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TMI Blog1993 (12) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... As common questions of law arise, all these cases have been heard together. The hearing of all these cases and the arguments on behalf of all the learned Advocates appearing was concluded in the second week of November, 1993, when the judgment was reserved. However, filing of written arguments on behalf of all of them was completed about 10 days thereafter. 2. I shall set out the facts, relevant to the points involved, in respect of the different writ petitions as follows: (a) C.W.J.C. No. 1790 of 1992 (R) Indian Aluminium Company Ltd. The Petitioner No. 1 is a Company incorporated under the Companies Act, which is engaged in the business of manufacturing and selling of aluminium and aluminium products. The majority directors and share-holders of Petitioner No. 1, including the Petitioner No. 2, are citizens of India. It is stated that they carry on business through the instrumentality of Petitioner No. 1. One of the basic raw materials required by the Petitioner No. 1 for manufacturing aluminium is bauxite. Petitioner No. 1 holds six mining leases for mining of bauxite in the State of Bihar. The said leases have been granted under and in accordance with the Mines and Minerals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clearance of undergrowth over an area exceeding one tenth of an acre or the cutting down of trees or poles or saplings or bamboos, the previous permission in writing of the Divisional Forest Officer shall be necessary and the clearance shall not be done until these have been marked by the Forest Department for felling and the royalty thereof assessed and paid: Provided that in case the Forest Officer decided to refuse such permission, he shall consult the Mining Officer of the District before doing so and if they agree, the permission may be refused but if they disagree, the matter may be referred to the Chief Conservator of Forest, Bihar, who will consult the Chief Mining Officer, Bihar (sic) disagree, the matter should be referred to Government for orders. (v) If the mining lessees desire to construct any road or building or any other work or structure for purpose of mining or quarrying, they shall obtain the previous permission of the Forest Officer and shall pay compensation and follow regulations issued by the Forest Officer in this behalf. (vi) The lessees must carry on mining of quarrying operations down to the maximum economic depth or quarrying already taken up and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bhum (East), Bihar, by virtue of lease dated 31.1.1987 which was a renewal of the earlier lease. (d) C.W.J.C. No. 740 of 1993 (R) Steel Authority of India Ltd. The Petitioner is a Government Company within the meaning of Section 617 of the Companies Act", 1956 and all its Directors are citizens of India. The Petitioner states that the Government of Bihar was interested in setting up a Steel Plant in its State and accordingly agreed to give certain concessions and facilities to the then Government Company namely Hindustan Steel Limited for public purpose. A meeting look place on August 17, 1962 in the office of the then Chief Secretary, Government of Bihar, which was attended by the representatives of the Government of India as well as Hindustan Steel Ltd. The Secretary to the Government of Bihar, Development (Industries) Department in his letter no 20-2-D Dated January 15, 1955 communicated the following to the Government of India, Ministry of production: A ceiling cost will be fixed in advance for the acquisition of the remaining lands which are privately owned and any cost in excess over the ceiling would be met by the State Government. The Petitioner states that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile HSL and a request was made for taking steps for transferring the forest lands including trees. The Petitioner states that a series of correspondence ensued regarding the transfer of the forest land and evaluation of the amount of compensation to be paid by erstwhile HSL and subsequently Bokaro Steel Project/Bokaro Steel Plant of Steel Authority of India Limited. The Petitioner states that the Forest lands were transferred in 10 villages the details are given in the sheet showing handing over and taking over the forest lands on 24.5.1962. The land in Village Dumarjoor surrendered on 9.12.1966 to forest authorities. The Petitioner states that thereafter several correspondence ensued between the forest officials and the officials of Bokaro Steel Project/Bokaro Steel Limited regarding the compensation to be paid for the trees standing on the forest lands. The Divisional Forest Officer, Dhanbad Division estimated the cost of the trees at ₹ 20.58 lakhs and out of these a sum of ₹ 10 lakhs stands paid by the Bokaro Steel Plant and the balance amount will be paid for which the Forest Department has to furnish further details as Remanded by the Bokaro Steel Plant in their l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both in the State of Bihar, under the MMRD Act and executed in the form prescribed by the Rules framed thereunder. The liberties, powers and privileges exercisable by' the Petitioner and the restrictions and conditions as to the exercise of such liberties, powers and privileges are enumerated in detail in the said leases. Clause 4(a) of Part III of the said leases provide similarly as we have quoted in respect of Indian Aluminium Company. The rents and royalties reserved by the said leases are contained in Part V thereof. The Petitioner contends that no further money is payable to the State of Bihar for mining of the said area other than the amounts specified in the mining lease. (f) C.W.J.C. No. 3347 of 1992 (R) The Tata Iron and Steel Co. Ltd. The Petitioner is a Public Limited Company within the meaning of the Companies Act, 1956 having its Registered Office at 24, Homi Mody Street, Fort, Bombay. The Petitioner is primarily engaged in the business of manufacture of iron and steel which is carried on in the Petitioner's Steel Plant in Jamshedpur in the district of Singhbhum (East) in Bihar. It is stated that in the entire country there are six major steel plants in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.W.J.C. No. 3172 of 1992 (R) Singhbhum Mineral Company. (l) C.W.J.C. No. 3170 of 1992 (R) M/s. Nirmal Kumar Pradeep Kumar. (m) C.W.J.C. No. 3195 of 1992 (R) Harital Variang Rathor. (n) C.W.J.C. No. 3045 of 1992 (R) M/s. Misrilal Jain and Sons. (o) C.W.J.C. No. 3196 of 1992 (R) Gyan Chand Jain. (p) C.W.J.C. No. 3197 of 1992 (R) M/s. Thakur Prasad Sao. The facts of these cases are similar to those in C.W.J.C. No. 3313/92 (R). (q) C.W.J.C. No. 3054 of 1992 (R) M/s R. Modill and Co. Pvt. Ltd. The Petitioner is a private limited company and all its directors are citizens of India. The Petitioner had been granted a mining lease for mineral iron ore in Saranda Division in the district of Singhbhum West at Chaibassa. The liberties, power and privileges exercisable by the Petitioner and the restrictions and conditions as to the exercise of such liberties, power and privileges are enumerated in details in the said lease provides, inter alia, that the lessee shall not fell any trees or timber without obtaining the sanction of the Forest Officials. The rents and royalties reserved by the said lease are contained in part V thereof. The Petitioner also states that no further mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or issuance of notification within six months declaring the proposed area as protected forest. The Respondent No. 3 did not pass any order for execution of the deed of lease but he permitted the Petitioner to work in the area till the expiry of the said period of six months without execution of the deed of lease. The Petitioner filed a revision before the revisional authority against the order of Respondent No. 3, and by order dated 31.8.1992 the Mines Commissioner directed the Respondent No. 3, to execute the deed of lease since the notification under the provisions of the Forest Act was yet to be issued. According to the Petitioner, Respondent No. 3, having been annoyed with the Petitioner because of his filing revision against his order, directed the Assistant Mining Officer (Respondent No. 5) to issue notice under the provisions of the said Bihar Ordinance No. 11 of 1992, in spite of the fact that Respondent No. 3 had already adjudicated the matter and passed order on 2.9.91 allowing the application of the Petitioner for grant of renewal of the lease on being fully satisfied that the land in question was not forest land as defined in Section 2(e) of the said Ordinance. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the said Act he has submitted that "taxable event" means the event on the happening of which the liability to pay tax arises. The taxable event will have to be identified from the provisions of the Act including the charging provisions. In this connection he has relied on - Goodyear India Ltd. v. State of Haryana: (1990) 2 SCC 71, Jiyajeerao Cotton Mills Ltd. v. State of M.R.: AIR (1963) SC 414, State of Mysore v. M/s. T.V. Sundaram Iyengar and Sons: AIR (1980) SC 148, Wallace Flour Mills Co. Ltd. v. Collector of Central Excise, Bombay Div. III:: (1989) 4 SCC 592, Buxa Dooars Tea Co. Ltd. v. State of West Bengal: (1989) 3 SCC 211 and Central Coalfields Ltd. v. State of Bihar and Ors.: AIR (1991) Pat 27 : 1992 (1) PLJR 573. 3.1.1.3. On the question of the relevant provisions of the said Act constituting the charge/taxable event, he has submitted as follows: Section 3(1) of the Act does not by itself constitute the charging section because there is no taxable event specified therein. Referring to Section 3(2) of the Act he submitted that the same provides as to by whom the tax shall be payable. It identifies the Assessee. It also indicates why it is payable, namely; (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h entry the legislation really falls. The India Cement. Ltd. etc. v. State of Tamil Nadu AIR (1990) SC 85. 3.1.1.6. In the instant case the only entry relied upon on behalf of the State is that the Act is covered by Entry 49 of List II. He has submitted that the power to make lax laws is under Article 265 of the Constitution. Taxation Entries and General Entries are distinct i.e. taxation field is not included in the general field M.P.V. Sundararamier and Co. v. State of Andhra Pradesh AIR (1958) SC 468. Fields of taxation, as far as State legislation is concerned, are exclusively specified in List II, i.e., there is no entry relating to taxation in List III. It follows that when the legislative competence of the State Legislature is questioned in relation to a taxation statute the only question to be asked is: is the Act covered by any of the taxation entries in List II? If the answer is in the negative, the lack of legislative competence of the State Legislature is established and no further question is relevant. In the absence of any specific power to tax it comes within the competency of the Parliament in view of Article 248 and List I Entry 97. 