  Coalfields  Ltd. and some  traders  in  coal assailed  the  validity  of  the  Orissa  Rural  Employment, Education and Production Act, 1992 (Orissa Act 36 of  1992), as amended, hereinafter referred to as ’the Act’, before the High  Court  of Orissa in a series of writ  petitions.   The main controversy in the cases was regarding the levy of  tax under the Act on "coal bearing lands".  By a common Judgment dated  26.4.1994 the Division Bench of the High  Court  held that  the State Legislature did not have the  competence  to levy  the tax on coal bearing lands and struck down  section 3(2)(c)  of the Act as well as the schedule attached to  the Act  levying  tax of Rs.32,000/- per acre  on  coal  bearing lands   and  also  the  consequential  demand  notices   and certificate  proceedings.  As a sequel thereto, the  demands raised  by Mahanadi Coalfields Ltd. against the traders  and consumers  on account of additional burden of tax  on  lands were  also quashed, The High Court also took the  view  that the  levy would be hit by section 9A of Mines  and  Minerals (Regulation  and  Development) Act, 1957, (Act 67  of  1957) hereinafter  referred to as ’M.M.R.D. Act’ and the  levy  is also   discriminatory   and  hit  by  Article  14   of   the Constitution  of  India.   The question of  passing  on  the burden by Mahanadi Coalfields Ltd. was left open, though the High  Court opened that if the tax is on lands,  the  burden cannot  be passed on to the consumer or the trader.   A  few other pleas taken up by the petitioners were also negatived. The  High Court allowed the batch of writ applications.   In S.L.P.(C) Nos.12477-12751 of 1994, by an order dated 10.  1.

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1995,  a three Member  Bench of this Court granted leave  to appeal to the State of Orissa against the aforesaid Judgment of the High Court dated 26.4.1994. Apart from the competence of  the Orissa Legislature to enact the law, M/s.   Mahanadi Coalfields  Ltd.  raised various other pleas to  assail  the levy under Orissa 665 Act  36/1992  as  invalid.   Important  among  such   pleas, involved  interpretation of Article 285 of the  Constitution read  with  Sections  9, 10 and 11  of  Coal  Bearing  Areas (Acquisition  and Development) Act, 1957 and the  provisions of  Colliery  Contract Order framed under Section 3  of  the Essential Commodities Act.  The said pleas were negatived by the High Court by the same common judgment of 26.4.1994  and M/s.   Mahanadi  Coalfields  Ltd. have come  up  in  appeals against  that portion of the judgment, which repelled  their pleas  aforesaid, amongst others.  The appeals so filed  are C.A. Nos. 42-43/94, 605/95 and 26602932/95.  Accordingly the above Civil Appeals and special leave petitions have come up before this bench for hearing. 2.   We heard counsel for the appellants Sri B. Sen,  Senior Advocate  and counsel who appeared for the respondents,  the learned Attorney General of India Sri M.K. Banerjee,  Senior counsel Sri Shanti Bhushan, Sri A.K. Ganguli & others.   Sri B.  Sen,  learned counsel who appeared  for  the  appellants contended  in the main that the High Court was in  error  in holding   that  Orissa  Rural  Employment,   Education   and Production Act, 1992, is without legislative competence  and is also discriminatory and hit by Article 14 of the  Consti- tution of India.  It was argued : (a)  That the levy of tax in the instant case     would squarely fall under Entry 49,List  11    of   the    Seventh Schedule (Taxes on land  and     buildings).      It     was alternatively contended that even if it is not so, the  levy of  tax in the instant case will fall under Entry 23 or  50, List  II  of the Seventh Schedule (Regulation of  mines  and mineral development; taxes on mineral and mineral rights). (b)  That  the High Court erred in holding that the levy  is discriminatory and so hit by Article 14 of the Constitution, since there is no material much less a finding to the effect that  the levy is confiscatory.  On the other hand,  learned Attorney General Sri M.K. Banerjee and the other counsel who supported  him, contended that in substance, the levy is  on minerals  and  mineral rights alone and not a  tax  on  land covered by Entry 49, List II of the Seventh Schedule.  Since substantially the levy is on minerals or on mineral  rights, even  i the levy falls under Entry 23 or 50, List II of  the Seventh Schedule (Regulation of mines & mineral  development or  Tax  on  mineral rights), it is  subject  to  limitation imposed  by Parliament under the law relating to  regulation of mines and mineral development.  Parliament has legislated on  the  subject  under  Entry 54, List  I  of  the  Seventh Schedule and has enacted the M.M.R.D. Act, which covers  the field.   In  this view, the Orissa Act 36 of 1992  is  ultra vires  and  beyond  legislative  competence.   It  was  also contended  that in effect and substance the levy is only  on coal  bearing lands without any basis, and so arbitrary  and hit by Article 14 of the Constitution.  Various other  pleas taken up be fore the High Court to assail the levy were also taken up before us. 3.   In  order  to evaluate the merits of  the  rival  pleas urged  before  us,  it  is necessary to  bear  in  mind  the relevant provisions of the Constitution of India, the Orissa Rural Employment, Education an Production Act, 1992  (Orissa Act  36 of 1992, as amended) and M.M.R.D. Act  The  relevant

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provisions of the Constitution of India are as follows:               "246.  Subject-matter of laws made by               666               Parliament and by the Legislatures of States.-               (1)  Notwithstanding anything in  clauses  (2)               and  (3),  Parliament has exclusive  power  to               make  laws with respect to any of the  matters               enumerated  in List I in the Seventh  Schedule               (in  this  Constitution  referred  to  as  the               ’Union List’).               (2) Notwithstanding    anything in clause (3),               Parliament  and,  subject to  clause  (1)  the               Legislature  of any State also, have power  to               make  laws with respect to any of the  matters               enumerated in List III in the Seventh Schedule               (in  this  Constitution  referred  to  as  the               ’Concurrent List’).               (3)   Subject  to  clauses (1)  and  (2),  the               Legislature  of any State has exclusive  power               to  make  laws  for such  State  or  any  part                             thereof  with  respect to any  of  the  matter s               enumerated in List II in the Seventh  Schedule               (in  this  Constitution  referred  to  as  the               ’State List’)."                             "SEVENTH SCHEDULE                               (Article 246)                            List I - Union List                          xxx xxx xxx xxx xxx xxx               54.   Regulation  of  mines  and  mineral  de-               velopment   to  the  extent  to   which   such               regulation  and development under the  control               of  Union is declared by Parliament by law  to               be expedient in the public interest.               xxx xxx xxx xxx xxx xxx               97.   Any other matter not enumerated in  List               II or List III including any tax not mentioned               in either of those Lists."                           "List II - State List               xxx xxx xxx xxx xxx xxx               23.   Regulation  of  mines  and  mineral  de-               velopment subject to the provisions of List  I               with  respect  to regulation  and  development               under the control of the Union.               xxx xxx xxx xxx xxx xxx               49.   Taxes on lands and buildings.               50.   Taxes  on mineral rights subject to  any               limitations  imposed  by  Parliament  by   law               relating to mineral development." The  relevant  provisions of the  Orissa  Rural  Employment, Education  and Production Act, 1992 (Orissa Act 36 of  1992) which came into force on 1.2.1993, are as follows:                    ORISSA ACT 36 OF 1992               THE  ORISSA  RURAL EMPLOYMENT,  EDUCATION  AND               PRODUCTION ACT, 1992               AN ACT TO PROVIDE FOR ADDITIONAL RESOURCES FOR               PROMOTION OF EDUCATION AND EMPLOYMENT IN RURAL               AREAS  AND FOR IMPLEMENTING RURAL  EMPLOYMENT,               EDUCATION AND PRODUCTION PROGRAMMES.               Be it enacted by the Legislature of the  State               of  Orissa  in  the Forty-third  Year  of  the               Republic of India as follows:-               2.    In  this Act, unless the context  other-               wise requires,-               (a)   "annual  value" in relation to a  finan-

