Orissa Cement Ltd & Ors Vs. State of Orissa & Ors [1991] INSC 92 (4 April 1991)
1991 Latest Caselaw 92 SC

Orissa Cement Ltd & Ors Vs. State of Orissa & Ors [1991] INSC 92 (4 April 1991)

Rangnathan, S. Rangnathan, S. Kasliwal, N.M. (J) Agrawal, S.C. (J)

CITATION: 1991 AIR 1617 1991 SCR (2) 105 1991 SCC Supl. (1) 430 JT 1991 (2) 439 1991 SCALE (1)617

ACT:

Orissa Cess Act, 1962: Sections 5-7--Constitutional validity of.

Orissa Cess Rules, 1963: Rule 6A.

Bengal Cess Act (Act IX of 1880) (As applicable to State of Bihar): Sections 4,5,6 and 9-- Constitutional validity of.

Madhya Pradesh Upkar Adhiniyam, 1981: Part IV--Section 11--Constitutional validity of.

Madhya Pradesh Karadhan Adhiniyam 1982: Part IV-- Section 9-Constitutional validity of.

Madhya Pradesh Mineral Areas Development Cess Rules, 1982: Rule 3 and 10.

Land Cess-Levy of cess based on royalty derived from mining lands-Nature, character and validity of-State Legislatures-Legislative competence of-Whether denuded by enactment of Mines and Minerals (Regulation and Development) Act. 1957.

`Royalty'--Whether tax.

`Land Revenue'--Connotation of.

Constitution of India, 1950: Seventh Schedule- List 1 Entries 52 and 54- List II Entries 5, 18, 23, 45, 49. 50 and 66-State Law-Central law-Doctrine of occupied field-State Act encrouching field occupied by Central Act-Effect of.

Articles 142, 246 and 265-Cess -Constitutional invalidity-Consequences of -Refund of cess whether automatic and inevitable consequence-Declaration of invalidity and determination of relief in consequence whether two different things-Relief whether discretion of Court-Power of Court to would or restrict the relief-Doctrine of prospective overruling and doctrine of unjust enrichment-Applicability of.

Article 277-Essential requirements of the Article- Discussed.

Practice and procedure: Undertaking given by the parties 106 directions given by Supreme Court- Effect of.

HEAD NOTE:

The States of Orissa, Bihar and Madhya Pradesh levied a cess which was based on the royalty derived from mining lands. The cess was levied by these States under their respective statutes viz. Orissa Cess Act, 1962, Bengal Cess Act, 1880 (as applicable to the State of Bihar), Madhya Pradesh Upkar Adhiniyam 1981 and Madhya Pradesh Karadhan Adhiniyam, 1982.

The assesses challenged the constitutional validity of the cess by filing various petitions in the High Courts of Orissa declared the cess unconstitutional on the ground that it was beyond the legislative competence of the State Legislatures, but rejected the prayer of the assessees for a direction to the State to grant refund of the cess collected from the assessees. Against the decision of the Orissa High Court the assessees have filed appeal in this Court whereas the State of Orissa has filed a cross-appeal. The High Court of Madhya Pradesh also declared the levy of cess unconstitutional on the ground that it was beyond the legislative competence of the State legislature. Against the decision of the Madhya Pradesh High Court the State of Madhya Pradesh has filed an appeal in this Court. On the other hand the High Court of Patna dismissed the writ petition of the assessee. Against the decision of the Patna High Court the assessee has filed an appeal in this court.

In appeal to this court, it was contended on behalf of the State of Orissa; that

(i) the levy of cess being referable to Entries 45, 49 and 50 of the State List of the Seventh Schedule of the Constitution the impugned legislation was within the legislative competence of the State legislature;

(ii) the limitations imposed in the statute on the modes of utilisation of cess supports a view that the cess is fee on which the State legislature is competent to legislate under Entry 23 read with Entry 66 of the State List;

(iii) since the impugned Act was concerned with the raising of funds to enable panchayats and Samithis to discharge their responsibilities of local administration and take steps for proper development of the area under their jurisdiction, the impugned legislation was referable to Entry 5 of State List; and

(iv) the enactment of the Central Legislation viz. Mines and Minerals (Regulation and Development) Act, 1957 has not denuded the State legislation of its competence to enact the impugned legislation since the scope and subject matter of the two legislations are entirely different and the impugned State Legislation does not encroach upon the field covered by the Central Legislation i.e. 1957 Act. 107

On behalf of the assessees it was contended inter alia that (i) all the State levies were ultra vires for the reasons given by this Court in the India Cement case; (ii) the State cannot seek to sustain the levy under the Bengal Cess Act 1880 by relying on Article 277 of the Constitution;

and (iii) the levy being unconstitutional the Court should direct the States to refund the cess collected from the assessees because (a) a refund is the automatic and inevitable consequence of the declaration of invalidity of tax and (b) the States have given undertakings before this Court that they would refund the amount collected in case the levy is declared invalid by this Court.

Disposing of the appeals, this Court,

HELD: 1. The levy of cess under sections 5 to 7 of the Orissa Cess Act, 1962 is beyond the competence of the State Legislature. [169B] 1.1. A royalty or the tax thereon cannot be equated to land revenue. Therefore the cess cannot be brought under Entry 45 of List II. [142D] India Cement & Ors. v. State of Tamil Nadu & Ors., [1990] 1 S.C.C. 12, followed.

1.2 A tax on royalties cannot be a tax on minerals and is outside the purview of Entry 50 of List II. Even otherwise, the competence of the State Legislature under the said Entry is circumscribed by "any limitations imposed by Parliament by law relating to mineral development". The Mines and Minerals (Regulation and Development) Act, 1957 is a law of Parliament relating to mineral development and Section 9 of the said Act empowers the Central Government to fix, alter, enhance or reduce the rates of royalty payable in respect of minerals removed from the land or consumed by the lessee, Sub-Section (3) of Section 9 in terms States that the royalties payable under the Second Schedule to that Act shall not be enhanced more than once during a period of three years. This is a clear bar on the State legislature taxing royalty so as, in effect, to amend the Second Schedule to the Central Act. This is exactly what the impugned Act does. Therefore the validity of the impugned Act cannot be upheld by reference to Entry 50 of List II.

And if the cess is taken as a tax falling under Entry 50 it will be ultra vires in view of the provisions of the Central ACt. [144B, 153B-D, 168D] India Cement & Ors. v. State of Tamil Nadu & Ors., [1990] 1 S.C.C.12, followed.

108 Hingir Rampur Coal Co. Ltd. & Ors. v. State of Orissa & Ors., [1961] 2 S.C.R.537, Justice Wanchoo's dissent explained.