3.1.1.7. Tax on land within En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 is directly on land. 4. Nomenclature of object is not the determining factor. 5. The true test is: Is the tax payable irrespective of the activities specified in the Schedule read with Section 32(b) of the Act? If the tax payable is in the negative, then it cannot be tax on land. 3.1.1.9. In pith and substance it is a tax on the activities of mining at least as far as Section 3(2)(b) read with items (a) to (c) of the Schedule is concerned. Section 3(2)(b) expressly refers to mining. Combined effect of Section 3(2)(b) and the Schedule is that developmental activities are restricted to open cast excavation and underground excavation. 'Open Cast' refers to mining activity. In this connection he has referred to (The Concise Oxford Dictionary Eighth Edn. p. 831. Chambers Dictionary of Science and Technology, 826, Collin Combined Dictionary, p. (208) this connection he has also referred to Section 2(kk) of Mines Act, 1952- "open cast working". 3.1.1.10. Since in pith and substance it is a tax on mining operations it will be covered by Entry 54 List I read with Entry 97 List I and Article 248 and it is not covered by Entry 49 of List II (The India Cement Ltd. e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees, taxes, lump-sum taxes and their enhancement. 3.1.1.13. The conferment of unguided/uncanalised power results in investing the authorities with arbitrary powers violating Article 14 of the Constitution. Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh AIR (1954) SC 224 227, Air India v. Nergesh Meerza AIR (1981) SC 1829 (p. 1859 pr. 117), B.B. Rajwanshi v. State of U.P. AIR (1988) SC 1089 (p. 1093 prs. 8, 10) A.N. Parasuraman v. State of Tamil Nadu AIR (1990) SC 40 (p. 43, 44). Delegation of essential legislative function (or excessive delegation) violates Article 246 of the Constitution. In the present context, each delegation violates Article 246(3) of the Constitution. Essential legislative functions are those functions which must be performed by the Legislature itself. In the context of a taxing statute such functions would include: (a) Specifying the taxable event; (b) Specifying the rates without any guidelines. (c) the basis for assessment. The two concepts, namely, conferment of unguided/uncanalised power and delegation of essential legislative functions are sometimes overlapping. But, if it is demonstrated that legislation transgresses any of these limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essive delegation of legislative powers. To that extent it would also be violative of Article 14 because it would confer unguided power for framing rules relating to assessment. In any event, it was submitted that if the substantive provision of the Act is ultra vires, the same cannot be rendered intra vires by subordinate legislation made under the Act. In the instant case, even the rules framed under notification GSR 19 dated 5th June, 1992 (Bihar Restoration and Improvement of Degraded Forest Land Taxation Rules) are arbitrary, so far as the assessment is concerned, violating Article 14 of the Constitution on the following grounds: (i) The return in From I assumes identification and determination of vegetation density, although in fact it has not been done and cannot be done; (ii) Rule 5 does not lay down any standards against which the Collector's satisfaction must be based. The exercise of assessment under Rule 5 is dependent on the ipse dixit of the Collector. (iii) No provision for giving any opportunity to the Assessee in the event of the Collector not being satisfied with the return. 3.1.1.16. His next broad submission was that the Act is void for uncertainty. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kherjee and Ors. v. Ratan Chandra Ghosal and Ors. AIR (1957) Cal 257. 3.1.2.2. On the question of distribution of Legislative power within the scheme of Indian Constitution between the State and the Centre with regard to subject matter and taxation power he has relied on the following M.P.V. Sundraramier and Co. v. State of A.P. (1958) SCR 1422 at pp. 1480-82 : AIR (1958) SC 468 at p. 494-5, Synthetics and Chemicals v. State of U.P. AIR (1990) SC 1927 at page 1952 (para 67). Hoechst v. State of Bihar AIR (1983) SC 1019 at page 1044 (para 67). It was further submitted that in the Constitution of India the legislative field is distributed between the Union and the State in Articles 246(1), 246(2), 246(3), 248 and where there is a repugnancy between a Central law and a State law in the concurrent List the consequences are laid down in Article 254. It was submitted that it is to be noted that in distributing the field of legislation in the Constitution the subject matter or the topics of legislation are also separately enumerated, 'Land', which is normally a comprehensive expression, finds its place in Entry 18 List II of the Seventh Schedule of the Constitution. But there ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he event on the occurrence or happening of which the liability to pay tax arises. If the event does not occur then the liability to pay tax does not exists. In the case of the impugned Act the liability to pay lax does not arise upon owning or occupying or possessing the land. The liability to pay tax arises only upon carrying on mining activity or developmental activity or having been allowed to occupy forest land using such land for non-forest purpose. Further if the activity as aforesaid is carried on by mechanical process than the rate of tax is 55 lacs per hectare which is equal to: One hectare is about a little less than 3 acres i.e. a little less than 60 cottahs, one cottah of land being 720 sq. of land where mining or development activity has been carried on by mechanical process comes to about Rupees Ninety Thousand. If however in the same land mining or developmental activities is carried on by non-mechanised process the ceiling limit of the tax is ₹ 30 lacs per hectare. As such it is submitted that the taxable event does not occur upon owning or occupying or possessing the land which is the normal criterion for determining and levy of land tax but hire although t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, clearly ascertainable, free from ambiguity or vagueness. Otherwise this may be violative of the provision of Part III (fundamental rights Articles 14 and 191(g) of any other provisions of the Constitution. In this connection reference was made to the following decisions (i) Govinda Saran, Ganga Saran, 60 STC P-1 (ii) Harakchand Banthia and Ors. v. Union of India AIR 1970 SC 1453 Section 27(6) as it stood before its amendment read as follows: On receipt of an application for the issue of renewal of a licence under this section, the Administrator may, after making such inquiry, if any, as he may consider necessary, by order in writing either issue or renew the licence, or reject the application for the same: Provided that no licence shall be issued or renewed under this section unless the Administrator, having regard to the following matters, is satisfied that the licence should be issued or renewed, namely: (a) the number of dealers existing in the region in which the applicant intends to carry on business as a dealer. (b) the anticipated demand, as estimated by him for ornaments in that region. (iii) Hamdard Dawakhana and Ors. v. Union of India AIR 1960 SC 554. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier responsible for creating void or void by indulging in any "developmental activity including mining." The expression "developmental activity" has nowhere been defined in the Act and is wholly vague. It is difficult to understand that how one can indulge in "developmental activity" which is prescribed in every mining lease granted under the Mines and Minerals Regulation and Development Act 1957, viz. construction of Roads, Workers Colony, Hospital etc., which are statutory requirements but these activities are not distinguished from unauthorised activity. In absence of any clear definite identifiable meaning as to what is "developmental activity" the entire charge appears to be vague. Further the rate of tax for such developmental activity if it is done by mechanised open cast excavation process is ₹ 55 lacs per hectare as ceiling limit and if it is by non-mechanised process the ceiling limit is ₹ 30 lacs. This clause is therefore wholly arbitrary and violative of Article 14 of the Constitution. Then again although such developmental or mining activity may be done by mechanised or non-mechanised process, but the resultant effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Cement, 1990 (1) SCC 12 at P-26. It appears that in the instant case also no tax can be levied or is leviable under the impugned Act if no mining activities are carried on. Hence, it is manifest that it is not related to land as a unit which is the only method of valuation of land under Entry 49 of List II, but is relatable to minerals extracted. 3.1.3. Arguments by Mr. K.P. Chatterji learned Counsel appearing on behalf of the Petitioners. C.W.J.C. 2336, 3350 and 3347 of 1992 (R) and 740 of 1993 (R). 3.1.3.1. Mr. K.D. Chatterjee, learned Senior Advocate appearing on behalf of the Petitioners made submissions in support of a written argument submitted by him. At the outset it was made clear by him that his sub-mission was not exhaustive, but a supplement to the argument advanced by Counsel in C.W.J.C. 1720/92 (R) and Ors. (by Mr. Pal and Mr. Bose). He has submitted that basically, the challenge to the said Act falls under two heads: (a) Colourable Legislation and (b) Violative of Article 14. 3.1.3.2. On the question of colourable legislation he has submitted that the Act in its own terms does not purport to tax land as a unit. But if it purports to be such a tax, it is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 18 List II is bereft of the power to tax; whereas a taxing entry is confined to a tax on the very object of taxation mentioned in the entry. In short, unless the impost is a tax on the land itself - a corporeal thing which is part of the surface of the earth, you can not pretend to tax land by taxing some activities upon the land or some transaction relatable to land. Another example given was as follows: Under Entry 8 List II the field of legislation is "intoxicating liquors". Under Entry 51 the State can impose duty of excise on "alcoholic liquors for human consumption". Only potable liquor can be taxed but a fiscal law concerning any intoxicating liquor regarding which laws can be made under Entry 8 can not be supported by Entry 51(a). He has submitted that the doctrine of pith and substance means that you can not do indirectly what you can not do directly. In this connection he has relied on K.C.G. Nurayan Den. v. State of Orissa AIR 1953 SC 375, State of Bihar v. Kameshwar Singh: AIR 1952 SC 252 and Seervai - 4th Edn. Vol. 1 pages. 