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             cial year means-               (i)   in  relation to land held by  a  raiyat,                             the rent payable by such raiyat to the landlor d               immediately under whom he holds the land:               667                        ............................               (a-1)  ’coal-bearing  land’  means  any   land               acquired  or declared from tune to time  under               any law for the purpose of obtaining coal;                ...................               (c)   ’land’ means  land of whatever  descrip-               tion  which  is  cultivated,  uncultivated  or               covered with water, and includes all  benefits               to  arise out of land and things  attached  to               the earth or permanently fastened to  anything               which  is attached to the earth, but does  not               include crops of any kind, or houses, shops or               other buildings;               (d)   ’mineral-bearing  land’  means   mineral               bearing  land or quarry held for  carrying  on               mining operations,               (e)   ’prescribed’ means prescribed by rules;"               "3.(1)  On and from the commencement  of  this               Act,  all lands shall be liable to payment  of               rural employment, education and production tax               assessed  in the prescribed manner subject  to               provisions hereinafter contained.               Provided  that  any land which  is  liable  to               payment  of  cess under the Orissa  Cess  Act,               1962  shall not be liable to payment of  rural               employment, education and production tax.               (2)   The  rate  per year at  which  such  tax               shall be levied shall be-               (a)   in  the case of land other than  mineral               bearing  land, fifty per centum of the  annual               value thereof,               (b)   in the case of any mineral- bearing land               other than coal bearing land, the rate as  may               be  prescribed  from time to time  in  respect               thereof,               (c)   in  the case of coal-bearing  land,  the               rate as specified in the Schedule, and               (3)   The  State  Government may,  by  notifi-               cation,  amend the Schedule from time to  time               so  as  to enhance or reduce the rate  of  tax               specified therein;               Provided  that every such notification  shall,               as soon as it is published, be laid before the               State  Legislature  for  a  total  period   of               fourteen days which may be comprised in one or               more sessions.               (4)   The  rate  of  tax that  may  either  be               prescribed in pursuance of clause (b) of  sub-               section   (2)  or  enhanced  or   reduced   by               amendment  of  the Schedule  under  subsection               (3),  shall be so prescribed or, as  the  case               may  be,  enhanced or reduced  that  the  rate               fixed in the case of-               (i)   any  mineral  bearing land  other  coal-               bearing  land,  does not  exceed  the  average               annual  income from all such  mineral  bearing               lands in the State during the two  consecutive               years immediately preceding the year in  which               the rate is so fixed; and

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             (ii)coal  bearing  land, does not  exceed,  in               the  aggregate,  fifty per cent  of  the  rate               specified  in  the  Schedule on  the  date  of               publication of this Act in the Gazette.                          "SCHEDULE         Clause (c) of sub-section (2) of section 31 -------------------------------------------------------------- Description of mineral                    Rate of tax per bearing land                             year per acre. --------------------------------------------------------------      (1)                                     (2) ------------------------------------------------------------- 1.Coal bearing land                          Rs. 32,000 668 4.   It  may  be noted at this juncture that  Government  of Orissa  constituted a Committee to recommend rates of  taxes on  mineral  bearing lands (other than coal  bearing  lands) levied under section 3(2)(b) of the Act, as per Notification dated  4.3.1993  and  in pursuance to  the  report  of  that Committee,  the  Government promulgated  Notification  dated 26,9.1994,  No. 12372-VII(A)SM-23/94/SM, adding  Schedule  C prescribing rates of taxes for various mineral bearing lands (AnnexureB, page 270 of Paper Book). (This is subsequent  to the decision of the High Court).  Schedule C is as follows:                         "SCHEDULE-C                        (See rule 2-A) ------------------------------------------------------------ Serial             Description of mineral      Rate  of  tax No.                bearing lands.              per acre. ------------------------------------------------------------ 1.             Land bearing Asbestos         Rs.    20.00 2.             Land bearing Bauxite          Rs. 4,965.00 3.             Land bearing Chromite         Rs.26,960.00 4.             Land bearing Graphite         Rs.   702.00 5.             Land bearing Lead Ore         Rs. 9,942.00 6.             Land bearing Mica             Rs.   710.00 7.             Land bearing Quartz           Rs.   217.00                and Quartzite 8.             Land bearing                Sand(Stowing)                 Rs. 5,312.00 ----------------------------------------------------------------- The relevant provisions of the Mines an Minerals (Regulation and Development Act, 1957 (Act 67 of 1957) are as follows:               "An Act to provide for the regulation of mines               and development of minerals under the  control               of the Union......               2.    Declaration  as to expediency  of  Union               control:-  It  is hereby declared that  it  is               expedient  in  the public  interest  that  the               Union  should  take  under  its  control   the               regulation  of  mines and the  development  of               minerals to the extent hereinafter provided.               3.    Definitions:-  In this Act,  unless  the               context otherwise requires-               (a)   ’minerals’ includes all minerals except mineral               oils; ....               (d)   ’mining operation’ means any  operations               undertaken  for  the purpose  of  winning  any               mineral;"               "9.  Royalties in respect of  mining  leases:-               (1)  The  holder  of a  mining  lease  granted               before  the  commencement of this  Act  shall,               notwithstanding    anything    contained    in               instrument of lease or in any law in force  at

