TMI Blog1979 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... original one specified in the Second Schedule in case of limestone. That notification came into force on 10th Nov. 1962. The new rate was Re. 00-75 P. per tonne but subject to a rebate of Re. 00-38p. per tonne to be given on limestone beneficiated by froth floatation method. On 29th June 1968 another notification was issued. By that notification, a new rate was substituted for one which was made effective under the notification of 1962. The 1968 notification classified limestone into two categories. The first category consisted of superior grade with 45% or more of CaO Royalty of one Rupee and twenty-five paise per tonne was prescribed for this grade. These categories of limestone were of inferior grade with less than 45% of CaO. Seventy-five paise per tonne was the royalty prescribed for this grade. On 29th Jan. 1970, the third notification was issued which became effective on 7th Feb. 1970. By that notification, the categorization of limestone was done away with and royalty at the flat rate of ₹ 1.25 p. per tonne was levied. It is these notifications against which this petition is principally directed. 2. Mr. Patel who appears on behalf of the petitioner has raised the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt) Act, 1957 violates equality clause incorporated in Art. 14 of the Constitution. He did not make good that contention of his by raising an argument in support thereof. Even otherwise, it is difficult to think how a constitutional amendment by which protection under Art. 31B is given to the said Act violates the concept of basic structure enunciated in Kesavananda Bharati's case AIR 1973 SC 1461 by the Supreme Court. In fact, he has stated this contention for being rejected and it is not necessary for us to examine it any more. The first contention raised by Mr. Patel is, therefore, rejected. 4. We now deal with the fifth contention raised by Mr. Patel. He has tried to argue that S. 9 of the Act is unconstitutional because it is a tax in a provision, which falls under Entry 50 of the State List. Mr. Nanavaty, on the other hand, has tried to argue that it falls under Entry 54 of the Union List. Entry 50 in State List reads: - Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. 5. Entry 54 in the Union List reads thus: - Regulation of mines and mineral development to the extent to which such regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report provided: - The annual rent value shall, for the purposes of S. 78, be calculated in the following manner: (i) In the case of lands held direct from Government on rotary tenure or on lease or licence, the assessment, lease amount, royalty or other sure payable to Government. For the lands, together with any water-rate which may be payable for their irrigation, shall b-taken to be the annual rent value. S. 79 (1), therefore, inter alia, used in juxtaposition the lease amount and royalty. It was contended in that case before the Supreme Court that since, the impugned land cess was payable only in the event of a mining lease winning the mineral and so paying the royalty and not when' no minerals were extracted, it was in effect a tax on mineral won and, therefore on mineral rights. The Supreme Court observed that when a question arises as to the precise head of legislative power under which a taxing statute has been passed, the subject for enquiry is what in truth and in substance is the nature of the tax. It was further observed in that decision that in a very remote sense it has relationship to mining as also to the mineral won from the mine under a cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n claims in the minerals which have been won from the soil by the lessee and which otherwise belong to it. No holder of a mining lease can say that what it lying beneath the soil becomes his own property merely by virtue of the fact that because of mining lease, he has won those minerals. Basically and fundamentally it is the property of the Union which is brought on the surface from beneath the soil by the lessee. In consideration of the labour and the enterprise which the holder of a mining lease applies for winning those minerals from sub-soil strata, he takes away a part; while the Union, the owner of those minerals, takes away another Part. Therefore, in our opinion, royalty is a share in such minerals and not a tax in the form of a compulsory exaction. It is not compulsory, because anyone who applies for a mining lease to win minerals for being removed or consumed must pay its price. If he does not want to pay the price, he may not apply for a mining lease. Clause (28) of Art. 366 defines the expression taxation so as to include imposition of any tax or impost, whether general or local or special, and states that tax shall be construed accordingly. Royalty which is a shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond contention which Mr. Patel has raised is that the notification of 1970 was issued by the Central Government without authority and in violation of the limitations imposed by the Section itself upon the Central Government. In this behalf Mr. Patel has placed reliance upon proviso (b) to S. 9 which reads as under:- Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of four years. Now, in