Telangana High Court
M/S. Amma Ispath, Hyd vs Deputy Secy Mines, New Delhi, And 4 ... on 18 August, 2025
Author: K. Lakshman
Bench: K. Lakshman
HON'BLE SRI JUSTICE K. LAKSHMAN
WRIT PETITION No.6969 OF 2011
ORDER:
Heard Sri Pannala Srinivas, learned counsel for the petitioner
and learned Assistant Government Pleader for Mines and Geology
appearing for respondents.
2. This writ petition is filed to declare the impugned order
No.35 of 2011 dated 07.01.2011 passed by respondent No.1 in
Revision Application File No.01(16)/2010-RC.II, dated 06.12.2010 of
respondent No.3 as illegal and consequently remand the same to
respondent No.1 for disposal in accordance with law.
FACTS OF THE CASE:
3. The petitioner is a partnership firm and it has established a
Sponge Iron Plant in Sy.No.346 of Appala Narsimhapuram Village,
Nelakondapally Mandal, Khammam District in the year, 2007 at an
approximate cost of Rs.2 Crores. The production capacity of the plant
is 20 Metric Tons per day and it is able to run the plant with 40-45%
efficiency only i.e. producing 8 to 9 Metric Tons of Sponge Iron per
day. The petitioner firm is regularly filing its returns before the Sales
Tax and Central Excise authorities.
KL, J
4. While the matter stood thus, on 25.10.2008, the officials of
the Regional Vigilance and Enforcement Officer, Warangal, visited
the Plant and seized the records with regard to the procurement of Iron
ore on the ground that the Petitioner firm consumed a quantity of
11,852.68 Metric Tons of Iron ore for which the Royalty/Seigniorage
fee was not covered. They further observed that 437.5 MT was found
excess transportation by tampering the transit form of Mining Lease
holder, Sri N. Swadesh Rao. Respondent No.2 has issued notice dated
17.04.2009 to the petitioner firm basing on the report of the Regional
Enforcement and Vigilance Officer, Warangal. The Petitioner firm
submitted reply dated 08.05.2009 to the said notice. Thereafter, the
office of respondent No.3 issued show cause notice dated 06.07.2010
to the petitioner firm and the Petitioner submitted reply dated
05.08.2010 to the said show cause notice. Respondent No.3 once
again issued notice dated 11.08.2010 and the petitioner firm submitted
reply dated 15.09.2010.
5. Without considering replies submitted by the petitioner firm,
respondent No.3 issued notice No.2943/MD3/2005 dated 09.11.2010
demanding to pay Rs.48,71,452/- towards royalty for having
KL, J
consumed 11,852.68 MTs of Iron ore without permit as per Sec.21 (5)
of the Mines and Minerals (Development & Regulation) Act, 1957 (
for short, 'the Act'). Challenging the said notice dated 09.11.2010
issued by respondent No.3, the petitioner firm has filed Revision
Application vide File No.02/(16)/2010-RC.II on 06.12.2010 before
respondent No.1 - Tribunal. The Tribunal conducted hearing on
07.01.2011 and disposed it of at the admission stage holding that the
petitioner firm has got a provision to file an appeal under Rule 12 of
the A.P. Mineral Dealers Rules, 2000 (for short, 'the Rules') framed
under Section 23 (C) (3) of the Act, which reveal that the Central
Government shall have no power to revise any order passed by a State
Government or any of its authorized officers or any authority under
the Rules made under sub-sections (1) and (2).
6. Thus, according to the petitioner, respondent No.1 erred in
stating that it has no jurisdiction to entertain the Revision Application
dated 06.12.2010 on the ground that the petitioner firm does not fall
under the definition 'Dealer' as mentioned in Rule-2(1) (d) of Rules,
2000 as held by the erstwhile High Court of Andhra Pradesh in Novel
KL, J
Granites Limited v. State of Andhra Pradesh1. Respondent No.1
erred in holding that the petitioner firm has set a factory where the
mineral is stored before it is processed/manufactured and the
petitioner firm is obligated in law to show to the officials that the
mineral present at the time of inspection has suffered payment of
Seigniorage fee. In the present case, no mineral has been seized by the
officials of the Vigilance Department at the time of inspection on
25.10.2008. The Impugned notice dated 09.11.2010 is based on the
assumption and presumption that the petitioner firm has consumed
11,852.68 MT of Iron without permit. In fact, the petitioner firm is
regularly procuring the mineral from the leaseholders who have
already paid the seigniorage fee for processing the same in its plant.