1.3 There is a difference in principle between a tax on royalties derived from land and a tax on land measured by reference to the income derived therefrom. A tax on buildings does not cease to be such merely because it is quantified on the basis of the income it fetches. But in the impugned legislation the levy is not measured by the income derived by the assessee from the land, as is the case with lands other than mineral lands. The measure of the levy is the royalty paid, in respect of the land, by the assessee to his lessor which is quite a different thing. The impugned statute only purports to levy a cess on the annual value of all land. There is a clear distinction between tax on land and tax on income arising from land. The former must be one directly imposed on land, levied on land as a unit and bearing a direct relationship to it. A tax on royalty cannot be said to be a tax directly on land as a unit.

Hence the cess is outside the purview of Entry 49 List II.

[148H, 149A-D] Ajay Kumar Mukherjea v. Local Board of Barpeta, [1965] 3 Ss.C.R. 47; Ralla Ram v. The province of East Punjab, [1948] F.C.R.207; Buxa Dooars Tea Co. v. State, [1989] 3 S.C.R.211; Bhagwan Dass Jain v. Union of India, [1981] 2 S.C.R. 808 and R.R. Emgomeeromg Co. v. Zila Parishad, [1980] 3 S.C.R. 1, referred to.

Union of India v. Bomnbay Tyre International, [1984] 1 S.C.R.347; Re: A reference under the Government of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934, (1963) 2 All E.R.III, cited.

2. If the levy in question cannot be described as a tax on land, it cannot be described as fee with regard to land either. [169A]

2.1 Section 10 of the Orissa Cess Act, 1962 earmarks the purposes of utilisation of only fifty per cent of the proceeds of the cess and that, too, is limited to the cess collected in respect of "lands other than lands held for carrying on mining operations". Therefore the levy cannot be correlated to any services rendered or to be rendered by the State to the class of persons from whom the levy is collected. Accordingly the levy cannot be treated as a fee which the State legislature is competent to legislate for under entry 66 of the State List. [153E-F]

2.2 Even assuming that the levy is a fee, the State legislature can impose a fee only in respect of any of the matters in the State List. The 109 entry relied upon for this purpose i.e. Entry 23 is itself "subject to the provisions of List I with respect to regulation and development" of mines and minerals under the control of the Union. Under Entry 54 of List I, regulation of mines and mineral development is in the field of parliamentary legislation "to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest". Such a declaration is contained in Section 2 of the Mines and Minerals (Regulation and Development) Act, 1957. The validity of the impugned Act cannot be upheld by reference to Entry 23 List II. [153G-H, 154A, 168D]

3. There is a difference between the 'object' of the Act and its 'subject'. The object of the levy may be to strengthen the finances of local bodies but the Act has nothing to do with municipal or local administration.

Accordingly State's reliance on Entry 5 of List II is plainly too tenuous. [164D]

4. The answer to the question whether the State Legislature was denuded of its competence to enact the impugned legislation because of the Parliament having enacted the Mines and Minerals (Regulation and Development) Act, 1957 depends on a proper understanding of the scope of the Act and an assessment of the encroachment made by the impugned State legislation into the field covered by it. [161D]

4.1 The mere declaration of a law of Parliament that it is expedient for an industry or the regulation and development of miners and minerals to be under the control of the Union under Entry 52 or entry 54 of List I does not denude the State legislatures of their legislative powers with respect to the fields covered by the several entries in List II or List III. Particularly, in the case of a declaration under Entry 54, this legislative power is eroded only to the extent control is assumed by the Union pursuance to such declaration as spelt out by the legislative enactment which makes the declaration. The measure of erosion turns upon the field of the enactment framed in pursuance of the declaration. [161E-F]

4.2 In assessing the field covered by the Act of Parliament in question, one should be guided not merely by the actual provisions of the Central Act or the rules made thereunder but should also take into account matters and aspect which can legitimately be brought within the scope of the said statute. Viewed in this light and in the Light of the provisions of the Bihar Cess Act the conclusion seems irresistible that the State Act has trespassed into the field covered by the Central Act 110 viz. Mines and Minerals (Regulation and Development)Act, 1957.[163F]

4.3 The impugned legislation which stands impaired by the Parliamentary declaration under Entry 54, can hardly be equated to the law for land acquistion or municipal adminstration which are traceable to different specific entries in List II or List III [163G-H] Hingir Rampur Coal Co. Ltd. & Ors. v. State of Orissa & Ors. [1961] 2. S.C.R. 537; State of Orissa v. M.A. Tulloch & Co., [1964] 4 S.C.R., 461 and Indian Cement & Ors v. State of Tamil Nadu & Ors., [1990]1 S.C.C. 12 followed.

State of Haryana v. Chanan Mal, [1976] 3 S.C.R. 688; Ishwari Khatan Sugar Mills (P) Ltd v. State of U.P. [1980] 3 S.C.R. 331 and Western Coalfields Ltd. v. Special Area Development Authority., [1982] 2 S.C.R.1,distinguished. Indian tobacco Co. Ltd. v. Union, [1985] Supp. 1 S.C.R. 145; State of West Bengal v. Union [1964] 1. S.C.R. 371; Central Coalfields v. State of M.P., A.I.R. (1986) M.P.33; M. Karunanidhi v. Union of India, [1979] 3 S.C.R. 254; State of Tamil Nadu v. Hind Stone etc., [1981] 2. S.C.R. 742; I.T.C. v. State of Karnataka, [1985] Suppl S.C.R. 145; Bharat Coking Coal v. State of Bihar, [1990] 2 Scale 256; Kannan Dewan Hills Co. v. State of Kerala, [1973] 1. S.C.R. 356; Baijnath Kedia v. State of Bihar [1970] 2 S.C.R. 100; H.R.S. Murthy v. Collection of Chittoor & Ors. [1964] 6 S.C.R.; Ch. Tika Ramji & Ors. v. State of U.P.,[1956] S.C.R. 393; Laxmi Narayan Agarwala v. State, A.I.R. 919830 Ori.210; Bherulal v. State, A.I.R. (1965) Raj. 161; Sharma v. State A.I.R. (1969) P&H 79 and Saurashtra Cement & Chemical Industries Ltd. v. Union A.I.R. (1979) Guj. 180, referred to.

Trivedi & Sons v. State of Gujarat. [1986] Suppl. S.C.C. 20, cited.

5. Section 6 of the Bengal Cess Act, 1880 specifically enacts that the cess will be on royalty from mines and quarries and on the annual net profit of railways and tramways. The further amendments to Section 6 have not changed this basic position.