this case, the second Schedule to the Act with Entry 8 pertaining to 'Limestone' came into force on l st June 1958. S. 9 of the Act empowers the Central Government to enhance or reduce the rate specified in the Sch. The first notification was issued by the Central Government after the Act came into force and it became effective on 10th Nov. 1962. Obviously, therefore, it was issued after the expiry of four years. The second notification was issued in 1968 and it came into force on 1st July 1968. The second notification was also issued after the expiry of four years from the date of coming into effect of the first notification. So far as proviso (b) to S. 9 was concerned, it was not violated by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emained effectively until 1970 notification was issued. In our opinion, on this ground, the liability to pay royalty which accrued by virtue of notification of 1962 and 1968 cannot be called in question. 10. Now, what is the effect of striking down of notification of 1970? Does it leave a void in the field or does 1968 notification continue to operate? This takes us to the consideration of the question of substitution of one notification for another. Quite a few decisions have been shown to us in this context. Mr. Patel has invited our attention to the decision of the Supreme Court in Firm Mehtab Majid and Co. v. State of Madras, AIR 1963 SC 928. In that case, Rule 16 of Madras General Sales Tax Act (Turnover and Assessment) Rules, 1939, was substituted by another rule made in 1955. The substituted rule was declared invalid. The question which arose was whether the old rule continued to occupy the field. The principle which the Supreme Court laid down is that once the old rule has been substituted by the new rule, the old rule ceases to exist and does not get automatically revived when the new rule is held to be invalid. The next decision is in Koteswar Vittal v. K. Rangappa Bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh. Here, no intention to repeal, without a substitution, is deducible. In other words there could be no repeal if substitution failed. The two were a part and parcel of a single indivisible process and not bits of a disjointed operation. 12. The next decision to which our attention has been invited is in Mulchand Odhavji v. Rajkot Borough Municipality, AIR 1970 SC 685. A similar question in that case arose under the Saurashtra Terminal Tax and octroi Ordinance, 1949. In that case, under Octroi Rules framed by the Government, the Municipality could collect octroi duty. The municipality could also frame independent rules on the coming into force of which the rules made by the Government would stand withdrawn. Under that Ordinance, the Government issued the octroi rules. Thereafter the Rajkot municipality made its octroi rules and promulgated them. Ex facie, on the promulgation of the octroi rules made by Rajkot Municipality, Government rules stood withdrawn. The rules made by the Rajkot Municipality were later held to be invalid. The question which arose was whether the octroi rules made by the Government continued to be in force on account of the fact that the octroi rules mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India itself cancelled the carry-forward Rule of 1952. When, therefore, the Supreme Court struck down the carry-forward Rule of 1955 it did not mean that the carry-forward Rule of 1952 which had already ceased to exist because the Government of India had cancelled it and had substituted a modified rule in its Place was automatically revived. It was a case of substitution of carry forward Rule of 1952 by the new carry forward rule of 1955. The promulgation of the new carry forward rule which was later on struck down by the Supreme Court was interpreted by the Supreme Court as having the effect of canceling the earlier carry -forward rule of 1952. 14. The last decision to which reference has been made is in Premchand Jechand v. K. G. Sanghrani, (1968) 9 Guj LR 777. In that case, Clause 14-A of the Cotton Control Order, 1955 made under the Essential Commodities Act, 1955 was substituted by new Clause 14-A. This, Court held that the effect of substituting new Clause 14-A for the original Clause 14-31 was that the original clause ceased to exist and that, therefore, delegation of power under original Clause 14-A did not continue to operate so as to comprise delegation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to pay royalty in terms of the provisions made in the Schedule by 1962 notification From the date of coming into force of the 1968 notification, the petitioner became liable to pay royalty in terms of the provision made in respect of limestone by 1968 notification. His liability to pay in terms of 1968 notification continued without, in any way, being affected by 1970 notification. The contention raised by Mr. Patel that by the declaration of invalidity of 1970 notification the liability of the petitioner to pay royalty under the earlier notifications, ceased to exist, does not have any force and is, therefore, rejected. 