Though the petitioner does not fall under the purview of Section 21
(5) of the Act, the respondents are unnecessarily harassing the
petitioner firm which is the Manufacturer. The respondents basing on
some books of accounts seized in the factory falsely alleging that the
petitioner firm consuming the raw material without paying seigniorage
fee, which act of respondents is illegal. In support of its contention,
ALT 2010 (2) 793 =AIR 2009 AP 107
KL, J
the petitioner firm placed reliance on judgment of a 3-Judge Bench of
the Hon'ble Supreme Court in Rukmanand Bairoliya v. the State of
Bihar 2. Therefore, the petitioner firm sought to set aside the
impugned order.
CONTENTIONS OF THE RESPONDENTS:
7. Respondent Nos.2 to 5 filed counter, denying the averments
made by the petitioner and contended that:
i. On 25.10.2008, respondent No.2 along with his officials
inspected the petitioner firm and noticed a stock of 7000 MT of
Iron Ore and 10 MT of Sponge Iron.
ii. The Vigilance and Enforcement Officer, Warangal informed
that the officials seized the records and on verification, it was
found that the petitioner firm has purchased Iron Ore illegally
from other than leaseholders amounting to a quantity of
11852.68 MT for which the royalty was not covered and 437.5
MT was found to be excessively transported by tampering the
transit forms of Mining lease holder Sri N. Swadesh Rao. The
Regional Vigilance and Enforcement Officer, Warangal has
AIR 1971 SC 746
KL, J
directed to recover the royalty along with the price of the
mineral for illegal procurement of Iron Ore.
iii. Basing on the report of Regional Vigilance and Enforcement
Officer, Warangal, respondent No.2 issued notice dated
17.04.2009 to the petitioner firm calling for explanation for
procurement of Iron Ore illegally.
iv. The petitioner firm submitted its reply dated 08.05.2009 stating
that it was established in the year 2006 and their plant's
production capacity is 20 Tons per day but they are able to run
their plant with 60% efficiently only i.e. 12 tons per day. The
Vigilance Officials have accounted the receipts of Iron Ore
twice and doubled the records i.e. way bills as well as the same
date of General Inwards Registers of the local supplies. Sri N.
Swadesa Rao is responsible for the tampered quantity.
v. The petitioner firm in its reply dated 27.06.2009 stated that the
capacity of the unit is 20 Tons per day and the specification and
consumption of raw material approximately for Iron Ore @ 3.1
Tons. It has further stated that procurement of Iron Ore from
January, 2008 to the date of inspection i.e. 25.10.2008 as per
KL, J
the records is 11128 tons inclusive of tampered transit from
437.5+10690.5 and the quantity consumed is 3828 MT and the
closing balance of the stock available by the time of inspection
is 7000 Tons orally (but as per the records 7514.59 tons).
vi. The petitioner firm has not paid any amount to the Department
as they are having credit input on capital goods purchased
against machinery and other equipments for their industry.
vii. In respect of tampered royalty paid transit forms for a quantity
of 437.50 MT, it is submitted that said Transit Forms pertain to
lessee Sri. N. Swadesa Rao and action has been already initiated
against him and therefore the quantity of 437.50 MT was taken
as proof of non-payment of royalty.
viii. As per the observation of respondent No.2, the unit is running at
the installed capacity i.e. 20 Tones per day and the production
of Sponge Iron approximately is 500 Tons per month which is
evidenced from the balance Iron Ore stock of 7000 MT
available as on the date of inspection.