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             such  commencement, pay royalty in respect  of               any  mineral removed or consumed by him or  by               his  agent, manager, employee,  contractor  or               sub-lessee  from  the leased area  after  such               commencement,  at the rate for the time  being               specified in the Second Schedule in respect of               that mineral.               (2)   The holder of a mining lease granted  on               or  after the commencement of this  Act  shall               pay royalty in respect of any mineral  removed               or  consumed by him or by his agent,  manager,               employee,  contractor or sub-lessee  from  the               leased  area  at the rate for the  time  being               specified in the Second Schedule in respect of               that mineral. 669 (2-A)  The holder of a mining lease, whether granted  before or after commencement of the Mines and Minerals  (Regulation and  Development) Amendment Act, 1972, (56 of  1972),  shall not  be  liable to pay any royalty in respect  of  any  coal consumed  by a workman engaged in a colliery  provided  that such consumption by the workman does not exceed one third of a tonne per month. (3)The  Central  Government  may,  by  notification  in  the Official Gazette, amend the Second Schedule so as to enhance or  reduce  the rate at which royalty shall  be  payable  in respect of any mineral with effect from such date as may  be specified in the notification; Provided  that the Central Government shall not enhance  the rate  of  royalty in respect of any mineral more  than  once during any period of three years." "9-A.   Dead rent to be paid by the lessee:- (1) The  holder of  a  mining  lease, whether granted before  or  after  the commencement  of  the  Mines and  Minerals  (Regulation  and Development)  Amendment  Act,  1972, (56  of  1972),  shall, notwithstanding  anything  contained in  the  instrument  of lease  or in any other law for the time being in force,  pay to the State Government, every year, dead rent at such  rate as  may  be  specified  for the time  being,  in  the  Third Schedule,  for all the areas included in the  instrument  of lease. Provided that where the holder of such mining lease  becomes liable,  under  Section 9, to pay royalty  for  any  mineral removed  or  consumed  by  him or  by  his  agent,  manager, employee, contractor or sub-lessee from the leased area,  he shall be liable to pay either such royalty or the dead  rent in respect of that area, whichever is greater. (2)The  Central  Government  may,  by  notification  in  the Official Gazette, amend the Third Schedule so as to  enhance or  reduce the rate at which the dead rent shall be  payable in  respect of any area covered by a mining lease  and  such enhancement or reduction shall take effect from such date as may be specified in the notification: Provided  that the Central Government shall not enhance  the rate of the dead rent in respect of any such area more  than once during any period of three years."                                (emphasis supplied)                     "THE SECOND SCHEDULE                       (See Section 9)                       RATES OF ROYALTY 1.   Agate                    Fifty five rupees per tonne. 2.   All precious and         Twenty percent of the      Semiprecious             sale price at the       stones (except          pit’s mouth.      agate and diamond)

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670 3.Apatite and Rock Phosphate: (a) Ores with more than 27%                 Forty five rupees per P205                          tonne. (b)Ores with 20%              Twenty five rupees P205 to 27% P205              per tonne. (c)  Ores with less than 20% P205                 Ten rupees per tonne. 4.   Asbestos: (a) Chrysotile                Two hundred and eighty five                               rupees per tonne. (b) amphibole                 Fifteen rupees per tonne 5.   Barytes: (a)White (including    snow white & super    snow white)                Twenty rupees per tonne (b) off-colour.               Ten rupees per tonne. 6. Bauxite                    Ten rupees per tonne. 7. Cadmium                     Sixteen rupees per unit                                percent of cadmium met                                per tonne of ore and on                                prorata basis. 8. Calcite                     Fifteen rupees per tonne. 9.China clay; also called kaolin (including ball clay) and white shale; (a) Crude                      Eight rupees per tonne. 671 (b) Processed                  Thirty five rupees (including washed)             per tonne. 10.  Chromite (both lumpy non-friable ore and concentrates) (a)  containing                Sixty rupees per tonne. 48% Cr2O3 and above. (b)Containing less than 48% Cr2O3 and more                Thirty rupees per tonne. than 40% Cr2O3 (c)Containing 30% to 40% Cr2O3 (d)Containing less than 30% Cr2O3 11. Coal. (i)  Group I Coals: (a)  Coking Coal Steel Grade I Steel Grade II, Washery Grade I                  Seven rupees per tonne (b)Hand picked Coal produced in Assam, Arunachal Pradesh, Meghalaya and Nagaland. (ii) Group II Coal: (a)Cooking Coal Washery Grade II Coking Coal Washery Gradne III 672 (b)Semi-Coking

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Coal Grade I Semicoking Coal Grade 11 (c) Non-coking Coal              Six rupees and Grade A non-                     Fifty Paise per coking Coal                      tonne Grade B (d)  ungraded R.O.M. Coal produced in Assam, Arunachal Pradesh, Meghalaya & Nagaland. (iii)Group III Coals: (a)Coking Coal                    Five rupees and fifty Washery grade IV                  paise per tonne. (b) Non-coking coal  Grade C (iv) Group IV Coals: Non-coking coal                   Four rupees and Grade D                           Thirty paise per tonne Non-coking coal grade E (v)  Group V coals: Non-coking coal                  Two rupees and fifty paise Grade F                          per tonne Non-coking coal Grade G (vi) Group VI Coals: Coal produced                   Five rupees per tonne in Andhra Pradesh (Singareni 673 Collieries Company Limited)"                     "THE THIRD SCHEDULE                       (See Section 9A)                          Dead Rent (1)  The  rates of dead rent applicable to the leases  other than  those  obtained  for supply of  raw  material  to  the industry owned by the concerned lessee:     (RATES OF DEAD RENT IN RUPEES PER HECTARE PER ANNUM) --------------------------------------------------------- Category of    1st year   2nd to   6th to    11th year the Mining     of the     5th      10th      of the Lease          lease      year of  year of   leases &                           the      the       onwards                           lease    lease ---------------------------------------------------------   1              2         3       4            5 --------------------------------------------------------- 1.Lease area   Nil        30     60            90 upto 50 hectares 2.Lease area   Nil        40     80            120 [above 50 hectares but not exceeding 100 hectares.] 3.Lease area   Nil         60    100           150 above 100 hectares. (2)  In  the  case of lease obtained for the supply  of  raw material for the industry owned by the  concerned    lessee, the  rates  of  dead rent would be applicable  as  given  in respect of item No. 1  above,  irrespective  of  the   lease