Though the Section referees also to the value of the mineral-bearing land, that furnishes only the maximum upto which the cess, based on royalty, could go. Therefore, the cess is levied directly on royalties from mines and quarries. The different notifications issued by the State of Bihar under section 6 111 of the Act determining the rate of cess on the amount of rayalty of all minerals of the State place the matter beyond all doubt. The levy is a percentage or multiple of the royalty depending upon the kind of mineral and in the case of iron ore-the method of extraction and nature of the process employed. There are no clear indications in the statute that the amounts are collected by way of fee and not tax. Section 9 indicates that only a small percentage goes to the district fund and the remaining forms part of the consolidated fund of the State " for the constrution and maintenance of other works of public utility". However, the proviso does require at least ten percent to be spent for purposes relating to mineral development. Even the assumption that the levy can be treated, in part, as a fee and, in part, as a tax will not advance the case of the respondents. Therefore, the levy of cess sunder the Bengal Cess Act, 1880 is declared invalid. [169C-F,H,170A] Indian Cement & Ors. v. State of Tamil Nadu & Ors., [1990] 1 S.C.C. 12 followed.

Central Coalfields Ltd. v. State (CWJC 2085/89 decided on 6.11.90 by Patna High Court, referred to.

5.1 The attempt to sustain the tax under the Bengal Cess Act 1880 on the basis of Article 277 cannot also succeed.[171C] Ramkrishna Ramanath v. Janpad Sabha, [1962]Suppl. 3.S.C.R. 70; Town Municipal Committee v. Ramachandra [1964] 6 S.C.R. 947, referred to.

6. The levy of cess under section 11 of the Madhya Pradesh Upkar Adhiniyam, 1981 is not covered by Entry 49 or Entry 50 of List II and is therefore, ultra vires., [172B] M.P. Lime Manufacturers' Association v. State, A.I.R. (1989) M.P. 264 referred to.

6.1 Under Section 9 of Madhya Pradesh Karadhan Adhiniyam, 1982 the proceeds of the cess are to be utilised only towards the general development of mineral-bearing areas. Although there is no provision for the constitution of a separate fund for this purpose as is found in relation to the cesses levied under Part II or Part III of the Act yet this consideration alone does not preclude the levy from being considered as a fee. The clear ear-marking of the levy for purposes connected with development of mineral areas was rightly considered by 112 the High Court, as sufficient to treat it as a fee. The High Court was also right in holding that such a fee would be referable to item 23 but out of bounds for the State Legislature, after the enactment of the Mines and Minerals (Regulation and Development) Act, 1957. [171F-H] Srinivasa Traders v. State, [1983] 3 S.C.R. 843, referred to.

7. The grant of refund is not an automatic consequence of a declaration of illegality i.e. where the levy of taxes is found to be unconstitutional, the Court is not obliged to grant an order of refund. Therefore a finding regarding the invalidity of a levy need not automatically result in direction for a refund of all collections thereof made made earlier. The declaration regarding the invalidity of a provision and the determination of the relief that should be granted in consequence thereof are two deferent things and, in the latter sphere, the Court has, and must be held to have, a certain amount of discretion. Once the principle that the Court has a discretion to grant or decline refund is recognised, the ground on which such discretion should be exercised is a matter of consideration for the Court having regard to all the circumstances of the case. The Court can grant, would or restrict the relief in a manner most appropriate to the situation before it is such a way as to advance the interests of justice. The Court is entitled to refuse the prayer for good and valid reasons. Laches or undue delay or intervention of third party rights would clearly be one of those reasons. Unjust enrichment of the refundee may or may not be another. Also there is no reason why the vital interest of the State should not be a relevant criterion for deciding that a refund should not be granted.

[185H, 186A-C, D & E 181D-E]

7.1 In the instant case though the levy of the cess is unconstitutional, yet there shall be no direction to refund to the assessees of any amounts of cess collected until the date on which the levy in question has been declared unconstitutional. This, in regard to the Bihar cases, will be the date of this judgment i.e. 4.4.1991. In respect of Orissa and Madhya Pradesh cases the relevant date will be the date on which the concerned High Court has declared the levy unconstitutional i.e.22.12.1989 in case of Orissa and 28.3.1986 in case of Madhya Pradesh. The dates of the judgments of the appropriate High Court, may not constitute a declaration of law within the scope of Article 141 of the Constitution, but it cannot be gainsaid that the State cannot, on any ground of equity, be permitted to retain the cess collected on and after the date of the High Court's judgment. Accordingly the State should refund the amounts of cess collected after the relevant dates to assesses directly or in the Coalfields from whom they were collected, with 113 interest at the rate directed by this Court or mentioned in the undertaking from the date of the relevant judgment to the actual date of repayment. The Coalfields, when they get the refunds, should pass on the same to their customers, the assessees. [186F-G, 187B-C] India Cement & Ors. v.State of Tamil Nadu & Ors, [1990] 1 S.C.C.12, followed.

Linkletter, 14 L-Ed. (2d) 601; Sunburst. 77 L.Ed.310; Mahabir Kishore & Ors. v. Stte of Madhya Pradesh, [1989] 4 S.C.C. 1; Chhotabhai Jethabhai Patel & Co. v. Union of India, [1962] 2 Suppl. S.C.R. 1; State of Madhya Pradesh v. Bhailal Bhai & Ors., [1964] 6 S.C.R. 261; Tilok Chand Motichand v. Munshi, [1969] 2 S.C.R> 824; Ramchandra Shankar Deodhar v. State of Maharashtra, [1974] 2 S.C.R. 216; Shri Vallabh Glass Works Ltd. v. Union of India, [1984] 3 S.C.R> 180; State of M.P. v. Nandlal Jaiswal, [1986] 4 S.C.C.566' D. Cawasji & Co. v. State of Mysore, [1975] 2 S.C.R.511; Salonah Tea Co. Ltd. v. Superintendent of Taxes, [1988] 1 S.C.C. 401 and Lakshmi Narain Agarwala v. State, A.I.R. (1983_ Orissa 210, referred to.

Behram Khursheed Pesikaka v. State of Bombay, [1955] 1 S.C.R.613; R.M.D. Chamarbaugwala v. Union of India, [1957] S.C.R. 930; M.P.V. Sundararamier & Co. v. State of Andhra Pradesh & Anr., [1958] S.C.R. 1422; West Ramnad Electric Distribution Co. v. State of Madras, [1963] 2 S.C.R. 747; M.L.Jain v. State of U.P., [1963] suppl. 1 S.C.C.R. 912; K.T. Moopil Nayar v. State of Kerala & Anr., [1961] 3 S.C.R.77; Balaji v. I.T.O. Special Investigation Circle, [1962] 2 S.C.R. 983; Raja Jagannath Bakshi Singh v. State of U.P., [1963] 1 S.C.R. 220; Prem Chand Garg v. Excise Commissioner, U.P. Allahabad, [1963] Suppl. 1 S.C.R. 885 and I.C. Golaknath & Ors.v. State of Punjab & Ors.,[1967] 2 S.C.R. 762, cited.

