TMI Blog2014 (5) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... her, does not feel that the action of the said respondents by issuing the aforesaid notices/memos could at all be sustained. The Authorities are, therefore, directed to suspend their action for realization of the said amount from the future contracts, if to be awarded to the writ petitioners at this moment. Since the respondents have themselves chosen to deposit the excise duty on the royalty and stowing excise duty and in fact, paid the same and in the event, the larger bench of the Supreme Court decides the matter holding that the royalty is not a tax, the writ petitioners are certainly bound to pay the excise duty over the royalty. This Court, therefore, feels that equilibrium is required to be maintained. - The writ petitioners are, therefore, directed to give an indemnity bond to the aforesaid respondents indemnifying their obligations to pay the excise duty in such eventuality. Such indemnity bond shall be furnished within two weeks from the date. - W. P. No. 20522 (w) of 2013, W. P. No. 21000 (w) of 2013 W. P. No. 21377 (w) of 2013 W. P. No. 20518 (w) of 2013 W. P. No. 21642 (w) of 2013 W. P. No. 27462 (w) of 2013 W. P. No. 26230 (w) of 2013 W. P. No. 25180 (w) of 2013 W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell. The terms and conditions of the Spot e-Auction Scheme are posted in the web site which contains the various clauses wherein clause 4.4 under the broad head bidding process requires the buyer to quote their bid price per tonne in India Rupee as base coal price on FOR/FOB colliery basis, exclusive of other charges like statutory levies, surface transportation charges, sizing/beneficiation charges, taxes, cess, royalty, SED and any other charges as will be applicable at the time of delivery. It is also specifically mentioned in the said clause that those charges as well as the freight shall be on the Buyers account. On payment of the price of the coal as well as the other taxes, levies or charges as applicable, a debit advice is issued by the respective coal companies that it is onward transportation between the period from 1st March, 2011 to 28th February, 2013. The writ petitioners after having adjusted successful bidders purchased the coal upon deposit of the price of the coal as well as the charges, levies taxes as imposed by the Coal Companies. It is not in dispute that the Central Excise Duties is applicable on the transaction value as defined under Section 4 (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Authority -vs- Steel Authority of India reported in (2011) 4 SCC 450 by the Supreme Court referring the matter to a larger bench and, therefore, is not binding precedent. It is audaciously submitted that so long the bench of larger quorum than the quorum who decided India Cement s case took a contrary view. The ratio of the India Cement s Case operates the field and have not lost his binding efficacy. It is further submitted that each auction on successful exclusion becomes a complete transaction and it is not open to the aforesaid respondents to release the amount from the future contract. By referring the definition of transaction value engrafted under Section 4 (3) (b) of the Central Excise Act excludes the other taxes and the royalty being a tax cannot be brought within the said definition. It is strenuously submitted that the said respondents themselves were averred of the aforesaid possession and in fact, have not imposed the excise duty on the component of royalty and the stowing excise duty. It is succinctly argued that the decision of the Excise Authorities to impose excise duty on the royalty and stowing excise duty was passed on concession and, therefore, cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Taxation Commissioner Others reported in (1975) 1 SCC 737 2. M/s Titagarh Paper Mills Ltd. -v- Orissa State Electricity Board Another reported in (1975) 2 SCC 436 3. Titaghur Paper Mills Co. Ltd. Another v. State of Orissa Others reported in (1983) 2 SCC 433 4. Smt. Rukmanibai Gupta -vs- Collector, Jabalpur Others reported in (1980) 4 SCC 556 5. State of U.P Others -vs- Bridge Roof (Co. (india) Ltd. reported in AIR 1996 SC 3515 6. United Bank of India -vs- Satyawati Tondon Others reported in (2010) 8 SCC 110 7. Commissioner of Income Tax Others v. Chhabil Dass Agarwal reported in (2013) 36 Taxmann 36 (SC) 8. CIT, Gujarat -vs- Vijaybhai N. Chandrani, Civil Appeal No. 5888/2013, order dated 18.07.2013 Mr. Naganand relies upon the following unreported judgments of the various High Court where the same notices are challenged in support of his contention that the said demand cannot be said to be an illegal Act: 13. Order dated 21.06.2013 in W.P. (C) No. 3391/2013 before the Gauhati High Court BEHL Coal Fuel Pvt. Ltd. 6 Others -vs- North Eastern Coalfields Limited 3 Others 14. W.P. ( C) No. 3335/2013 before the Gauhati High Court Maha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leviable upon the said components. It is not a case of a debtor-waiver of the excise duty on the sale price but it was calculated barring the royalty and the stowing excise duty. Section 43 (b) of the Central Excise Act, 1944 which defines the transaction value excludes the tax