269-275. "It is not competent either for the Dominion or a Province under the guise, or the pretence or in the form o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose will pay the tax (according to Clause (d), (e) and (f) of the Schedule). Allowed by the State Government must mean lawfully allowed, that is allowed in compliance with Section 2 of the Forest (Conservation) Act, 1980 by permission of the Central Government. Thus, atleast from 1980, persons lawfully allowed will be taxed but those who have not been lawfully allowed (but have been using forest land for non-forest purpose) will escape the liability. This is strange discrimination. (ii) User is defined in Section 2(m). It includes persons who used in the past or shall use in the future. Strangely it does not include the person who is using forest land. However, that may be, taking a long period of years (50 years shown in Clauses (d) to (f) of the Schedule) the person who is the user is taxed for past use without any means of determination who was user in the past and for which period. If the person to be taxed at present have started the use of forest land recently he will have to pay for a long period of use by Ors. before him. The incidence of this tax is so arbitrary that it cannot stand the test of Article 14. So far as the question of user with reference to density of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the past or being used. If an annual tax is to be paid by the present occupier or user in the aforesaid terms the result would be mind boggling. Take an example. Under Clause (a) of the Schedule for an excavation of one hectare a maximum of fifty-five lacs is the tax. If this is annual the result will speak for itself. (ii) Even as a one time tax the result may be so fantastic that all mining and all enterprises and development work will have to be abandoned. (iii) The retrospective application of the Act will result in the aforesaid consequence and will clearly violate Article 14. 3.1.3.7. Next he has submitted that there is absence of any procedure for assessment. He has submitted that the matter is contained in a single section, Section 4, with no guidelines whatsoever. Under this section the Collector shall levy, collect and realise the tax and issue a demand notice. On such notices payment has to be made within 30 days. This is all the assessment proceeding in the Act. The Rules do not carry it any further except to provide for filing of return. He has further submitted that mere provision of appeal does not cure infirmity of assessment. The defects pointed out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine can not be said to be a Forest Land. A mine includes all types of land but once different types of land becomes a Mine, the nature and character of other lands changes and they no longer remain forest land, agriculture land etc. A Mine includes the surface land also, Reference has been made in this connection to AIR (1989) SC 1530 (at page 1533 para 15). 3.1.4.4. The Parliament in its wisdom knowing fully well that the State Legislature does not have any competence to legislate in relation to a Mine, has itself enacted various laws in relation to regulation and development of Mines which take care of every aspect including degradation of land and environmental aspects so far a mine is concerned. If land is interpreted to also include mine then the enactment made by Parliament in relation to a mine will be without any competence. 3.1.4.5. Under the provisions of Rules 72 and 73 of the Mineral Concession Rules 1960 read with Clause 23 of the Condition of lease, a lessee is bound to pay compensation for damage done to the surface of the land. 3.2. On behalf of the State Respondents. Mr. Kapil Sibal, learned Senior Advocate appearing on behalf of the State Respondents made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The levy is not in terms of per unit of mineral recovered and is relatable to the deleterious consequences of mining activity and the cost of reclamation of "voided" land as the said expression is used in the Act. (h) The provisions of the Act in respect of issues relating to legislative competence, vagueness, uncertainly and arbitrariness are viewed in the context of the above mentioned general observations. 3.2.2. Thereafter Mr. Sibal put forward the following propositions on behalf of the State of Bihar: Proposition 1. It is the contention of the State of Bihar that the impugned legislation being the Bihar Restoration and Improvement of Degraded Forest Land Taxation Act, 1002 (hereinafter referred to as the "Impugned Legislation" falls within Entry 49 of List II, which reads as under: List II-State List. Proposition 2 - The taxable event under the Act is set out in Section 3 read with the Schedule referred to therein which forms part of the said section. Proposition 3 - None of the provisions of the Act nor can the Act be struck down on any of the following grounds: (a) That certain provisions of the Act suffer from excessive delegation of legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 025 para 16 -Vajravelu. ' AIR 1078 SC 1675 para 38 at 1686 Sunil Batra AIR 1992 SC 1277 para 85 at 1302 - K.C. Mahajan. (c) The third principle is that when construing legislation in order to determine the entry in the Seventh Schedule to which it relates, the pith and substance of the legislation is to be seen and thereafter related to a particular entry in the Seventh Schedule. Merely because a part of the State legislation may affect Anr. entry in the Union List in the Seventh Schedule it will not render the State Legislation unconstitutional as long as the pith and substance of the impugned legislation falls within an entry in the State List. In this connection, he cited the following decisions: SC 1044 at 1049-50 para 8 - Calcutta Gas. AIR 1970 SC 1453 at 1458 para 6 -Harakchand AIR 1972 SC 1061 at 1069-70 para 20 -H.S. Dhillon Supp. SCC 476 at 493 para 11 at 495 para 17 onwards - ITC Ltd. at 571 para 216 onwards at 575 para 230 AIR 1990 SC 85 at 90 para 18 - India Cement AIR 1990 SC 1927 at 1950 para 66 onwards -- Synthetics and Chemicals AIR 1990 SC 781 at 797 para 39 onwards M/s. Goodyear. He further submitted that the theory of pith and substance in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Section 2(o) "void", Section 2(p) meaning of "zero density" with Section 3 stipulates that the tax is to be assessed and collected for mechanical and biological reclamation of forest land and for rehabilitation so that the land is reclaimed as far as possible. Section 3(2)(a) and (b) imposes a liability on every user for use of forest land for non-forest purposes and every occupier responsible for creating voids by indulging in any developmental activities including mining. Section 3(3)(a) read with Sr. Nos. (a), (b) and (c) of the Schedule again relate to land already voided, being voided or may by voided as referred to therein. Section 3(3)(b) relates to Sr. Nos. (d) to (f) of the Schedule for use of forest land used for non-forest purposes. A reference to the Schedule of its own will indicate that the extent of rate of levy is directly relatable to the extent of land voided or the extent to which its density is effected. The Act, therefore, relates to the consequences of mining activity and using forest land for non-forest purposes and not related to the regulation of mines and mineral development. The contention, therefore, that the Act is unconstitutional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that upon a reading of Section 3 and the Schedule appended thereto the taxable event in the case of excavated land through various means is the voiding of the said land and in the case of any other activity, if relatable to the density per unit of land, is as specified in the Schedule. It is this reasonable interpretation which must commend itself in the court when deciding upon the Constitutional validity of the impugned legislation. It is a well established principle of law that the taxable event will have to be identified by readings the charging section along with all other relevant provisions of the impugned legislation. 3.2.5. On the question of constitutionality of the Act it was contended that the, provisions of the Act are liable, to be struck down on the grounds: (a) that certain provisions of the Act suffer from excessive delegation of legislative power; (b) that some of the provisions of the Act suffer from the vice of vagueness and indefiniteness; (c) that there is no methodology for the machinery contemplated by the Act for the assessment and levy of tax; and (d) that the Act suffers from the vice of uncertainty. So far as the charge of unconstitutionality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 3 of the impugned Act are concerned, the rules to be framed by the State Government may impose a lumpsum tax not in addition to but in lieu of the tax stipulated under Sub-section (1) of Section 3 read along with the Schedule. This Court may make note of this fact in its judgment. No other provisions of the Act can be challenged on grounds of excessive delegation of power. The Act in defining the expressions 'Biological reclamation', 'excavation', 'forestland', 'forest use', 'mechanical reclamation', 'open cast excavation', 'vegetative density', and the expression 'void' as well as the expression 'zero density' suggest that there is no basis to contend that the Act suffers from indefiniteness and vagueness. As already enunciated, Section 3 read along with the Schedule stipulates the basis for the levy of tax and the taxable event with reference thereto. The Schedule also stipulates the rates at which the tax has to be levied. Section 4 of the Act further stipulates that the Collector shall levy, collect and realise the tax at the rates mentioned in the Schedule. The manner of the levy and the manner of coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary. If an issue arises in respect of any individual lease where forest land is sought to be used for a non-forest purpose without the prior approval of the Central Government, the remedy lies in either terminating the lease or seeking a direction from a court of appropriate jurisdiction that the lease should not be allowed to operate. The provisions of the impugned legislation, however, proceed on the assumption that forest land covered by the provisions of the Act are legitimately being used for non-forest purposes and in the event of such legitimate user, the Act provides for reclamation and rehabilitation of the said land which has been voided on account of such use for non-forest purposed Consequently, the two Acts operate in different spheres and there can be no valid basis to strike down the impugned legislation on the ground of repugnancy. As has already been demonstrated the impugned legislation is directly covered by the field of legislation Entry 49 of List II. The pith and substance of the said legislation falling within the ambit of the said field of legislation