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area." 674 5.During  the course of arguments, it was fairly  agreed  by all  parties that if the Orissa Rural Employment,  Education and Production Act, 1992 (Orissa Act 36 of 1992) as  amended is  without  legislative competence, it  is  unnecessary  to adjudicate  upon  the other points raised  before  the  High Court  and reiterated before us.  Therefore, we shall  first go into the question as to whether Orissa Act 36 of 1992  is within   the  legislative  competence.   According  to   the appellants the Act in question would fall under "Entry  49", List  II of the Seventh Schedule (Taxes on  buildings),  and even  if it is not so, it will fall under "Entry 23 or  50", List  II  of  the Seventh  Schedule.   The  respondents  em- phatically contend that in reality and substance the levy is on mineral lands and particularly on coal bearing lands  and mineral rights.  The legislation has no nexus with land.  It concerns only minerals.  The legislation purports to be  one on "lands" and the nomenclature states so; but it Is only  a colourable  device.   The legislation being one  on  mineral lands  and mineral rights and Parliament having enacted  The Mines  and Mineral (Regulation and Development)  Act,  1957, the  field is entirely covered and Orissa State  Legislature is  incompetent  to  enact  Orissa  Act  36  of  1992.    To substantiate their respective pleas, emphasis was placed  on the  following  three  decisions of this  Court:  (1)  India Cement Ltd.  Vs.  State of Tamil Nadu, 1989 Supp.(1) SCR 692 =  1990 (1) SCC 12 = AIR 1990 SC 85, (2) Orissa Cement  Ltd. vs. State of Orissa and Ors. 1991 (2) SCR 105 = AIR 1991  SC 1676 = 1991 Supp. (1)    SCC   430,  (3)  Buxa  Dooars   Tea Company   Ltd. and others vs.  State of West Bengal    1989 (3) SCR 793 = 1989 (3) SCC 211 = AIR 1989 SC 2015. 6.   At  this  juncture, it will be useful to  remember  the following well settled principles in Constitutional law.  In Harakchand  Ratanchand Banthia and Ors. vs.  Union of  India and  Ors.,  AIR 1970 SC 1453, at page 1458,  a  Constitution Bench of this Court stated thus:               "The  power  to  legislate  is  given  to  the               appropriate legislatures by Article 246 of the               Constitution.  The entries in the three  lists               are  only  legislative  heads  or  fields   of               legislation;  they  demarcate  the  area  over               which  the  appropriate legislatures  can  op-               erate.  It is well established that the widest               amplitude  should be given to the language  of               the  entries.  But some of the entries in  the               different  lists  or  in  the  same  list  may               overlap or may appear to be in direct conflict               with each other.  It is then the duty of  this               Court to reconcile the entries and bring about               a  harmonious  construction.   In  in  re  The               Central  Provinces  and Berar Sales  of  Motor               Spirit and Lubricants Taxation Act, 1938, 1939               FCR  18 = (AIR 1939 FC 1), Sir  Maurice  Gwyer               proceeded to state:               ‘Only  in the Indian Constitution Act can  the               particular  problem arise which is  now  under               consideration;  and an endeavour must be  made               to  solve it, as the Judicial  Committee  have               said  by  having recourse to the  context  and               scheme  of  the  Act,  and  a   reconciliation               attempted  between two apparently  conflicting               jurisdictions by the two entries together  and               by   interpreting,   and,   where    necessary               modifying, the language of the one by that  of

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             the other.  " In  K.  C.  Gajapati Narayan Deo and Ors. v.  The  State  of Orissa,  1954  SCR 1, the Constitution Bench of  this  Court stated at page 11 thus:               "If the Constitution of a State distrib-               675               utes the legislative powers amongst  different               bodies,   which  have  to  act  within   their               respective  spheres  marked  out  by  specific               legislative   entries,   or   if   there   are               limitations  on the legislative  authority  in               the shape of fundamental rights, questions  do               arise  as  to  whether the  legislature  in  a               particular case has or has not, in respect  to               the  subject- matter of the statute or in  the               method of enacting it, transgressed the limits               of    its   constitutional    powers.     Such               transgression  may  be  patent,  manifest   or               direct,  but it may also be disguised,  covert               and indirect and it is to this latter class of               cases   that   the   expression    ’colourable               legislation’  has  been  applied  in   certain               judicial pronouncements.  The idea conveyed by               the  expression is that although apparently  a               legislature in passing a statute purported  to               act  within the limits of its powers,  yet  in               substance and in reality it transgressed these               powers, the transgression being veiled by what               appears,  on proper examination, to be a  mere               pretence or disguise.  " Again at page 12 the Court stated:               "...it  is  the substance of the Act  that  is               material  and not merely the form  or  outward               appearance,  and  if  the  subject  matter  in               substance  is  something which is  beyond  the               powers  of the legislature to legislate  upon,               the form in which the law is clothed would not               save  it from condemnation.   The  legislature               cannot violate the constitutional prohibitions               by  employing  an indirect method.   In  cases               like  these the enquiry must always be  as  to               the   true   nature  and  character   of   the               challenged legislation and it is the result of               such investigation and not the form alone that               will determine as to whether or not it relates               to a subject which is within the power of  the               legislative  authority.   For the  purpose  of               this  investigation the Court could  certainly               examine the effect of the legislation and take               into  consideration  its  object,  purpose  or               design.   But these are only relevant for  the               purpose of ascertaining the true character and               substance  of the enactment and the  class  of               subjects  of  legislation to which  it  really               belongs  and not for finding out  the  motives               which induced the legislature to exercise  its               powers.                                     (emphasis supplied) Speaking  for  the Constitution Bench in  A.S.  Krishna  and others  v.  State of Madras, AIR 1957 SC 297, at  page  303, Venkatarama Ayyar, J., stated thus:               "When a- law is impugned on the ground that it                             is  ultra vires the powers of  the  legislatur e               which  enacted it, what has to be  ascertained

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             is the true character of the legislation.   To               do that, one must have regard to the enactment               as  a whole, to its objects and to  the  scope               and  effect  of its provisions.   If  on  such               examination  it is found that the  legislation               is  in substance one on a matter  assigned  to               the  legislation, then it must be held  to  be               valid  in its entirety, even though  it  might               incidentally  trench on matters which are  be-               yond its competence."                                    (emphasis supplied) 7.   In  Buxa  Dooars Tea Company Ltd. and  Ors.  (supra)  a Bench  of  two Judges of this Court held that  in  order  to determine  the true nature of a levy, the substance  of  the legislation   should  be  ascertained  from   the   relevant provisions of the statute. 8.   In K. P. Varghese v. Income Tax Officer, Ernakulam  and Anr.   AIR 1981 SC 1922, in explaining the extent  to  which external  aid can be resorted to in the interpretation of  a statute, this Court held at page 1930, thus: 676               "...the  speech made by the Mover of the  Bill               explaining the reason for the introduction  of               the Bill can certainly be referred to for  the               purpose of ascertaining the mischief sought to               be remedied by the legislation, and the object               and  purpose  for  which  the  legislation  is               enacted  This  is in accord  with  the  recent               trend in juristic thought not only in  Western               countries    but    also   in    India    that               interpretation of a statute being an  exercise               in  the ascertainment of  meaning,  everything               which  is  logically relevant  should  be  ad-               missible.  "                                   (emphasis supplied) 9.   In  Diwan Brothers vs.  Central Bank of  India,  Bombay and others, AIR 1976 SC 1503, (pp. 1507 & 1508), the learned Judges  took  the view that a perusal of the speech  of  the Minister, who introduced the Bill in Parliament, will give a clear  in sight into the various objects of the Act and  the main  purposes which the legislation sought to achieve.   It was further held that this will have an important bearing on the interpretation of the provisions of the Act. 10. In Shashikant Laxman Kale and Anr. v. Union of India and Anr.,  AIR  1990 SC 2114, Verma, J., speaking  for  a  Three Member  Bench, stated at page 2119:               "For determining the purpose or object of  the               legislation,  it is permissible to  look  into               the    circumstances   which   prevailed    at               the  time  when the  time when the  law  which               necessitated  the  passing  of  that  law  was               passed   and  For  the  limited   purpose   of               appreciating the background and the antecedent                             factual  matrix leading to the legislation,  i t               is  permissible to look into the Statement  of               Objects and Reasons of the Bill which actuated               the  step  to provide a remedy  for  the  then               existing malady." 11.  It is in the light of the above principles of law  laid down  by this Court, we have to scan the provisions  of  the Orissa Act 36 of 1992 and adjudicate as to whether it really falls  within "Entry 49" or "Entry 23 or 50" of List  II  of the  Seventh Schedule of the Constitution, as  contended  by the appellant, and the legal effect flowing therefrom.