ix. In this regard, the petitioner firm stated that the inspecting
officials have accounted the receipts of Iron Ore twice/doubled
KL, J
the records i.e. way bills as well as the same date of General
Inward register of the local suppliers. But the petitioner firm,
has not specified the quantity which was accounted twice. The
registers and bill books seized have been verified by respondent
Nos.2 and 3 and found that no quantity has been entered twice
by the Inspection officials. Hence the quantity of 11852.680
MT mentioned by the Inspection officials was taken into
consideration for levy of penalty on illegal transportation of
Iron Ore.
x. The petitioner firm stated that specification of consumption of
Iron Ore approximately @ 3.1 tones of Iron Ore per 1 MT of
Sponge Iron. But as per the returns submitted by the petitioner
firm, for production of 1 MT of Sponge Iron, the consumption
of Iron ore comes to 1.9 MT only which is contrary to his own
statement of letter dated 29.06.2009. Hence there is shortfall of
Iron Ore for production of Sponge Iron which shows that the
petitioner firm purchased the material illegally from the local
suppliers evidenced from the registers maintained by it.
KL, J
xi. The explanation submitted by petitioner firm that the Regional
Vigilance and Enforcement Officer, Warangal has recorded the
quantity by making double entries for the same quantity is
totally wrong.
xii. Respondent No.4 vide Circular Memo No: 29541/Vg/2006
dated 10.08.2007 has issued instructions on the illegal
excavation of Iron Ore and levying of penalty. Respondent
No.4 has clarified that it is the responsibility of the stock
yard/mineral based industry owner to produce valid transit
forms/Royalty paid way bills issued by the Mines and Geology
Department for the stocks, otherwise it will be construed that
the minerals are procured from illegal sources and therefore
penalty and price of the mineral along with royalty and Cess on
mineral bearing lands shall be collected under Section 21(5) of
the Act. Since price of the mineral is to be charged, there is no
need for computation of cost of mineral/pit mouth value for
illegally procured Mineral.
KL, J
xiii. Therefore, the petitioner firm procured 11852.68 MT of Iron
ore illegally, therefore it is liable to pay penalty as per
provisions of the Act.
xiv. The judgment in W.P. No. 5871/2002 dated 03.10.2008 has no
relevance to the present case on the reason that the Regional
Vigilance and Enforcement Officer, Warangal after verification
of the registers reported that the sponge Iron plant has involved
in illegal procurement of Iron Ore from the local persons, who
are not having any leases. The Ore is procured from persons
carrying out illegal mining operations in Jaggaiahpeta and
Nelakondapally Mandals of Krishna and Khammam Districts
respectively. The Iron Ore is known as KAKI RAYEE which is
available mostly in the size of pebbles, occasionally lump size
and people pick up the same backed by some
contractors/suppliers to carry out illegal mining operations. A
quantity of 11852.68 M.T's have been arrived from six
registers, in which the petitioner firm has recorded all the
particulars like cost of the mineral paid to the suppliers,
transportation, loading charges and place from where the
KL, J
mineral received. Respondent No.2 has inspected the said areas
and seized the Iron Ore which is in the form of pebbles and
disposed the same in public auction.
xv. The demand raised by respondent No.3 is on the Iron Ore and
not on the mineral product "Sponge Iron". Hence the demand
raised by respondent No.3 is according to the procedure laid
down under the Act.
xvi. The petitioner firm is holding a dealer license under Rule 5(2)
of Rules, vide registration No. 2943/MD-3/DDWGL/2005,
dated 30.11.2005.
xvii. As per Section 23-B of the Act, the State Government or the
officials authorized by them are empowered to search for any
mineral that has been raised in contravention of the provision of
the Act or Rules made thereunder or any document or thing in
relation to such mineral is secreted in any place or vehicle. As
per section - 21(5) of the Act, whenever any person raises,
without any lawful authority, any mineral from any land, or,
where such mineral has already been disposed of, the price
thereof, and may also recover from such person, rent, royalty or
KL, J
tax, as the case may be, for the period during which the land
was occupied by such person without any lawful authority.
xviii. As per the said provisions of the Act only, the respondent
authorities inspected the premises of petitioner firm and seized
certain documents wherein the particulars like cost of the
mineral paid to the suppliers, transportation, loading charges
and place from where the mineral received has been recorded.