even if it is assumed that some of the rules framed under the Mines and Minerals (Regulation and Developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the minerals. Justification by the State of such a levy under Entry 49 could not be sustained since the said Entry only entitles the State Government to levy a charge on land as a unit. This was obviously not the case there. Therefore, both in the case of Orissa Cement and India Cement the levies were struck down. In the present case, admittedly, the levy cannot be related to either the quantity or the value of mineral recovered. There may be void land without recovery of mineral. The extent of voided land may also be unrelated to the quantum of value of the mineral recovered. In any event the charging section read with the Schedule specifies the extent of the levy. The subject matter of the levy determines the nature of the charge. Since the subject matter of the levy is cubic meter of voided land, the nature of the charge is taxation on land as a unit. Consequently, there can be no doubt that such a levy is justified under Entry 49 of List II. If this conclusion is correct no other exercise is required to be undertaken. The test that because of consequence of mining activity, any levy on voided land cannot be relatable to Entry 49 of List II is to suggest that in no case can an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Mr. Sibal appearing on behalf of State of Bihar it was submitted by Mr. Somendra Chandra Bose appearing on behalf of some of the Petitioners as follows: 3.3.1. It is argued on behalf of the State of Bihar that impugned tax is a "Tax on Land" coming within entry 49 of list II of the VIIth Schedule to the Constitution of India. The Respondent submitted that land means all lands from surface upwards to the bottom of the earth. The impugned tax on the basis of one cubic meter of land extracted or voided is "tax on land". The taxable event is extraction from land as a unit. 3.3.2. The submission made on behalf of the Petitioner is that such contention is an ever simplification of the true and correct legal propositions and cannot be sustained inter alia for several reasons: (a) In the Constitution of India the legislative field with regard to 'land', 'forest', 'mineral development' and 'tax on land', 'tax on mineral resources' are separately allotted to separate entries in the VIIth schedule to this Constitution. Tax on 'minerals' or mineral produce is not allotted expressly to any of the list. As such as held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natic Co. Ltd. AIR 1970 SC 160, the tax is levied on urban land on the basis of market value of the land @ 0.4% on such market value (pg 172 para 2). So far as "land and building" in Municipal areas are concerned such tax is normally calculated upon the actual value of the holding which may be either letting value of the holding or the market value of the holding. 3.3.3. However, in case of mineral land payment by the lessee to its lessor on the basis of extraction of minerals from such land such payment is called "royalty". 3.3.4. It is submitted on behalf of the Petitioner that under entry 18 of list II of the VIIth Schedule, the field of legislation with respect of "land" is allotted to the States. Similarly under entry 49 of list II "taxes on land" and property is within the legislative field of the State Legislature. But in view of express provisions of entry 23 and entry 50 of list II the Held of legislation converted by these two entries is excluded from entry 18 and entry 49. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Cases of India Cement AIR 1990 SC 85 and Orissa Cement AIR 1991 SC 1976. As such it is submitted that as a power of taxation exists in MMRD Act, 1957 then it can certainly provide for compulsory levy for creation of void by extraction of minerals from the land by reason of indulgence in mining activity. Such being the position in law the State of Bihar had lost its legislative competence to levy the impugned tax after the enactment of MMRD Act, 1957. 3.3.7. On the question of vagueness, apart from what was submitted earlier, it was submitted as follows: Referring to Section 3 and the Schedule, the expression "mechanical reclamation" have been defined in Section 2(h) meaning restoring the original contour as far as possible or filling up of void. The Act or the rules nowhere have provided for any machinery to ascertain what was the original contour of the land as also which should be the date to determine such contour. Referring to Section 2(n) which defines "Vegetative density" it was submitted that there is no provision in the Act or in the Rules as to how such vegetative density can be measured. In a vast area of land which is forest land there may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'Union List'). (3) Subject to Clauses (1) and (2), the Legislature of any State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the 'State List'. (4) Parliament has power to make laws with respect to any matter for any part of the territory of India and "included in a State notwithstanding that such matter is a matter enumerated in the State List. Article 248: (1) Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List. (2) Such power shall include the power of making any (sic) imposing a tax not mentioned in either of these Lists. Seventh Schedule List I - Union List Entry 52: Industries, the control of which by the Union is 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 the Union is declared by Parliament by law to be expedient in the public interest. Entry 55: Regulation of labour and safety in mines and colfields. Entry 96: Fees in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llary activities; (g) "government" means the Government of the State of Bihar. (h) "mechanical reclamation" means restoring the original contour as far as possible and/or filling up of void; (i) "non-forest use" means any use other than forest use; (j) "open cast excavation" means an excavation confined to land surface only; (k) "occupier" means a person in possession of an area of excavated and voided land; (1) "prescribed" means prescribed by the rules framed under this Act; (m) "user" means a person who used or shall use an area of forest land for non-forest purpose or proposes 'to use such area of forest land; (n) "vegetative density" 1.0, 0.9, 0.8, 0.7, 0.6, 0.5, 0.4, 0.3, 0.2, and 0.1 density means 100, 90, 80, 70, 60, 50, 40, 30, 20 and 10 per cent respectively of a unit area of the forest land not receiving sunlight due to effective tree growth or green canopy; (o) "void" means any area of left over forest land from where soil, any mineral or rock or ore or anything being fastened with the earth has been removed for non-forest purpose, transported or dumped at a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee which shall not he more than the amount of the tax. 7. Appeals.-- (1) Any user/occupier on levy of tax aggrieved by an order or demand or an order of imposing penalty may prefer appeal, in such form and in such manner and within such period as may be prescribed, before an appellate authority appointed under this Sub-section by the State Government. (2) No such appeal shall be entertained unless 40 per cent of the tax levied/demanded is deposited along with the appeal: Provided that the appellate authority on its discretion in appropriate cases, may after graining relaxation by an order, entertain the appeal, on an application by the party. (3) After the receipt of an appeal under Sub-section (1) the appellate authority shall, after giving the Appellant an opportunity of being heard in the matter, dispose of appeal as expeditiously as possible. (4) Every order passed in the appeal shall be final and shall not be called in question in any court of law. 8. Recovery of money due to Government.-- All money payable to the State Government under this Act or under any rule framed thereunder may, if not paid when due, be recovered as an arrear of land revenue. 12. Powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days from the date of order: 8. Provided that the appellate authority, if satisfied that the Appellant was prevented by sufficient cause from filing the appeal in time, may entertain the appeal after the expiry of the said period of 30 days. 4.4 The Mines and Minerals (Regulation and Development) Act, 1957. 2. Declaration as to expediency of Union control.-- It is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided. 3. Definitions. --In this Act, unless the context otherwise requires,- XX XX (c) "mining lease" means a lease granted for the purpose of undertaking mining operations, and includes a sub-lease granted for such purpose; (d) "mining operations" means any operations undertaken for the purpose of winning any mineral; XX XX XX 9. Royalties in respect of mining leases.-- (1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which and the manner in which the dead rent or royally shall be payable; (j) the manner in which rights of third parties may be protected (whether by payment of compensation or otherwise) in cases where any such party may be prejudicially affected by reason of any prospecting or mining operations; (m) The construction, maintenance and use of roads, power transmission lines, tramways, railways, aerial ropeways, pipelines and the making of passages for water for mining purposes on any land comprised in a mining lease; (q) the period within which applications for revision of any order passed by a State Government or other authority in exercise of any power conferred by or under this Act, may be made the fees to be paid therefore and the documents which shall accompany such applications and the manner in which such applications shall be disposed of; (qq) the manner in which rehabilitation of flora and other vegetation such as trees, shrubs and the like destroyed by reason of any prospecting or mining operations shall be made in the same area or in any other area selected by the Central Government (whether by way of reimbursement of the cost of rehabilitation or otherwise) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being in the rules framed by the State Government in respect of minor minerals: Provided that the State Government shall not enhance the rate of royalty or dead rent in respect of any minor mineral for more than once during any period of three years. 18. Mineral Development. -(1) It shall be the duty of the Central Government to take all such steps as may be necessary for the conservation and systematic development of minerals in India and for the protection of environment by preventing or controlling any pollution which may be caused by prospecting or mining operations and for such purposes the Central Government may, by notification in Official Gazette, make such rules as it thinks fit. (2) In particular, and without prejudice to the generality of foregoing power, such rules may provide for all or any of the following matters, namely; (a) the opening of new mines and the regulation of mining operations in any area; (b) the regulation of the excavation or collection of minerals from any mine; (c) the measures to be taken by owners of mines for the purpose of beneficiation of ores, including the provisions of suitable contrivances for such purpose; (d) the developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accompany such applications. 