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12.  Earlier similar legislations in the State    of  Orissa and judicial decisions which  adjudicated  the  validity  or otherwise  of  those legislations are relevant in  order  to understand the historical background. 13.  The  legislations are Orissa Mining  Areas  Development Fund  Act, 1952 (Act 27 of 1952), and Orissa Cess Act,  1962 (Act  2 of 1962) as amended by Act 40 of 1966.  Of the  two, the  earlier  legislation  Act  27  of  1952  came  up   for consideration  before this Court on two occasions.   On  the first  occasion, Orissa Mining Areas Development  Fund  Act, 1952  (Act  27 of 1952) was considered in the light  of  the Mines  and Minerals (Regulation and Development)  Act,  1948 (Central Act 53 of 1948).  In Hingir Rampur Coal Company  v. State of Orissa & Ors., 1961 (2) SCR 537, the cess or fee on minerals, levied by the Orissa Act was held to be neither  a tax nor a duty of excise but a fee.  The question turned  on the  impact  of MMRD Act, on the States power  to  levy  fee under  Entry  66  read  with  Entry  23  of  List  II  as  a consequence of the declaration contained in section 2 of the Central Act 53 of 1948.  The Court held that the declaration by Parliament in terms of Entry 54 of List I of the  Seventh Schedule  operated  as  a  limitation  on  the   legislative competence of the State Legislature itself.  The 677 Court  was  inclined to the view that if Central Act  53  of 1948  contained the declaration referred to in Entry  23  of the  List II, there would be no difficulty in  holding  that the  declaration  covered  the  field  of  conservation  and development   of   minerals   and   the   said   field   was indistinguishable from the field covered by the Orissa  Act. But  it was found by the Court that the declaration made  by section  2  of  the Central Act (Act 53  of  1948)  did  not constitutionally  amount  to the  requisite  declaration  by "Parliament"  and  that the declaration did  not  cover  the field  covered by the Orissa Act, and so the limitation  im- posed  by Entry 54 of List I does not come  into  operation. On  the second occasion, when Orissa Act 27 of 1952 came  up for  consideration  of  this Court in State  Orissa  v.  MA. Tulloch  &  Company, AIR 1964 SC 1284 = 1964  (4)  SCR  461, "MMRD  Act  "  of 1957 (Central Act 67  of  1957)  had  been enacted  in place of the earlier 1948 Act.  The validity  of the  very  same  cess was considered in  the  light  of  the declaration  in  section  2  of the  M.M.R.D.  Act  of  1957 (Central  Act  67  of  1957) and this  Court  held  after  a detailed  analysis of the State Act as well as  the  Central Act, that the levy of cess under the Orissa Act was  invalid from 1.6.1958, on which date the MMRD  Act of 1957 came into force.   This Court reached the conclusion that the  Central Act  67  of  1957  contained  the  requisite   Parliamentary declaration  in  section 2 of the Act to occupy  the  entire field  of legislation covered under Entry 54 of List I,  and since  the aforesaid Central Act covered the same  field  as the  State  Act  of  1952 in regard  to  mines  and  mineral development,  the  earlier decision in  Hingir  Rampur  Coal Company  v.  State of Orissa & Ors.  AIR 1961 SC  549,  con- cluded  the matter and the State legislature was denuded  of its  powers  to  enact  any  law  on  the  subject.   It  is thereafter,  Orissa Cess Act, (Act 2 of 1962),  as  amended, was  enacted, and it came up for consideration  before  this Court in Orissa Cement Ltd. v. State of Orissa, AIR 1991  SC 1676  =  1991 Supp. (1) SCC 430.  By then, the  law  on  the subject has been considered in detail by a 7-Judge Bench  of this  Court  in India Cement Ltd. & ors. v. State  of  Tamil Nadu & ors. 1989 Supp. (1) SCR 692 = 1990 Suppl. (1) SCC 12. The  matter  was also discussed in detail in  Orissa  Cement

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case (supra).  Section 4 of the Orissa Act, (Act 2 of 1962), as  amended in 1976, imposed a cess on all lands  (including mineral  lands)  determined and payable as provided  in  the Act.   With  regard  to lands held for  carrying  on  mining operations,  in  relation to any mineral, the  amendment  of section  5  (2) (a) of the Act read  with  the  Notification issued,  prescribed a percentage of the royalty or the  dead rent, (as the case may be) as the cess in respect of various items  of  specified  minerals.  The  Court  held  that  the measure  of the levy is the royalty paid in respect  of  the land  by  the assessee to his lessor,  and  considering  the change  in  the  scheme of taxation effected  in  1976,  the importance and magnitude of the revenue by way of  royalties received  by  the  State,  the  charge  of  the  cess  as  a percentage  and, indeed, as multiples of the amount  of  the royalty,  and  the mode and collection of  the  cess  amount along  with the royalties and as part thereof,  would  point out  that the legislation in that regard is with respect  to royalty rather than with respect to land.  It was held  that the levy could not be justified under Entries 45, 49 and  50 of  List II of the Seventh Schedule.  Even if the  levy  was one which could fall under Entry 50 of List II, it was  held that the MMRD Act of 1957 covered 678 the entire field and so the State legislation to the  extent it encroached on the field covered by MMRD Act of 1957, will be ultra vires.  Sections 5, 6 & 7 of Orissa Act, (Act 2  of 1962)  as  amended  in  1976, were held  to  be  beyond  the competence of State legislature in view of the Parliamentary declaration contained in MMRD Act of 1957 (Central Act 67 of 1957).  It is only appropriate to notice in this  connection that under section 8 of the Orissa Cess Act 1962 read  along with  sections 18 & 19 of the Orissa Surveys and  Settlement Act,  lands,  except  those  held  for  carrying  on  mining operations, were subject to levy of cess depending upon  the "surface  characteristics" of the land, whereas the levy  on lands  held for carrying on "mining operations" was made  on the  basis of "minerals extracted" in view of the  amendment of Orissa Cess Act, 1962 by Act 42 of 1976. 14.  In  order to meet the situation, the  State  of  Orissa enacted   the  instant  legislation  --  The  Orissa   Rural Employment, Education and Production Act, 1992.  The  speech made by the Minister in moving the Bill will throw light  on the  objects  of  the Act and the main  purposes  which  the legislation sought to achieve.  It is contained in the paper book  (vol.   C)  Annexure 1,  pages  10-12.   The  relevant portions of the same are as follows:-               "...  this Bill has been brought  to  increase               the  income of the State or to compensate  the               loss that the State Exchequer has lost due  to               Orissa  Cement Case, a Judgment pronounced  by               the   Supreme  Court.   By  virtue   of   that               judgment,  the  State lost nearly  Rs.  150.00               crores  and for a State like ours  losing  Rs.               150.00  crores  is not a  small  thing.   Even               though the Central Government later on revised               the  rate of royalty on coal and thereby  loss               could  be compensated to the extent of Rs.  30               to Rs. 40 crores, still we are in short of Rs.               100.00crores.   Because  of  that   judgement,               Government  has  come out with this  Bill  for               imposing   tax   on   all   types   of   land,               agriculture, non-agriculture including mineral               bearing lands.  You know under item 49 of  the               State  list of the Constitution of India,  the