8. The undertaking given by the parties or interim directions given by the Court cannot be understood in such a manner as to conflict with the Court's final decision. [187]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.4353-54 of 1983 etc. etc.

From the Judgment and Order dated 7.3.1983 of the Orissa High Court in O.J.C. No. 1517 of 1978.

A.K. Ganguli, G. Ramaswamy, T.S. Krishnamurthy Iyer, Dr. 114 L.M. Singhvi, Shanti Bhushan, P. Chidambram, R.B. Datar, T.V. S.K. Iyer, V.A. Bobde B.Sen, M.S. Gujral, R.F. Narinan, P.H. Parekh Ms. Shalini, Soni, K.K. Lahiri, J.B.Dadachanji, S.Sukumaran, P.N.Gupta, R.K. Mehta, A.K.Panda, Sakes Kumar, Ashok Singh, Satish Agnihotri, D. Goburdhan, D.N. Mishra, Shri Narain, Abhey Sapra, Sandep Narain, Mrs. Kirti Misra, Harish N.Salve, S.R. Grover, K.J.John, M.P. Sharma, Ms. Deepa Dixit, Sanjay Parekh, Praveen Kumar, Darshan Singh, K.V. Srekumar, T.G.N.Nair, B.R.Agrawal, S.K. Bagga, Mrs. S.K.Bagga, Rameshwar Nath and A.M. Dittia for the appearing parties.

The Judgment of the Court was delivered by RANGANATHAN, J. These are connected batches of Civil Appeals and Special Leave Petitions. We grant special leave to appeal in all the petitions (condoning the delay in the filing of the unnumbered one referred to below) and proceed to dispose of all the appeals by this common judgment. The details of the appeals and petition are, for sake of convenient reference, tabulated below:

----------------------------------------------------------------- High Court Date of Civil Appeal/ Name of Judgment SLP Nos. Appellant ------------------------------------------------------------------

1. Orissa 17.4.1980 C.A.2053-2080/80 Tata Iron & Steel Co. Ltd.

7.3.1983 C.A.4353-4354/83 Orissa Cement Ltd.

22.12.1989 S.L.P. 1479/90 State of Orissa 22.12.1989 S.L.P. ----/90 Orient Paper & Industries Ltd. & Anr. 13.7.1990 S.L.P.11939/90 -do-

2. Bihar 10.2.1986 C.A. 592/86 Tata Iron & Steel Co. Ltd.

3. Madhya 28.3.1986 C.A. 1641-1662/86 State of M.P. Pradesh We shall discuss later the manner in which these appeals and petitions have arisen.

115 THE ISSUE The validity of the levy of a "cess", based on the royalty derived from mining lands, by the States of Bihar, Orissa and Madhya Pradesh is challenged in these petitions and appeals. A seven-Judge Bench of this Court in India Cement, [1990] 1 S.C.C. 12 struck down a similar levy under a Tamil Nadu Act as beyond the legislative competence of the State Legislature. The assessees, in the matters now before us, claim that the issue here is directly and squarely governed by the above decision. The State, on the other hand, claim that the nature and character of the levies imposed by them is totally different from that of the Tamil Nadu levy and that they are entirely within the scope of the States' Legislative powers under the Constitution. This is the issue to be decided in these matters. As the impugned enactments of Bihar, Orissa and Madhya Pradesh mutually differ from one another in some respects, they will need separate consideration. However, the basic issue being the same, all these matters have been heard together and it is found convenient to dispose of them all by this common judgment. We may mention in passing that, initially, these matters were listed before a Bench of two Judges of this court. It referred the matters on 17.8.1990 to the learned Chief Justice for the constitution of a larger Bench. The matters have come up before us in pursuance of the directions of the Hon'ble Chief Justice.

THE LEGISLATIVE ENTRIES

It will be convenient, at the outset, to refer to the various entries of the Union and the State Lists in the Seventh Schedule to the constitution which have a bearing on the issues to be discussed. These are:

List I-(Union List) Entry 52:

Industries, the control of which by the Union declared by Parliament by law to be expedient in the public interest.

Entry 54:

Regulation of mines and mineral development 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.

116 List II-(State List) Entry 18:

Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; improvement and agricultural land;

colonization.

Entry 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.

Entry 45:

Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues.

Entry 49:

Taxes on lands and buildings.

Entry 50:

Taxes on mineral rights subject to nay limitations imposed by Parliament by law relating to mineral development.

Entry 66:

Fees in respect of any of the matters in this List, but not including fees taken in any court.

EARLIER HISTORY

Before proceeding to consider the provisions of the enactments impugned, and the issues debated, before us, it is necessary to set out certain earlier controversies that led to India Cement.

Hingir Rampur Case [1961-2 S.C.R. 537] As early as in 1960, this Court had to consider the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952 (Orissa Act XXVII of 1952). S. 3 of the Act empowered the State Government to constitute mining areas whenever it appeared to the Government that it was necessary and expedient to provide amenities 117 life communications, water supply and electricity for the better development of such areas or to provide for the welfare of the residents or workers in areas within which persons employed in a mine or a group of mines reside or work. S.4 empowered the State Government to impose and collect a cess or fee on the minerals extracted the rate of which was not to exceed 5% of the valuation of the minerals at the pit'smouth. S.5 provided for the constitution of the Orissa Mining Areas Development Fund. The proceeds of the cess recovered in pursuance of S.4 along with other subsidies from Government, local authorities and other public subscriptions were credited to the fund and the expenses for such collection debited thereto. The fund has to be utilised to meet expenditure incurred in connection with such development measures as the State Government might draw up for the purposes above mentioned as well as for the purposes specified in clauses (a) to (e) of S.5(5). The validity of this levy of cess was challenged by the petitioner coal company in the Hingir Rampur case as ultra vires the powers of the State Legislature because (a) the cess was not a fee but a duty of excise on coal which was a field covered by Entry 84 of List I in the Seventh Schedule and repugnant to the Local Mines Labour Welfare Fund Act, 1947 (Central Act XXXII of 1947); and (b) even if it was treated as a fee relatable to Entries 23 and 66 of List II in the Seventh Schedule, it was hit by Entry 54 of List I read with the Mines and Minerals (Development & Regulation) Act, (Central Act LIII of 1948) (`the MMRD Act' for short) or by Entry 52 of List I read with the Industries (Development and Regulation) Act (`the IDR Act' for short), 1951 (Central ACt LXV of 1951). The first of the above arguments was based on the fact that the cess was fixed at a percentage of the valuation of the mineral concerned at pit's mouth. This argument was based on two considerations.