25. Recovery of certain sums as arrears of land revenue. -- (1) Any rent, royalty, tax, fee or other sum due to the Government under this Act or the rules made thereunder or under the terms and conditions of any prospecting licence or mining lease may, on a certificate of such officer as may be specified by the State Government in this behalf by general or special order, be recovered in the same manner as an arrear of land revenue. (2) Any rent, royalty, tax, fee or other sum due to the Government either under this Act or any rule made thereunder or under the terms and conditions of any prospecting licence or mining lease may, on a certificate of such officer as may be specified by the State Government in this behalf by general or special order, be recovered in the same manner as if it were an arrear of land revenue and every such sum which becomes due to the Government after the commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972 (56 of 1972) together with the interest due thereon, shall be a first charge on the assets of the holder of the prospecting licence or mining lease, as the case may be. 4.5. Mineral Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mining operations in underground shall be carried out in such a way so as to achieve optimum ore/mineral recovery. (2) The method of underground development of the deposit shall be planned in accordance with the method of stopping which shall be selected with due consideration of the geology of the deposit and geomechanical properties of the ore and the adjoining rocks. (3) The size of development openings, size of blocks and pillars shall be such that the workings remain stable during the development and sloping stages and between such stages. (4) The sloping practices shall be such as to cause minimum disturbance to the surface. (5) In case of a doubt as to the optimum ore/mineral recovery under sub- Rule (1), or the method of underground development under Sub-rule (2) or size of openings, blocks or pillars under Sub-rule (3) or the stopping practices under Sub-rule (4), it shall be referred to the Chief Controller of Mines for decision. (6) The Chief Controller of Mines may order such investigations and tests to be carried out as are considered necessary before arriving at a decision on any matter referred to him under Sub-rule (5) 31. Protection of environment. -- Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospecting or mining operations and shall complete this work before the conclusion of such operations and the abandonment of prospect of mine. 35. Precaution against ground vibrations. -- Whenever any damage to public buildings or monuments is apprehended due to their proximity to the mining lease area, scientific investigations shall be carried out by the holder of mining lease so as to keep the ground vibrations caused by blasting operations within safe limit. 36. Control of surface subsidence. -- Sloping in underground mines shall be so carried out as to keep surface subsidence under control. 37. Precaution against air pollution. -- Air pollution due to fines, dust, smoke or gaseous emissions during prospecting, mining, beneficiation or metallurgical operations and related activities shall be controlled and kept within 'Permissible Limits' specified under various environmental laws of the country including the Air (Prevention and Control of Pollution) Act, 1981 (14 of 1981) and the Environment (Protection) Act, 1986 (29 of 1986) by the holder of prospecting licence or a mining lease. 38. Discharge of toxic liquid. -- Every holder of prospecting licence or a mining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reserved; (ii) that any forest land or any portion thereof may be used for any non-forest purpose. (iii) that any forest land or any portion thereof may be assigned by way of lease or otherwise to any private person or to any authority, corporation, agency or any other organisation not owned, managed or controlled by Government; (iv) that any forest land or any portion thereof may be cleared of trees which have grown naturally in that land or potion, for the purpose of using it for reafforestation. Explanation. -- for the purpose of this section "non-forest purpose" means the breaking up or clearing of any forest land or portion thereof for -- (a) the cultivation of tea, coffee, spices, rubber, palms, oil bearing plants, horticultural crops or medicinal plants; (b) any purpose other than reafforestation, but does not include any work relating or ancillary to conservation, development and management of forests and wild life, namely, the establishment of check-posts, fire lines, wireless communications and construction of fencing, bridges and culverts, dams, water holes, trench marks, boundary marks pipelines or other like purposes. 4.7. Forest (Conservation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific recommendations of the Chief Conservator of Forests/Head of the Forest Department for acceptance or otherwise of the proposal with reasons thereof. Certified that all other alternatives for the purpose have been explored and the demand for the required area is the minimum demand for forest land. Signature of the authorised Officers of the State Government/Authority. 5. Principle of interpretation of Constitution including the entries in the seventh schedule with particular reference to Taxing Statutes: Before I deal with the specific points raised, I shall set out at the outset certain well known principles regarding interpretation of Acts, Constitution and particularly the different entries in the different lists of the Seventh Schedule. I shall also deal with the interpretation of taxation provisions separately. 5.1.1. The first principle of interpretation is that the nomenclature of an Act is not the true test of ascertaining the scope of the Act. The true nature of a law has to be determined no on the label given to it in the statute but on its substance. M.P.V. Sundararamier and Co. v. State of Andhra Pradesh AIR (1958) SC 468 (para 31). 5.1.2. As pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till an agreeable solution is found, but that would not make the consignment tax to be in suspended animation in the State, and make us hold that a tax which is in essence a tax on consignment should be taxed by the States by the plea either that otherwise there is ample scope of evasion and further States are without much resources in these days when there is such a tremendous demand on the revenue of the States. (Para 40) 5.2. On general principles of interpretation of Constitution and particularly the distribution of legislative powers in the Seventh Schedule I may refer to the following: 5.2.1. In the case of the India Cement Ltd. etc. v. State of Tamil Nadu AIR (1990) SC 85, it was observed as follows: Courts of law are enjoined to gather the meaning of the Constitution from the language used and although one should interpret the words of the Constitution on the same principles of interpretation compel one to take into account the nature and scope of the Act which requires interpretation. It has to be remembered that it is a Constitution that requires interpretation. Constitution is the mechanism under which the laws are to be made and not merely an Act which declare what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92 at pp. 1069-70. The lists are designed to define and delimit the respective areas of respective competence of the Union and the States. These neither impose any implied restriction on the legislative power conferred by Article 246 of the Constitution, nor prescribe any duty to exercise that legislative power in any particular manner. Hence, the language of the entries should be given widest scope D.C. Rataria v. Bhuwalka BrOrs. Ltd.: 1955 (1) SCR 107 : AIR 1955 SC 182. To find out which of the meanings is fairly capable because these set up machinery of the Govt. (sic). Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. In interpreting an entry it would not be reasonable to import any limitation by comparing or contrasting that entry with any other one in the same list. It is in this background that one has to examine the present controversy. (Para 18) 5.2.2. In the case of Synthetics and Chemicals v. State of U.P. and Ors.: (1990) 1 SCC 109 it was observed as follows: It is well to remember that the meaning of the expression used in the Constitution must be found from the language used. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith each other, then and then only comes the duty of the court to find the true intent and purpose and to examine the particular legislation in question. Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. In interpreting an entry it would not be reasonable to import any limitation by comparing or contrasting that entry with any other in the same list. It has to be interpreted as the Constitution must be interpreted as an organic document in the light of the experience gathered. In the constitutional scheme of division of powers under the legislative lists, there are separate entries pertaining to taxation and other laws. The aforesaid principles are fairly well settled by various decisions of this Court and other Courts. Some of these decisions have been referred to in the decision of this Court in Civil Appeal No. 62 (N)/70- India Cement Ltd. v. State of Tamil Nadu (para 67). The Balsara case was in the context of the business of potable alcohol. Problems arose with regard to auctions, vends, licences and the business of manufacturing, selling, etc. of potable alcohol. Until the case of Synthet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries, then they have to be reconciled. It cannot be that one entry is to be liberally construed and the other entry is not to be liberally construed. (ii) Under the constitutional scheme of division of powers under legislative lists, there are separate entries pertaining to taxation and other laws. A tax cannot be levied under a general entry. (iii) A Constitution is an organic document and has to be so treated and construed. (iv) If there is a conflict between the entries, the first principle is to reconcile them, But the Union power will prevail by virtue of Article 246(1) and (3). The words "notwithstanding" and "subject to" are important and give primacy to the Central legislative power. (Para 68) 5.2.3. In the case of Good Year India v. State of Haryana (1990) 2 SCC 71 it was observed as follows: It is well to remember that in construing the expressions of the Constitution to judge whether the provisions like Section 9(1)(b) of the Act, are within the competence of the State Legislature, one