16. We now turn to the third contention, which Mr. Patel has raised before us. The first part of his contention is that all the three notifications issued in 1962, 1968 and 1970 were bad in law because sub-section (3) of S. 9 did not empower the Central Government to revise the rates of royalty before the expiry of a period of four years from the last revision. We have already stated that this contention holds good only in respect of 1970 notification but not in respect of 1962 and 1968 notifications. 17. The next part of this contention is that these no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1962 and 1968 notifications is bad in law and is ultra vires proviso (a) to S. 9. It cannot be gainsaid that if the Parliament or a Legislature has adopted one method, then the subordinate authority which has been given power to modify the Schedule cannot introduce a new method. The argument is based upon the proposition that a subordinate amending authority cannot, in exercise of power of amendment given to it by the parliament do something which derogates from the legislative policy or is contrary to it. In this context, our attention has been invited to the decision of the Supreme Court in Rajnarain Singh v. Chairman, Patna Administration Committee, (1955) 1 SCR 290. The principle which has been laid down in the matter of delegation of legislative power in the context of Patna Administration Act, 1915 is as follows: An executive authority can be authorised by a statute to modify either existing or future laws but not in any essential feature. It has also been observed in that decision: - Exactly what constitutes an essential feature cannot be enunciated in general terms but it is clear that modification cannot include a change of policy. Essential legislative function cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect because it has already been declared to be invalid. 20. Now, the legislative policy in the matter of fixing royalty as disclosed by Entry 8 in the Second Sch. is twofold. Firstly, the royalty is to be computed at five per cent of the sale price at the pit's mouth. Secondly, it is to be computed at the rate of 00.37 p. per tonne and the holder of a mining lease becomes liable to pay whichever is higher. It is wrong, therefore, to contend that the Legislature enacted the policy of charging royalty on the basis of a certain percentage of the sale price only. The 1962 notification adopted one of these two modes only and laid down that royalty shall be payable at the rate of 00.75 P. per tonne subject to a certain rebate in case of a certain quality of limestone with which we are- not concerned in this case at this stage. The 1968 notification also disclosed the same policy, namely, charging royalty at a certain rate per tonne of limestone. What, therefore, the Central Government did any issuing 1962 and 1968 notifications was to adopt one of the two methods prescribed by the Parliament in Entry 8 in the Second Schedule. It is difficult to say, therefore, that the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of levying royalty. The 1968 notification split limestone into two categories: (i) Superior Grade with 45 % or more of CaO, (ii) Inferior Grade with less than 45% CaO and prescribed different rates of royalty for them. In 1970 (we state it for the purpose of completing the narrative), limestone was again treated as one single commodity without any distinction between its grades. The question, therefore, which we are required to consider is whether under sub-section (3) of S. 9 of the Act, the Central Government had the power to split limestone into different grades for the purpose of levying royalty at different rates. Our attention in this connection has been invited by Mr. Nanavaty to the decision in V. Venugopala Ravi Varma Rajah v. Union of India, AIR 1969 SC 1094. It was a decision under the Expenditure Tax Act, 1957. The principle which has been laid down is that it is open to the Legislature to select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the Legislature does so reasonably. It has been also laid down that if the classification is rational, the Legislature is free to choose objects of taxation, impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify them and treat them as different commodities, is, therefore, without any substance and is rejected. 23. The next contention which he has raised under this head is that by 1962 notification the Central Government permitted a rebate at the specified rate on the royalty collected on the limestone. 1962 notification shows that the Central Government for the purpose of allowing rebate, excluded from the category of limestone, limestone beneficiated by froth floatation method. The policy of granting rebate can hardly be called in question because to grant rebate is to give some concession. Indeed the concession must be founded on some rational basis. By 1962 notification what the Central Government did was to give a certain rebate on a particular quality of limestone in order to encourage it s development. The primary object of the Act is the development of minerals. In order to carry into effect that policy, if the Central Government, in exercise of their power to amend the rates of royalty, prescribed a particular rate for the limestone and allowed rebate on a particular kind of limestone at a prescribed rate, all that it did was to exercise its power of fixing the rate of royal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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