The first related to the form and the second to the extent of the levy. Repelling the argument, it was held that the extent of levy of a fee would always depend upon the nature of the services intended to be rendered and the financial obligations incurred thereby and cannot by itself alter the character of the levy from a fee into the of a duty of excise except where the correlation between the levy and services is not genuine or real or where the levy is disproportionately higher than the requirements of the services intended to be rendered. So far as the first consideration was concerned, it was observed that the method in which the fee is recovered is a matter of convenience and by itself it cannot fix upon the levy the character of a duty of excise. Though the method in which an impost is levied may be relevant in determining its character its significance and effect cannot be exaggerated. The court, therefore, came to the conclusion that the cess levied by the impugned act was 118 neither a tax nor a duty of excise but a fee.

The second argument turned on the impact of the MMRD Act on the State's power to levy a fee under Entry 66 read with Entry 23 of List II as a consequence of the declaration contained in S.2 of the Central Act. The Court agreed that a declaration by Parliament in terms of Entry 54 of List I operated as a limitation on the legislative competence of the State Legislature itself and observed:

"if Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union, to the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act, the impugned Act would be ultra vires not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law." (underlining ours) However, the answer to the argument was easily found by the Court inasmuch as the declaration on the terms of Entry 54 of List I relied on for the coal company was founded on Act LIII of 1948 which was an Act of the Dominion Legislature and not an Act of Parliament. However, the Court did not stop here. It proceeded to review the provisions of Central ACt LIII of 1948 and concluded that, if this Act were held to contain the declaration referred to in Entry 23, there would be no difficulty in holding that the declaration covered the field of conservation and development of minerals, and that the said field was indistinguishable from the field covered by the impugned Act. In coming to this conclusion the Court pointed out that the rule-making powers conferred on the Central Government under Section 6(2) of the Act included the levy and collection of royalties, fees and taxes in respect of minerals, mines, quarried excavated or collected. The circumstance that no rules had in fact been framed by the Central Government in regard to the levy and collection of any fees, it was held, would not make any difference, The Court observed:

"What Entry 23 provides is that the legislative competence of the State Legislature is subject to the provisions of List I with respect to regulation and development under the con- 119 trol of the Union, and Entry 54 in List I requires a declaration by Parliament by law that regulation and development of mines should be under the control of the Union in public interest.

Therefore, if a Central Act has been passed for the purpose of providing for the conservation and development of minerals, and if it contains the requisite declaration, then it would not be competent to the State Legislature to pass an Act in respect of the subject-matter covered by the said declaration. In order that the declaration should be effective it is not necessary that rules should be made or enforced; all that this required is a declaration by Parliament that it is expedient in the public interest to take the regulation and development of mines under the control of the Union. In such a case the test must be whether the legislative declaration covers the field or not. Judged by this test there can be no doubt that the field covered by the impugned Act is covered by the Central Act LIII of 1948." The Court then considered the argument based on Entry 52 of List I and the provisions of the IDR Act but came to the conclusion that the vires of the impugned Act could not be successfully challenged on this ground. Wanchoo J., delivered a separate dissenting judgment.

He held that the levy was not a fee or a land cess but a duty of excise. He pointed out (at p-579-80) how taxes could be turned into fees on the so-called basis of quantification with the help of the device of creating a fund and attaching certain services to be rendered out of monies in the fund.

In this view, he did not consider the question how far the Central Acts of 1948 and 1951 impaired the State's competence to levy the fees in question. He negatived the State's attempt to bring the levy in question (treating it as a tax) within the scope of Entry 50 of List II. He was of opinion that the expressions "taxes on mineral rights" referred to taxes on the right to extract minerals and not taxes on the minerals actually extracted. He held that the cess in the present case was not a tax on mineral rights but a tax on the minerals actually produced. It was no different in pith and substance from a a tax on goods produced which comes under Item 84 of List I as duty of excise.

Tulloch case [1964] 4 SCR 461.

The same issue regarding the competence of the Orissa State Legislature to levy the very same cess came up for consideration again 120 in the Tulloch case. The scenario had changed because the levy now challenged was in respect of the period July 1957 to March, 1958 by which time the MMRD Act, 1957 (Central Act (Central Act LIII of 1948). The 1948 Act, which had earlier provided for the regulation of mines and oil fields and for the development of minerals, was now limited only to oil fields and the 1957 Act provided for the regulation of mines and mineral development. S.2 of the 1957 Act, like the predecessor 1948 Act, contained the following declaration in terms of Entry 54 of List I. It read:

"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". but unlike the earlier one this was a declaration contained in an Act of Parliament which had the effect of impairing the legislative competence of the State under Entry 23 read with Entry 66 of the State List. The hurdle which prevented the Supreme Court from considering the provisions of the 1948 Act as a bar to the levy of the cess was therefore out of the way. The Court analysed in detail the provisions of the impugned State Act as well as the two Central Acts. It referred to its conclusion in the Hingir-Rampur case that the field covered by the impugned State Act was covered by the 1948 Act and observed that this fully applied to the State Act vis-a-vis the 1957 Act also, particularly as Ss. 18(1) and (2) of the 1957 Act were wider in scope and amplitude and conferred larger powers on the Central Government than the corresponding provisions of the 1948 Act. Counsel for the State attempted to distinguish the ambit of the 1957 Act from that of the 1948 Act. But the Court pointed out that the argument could not prevail. S. 13 of the 1957 Act contained an express provision for the levy of a fee. S. 25-though not as categorically as s. 6 of the 1948 Act-clearly implied a power to levy "rent, royalty, tax, fee and other sums" a nd, besides, S. 18 of the Central Act of 1957 were wider in scope and amplitude and conferred larger powers on the Central Government than the corresponding provisions of the Act of 1948. It was reiterated, referring to Hingir-Rampur and distinguishing Ch. Tika Ramji & Ors. etc. v. The State of Uttar Pradesh & Ors., [1956] S.C.R. 393 that it was incorrect to think that, until rules were made under S. 13 or steps taken under S.25 to collect fees etc., the Central Act would not cover the field. The Court observed, further:

121 "But even if the matter was res integra the argument cannot be accepted. Repugnancy arises when two enactments both within the competence of the two Legislatures collide and when the Constitution expressly or by necessary implication provides that the enactment of one legislature has superiority over the other then to the extent of the repugnancy the one supersedes the other. But two enactments may be repugnant to each other even though obedience to each of them is possible without disobeying the other. The test of two legislations containing contradictory, for if a competent legislature with a superior efficacy expressly or impliedly evinces by its legislation an intention to cover the whole field, the enactments of the other legislature whether passed before or after would be overborne on the ground of repugnance. Where such is the position, the inconsistency is demonstrated not by a detailed comparison of provisions of the two statutes but by the mere existence of the two pieces of legislation. In the present case, having regard to the terms of s. 18(1) it appears clear to us that the intention of Parliament was to cover the entire field and thus to leave no scope for the argument that until rules were framed, there was no inconsistency and no supersession of the State Act".