must bear in mind that the Constitution is to be construed not in a narrow or pedantic sense. Constitution is not to be construed as mere law but as the mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. The tax on despatch of good outside the territory of the State certainly is in the course of inter-State trade or commerce, and in other words, amounts to imposition of consignment tax and hence the latter part of Section 9(1)(b) is ultra vires and void." (Para 41) 5.2.4. In the case of M.P.V. Sundaramier and Co. v. State of Andhra Pradesh AIR 1958 SC 468 it was observed as follows: ... This conclusion is further strengthened, when regard is had to the scheme of the Lists in the Seventh Schedule and the principle under-lying the enumeration of heads of legislation therein." (Para 50). Under the scheme of the Entries in the Lists taxation is regarded as a distinct matter and is separately set out. (Para 55) We must now consider the arguments that have been put forward as supporting the opposite conclusion. It is firstly contended that the Entries in the Legislative Lists must be construed broadly and not narrowly or in a pedantic manner, and that, in accordance with this principle, Entry 42, should be construed, there being no limitation contained therein, as inclusive of the power to tax sales in inter-State trade and commerce. The rule of construction relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on inter-State sales, then on the principle enunciated in Province of Madras v. Boddu Paidanna and Sons (z3) and Governor-General in Council v. Province of Madras (z4) (supra), we should so construe it, as that will avoid a conflict between the two Entries. (Para 57). It was also argued in support of the contention that Entry 42 in List I must be held to include the power to tax, that was the interpretation put by the American authorities on the Commerce Clause, and that there was no reason why it different construction should be put on Entry 42 in List I of our Constitution. It is true that our Constitution-makers had before them the Commerce Clause and the authorities thereon, but it is a mistake to suppose that they intended to bodily transplant that clause in Entry 42. We had in the Government of India Act, 1935, a full-fledged Federal Constitution in force in this Country, and what the Constitution-makers did was to draw from other Federal Constitutions of the world, adapt and modify the provisions so as to suit our conditions and fit them in our Constitution. In this new context, those provisions do not necessarily mean what they meant in, their old setting. The thread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th equal propriety, be made amenable to the tax. It is true that economists regard an entertainment tax as a tax on expenditure and, indeed, when the tax is imposed on the receiver of the entertainment, it does become a tax on expenditure, but there is no warrant for holding that entry 50 contemplates only a tax on moneys spent on luxuries, entertainments or amusements. The entry, as we have said, contemplates a law with respect to these matters regarded as objects and a law which imposes tax on the act of entertaining is within the entry whether it falls on the giver or the receiver of that entertainment. Nor is the impugned tax a imposed for the privilege of carrying on any trade or calling. It is a tax imposed on every show, that is to say, on every instance of the exercise of the particular trade, calling on employment. If there is no show, there is no tax. A lawyer has to pay a tax or fee to take out a licence irrespective of whether or not he actually practises. That tax is a tax for the privilege of having the right to exercise the profession if and when the person taking out the licence chooses to do so. The impugned tax is a tax on the act of entertainment resulting in a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvalid because the Legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee whereby the impugned statute is examined to ascertain its 'pith and substance', or its true nature and character', for the purpose of determining whether it is legislation with respect to matters in this list or in that: Citizens Insurance Company of Canada list or in that: Citizens Insurance Company of Canada v. Parsons 1881 7 AC 96 : Russell v. The Queen 1882 7 AC 829; Union Colliery Co. of British Columbia v. Bryden 1899 AC 580; All Gen. for Canada v. Att. Gen. for British Columbia 1930 AC 111; Board of Trustees of Lelhbridge Irrigation District v. Independent order of Foresters 1940 AC 513. In my opinion, this rule of interpretation is equally applicable to the Indian Constitution Act. For the reasons already expressed we hold that in pith and substance the new Act in imposing a tax on urban land at a percentage of the market value is entirely within the ambit of Entry 49 of List II and within the competence of the State Legislature and does not in any way trench upon the field or legislation of Entry 86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary powers of legislation. Parliament has exclusive power to make any law in respect to any matter not enumerated in the Concurrent List or State list and this power includes the power of making any law imposing a tax not mentioned in either of those lists. For this purpose, and to avoid any doubts, an entry has also been included in the Union List to the following effect: 97. Any other mailer not enumerated in List II or List III including any tax not mentioned in either of those lists." (para 4) It will, therefore, be seen that the sovereignty of Parliament and the Legislatures is a sovereignty of enumerated entries, but within the ambit of an entry, the exercise of power is as plenary as any legislature can possess, subject, of course to the limitations arising from the Fundamental Rights. The entries themselves do not follow any logical classification or dichotomy. As was said in State of Rajasthan v. S. Chawla (1959) Supp. 1 SCR 904 : AIR 1959 SC 544 the entries in the list must be regarded as enumeratio simplex of broad categories. Since they are likely to overlap occasionally, it is usual to examine the pith and substance of legislation with a view to determining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Parliament must undoubtedly possess that power under Article 248 and Entry 97 of the Union List. (Para 10). 5.3.3. Taxing Statutes are also subject to the provisions of the Constitution including Part III thereof and accordingly it can be struck clown if it violates Articles 14, 19, 31, 265, 301 or any other provisions of the Constitution. In this context we may refer to the decision of K.T. Moopil Nair v. State of Kerala AIR (1961) SC 552. on behalf of the State of Kerala, the learned Advocate General has argued that, though in most of the cases, that is to say, except in seven petitions (petitions 21, 22, 47, 49, 50, 51 and 54) the lands have not been surveyed, the areas mentioned in the notices proposing provisional assessment have been ascertained through the local agencies of the Government. It was further contended that the State had only declared the liability to the payment of the tax at a flat rate of ₹ 2 per acre in respect of land, irrespective of the income to be derived therefrom. Hence there was no necessity for making provision for a detailed enquiry or investigation. The rate of the tax being known, and the area of the land to be taxed having been locally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State in so far as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in Article 13 of the Constitution. One of such conditions envisaged by Article 13(2) is that the Legislature shall not make any law which takes away or abridges the equality clause in Article 14, which enjoins the State not to deny to any persons equality before the law or the equal protection of the laws of the country. It cannot be disputed that if the Act infringes the provisions of Article 14 of the Constitution, it must be struck down as unconstitutional. For the purpose of these cases, we shall assume that the State Legislature had the necessary competence to enact the law, though the Petitioners have seriously challenged such a competence. The guarantee of equal protection of the laws m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions aforesaid of the impugned Act are in their effect confiscatory is clear on their face. Taking the extreme case, the facts of which we have stated in the early part of this judgment, it can be illustrated that the provisions of the Act, without proposing to acquire the privately owned forests in the State of Kerala after satisfying the conditions laid down in Article 31 of the Constitution, have the effect of eliminating the private owners through the machinery of the Act. The Petitioner in petition 42 of 1958 has been assumed to own 25 thousand acres of forest land. The liability under the Act would thus amount to ₹ 50,000/ - a year, as already demanded from the Petitioner on the basis of the provisional assessment under the provisions of Section 5(A). The Petitioner is making an income of ₹ 3,100/ - per year out of the forests. Besides, the liability of ₹ 50,000/ - as aforesaid, the Petitioner has to pay a levy of ₹ 4,000/ - on the surveyed portions of the said forest. Hence, his liability for taxation in respect of his forest land amounts to ₹ 54,000/ - whereas his annual income for the time being is only ₹ 3,100/ - without making an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxing statute contravenes Article 19 Courts would naturally be circumspect and cautious. Where for instance it appears that the taxing statute is plainly discriminatory, or provides no procedural machinery for assessment and levy of the tax, or that it is confiscatory, Courts, would be justified in striking down the impugned statute as unconstitutional. In such cases, the character of the material provisions of the impugned statute is such that the Court would feel justified in taking the view that, in substance, the taxing statute is a cloak adopted by the legislature for achieving its confiscatory purposes. This is illustrated by the decision of this Court in the case of Kunna that Thathunni Moopil Nair v. State of Kerala A.I.R. 1961 SC 552 where a taxing statute was struck down because it suffered from several fatal infirmities. On the other hand, we may refer to the case of A.I.R. 1962 SC 1963 where a challenge to the taxing statute on the ground that its provisions were unreasonable was rejected and it was observed that unless the infirmities in the impugned statute were of such a serious nature as to justify its description as a colourable exercise of legislative power, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the urban land was arrived at by applying what is known as the contractor's method not to the building which stands on the land whose value is ascertained by that means but to some other building on a different land taken for compensation. It was