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             State is empowered to impose tax on lands  and               exercising  power this Bill has been  brought,               wherein  Government once assume the  power  of               imposing  tax  on all lands.   However,  State               have taken all steps to safeguard the interest               of   the   cultivators   and   agriculturists.               Provision has been made in the Bill that under               the  Orissa  Cess Act, 1962 one who  has  paid               tax/cess will not be further liable to pay tax               under the present Bill. Therefore there should               be no apprehension in the mind of the  Hon’ble               Members  that either it will be double  taxing               or  the  cultivators who  have  already  over-               burdened  with tax will be further  liable  to               pay  any  tax.   Stress  has  been  given   on               imposing  tax  particularly  on  the   mineral               bearing lands.  You know, Sir, ours is a State               which  is  full of  mineral  resources.   Even               though  we are rich in that way we are  unable               to  exploit  our  minerals  and  increase  the               income  of the State because of several  legal               hindrances,   constitutional  and   statutory.               Therefore,  we have to act within the  purview               of   the  law  which  authorises   the   State               Government  to impose tax and take  resort  to               that  and  keeping in view the  Orissa  Cement               Case and India Cement case, the two  judgments               of  the  Supreme  Court, this  Bill  has  been               introduced.  "                                       (emphasis supplied) 15.  Let us examine the crucial provisions of Orissa Act  36 of 1992.  The charging section provides that all lands shall be liable to payment of rural employment 679 education  and  production tax assessed  in  the  prescribed manner  subject  to provisions  thereafter  contained.   The proviso to section 3(1) of the Act states thus:-               "Provided  that  any land which is  liable  to                             payment of cess under the Orissa Cess Act, 196 2               shall  not  be  liable  to  payment  of  rural               employment, education and production tax." Though  the  charging  section provides for a  levy  on  all lands,  land  which is liable to payment of  tax  under  the Orissa Cess Act, 1962 shall not be liable to payment of  the rural  employment, education and production tax.  Section  4 of the Orissa Cess Act, 1962, as it originally stood, is  as follows:               "4. All lands to be liable to payment of cess.               (1)  From and after the commencement  of  this               Act  all lands shall be liable to the  payment               of  cess  determined  and  payable  as  herein               provided:               Provided that no such cess shall be payable in               respect  of  lands which were  not  liable  to               payment  of rent or revenue prior to  the  1st               day  of  April, 1977 or lands  in  respect  of               which  a tax on holding is assessed under  the               Orissa Municipal Act, 25 of 1950.               Provided further-that nothing in the preceding               proviso shall apply to lands held for carrying               on mining operations.  " The  definition of ’land’ in section 3(vi) at  the  relevant time stood as follows:               "3(vi)   ’land’   means   land   of   whatever

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             description and includes land which is covered               with  water,  but does not include  houses  or               buildings." Later  the  second  proviso to section  4  was  deleted  and simultaneous  the definition of ’land’ in section 3(vi)  was substituted by Act 10 of 1994 thus:               "3(vi)  ’land’  means  land  of  whatever  de-               scription  and includes land which is  covered               with water, but does not include-               (a)   mineral  bearing land as defined in  the               Orissa   Rural   Employment,   Education   and               Production Act, 1992; and               (b)   houses or buildings." 16.  From  the  above,  it will be seen  that  the  combined effect  of  section 3(1) of Orissa Act 36 of  1992  and  the Orissa  Cess Act of 1962, as amended by Act 10 of  1994,  is that only mineral bearing land and coal bearing land will be subject  to the levy of tax under Orissa  Rural  Employment, Education and Production Act, 1992 (Orissa Act 36 of  1992). It is not all types of land that will be subject to the levy but only the two types of land mentioned above which will be caught  by the taxing-net.  This is in accord with what  the Hon.  Minister stated in introducing the Bill to the  effect that "stress has been given on imposing tax particularly  on the mineral bearing lands." The earlier levy in that  regard was rendered futile by the decisions referred to by the Hon. Minister  himself in his speech and the main purpose of  the legislation was only to levy the tax on mineral bearing  and coal bearing lands.  We may incidentally observe that it  is common ground that 85% of the coal bearing lands are in  "F" and "G" category in the State of Orissa. 17.  The  above  aspect can be looked at  from  a  different angle  also.   The Orissa Rural  Employment,  Education  and Production  Act, 1992 (Orissa Act 36 of 1992) provided  that all lands shall be liable to 680 the  payment  of  tax under the Act.   Land  is  defined  in section  2(c)  of  the  Act  to  mean,  "land  of   whatever description....  and includes all benefits to arise  out  of land".   Lands held for carrying on mining operations  would be  taken in by the said definition.  It is  patently  clear that  "minerals", which are benefits to arise out  of  land, will  be  roped  in within the purview  of  the  levy  under section  3(1)  read with section 2(c) of the  Act.   So  the charging  section of the impugned Act imposes a tax  on  the "minerals"  also  and  not confined to a  levy  on  land  or surface characteristic of the land.  Yet another aspect that is  self-evident is that for all lands, other  than  mineral bearing  land,  the  tax is levied at a  percentage  of  the "annual  value  of  the land".  So far  as  tax  on  mineral bearing land is concerned, it is for the State Government to prescribe  the same and it has been so fixed  in  accordance with  section  3(4)(i) of the Act based on  "average  annual income".   As  stated  in paragraph  3  (supra),  by  adding Schedule C as per Notification dated 26.9.1994  (Annexure-B, page  270  of Paper Book), the rates of tax  are  fixed  for different  kinds  of minerals per acre, obviously  based  on "average annual income".  With regard to coal bearing  land, as per section 3(2)(c), the statute itself has specified the rate  of  tax in the Schedule at Rs.32,000/- per  acre.   We have  already  seen that lands other  than  mineral  bearing lands  and coal bearing lands will fall outside the  purview of  the  impugned Act since they are dealt  with  under  the Orissa Cess Act,1962. it Is only the "coal bearing land" and "mineral  bearing  land", as defined in section  2(a-1)  and