Meeting the argument that the power to levy a fee was an independent head of legislative power under each of the three legislative lists and that the levy of tax undue the State Act could be traced to this entry, the Court pointed out the fallacy underlying the argument in the following words:

"The materials words of the Entries are: "Fees in respect of any of the matters in this List". It is, therefore, a prerequisite for the valid imposition of a fee that it is in respect of a "matter in the list". If by reason of the declaration by Parliament the entire subject- matter of "conservation and development of minerals" has been taken over, for being dealt with by Parliament, thus depriving the State of the power which it theretofore possessed, it would follow that the "matter" in the State List is, to the extent of the declaration, subtracted from the scope and ambit of Entry 23 of the State List.

There would, therefore, after the Central Act of 1957, be "no matter in the List" to which the fee 122 could be related in order to render it valid." The result was that Tulloch declared the levy of the cess to be invalid and it was held that, as and from 1.6.1958, the date on which the 1957 Act came into force, the Orissa Act should be deemed to be non-existent for every purpose.

Murthy case [1964-6 S.C.R 666] We now come to the third important case on the topic, Murthy v. Collector of Chittoor, which seems to strike a somewhat different note although in both Tulloch and Murthy the judgments were delivered within a few month of each other by Rajagopala Ayyangar J. on behalf of 5-Judge Benches which were constituted differently.

The erstwhile Province of Madras (later State of Tamil Nadu) had been levying, since long, a cess on land revenue under the Madras District Boards Act (Madras Act XIV) of 1920. Under S.78 of the Act, a cess was levied on the annual rent value of all occupied lands on whatever tenure held. It was a tax at two annas in the rupee of the annual rent value of all lands ins the district. The annual rent value of the land was to be calculated in the manner prescribed in S.79 of the Act. The appellant held certain lands under a mining lease (for extraction of iron ore) from the Government which stipulated for the payment of a stipulated amount of dead rent, a royalty on the basis of every ton of ore mined as well as a surface rent per acre of the surface area occupied or used. In the case of such lands, S.79(i) provided that "the lease amount, royalty or other sum payable to the Government for the lands" shall be taken to be the such lands, annual rent value. The appellant was, therefore, called upon to pay a cess based on the royalty paid by him to the State Government (of Andhra Pradesh, which had succeeded to the State of Madras in respect of the territories in question) and it was the validity of this levy which was upheld by the High Court that came up for the consideration of this Court.

It was contended, on behalf of the appellant, relying on Hingir-Rampur and Tulloch, that the provision imposing land cess quoad royalty must be held to be repealed by MMRD Act of 1948 or, in any event, by the MMRD Act, 1957 (Central Act LXVII of 1957) and that, after the date when these enactments came into force, the land cess that could be levied must be exclusive of royalty under a mining lease.

Distinguishing the decisions cited, this Court rejected the contention. It observed:

123 "It will be seen that there is no resemblance, whatever, between the provision of the Orissa Act considered in the two decisions and the provision for the levy of the land cess under ss. 78 and 79 of the Act with which we are concerned. Sections 78 and 79 have nothing to do and are not concerned with the development of mines and minerals or their regulation. The proceeds of the land cess are, under s.92 of the Act, to be credited to the District fund, into which, under the terms of the Finance Rules in s. V to the Act, the land-cess as well as several other taxes, fees and receipts are directed to be credited. This fund is to be used under Ch. VII of the Act with which s.112 starts "for everything necessary for or conducive to the safety, health, convenience or education of the inhabitants or the amenities of the local area concerned and everything incidental to the administration" and include in particular the several matters which are mentioned in those sections. It will thus be seen that there is no connection between the regulation and development of mines and collection of land-cess for which provision is made by ss.78 and 79 of the Act.

There is therefore no scope at all for the argument that there is anything in common between the Act and the Central Acts of 1948 and 1957 so as to require any detailed examination of these enactments for discovering whether there is any over-lapping" A second contention raised before the Court was that, as the impugned land-cess was payable only in the event of the lessee winning the mineral and not when no minerals were extracted, it was in effect a tax on the minerals won and, therefore, on mineral rights. Rejecting this contention, the Court observed:

"We are unable to accept this argument. When a question arises as to the precise head of legislative power under which a taxing statue has been passed, the subject for enquiry is what in truth and substance is the nature of the tax. No doubt, in a sense, but in a very remote sense, it has relationship to mining as also to the mineral won from the mine under a contract by which royally is payable on the quantity of mineral extracted. But that does not stamp it as a tax on either the extraction of the mineral or on the mineral right. It is unnecessary for the purpose of this case 124 to examine the question as to what exactly is a tax on mineral rights seeing that such a tax is not leviable by Parliament but only by the State and the sole limitation on the State's power to levy the tax is that it must not interfere with a law made by Parliament as regards mineral development. Our attention was not invited to the provision of any such law enacted by Parliament.

In the context of ss.78 and 79 and the scheme of those provisions it is clear that the land cess is in truth a "tax on land" within Entry 49 of the State List".

(emphasis added) The Court proceeded to explain why the land cess before it was nothing else except a land tax falling within Entry 49.

"Under s. 78 of the Act the cess is levied on occupied land on whatever tenure held. The basis of the levy is the "annual rent value" i.e., the value of the beneficial enjoyment of the property.

This being the basis of the Tax and disclosing its true nature, s.79 provides for the manner in which the "annual rent value" is determined i.e., what is the amount for which the land could reasonably be let, the benefit to the lessor representing the rateable value "or the annual rent value". In the case of ryotwari lands it is the assessment which is payable to the Government that is taken as the rental value being the benefit that accrues to the Government. Where the land is held under lease it is the lease amount that forms the basis.

Where land is held under a mining lease, that which the occupier is willing to pay is accordingly treated as the "annual rent value" of the property. Such a rent value would, therefore, necessarily include not merely the surface rent, but the dead rent, as well as the royalty payable by the licensee, lessee or occupier for the user of the property.

The position then is that the rent which a tenant might be expected to pay for the property is, in the case of lease-hold interests, treated as the statutory "annual rent value". It is therefore not possible to accept the contention, that the fact that the lessee or licensee pays a royalty on the mineral won, which extended only to the mere use of the surface land, places it in a category different from other types where the lessee uses the surface of the land alone. In each case the rent 125 which a lessee or licensee actually pays for the land being the test, it is manifest that the land- cess is nothing else except a land tax." The judgment of the Supreme Court in the Murthy case (supra) held the field from 1964 to 1990.