components if the contention of the writ petitioner is accepted that the royalty is a tax, there is no hesitation to hold that levy of excise duty within the definition of a transaction value is impermissible. The 7th Judge Bench of the Supreme Court in India Cement s Case was considering whether Cess on royalty can be termed as taxes while providing the reasons it is held that the royalty is a tax in following words: 34. In the aforesaid view of the matter, we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State legislature because Section 9 of the Central Act covers the field and the State legislature is denuded of its competence under Entry 23 of List II. In any event, we are of the opinion that cess on royalty cannot be sustained under Entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the para records in quick succession as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature . What Their Lordships have intended to record is that cess on royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature . That makes correct and sensible reading. A doubtful expression occurring in a judgment, apparently by mistake or inadvertence, ought to be read by assuming that the Court had intended to say only that which is correct according to the settled position of law, and the apparent error should be ignored, far from making any capital out of it, giving way to the correct expression which ought to be implied or necessarily read in the context, also having regard to what has been said a little before and a little after. No learned Judge would consciously author a judgment which is self-inconsistent or incorporates passages repugnant to each other. Vide para 22, Their Lordships have clearly held that there is no entry in List II which enables the State to impose a tax on royalty and, therefore, the State was incompetent to impose such a tax (cess). The cess w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax. The lessor receives royalty as his income and for the lessee the royalty paid is an expenditure incurred. Royalty cannot be tax. We declare that even in India Cement it was not the finding of the Court that royalty is a tax. A statement caused by an apparent typographical or inadvertent error in a judgment of the Court should not be misunderstood as declaration of such law by the Court. We also record our express dissent with that part of the judgment in Mahalaxmi Fabric Mills Ltd. which says (vide para 12 of SCC report) that there was no typographical error in India Cement and that the said conclusion that royalty is a tax logically flew from the earlier paragraphs of the judgment. Because of the conflicting decisions, the subsequent bench of the Supreme Court referred the matter to the Hon ble Chief Justice of India to constitute a larger bench and it is uniformly submitted at the bar that the reference to the larger bench has not been decided as yet. In case of Harbhanjan Singh (supra), the point evolved was whether the application under Section 319 is maintainable until the cross-examination of the witness is complete. The bench took note of the judgment rendered in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction between the land revenue and the royalty and, therefore, the royalty cannot be included within the broader meaning of the land revenue by making a following observations: It is, therefore, recognised by the very force of that Explanation and the amendment thereto that the expression royalty in Sections 115 and 116 of the Act cannot mean land revenue properly called or conventionally known, which is separate and distinct from royalty. It was further sought to be argued on behalf of the staterespondents that the imposition of cess can also be justified under Entry 49 of list II of the 7th Schedule as taxes on lands and buildings. The aforesaid contention was turned down with the categorical finding that the royalty which may be indirectly connected with the land but cannot be said to be a tax directly on the land as an unit with the following observations: 23. In Asstt. Commissioner of Urban Land Tax v. Buckingham Carnatic Co. Ltd. this Court reiterated the principles laid down in S.C. Nawn case and held that Entry 49 of List II was confined to a tax that was directly on land as a unit. In Second Gift Tax Officer, Mangalore v. D.H. Nazareth it was held that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the central power under Entry 23 or Entry 50 of List II, the impugned legislation cannot be upheld. Our attention was drawn to a judgment of the High Court of Madhya Pradesh in Miscellaneous Petition No. 410 of 1983) Hiralal Rameshwar Prasad v. State of Madhya Pradesh which was delivered on March 28, 1986 by a Division Bench of the High Court. J.S. Verma, Acting Chief Justice, as His Lordship then was, held that development cess by Section 9 of the Madhya Pradesh Karadhan Adhiniyam, 1982 is ultra vires. It is not necessary in the view taken by us, and further in view that the said decision is under appeal in this Court, to examine it in detail. 