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section 2(d), which have to bear the brunt of taxation.   In the  light of the above, we have no doubt in our  mind  that the substance of the levy under the Orissa Rural Employment, Education  and  Production Act, 1992 is really  on  "mineral bearing land" and "coal bearing land". 18.  The  main contention of the appellants’ counsel Mr.  B. Sen was that the levy of the tax under Orissa Act 36 of 1992 will  come  under Schedule 7, List II Entry  49   "Taxes  on lands and buildings".  In the alternative, it was  contended that  the levy will fall under List II Entry 23 or Entry  50 of the Seventh Schedule. .LM15 List II.  "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.  " It  appears  to us that Entry 49 of List II is  the  general entry which enables the State Legislature to impose taxes on lands  and  buildings.  A particular category or  specie  is taken out of the general entry, and is provided by Entry  50 of  List II.  But the tax that can be levied under  List  II Entry 50 is subject to limitations imposed by Parliament  by law relating to regulation of mines and mineral development. Similarly,  under  List  II  Entry  23,  though  the   State Legislature can enact a law relating to regulation of  mines and mineral development, it is subject to the provisions  of List   I  (Legislation  by  Parliament)  with   respect   to regulation  and development under the control of the  Union. In other words, if the impugned Orissa Act 36 of 1992  falls either  under  List II Entry 50 of List II Entry 23,  it  is subject to the lam made by Parliament relating to the regu- 681 lation of mines and mineral development. (List I Entry  54). A   perusal  of  the  Mines  and  Minerals   (Regulation   & Development) Act, 1957 (Central Act 67 of 1957), sections 2, 3(a),  &  3(d),  sections 9 and 9-A  and  Second  and  Third Schedules  to  the Act, quoted in paragraph 3  (supra)  will clearly  point  out  that taxation on  mineral  and  mineral rights, viz., any tax, royalty, fee or rent, are provided in the  said Act.  In particular, section 9-A provides  payment of  dead rent as provided therein by the holder of a  mining lease to the State Government at the rates specified in  the Third  Schedule to the Act.  And the proviso thereto  states that in cases where the holder of the mining lease is to pay royalty  under section 9, he shall be liable to  pay  either royalty under section 9 or the dead rent, as provided  under section 9-A, whichever is greater.  Section 9-A enables  the Central  Government  to  enhance  or  reduce  dead  rent  by amending  the  Third  Schedule.  The Second  and  the  Third Schedules  provide  varying  rates  for  different  minerals including  coal.   Since exhaustive provisions as  also  the Parliamentary declaration, contemplated by List I Entry  54, have  been  made  in the Mines and  Minerals  (Regulation  & Development)  Act, 1957, regarding all kinds of taxation  on mineral  and  mineral rights  tax, royalty  fee   dead  rent etc.,  the State Legislature is denuded or deprived  of  the power  to enact any law or to impose any tax or  other  levy with reference to List II Entry 23 or List II Entry 50.   We have  already held that levy of tax under Orissa Act  36  of 1992  is in substance on minerals and mineral rights,  which has  nothing to do with surface characteristic of the  land. In  this  view of the matter, the levy of  tax,  on  mineral bearing  lands and coal bearing lands, under section 3  read

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with  section  2(a)(1)  and 2(d) of the Act  is  beyond  the competence of the State Legislature and is ultra vires. 19.  In  this connection reference may be made to  a  seven- Member Bench decision of this Court in India Cement Ltd.  v. State  of Tamil Nadu 1989 Supp. (1) SCR 692.  In that  case, the Madras Legislature levied a cess on royalty. Royalty was payable  on extraction of minerals.  Section 115(1)  of  the Madras Panchayats Act, 1958 levied a local cess at the  rate of  45 paise on every rupee of land revenue payable  to  the Government  in  respect of any land for  every  fasli.   The Explanation thereto stated that "land revenue" means  public revenue due on land and includes...... royalty, lease amount or  other  sum payable to the Government...... The  levy  of cess  was  sought to be sustained as a tax  on  lands  under Schedule  VII List II Entry 49.  Incidentally the scope  and impact  of List I Entry 54, List II Entries 23, 49 & 50  and in particular, the scope of section 9 of Mines and  Minerals (Regulation  & Development) Act came up  for  consideration. The Court held at page 710 of the report thus:               "In       this       connection        learned               Attorney  General appearing for the  Union  of               India  submitted  before us that in  order  to               sustain  the  levy,  the power  of  the  State               Legislature has to be found within one or more               of the entries of List II of the 7th Schedule.               The levy in question has to be either a tax or               a  fee or an impost.  If it, is neither a  tax               nor  a fee then it should be under one of  the               general entries under List II. The  expression               ’land’ according to its legal significance has               an   indefinite   extent   both   upward   and               downwards,  the surface of the soil and  would               include  not  only the face of the  earth  but               everything  under  it  or over  it.   See  the               observations in Anant Mills Co. Ltd. v.  State               of Gujarat & Ors. (1975 3 SCR 220 at 249), The               minerals               682               which  are  under the earth,  can  in  certain               circumstances fall under the expression ’land’               but  as  tax on mineral  rights  is  expressly               covered  by  entry  50 of List II,  if  it  is               brought under the head taxes under entry 49 of               List  II, it would render entry 50 of List  II               redundant.  Learned Attorney General is  right               in  contending that entries should not  be  so               construed as to make any one entry  redundant.               It  was further argued that even in  pith  and               substance the tax fell to entry 50 of List II,               it would be controlled by a legislation  under               entry 54 of List I.." After referring to H.R.S. Murthy’s case (1964 (6) SCR  666), at page 712 of the report the Court held thus:               "...attention of the Court was not invited  to               the   provisions   of   Mines   and   Minerals               (Development  & Regulation) Act 1957  and  s.9               thereof.   S9(3)  of the Act in  terms  states               that royalties payable under the 2nd  Schedule               of  the  Act shall not be enhanced  more  than               once  during  a  period of 4  years.   It  is,               therefore,   a   clear  bar   on   the   state               legislature taxing royalty so as to in  effect               amend 2nd Schedule of the Central Act.  In the               premises,  it cannot be right to say that  tax               on  royalty can be a tax on land, and even  if