Murthy followed:

The above type of levy was not peculiar to the State of Tamil Nadu. In fact, a cess on royalty was bound to be very remunerative to States having a wealth of mineral resources.

We are informed that similar cess is being levied in several States. We have already referred to the cess levied in Orissa which came to be considered by this Court as early as 1961 and 1964 in the Hingir-Rampur and Tulloch cases.

Further cases came up for consideration, on the same lines;

in Bihar, Associated Cement Co. Ltd. V State of Bihar, [1979] 27 B.L.J.R. 64 and Tata Iron & Steel Co. v. State, (C.W.J.C. 30/1978 decided on 15.5.84 , the subject matter of C.A. 592/86 before us); in Orissa, Laxmi Narayan Agarwala v. State, A.I.R. 1983 Ori. 210; in Rajasthan, Bherulal v. State, A.I.R. 1965 Raj. 161; in Punjab, Sharma v. State, A.I.R, 1969 P & H 79; in Gujarat, Saurashtra Cement & Chemical Industries Ltd. v. Union, A.I.R. 1979 Guj. 180; and Madhya Pradesh, Hiralal Rameshwar Prasad v. State, (m.P. 410/83 decided on 28.3.1986) and M.P. Lime Manufactures' Association v. State of M.P., A.I.R. 1989 M.P. 264 F.B. and, except for the last two cases from Madhya Pradesh, the others upheld the levy of a cess which depended on royalties, following Murthy.

India Cement case [1990] 1 S.C.C. 12 The correctness of the above line of decisions came to be tested in India Cement Ltd. v. State. The Government of Tamil Nadu and granted a mining lease on 19.7.1963 to the appellant for extraction of limestone and kankar for a period of twenty years. The lease deed, which was in accordance with the Mineral Concession Rules, stipulated for the payment of royalty, dead rent and surface rent and also provided that the lessee was bound to pay all Central and State Government dues except land revenue. At the time the lease was obtained, S.115(1) of the Madras Panchayats Act. 1958 provided for the levy, in each panchayat development block, of a local cess at the rate of 45 paise on every ruupee of land revenue payable to the Government in respect of any land for every fasli. S. 115(2) provided that the 126 local cess will be deemed to be public revenue and all the lands and buildings thereon shall be regarded as security therefore. S 115(3) and (4) set out the various purposes for which the cess levied and collected under S. 115 could be utilised. S116 provided for the levy of a local cess surcharge. The maximum amount of such surcharge was originally left to be prescribed by the Government and was in 1970 limited to Rs.1.50 on every rupee of land revenue and in 1972 to Rs.2.50 on every rupee of land revenue.

Apparently inspired by the decision in Murthy, the Tamil Nadu Panchayats (Amendment and Miscellaneous Provisions) Act (Tamil Nadu Act 18 of 1964) added, with full retrospective effect, the following Explanation to S.115(1):

"Explanation: In this section and in Section 116, `land revenue' means public revenue due on land and includes water cess payable to the government for water supplied or used for the irrigation of land, royalty, lease amount or other sums payable to the government in respect of land held direct from the government on lease or licence, but does not include any other cess or the surcharge payable under Section 116, provided that lands revenue remitted shall not be deemed to be land revenue payable for the purpose of this section".

The appellants' challenge in the High Court to this levy- which was consequent on the 1964 amendment-was unsuccessful.

The High Court upheld it as a "tax on land" measured with reference to land revenue, royalty or lease or other amount as mentioned in the Explanation. The challenge based on Entry 54 of List I read with Entry 23 of List II and the provisions of the MMRD Act, 1957 was also repelled, applying the decision in Murthy. The appeal to this Court was referred to a Bench of seven Judges who came to the conclusion that Murthy dity of the levy of the cess. It may be necessary to refer, in greater detail, to some passages in the judgment later but it will be convenient,. for the present, to summarise the salient conclusions of the Court.

These were:

1. The levy could not be supported under:

(a) Entry 45 of List II: as it is not a tax on land revenue, an expression which has a well defined connotation. `Land revenue' is separate and distinct from `royalty. The Explanation to S.115(1) itself proceeds on the basis that royalty cannot be land revenue 127 properly so called or conventionally so known.

(b) Entry 49 of List II: as it is not a tax on land. A tax on land can only be levied on tax as a unit, must be imposed directly on land and must bear a definite relationship to it. There is a clear distinction between a tax directly on land and a tax on income arising from land. The cess is not a tax directly on land as a unit but only a tax on royalty which is indirectly connected with land. In the words of Oza. J. it is a tax not only on land but on labour and capital as well. It could have been treated as a tax on land if it had been confined to `surface rent' instead of `royalty.

(c) Entry 50 of List II: as a tax on royalty as it is not a tax on mineral rights and so is outside the purview of Entry 50. Even otherwise, Entry 50 is subject to the provisions of List I and is, therefore, subject to the declaration contained in, and the purview of, the MMRD Act 1957.

2. Even if the cess is regarded as a fee, the State's competence to levy the same can, if at all, only be justified with reference to Entry 23 and Entry 50 of List II but this recourse is not available as the field is already covered by Central Legislation referable to Entry 54 of List I.

3. Murthy was not rightly decided. The view of the Rajasthan, Punjab, Gujarat and Orissa decisions was overruled. In the view taken by the Court, i.e. Madhya Pradesh ruling was not examined n detail, particularly as it was said to be pending in appeal before the Supreme Court.

In issue before us now are the levies of cesses based on royalty from lands containing minerals by the States of Orissa, Bihar and Madhya Pradesh. Since the relevant statutes vary in detail and the parties concerned have also taken different stands, emphasising different aspects, the arguments have to be considered and dealt with separately, We may, however, mention that the appeals before us include those in the cases of Laxmi Narayan Agarwalla (Orissa). land Harilal Rameshwar Prasad (Madhya Pradesh) noticed earlier.

THE VARIOUS ENACTMENTS ORISSA

The invalidation in 1961 of Orissa Act XXVII of 1952 in Hingir Rampur apparently rendered it necessary for the State to bring in fresh 128 legislation. The Orissa enactment with which we are now concerned is the Orissa Cess Act (Orissa Act IIof 1962) as amended by Act 42 of 1976. According to the Statement of Objects and Reasons accompanying the bill, the primary objective of the legislation is to condense and simplify the existing law on the subject by consolidating the different enactments, customs and usages relating to the levy of cess in the State, to cure defects and deficiencies therein and to introduce uniformity in the levy of cess throughout the State. The Act proposed to adopt a uniform rate of 25 paise in the rupee of the annual rental value and distribute the entire gross collection among the zilla parishads, panchayat samithis (referred to as `samithis' in the Act) and grama panchayats in the ratio 5:8:12 respectively thus providing them with enhanced revenues to enable them to discharge their statutory responsibilities more efficiently by taking up development works and providing better amenities to the people of the State. Its principal provisions are as follows:

(i) Under Section 4, from and after the commencement of the Act, all lands (other than lands which were not liable to payment of rent or revenue before 1.4.77 and lands which were subject to a tax on land holdings sunder a 1950 Municipal Act) are made liable to the payment of cess (in addition to any land revenue, tax, cess rate or fee otherwise payable in respect thereof) determined and payable "as herein provided". A 1976 amendment makes it clear that `lands held for carrying on mining operations" ar not exempt from the cess.