34. In the aforesaid view of the matter, we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State legislature because Section 9 of the Central Act covers the field and the State legislature is denuded of its competence under Entry 23 of List II. In any event, we are of the opinion that cess on royalty cannot be sustained under Entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax on land but a payment for the user of land. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d concerns the imposition of excise duty on the royalty and stowing excise duty which the said respondents were uncertain about its applicability. There is no factual disputes involved in the writ petition which requires a scrutiny of the various documents. The action of the respondent to charge the excise duty on the aforesaid components is challenged as according to the writ petitioners, they do not come within the ambit of the definition of transaction value given under Section 4 (3) (b) of the Central Excise Act, 1944. This Court, therefore, does not find that the judgments so relied upon by the aforesaid respondents can have any manner of applicability in the present arena of disputes. The impugned notices itself suggest that the questions whether the excise duty could be levied on the royalty and the stowing excise duty is not crystallized as the matter has been referred to a larger bench to be constituted by the Hon ble Chief Justice of India. The concession made before the excise authorities to pay the excise duty does not entitle the aforesaid respondents to claim the same from its buyers and it is within the competence of the buyers to challenge the imposition of the exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench held that in the case in hand, the dispute relates to stoppage of work by the appointment which is essentially a factual dispute and the writ court should not exercise the power of judicial review to resolve such disputes. The order of the division bench was carried to the Supreme Court and the same was affirmed upon dismissal of the special writ petition. The Division Bench did not unequivocal term laid down the proposition of law that the moment, the agreement contains an arbitration, the writ jurisdiction cannot be invoked; rather it held that if the disputes relates to the violation of contract or an agreement which is in the realm of a private law, the writ court should seldom entertain the petition when it can be effectively and completely resolved by a Court for a chosen by the parties. The Punjab Haryana High Court in case of Indian Oil Corporation (supra) refused to exercise the extraordinary jurisdiction, such dispute involved therein relating to cancellation of the dealership agreement is essentially a dispute relating to facts and the parties should have approached the arbitrator in terms of an arbitration clause in these words: 10. Mr. Amar Vivek, Learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B2B Logistics Solution Private Ltd.(supra), the Delhi High Court was also considering a matter relating to the termination of an agreement on account of breach committed by the erring party and refused to entertain the writ petition as the case involves the adjudication of a serious disputed question of facts in following words: 11. Applying the aforesaid principles to the facts of the present case, it would be quite evident that the present case also involves interpretation of the terms of the contract cannot be agitated by invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India. It is also evident that the dispute does not merely involve the interpretation of the terms of the contract, but there are other serious disputed questions of facts which too cannot be adjudicated upon by the writ Court. So far the contention raised by counsel for the petitioner that the existence of an alternative remedy provided in the Concession agreement through the forum of arbitrator will not debar the remedy of the Petitioner to invoke the writ jurisdiction is concerned, this Court does not dispute this legal position as it is well established that when the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions relating to the arbitration clause contained in the agreement, the High Court was fully within its competence to entertain and dispose of the writ petition filed on behalf of the respondent Company. We, therefore, see no reason to interfere with the views expressed by the High Court on the maintainability of the writ petition and also on its merits. As indicated above, the identical issue is pending before the larger bench of the Supreme Court and have not been finally decided as yet. This Court, further, does not feel that the action of the said respondents by issuing the aforesaid notices/memos could at all be sustained. The Authorities are, therefore, directed to suspend their action for realization of the said amount from the future contracts, if to be awarded to the writ petitioners at this moment. Since the respondents have themselves chosen to deposit the excise duty on the royalty and stowing excise duty and in fact, paid the same and in the event, the larger bench of the Supreme Court decides the matter holding that the royalty is not a tax, the writ petitioners are certainly bound to pay the excise duty over the royalty. This Court, therefore, feels that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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