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             it is a tax, if it falls within entry 50  will               be ultra vires the State legislature power  in               view of s. 9(3) of the Central Act."               "It  was contended by Mr.  Krishnamurthy  Iyer               that  the State has a right to  tax  minerals.               It  was  further  contended  that  if  tax  is               levied, it will not be irrational to correlate               it  to the value of the property and  to  make               some kind of annual value basis of tax without               intending  to tax the income.  In view of  the                             provisions  of the Act, as noted  hereinbefore ,               this  submission  cannot  be  accepted.    Mr.               Krishnamurthy Iyer also further sought to urge               that  in  entry  50 of List II,  there  is  no               limitation  to the taxing power of the  State.               In   view   of   the   principles    mentioned               hereinbefore  and the expressed provisions  of               s. 9(2) of the Mines & Minerals (Regulation  &               Development) Act, 1957, this submission cannot               be accepted.  This field is _fully covered  by               the Central legislation.               In  any event, royalty is  directly  relatable               only  to  the minerals extracted  and  on  the               principle  that the general provision  is  ex-               cluded  by the special one, royalty  would  be               relatable  to entries 23 & 50 of list 11,  and               not  entry 49 of list II.  But as the  fee  is               covered by the Central power under entry 23 or               entry 50 of list II, the impugned  legislation               cannot be upheld." 20.In  Federation  of Mining Associations  of  Rajasthan  v. State  of  Rajasthan and Anr., 1992 Supp.(2)  SCC  239,  the Rajasthan Land Tax Act of 1985 (Act 6 of 1985) by section  3 read  with section 2(a) & (d) of the Act, imposed a  tax  on annual  value of mineral bearing land based on dead rent  or royalty  whichever is higher.  Holding that the levy in  the said  case  is  practically on all fours with  the  levy  in Orissa  Cement’s case (supra), a three Member Bench of  this Court observed at page 244 thus:               "The  question of validity of levies  of  this               type has come up for consideration by a  seven               Judge bench of this Court in India Cement Ltd.               v.  State of Tamil Nadu and by a  three  Judge               bench  in  Orissa  Cement  Ltd.  v.  State  of               Orissa."               "...For  the reasons set out in  India  Cement               and Orissa Cement cases, we are of the opinion               that  the State legislature did not  have  the               competence to legislate for the levy cf a  tar               on mineral bearing lands based on the  royalty               derived from the land. 21.  In  the  light of the aforesaid  decisions,we  have  no hesitation  to hold that Orissa Act 36 of 1992  purports  to impose  a tax on coal bearing land and mineral bearing  land as  defined in section 2(a-1) and 2(d) of the Act, which  is fully  covered  by  Parliamentary  legislation   Mines   and Mineral (Regulation & Development) Act, 1957, 22.  Mr.  B. Sen, Counsel for the appellants submitted  that in  India Cement’s case (1989 Supp. (1) SCR 692 =  1990  (1) SCC  12) the sole question that arose for consideration  was whether  royalty  was  a tax and  whether  cess  on  royalty amounts to a tax on tax thereby denuding the legislation  of its  true  character  as a tax on land.  It  was  held  that royalty  being within the purview of section 9 of  Act,  the

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levy  was invalid.  But, in the instant case, tax is  levied on  land, and so clearly within List II Entry  49.   Support was  sought from certain observations in Orissa Cement  case (1991  Supp.  (1) SCC 430) and also the latest  decision  in Goodricke Group Ltd. (JT 1994 (7) SC 577) and in particular, the following observations contained in paragraph 29 of  the latter Judgment:               "It is thus clear from the aforesaid decisions               that merely because a tax on land or  building               is  imposed  with reference to its  income  or               yield,  it does not cease to be a tax on  land               or  building.   The  income or  yield  of  the               land/building is taken merely as a measure  of               the  tax;  it  does not alter  the  nature  or               character of the levy.  It still remains a tax               on land or building.  There is no set  pattern               of levy of tax on lands and buildings   indeed               there can be no such standardization.  No  one               can  say that a tax under a  particular  entry               must  be levied only in a  particular  manner,               which  may  have been adopted  hitherto.   The               Legislature  is free to adopt such  method  of               levy  as  it  chooses  and  so  long  as   the               character  of  levy remains  the  same,  i.e.,               within  the  four corners  of  the  particular               entry, no objection can be taken to the method               adopted.  " Stress was also laid on the fact that the decisions in India Cement’s  and  Orissa Cement’s case  were  distinguished  in Goodricke  case.   On  the  other  hand,  counsel  for   the respondents submitted that reliance placed on Goodricke case is  erroneous since the Orissa Rural  Employment,  Education and  Production Act, 1992 is in substance and effect a  levy on  minerals  and  mineral rights and not on  land;  and  in Goodricke case, the Act was held to be a law relating to tax on land and that makes all the difference.  The  respondents also  took  up  the plea that some of  the  observations  in Goodricke  case are not in accord with India  Cement’s  case and the Orissa Cement’s case.  We are of the view that it is unnecessary to consider the rival pleas on this score, since we  have held that the levy under Orissa  Rural  Employment, Education  and Production Act, 1992 is not on land,  but  on minerals and mineral rights. 23.  We  concur  with the conclusion of the  High  Court  of Orissa that section 3 (2) (c) of the impugned Act as well as the Schedule attached to the impugned Act, levying a tax  of Rs.  32,000/-  per  acre of coal  bearing  land,  should  be declared illegal and ultra vires.  The consequential notices issued in Form V and the demand notices in Form VII and  the certificate  proceedings  pending before any forum  for  the realisation  of  the dues under the impugned  Act  are  also illegal and infirm.  We further concur with the decision  of the  High  Court  that the demands raised  by  the  Mahanadi Coalfields Ltd against the traders and consumers on  account of the additional bur- 684 den of tax on land are invalid and illegal.  The judgment of the High Court of Orissa dated 26.4.1994 is affirmed but  in the circumstances of the case without any order as to costs. 24.  We should hasten to add that we have    not  pronounced on any other question    raised either before the High Court of Orissa or before us by any of the parties, in this  batch of  cases, and they are left open for consideration  in  the future  as  and when occasion arises therefore.  It  is  un- necessary to pronounce on those questions at this stage,  in

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view  of the fundamental infirmity regarding the  competency of  the State Legislature to enact Orissa Act 36 of 1992  as stated  by us earlier.  Mr. Shanti Bhushan, senior  counsel, submitted  that  M/s.  Mahanadi Coalfields  Ltd.  should  be afforded  sufficient  time to return the  amounts  collected from  the traders and consumers of coal, as, more  than  one crore  of  rupees has been collected and  unless  sufficient time  is given, it will cause irreparable hardship.  We  see force  in  this plea.  We are of the view that  it  is  only appropriate   to  afford  a  breathing  time   to   Mahanadi Coalfields Ltd. in that behalf In our opinion, the amount so collected  may be refunded to persons entitled to the  same, within  a period of one year from today, failing which  they shall  pay interest at 18% p.a. on expiry of one year.   All the above civil appeals and the special leave petitions  are disposed of as above. 690