As per the verification of the documents, the petitioner firm has
procured 11852.68 MT's of Iron Ore from unauthorized sources
i.e. from nearby patta lands of Khammam and Krishna Districts.
The so called source areas are situated within a radius of 10 to
12 Kms from the unit area.
xix. The petitioner firm, on one hand, contends that their firm does
not fall under the definition of "Dealer", under Rule 2 (1) (d) of
the Rules and on the other hand, it is holding a Dealer license
for processing, storing of Iron Ore, trading of sponge Iron under
the same provision which is quite contradictory. The petitioner
is also submitting returns, though not regularly, under these
rules to the concerned authorities. Hence the contention of the
KL, J
petitioner that they do not fall under the definition of Dealer is
not correct.
xx. If the petitioner is aggrieved by the demand notice issued by
respondent No.3, there is a provision under Rule 11 and 12 of
the Rules, to prefer appeal before respondent No.4/Director of
Mines and Geology, Hyderabad and revision to the Government
respectively. The petitioner, instead of availing the same,
approached the Government of India by filing revision which
was rightly dismissed.
With the said submissions, they sought to dismiss the writ petition.
ANLYSIS AND FINDINGS OF THE COURT:
8. The aforesaid rival submissions would reveal that the
Officials of Regional Vigilance and Enforcement Officer, Warangal,
along with Royalty Inspector of office of respondent No.3 inspected
the plant of the petitioner situated at Survey No.343 of
Apalanarasimhapuram Village, Nelakondapally Mandal, Khammam
District on 25.10.2008. During the said inspection, it was noticed a
Stock of 7000 MT of Iron Ore and 10 MT of Sponge Iron. The
KL, J
Inspecting Officials seized the records of the Unit, and after verifying
the records, they found excess transportation by tampering the Transit
Forms. A notice dated 17.04.2009 was issued to the petitioner by
respondent No.2. The petitioner has submitted explanation dated
08.05.2009 to the said notice specifically contending that it has not
tampered any waybills for the quantity mentioned therein and
leaseholder is held responsible for the said quantity. On consideration
of the same, vide letter dated 15.05.2009, respondent No.2 submitted
report to respondent No.3 along with reply. A show-cause notice
dated 06.07.2010 was issued to the petitioner. It has submitted
explanation on 05.08.2010. Thereafter, respondent No.3 has issued
another notice dated 11.08.2010. The petitioner has submitted reply
dated 15.09.2010 to the said notice. Finally, respondent No.3 has
issued demand notice dated 09.11.2010 to the petitioner, directing it to
pay royalty for 11852.68 MT of Iron Ore @ Rs.11/- per MT and price
thereof @ Rs.350/- per MT of Iron Ore and Cess on MBL @ Rs.50/-
per MT (royalty Rs.1,30,380/- + Price Rs.41,48438/- + Cess on MBL
Rs.5,92,634/-, total Rs.48,71,452/- as per Section - 21 (5) of the
MMDR Act, 1957.
KL, J
9. The petitioner has filed a revision under Rule 35-A of the
Andhra Pradesh Minor Mineral Concession Rules, 1966 with
respondent No.1 challenging the said demand notice dated
09.11.2010. Vide order dated 07.01.2011, respondent No.1 dismissed
the said revision holding that as per Rule - 12 of the Rules framed
under Act, any person aggrieved by an order passed on an appeal
under the said rules, may file an application for revision before the
State Government within thirty (30) days from the communication of
such order in Form-K. With the said findings, the revision filed under
Section - 23C (3) of the Act, was dismissed.
10. Challenging the said order, dated 07.01.2011 of respondent
No.1 and demand notice dated 09.11.2010 of respondent No.3, the
petitioner filed the present writ petition.