(ii) The "rate of cess, assessment [and] fixation of cess year" are dealt with by S.5 which originally read thus:

"5.(1) The cess shall be assessed on the annual value of all lands on whatever tenure held calculated in the manner hereinafter appearing.

(2) The rate per year at which such cess shall be levied shall be twenty five percentum of the annual value of the land.

(3) x x x" Sub-section(2) was amended by Act 13 of 1970 by substituting of 50% in place of 25% but a 1982 amendment inserted S.5A to provide that for a period 1.4.1977 to 31.3.1980, the cess would be levied at 25% of the annual value in respect of lands held for carrying on mining 129 operations. S. 5 was again amended by Act 15 of 1988 w.e.f.

26.10.1988 to read thus:

"(2) The rate at which such cess shall be levied shall be.

a) in case of lands held for carrying on mining operations in relation to any mineral, on such percentum of the annual value of the said lands as specified against that mineral in Schedule II; and b) in case of other lands fifty percentum of the annual value.

Clause (a) was again amended by Act 17 of 1989 to read thus:

"(a) in the case of land held for carrying on mining operations in relation to any mineral, such percentum of the annual value as the State Government may, by notification, specify from time to time in relation to such mineral".

It will thus be seen that, in place of a fixed rate, an elasticity was provided for, initially, by requiring the rates to be specified in the Schedule differently for different minerals. Schedule II prescribed the percentage which the cess was to bear to the annual value; the percentages varied from 650% in the case of sand, to 300% in the case of coal, 200% in respect of certain minerals such as iron ore, limestone, manganese ore (except those meant for export or cement manufacture), 150% in the case of certain other minerals and 100% in respect of the rest.

Further elasticity was provided for in 1989 by leaving it to the Government to vary the rates by a simple notification.

In consequence of this amendment, Schedule has been omitted and a notification has been issued prescribing the percentage of the royalty or the dead rent (as the case may be) that is to be levied as the cess in respect of various items of specified minerals. The rates specified are 650%, 400%, 300%, 200% and 150%. In respect of all minerals not specified in the notification, the rate of cess is to be 100% of the royalty or dead rent.

(iii) S.6 specifies the person by whom the cess is payable. In so far as is material for our present purposes, it directs that the cess is payable "(c) by a person for the lands he holds for carrying on mining operations and shall be paid by him to the Government". This clause was inserted in S.6 simultaneously with the amendment of S.5 by Act 42 of 1976.

130 (iv) "Annual value" is defined in S.7 thus:

"7. Annual Value-(1) The annual value of lands held by a raiyat shall be the rent payable by such raiyat to the land-lord immediately under whom he holds the land:

x x x x x x (2) In the case of lands held as an estate the annual value shall be the aggregate of - (a) the amount which the intermediary is entitled to receive on account of revenue or rent less the amount payable by such intermediary as revenue to the intermediary immediately superior to him or to the Government, as the case may be; and (b) the rent, if any, payable held for carrying on mining operations, the annual value shall be the royalty or, as the case may be, the dead rent payable by the person carrying or mining operations(s) to the Government." The Explanation to the section defines "dead rent" and "royalty" in terms of their definitions in the MMRD Act,1957. It also states the "royalty" would include "any payments made or likely to be make to the Government for the right of raising minerals from the land which shall be calculated on every tone of such minerals despatched from the land at the same rate as prescribed under the said Act or such other rate as may be fixed by the Government but not exceeding the amount which would have been otherwise payable as royalty under the said Act". Act 17 of 1989 also amended S.7(3) to red thus:

"(3) In the case of lands held for carrying on mining operations, the annual value shall be the royalty or, as the case may be, the dead rent payable by the person carrying on mining operations(s) to the Government or the pit's mouth value wherever it has determined".

This was apparently intended to regulate the cess on coal in respect of which the pit's mouth value had been determined.

So a notification 131 dated 14.8.89 was issued to provide that the cess in respect of coal bearing lands would be 30% of the pit's mouth value of the said mineral.

(v) Sections 8 to 9B provide for the assessment of the cess in respect of various cases. S.9B, inserted by the 1976 amendment, provided:

"9B- Assessment of cess on lands held for mining operations:

(1) The cess payable in respect of lands held for carrying on mining operations shall be assessed in the prescribed manner.

(2) Nothing contained in Sections 8,9 and 9A shall apply in relation to the assessment of cess in respect of the aforesaid lands:

The prescribed manner of such assessment had been already set out in the Orissa Cess Rules, 1963. Rule 6A, inserted in 1977, deals with this but it is unnecessary for us to consider the details except to mention that it is assessed and collected, along with the amount of royalty or dead rent, by the Mining Officer concerned.

(vi) S.10 also needs to be referred to. It originally read thus:

"10. Application of proceeds of the cess: (1) Notwithstanding anything contained in any other law the amount collected as cess shall be credited to the Consolidated Fund of the State and shall be utilised in the following manner, namely:

(a) amounts collected in respect of lands within the local limits of any Municipality or Notified Area constituted under the Orissa. Municipal Act, 1950 shall be paid to the concerned Municipal Council or Notified Area Council, as the case may be; and (b) amounts other than those referred to in clause (a) shall be distributed in the prescribed manner among the Grama Panchayats, Samitis and Parishads in the ratio of twelve is to eight is to five.

132 Explanation- In this section "Grama Panchayat" mean a Grama panchayat constituted under the Orissa Grama Panchayats Act, 1948 and "Samiti" and "Parishad" respectively mean the Samiti and Parishad constituted under the Orissa Panchayat Samiti and Zila Parishad Act, 1964 and "Samiti" means a panchayat samiti constituted under the Orissa Panchayat Samitis Act 1959.

Orissa Act 13 of 1970 substituted the following section for the above:

"10 Application of proceeds of the cess. (1) Notwithstanding anything contained in any other law, the amount collected as cess shall be credited to the Consolidated Fund of the State and shell be utilised for the following purposes, namely:

(a) primary education;

(b) contribution to Grama-Panchayats; and

(c) contribution to Samitis.

Explanation-In this section"Grama Panchayat" means & Grama Panchayat constit