said that it was difficult enough for a man to apply the contractor's method of valuation to his own building which could be done by a competent architect after taking into account all measurements. But it is absolutely an impossible task to check up or make objections to the contractor's method applied to Anr. man's property which cannot be trespassed upon. It was said that the contractor's method was the last resort in valuation when a building has to be valued apart from the land and that it was a wrong application of the formula to use it to value the land without the building particularly when valuation of land can be made by applying the principles of the Land Acquisition Act. But this argument has no bearing on the constitutional validity of the charging section or the machinery provisions of the Act. It is, however, open to the writ Petitioners to challenge the validity of the particular valuation in any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, there is an identifiable, uniform and determinate test by which skelp can be properly distinguished from strip. In the mass of documents filed before us and the extensive arguments addressed at the bar with regard to the definitions called from various dictionaries, handbooks and authorities, we are not at all surprised that the three authorities came to the same conclusion by depending upon their own chosen tests. A particular type of strip may according to certain definitions be skelp and according to Ors. not skelp. This, however, cannot be permitted in a fiscal legislation which by all standards should adopt a clear definition of an excisable item which is incapable of giving rise to a confounding controversy as in this case unless the matter is beyond doubt in view of the popular meaning or meaning ascribed to the term in commercial parlance. In absence of any clear criterion to determine what is skelp and not strip no useful purpose would be served by even remanding the matter to the Excise authorities for a decision after taking necessary evidence. It is only when a taxing law provides for a clear and unequivocal test for determination as to whether a particular product w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and Ors. AIR 1989 SC 2015 it was observed as follows: But what is the position here. The statute speaks of a levy "in respect of a tea estate" and it says that the levy will not exceed ₹ 6/ - on each Kilogram of tea on the despatches from such tea estate of tea grown therein. The statute also provides that in calculating the despatches of tea for the purpose of levy of rural employment cess, the despatches for sale made at such tea auction centres as may be recognised by the State Government shall be excluded. And there is a proviso which empowers the State Government to fix different rates on despatches of different classes of tea. There is also Section 4(4) which empowers the State Government to exempt such categories of despatches or such percentage of despatches from the liability to pay the whole or any part of the rural employment cess, or to reduce the rate of the rural employment cess payable thereon under Clause (aa) of Sub-s. (2) on such terms and conditions as it may specify by notification. As from 1 October, 1982 the position remained the same except that the first proviso to Section 4(2)(aa) excluding the despatches for sale made at recognised tea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are concerned is an Act imposing liability for cess. The Act is fiscal in nature. The Act must, therefore, be strictly construed in order to find out whether a liability is fastened on a particular industry. The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to its natural construction of words. See the observations in Re Nicklethwait, (1885) 11 Ex 452 at p. 456. Also see the observations in Tenant v. Smith (1892) AC 150 and Lord Halsbury's observations at page 154. See also the observations of Lord Simonds in St. Aubyn v. All. Gen. (1951) 2 All ER 473 at p. 485. Justice Rowlatt of England said a long time ago, that in a taxing Act one has to look merely_at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One has to look fairly at the language used. See the observations in Capte Brandy Syndicate v. IRC 19211 KB 64 at p.71. This Court has also reiterated the same view in Gursahai Saigal v. C.I.T. Punjab (1963) 3 SCR 893 : AIR 1963 SC 1062, C.I.T. Madras v. V.M.R.P. Firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 616 (HL), p.625. 5.4. The aforesaid decisions lay down the general principles of interpretation of the Constitution and the legislative entries of the Seventh Schedule. It is not necessary to refer to various other decisions referred to in the written argument of Mr. Sibal inasmuch as the general principles propounded by him regarding the same under the heading 'Legislative Competence' cannot be disputed generally However, his interpretation of the scope of Entry 49 of List II, with or without reference to any Entry of List I, is the subject matter of dispute in the present proceedings and the same will be considered while dealing with the question of legislative competence specifically. 6. Legislative competency. One of the main arguments advanced before the Court was on the question of legislative competency of the State Legislature to enact the said Act. It was made clear on be half of the State at the very outset that the only Entry relied upon in this connection was Entry 49 of List II, i.e., "Tax on land and building". On behalf of the Petitioners the main submission was that it is not a tax on land but a tax on certain use and activities relating to la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y liability out of his assets it may be possible to break up the tax which is leviable on the total assets into components and attribute a component to lands and buildings owned by an Assessee. In such a case, the component out of the total tax attributable to lands and buildings may in the matter of computation bear similarity to a tax on lands and buildings levied on the capital or annual value under entry 49, List II. But the legislative authority of Parliament is not determined by visualising the possibility of exceptional cases of taxes under two different heads operating similarly on taxpayers. Again entry 49 List II of the Seventh Schedule contemplates the levy of tax on lands and buildings or both as units. It is normally not concerned with the division of interest or ownership in the units of lands or buildings which are brought to tax. Tax on lands and buildings is directly imposed on lands and buildings which may form a component of the total assets of the. Assessee. By legislation in exercise of power under Entry 86 List I tax is contemplated to be levied on the value of the assets. For the purpose of levying tax under Entry 49 List II the State Legislature may adopt fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore to be exercised subject to Clause (1) i.e. the exclusive power which the Parliament has in respect of the matters enumerated in List I. Assuming that there is a conflict between entry 86, List I and entry 69, List II, which is not capable of reconciliation, the power of Parliament to legislate in respect of a matter which is exclusively entrusted to it must supersede pro tanto the exercise of power of the State legislature. The problem viewed from any angle is incapable of a decision in favour of the Assessee. (para 7). On the question of respective scope of Entry 86 List I and Entry 49 List II it was observed as follows: The High Courts have consistently taken the view in cases in which the question under discussion expressly fell to be determined, that the power to levy tax on lands and buildings under Entry 49, List II does not trench upon the power conferred upon the Parliament by entry 86, List I, and therefore the enactment of the Wealth-tax Act by the Parliament is not ultra vires. In C.K. Mammad Kevi v. Wealth tax Officer, Calicut 1962 44 ITR 277 : AIR 1962 Ker 110 the High Court of Kerala held that Wealth-tax is specifically and in substance covered by entry 86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of agricultural land) and Entry 88 (Duties in respect of succession to such property) form is to carry out the directive principle of Article 39(c). The Constitution indicated that capital value or principal value shall be the basis of taxation under these entries and, therefore, the method of taxation of capital or principle value was prohibited even to Parliament in respect of other taxes and to the State except in respect of Estate Duty on agricultural land. Such in effect is the argument of Mr. V.K.T. Chari. But in our opinion, there is no warrant for the assumption that Entries 86, 88 of List I and Entry 48 of List II form a special group embodying any particular scheme. The directive principle embodied in Article 39(c) applies both to Parliament and to the State Legislature and it is difficult to conceive how entries 86 to 88 of List I would exclude any power of the State Legislature to implement the same principle The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeration of broad categories. We see no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping. The two taxes are entirely different in their basic concept and fall on different subject matters. (para 5). After referring to various decisions the Supreme Court held that in pith and substance the new Act was within the ambit of Entry 49 List II. In this context the Supreme Court held as follows: The problem in this case is the problem of characterisation of the law or classification of the law. In other words the question must be asked: what is the subject matter of the legislation in its "pith and substance or in its true nature and character for the purpose of determining whether it is legislation with respect to Entry 49 of List II or Entry 86 of List I. In Gallahagher v. Lynn 1937 AC 863 at p.870 the principle is stated as follows: It is well established that you are to look at the true nature and character of the legislation, the pith and substance of the legislation. If on the view of the statute as a whole, you find that the substance of the legislation is within the express powers, then it is not invalidated if incidentally it affects matters which are outside the authorised field. The legislation must not under the guise of dealing with one matter in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D.S. Hazareth AIR 1970 SC 999, it was observed as follows; The Gift Tax Act was enacted by Parliament and it is admitted that no entry in the Union List or the Concurrent List mentions such a tax. Therefore, Parliament purported to use its powers derived from Entry 97 of the Union List read with Article 248 of the Constitution. This power admittedly could not be invoked if the subject of taxes on gifts could be said to be comprehended in any entry in the State List. The High Court has accepted the contention of the tax-payers that it is so comprehended in entries 18 and (sic) of the State List. Those entries read: 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; land improvement and agricultural loans; colonisation. 