11. In Novel Granites Limited1, the erstwhile High Court of
Andhra Pradesh considering the provisions of the Act, the Rules
framed thereunder, the principle laid down by the Apex Court in
several judgments and applying the ratio from the said judgments, in
paragraph No.40 held as under:
KL, J
"40. The following ratio could be culled out from
the various judicial precedents referred to above:
a) The word 'Mineral' is judicially
interpreted, more than it is statutorily defined.
b) The word 'Mineral' is not a term of art,
but required to be understood in common parlance
depending upon the context in which it is used.
c) The word 'Mineral', understood in
common parlance is an inorganic substance found
either on or in the earth, which may be garnered or
exploited for profit and
d) The mineral changes its character after it
undergoes process such as pulverization."
12. On consideration of the same and also the scope and ambit
of Sections - 23, 23 (c) and definition of 'mineral' in Rule - 2 (h) of
the Rules, this Court held that the explanation to the definition of
'mineral' in Rule - 2 (h), it is clear that the State Government far too
expanded the scope of the definition of mineral by including in its
definition processed mineral and final product emerging out of such
process. While it is very much doubtful whether even the Parliament
would have made any such rule without amending the definition of
mineral in Section - 3 (a), the State Government is not competent to
stretch the definition of 'Mineral' to the extreme extent of subjecting
KL, J
the processed and finished product derived from the mineral to the
regulatory control by including the same in the definition of 'Mineral'.
13. Finally, this Court held that explanation to Rule - 2 (h) by
which the processed mineral and final products are treated as
'Mineral' is ultra vires the rule making power of the State
Government and the same is accordingly struck down. The definition
of 'Dealer' in Rule - 2 (1) (d) shall be read down as to exclude the
persons, who undertake manufacturing/processing activity using
mineral as raw material. It is, however, made clear that the State
Government and its officials that the State Government and its
officials authorized for this purpose shall be free to inspect and check
any premises or factory/industry where the mineral is stored before it
is processed/manufactured and exercise the power of seizure of
mineral before it is processed and converted into a finished product, if
it is found that such mineral has not suffered royalty and/or dead rent.
14. There is no appeal preferred challenging the said common
order of the erstwhile High Court of Andhra Pradesh at Hyderabad. It
attained finality.
KL, J
15. It is apt to note that considering the said principle, vide
order dated 18.03.2011 this court granted interim suspension as
prayed for I the present writ petition. The respondents filed vacate
stay application vide WPVMP No.322 of 2012 No.322 of 2012. Vide
order dated 22.06.2015, this Court dismissed the said vacate stay
application and posted the matter for hearing.
16. Thus, there is no consideration of the said aspects by
respondent No.3 in the order dated 09.11.2010. Vide order dated
07.01.2011, respondent No.1 relegated the petitioner to Appellate
Authority in terms of Rule - 12 of the Rules framed under the Act. In
fact, the petitioner has to prefer an appeal within thirty (30) days from
the date of communication of the said order. This writ petition is of
the year 2011. The interim order is dated 18.03.2011. Since then, the
petitioner is enjoying the said interim order. There is no consideration
of the principle laid down by erstwhile High Court of Andhra Pradesh
at Hyderabad in Novel Granites Limited1. Now, relegating the
petitioner to appellate Authority after 14½ years is improper.
KL, J
17. In the light of the above, both the demand notice dated
09.11.2010 of respondent No.3 and the order dated 07.01.2011 of
respondent No.1 are set aside. The matter is remanded back to
respondent No.3 with a direction to consider the principle laid down
by this Court in Novel Granites Limited1 pass orders afresh by
putting the petitioner on notice and affording it an opportunity.
However, respondent No.3 shall complete the entire exercise within
two (02) months from the date of receipt of copy of this order.
18. This writ petition is accordingly disposed of. In the
circumstances of the cases, there shall be no order as to costs.
As a sequel thereto, miscellaneous petitions, if any, pending in
the writ petition shall stand closed.
_________________
K. LAKSHMAN, J
18th August, 2025
Mgr