49. Taxes on lands and buildings. (Para 6) The argument is that by Entry 18, 'land' of all description is made subject to legislation in the States and by Entry 49 taxes of whatever description on lands in that large sense and buildings generally fall also in the jurisdiction of the State. Reference is made to Entries 45, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Gift Tax Act falls within Entry 49 of State List or it does not. If it does, then Parliament will have no power to levy the tax even under the residuary powers. If it does not, then Parliament must undoubtedly possess that power under Article 248 and Entry 97 of the Union List. (Para 10) The pith and substance of Gift Tax Act is to place the tax on the gift of property which may include land and buildings. It is not a tax imposed directly upon lands and buildings but is a tax upon the value of the total gifts made in a year which is above the exempted limit. There is no tax upon lands or buildings as units of taxation. Indeed the lands and buildings are valued to find out the total amount of the gift and what is taxed is the gift. The value of the lands and buildings is only the measure of the value of the gift. A gift-tax is thus not a tax on lands and buildings as such which is a tax resting upon general ownership of lands and buildings but is a levy upon a particular use. which is transmission of title by gift. The two are not the same thing and the incidence of the tax is not the same. Since Entry 40 of the State List contemplates a tax directly levied by reason of the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State generally as required by sub-paragraph (1) of Paragraph 8 of the Sixth Schedule to the Constitution. It cannot be sustained as any other kind of tax on land since the royalty payable has no reference to the extent of the land and the nature of the land and its potentialities. It is a tax only on the timber which is brought from private forests. The notification in unambiguous terms says that the royalty shall be on the squared log pines. It has no reference to the land on which those trees have grown. In pith and substance it is a tax on forest produce grown on private lands. The District Council has no power to levy such a tax on forest produce under Paragraph 8 of the Sixth Schedule to the Constitution. Reliance was, however, placed on the minority judgment of Justice Sarkar in K.T. Moopil Nair v. State of Kerala (1961) 3 SCR 77 : AIR 1961 SC 552 in support of the plea that lands on which forests grew could be taxed under entry 'tax on lands and building'. The impugned levy being not a tax levied on land as we have pointed out above, the said observation in the above decision is not useful to the Appellants. We may add that the very same learned Judge has observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and protected under those Rules. The royalty was fixed under the Mines and Minerals (Regulation and Development) Act, 1957, which was a Central Act, by which the control of mines and minerals has been taken over by the Central Government. It was an Act for regulation of mines and development of minerals under the control of Union of India. That Act was to provide for regulation of mines and development of minerals under the control of Union of India. Section 2 of the Act declares that it was expedient in the public interest that Union of India should take under its control the regulations of mines and development of minerals to the extent provided in the Act. The Central Act was passed by virtue of the power of the Parliament under Entry 54 of List of the Seventh Schedule. It was pointed out by the Supreme Court that since the control of the mines and the development of minerals were taken over by the Parliament the question that arises was whether the levy or the impost by the State Legislature imposed in the case could be justified or sustained, either under Entry 49,50 or 45 of List II of the 7th Schedule. On the question as to what is really "cess" reference was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after referring to the several decisions observed that entry 49 of list II of the 7th Schedule only permitted levy of tax on land and building. It did not permit the levy of tax on machinery contents in or situated on the building even though the machinery was there for the use of the building for a particular purpose. Rule 7(2) of the Bombay Municipal Corporation was held to be accordingly ultra vires in that case. In S.C. Nawn v. W.T.O. Calcutta (1969) 1 SCR 108 : AIR 1969 SC 59 this Court had occasion to consider this and upheld the validity of the Wealth Tax Act, 1957 on the ground that it fell within entry 86 of List I and not entry 49 of List II. Construing the said entry, this Court observed that Entry 49 list II contemplated a levy on land as a unit and the levy must be directly imposed on land and must bear a definite relationship to it. Entry 49 of List II was held to be more general in nature than entry 86, List I, which was held to be more specific in nature and it was well settled that in the event of conflict, between entry 86, List I and entry 49 of List II, entry 86 prevails as per Article 246 of the Constitution." (Para 22) In Asstt. Commissioner of Urban L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valued. Hence, there cannot be any doubt that the impugned legislation in its pith and substance is a tax on royalty and not a tax on land. (Para 23) On behalf of "the State it was next sought to urge that such impost could be sustained under entry 50 List II. In this connection it was observed by Supreme Court as follows: Entry 50 of list II of the 7th Schedule deals with taxes on mineral rights subject to limitation imposed by Parliament relating to mineral development. Entry 23 of list II deals with 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 and entry 54 in list I deals with regulation of mines and minerals under the control of Union declared by the parliament by law to be expedient in public interest. Even though minerals are part of the State list they are treated separately, and therefore, the principle that the specific excludes the general must be applied. See the observations of Waverly Jute Mills Co. Ltd. v. Raymon and Co. (I) Pvt. Ltd. at p. 220 : (1963) 3 SCR 209 : AIR 1963 SC 90 at p. 95, where it was held that land in entry 49 of list II cannot poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. State of Orissa (1961) 2 SCR 537 : AIR 1061 SC 450. See also the observations in State of Orissa v. M.A. Tulloch and Co. (1964) 4 SCR 461 : AIR 1964 SC 1284 and Baijnath Kedia v. State of Bihar at pp. 111-115 : (1070) 2 SCR 100 : AIR 1970 SC 1436 at pp. 1442-1445. (Para 26) Our attention was drawn to the decision of the division bench judgment of the High Court of Mysore in M/s. Laxminarayana Mining Co., Bangalore v. Taluk Dev. Board A.I.R. 1972 Mys. 299. There, speaking for the court, one of us, Venkataramiah J. of the Mysore High Court, as the learned Chief Justice then was, observed that a combined reading of entries 23 and 50 in list II and entry 54 of list I, establishes that as long as the Parliament does not make any law in exercise of its power under entry 54, the powers of the State Legislature in entries 23 and 50 would be exercisable by the State Legislature. But when once the Parliament makes a declaration by law that it is expedient in the public interest to make regulation of mines and minerals development under the control of the Union, to the extent to which such regulation and development is undertaken by the law made by the Parliament, the power of the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof. Section 9(3) of the Act in terms states that royalties payable under the 2nd Schedule of the Act shall not be enhanced more than once during a period of 4 years. It is, therefore, a clear bar on the State Legislature taxing royalty so as to in effect amend 2nd Schedule of the Central Act. In the premises, it cannot be right to say that tax on royalty can be a tax on land, and even if it is a tax, if it falls within entry 50 will be ultra vires the State legislative power in view of Section 9(3) of the Central Act. In Hingir Rampur Coal Co. Ltd. v. The State of Orissa AIR 1961 SC 459 (Supra), Wanchoo .J. in his dissenting judgment has stated that a tax on mineral rights being different from a duty of excise, pertains only to a tax that is leviable for the grant of the right to extract minerals and is not a tax on minerals as well. On that basis, a tax on royalty would not be a tax on mineral rights and would therefore in any event be outside the competence of the State Legislature. (para 30) It was next contended on behalf of the State that the State has a right to tax minerals. It was further contended that if tax is levied, it will not be irrational to correlate it to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court the validity of the levy of a "cess" on the royalty derived from mining lands by the States of Bihar, Orissa and Madhya Pradesh was challenged. A seven Judges Bench of the Supreme Court had earlier in India Cement Case struck down a similar levy under a Tamilnadu Act, as beyond the legislative competence of the State Legislature. The Assessee in the Orissa Cement Case claimed that the issue there was directly and squarely governed by the above decision. On the other hand, it was claimed on behalf of the States that the nature and character of the levies imposed by them was totally different from that of the Tamil Nadu levy, and that they were entirely within the scope of the States' legislative powers under the Constitution. After a detailed consideration of the different Legislative entries and the "Earlier History", which led to the India Cement Cases and after consideration of Hingir Rampur Case(1961) 2 SCR 537 : AIR (1961) SC 459; Tulloch Case, (1964) 4 SCR 461; AIR (1964) SC 1284; Murthy Case, (1964) 6 SCR 666 : AIR (1965) SC 177, the Supreme Court summarised the salient conclusions in the India Cement Case, (1990) 1 SCC 12 as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered to be a fee pertaining to the field covered by Entry 23 of the State List or has the State been denuded of the legislative competence under this Entry because of Parliament having enacted the MMRD Act, 1957? (Para 24) On the first question, so far as Entry 45 of State List is concerned ("Land Revenue"), it was held that the cess cannot be brought under the said Entry, on the ground of, amongst Ors. , the decision in India Cement Case as to the connotation of the expression "Land Revenue", (para 26). So far as Entry 50 ('Taxes on mineral rights subject to any limitation imposed by Parliament by law relating to mineral development') is concerned, it was held that India Cement case had chosen to approve the contrary view of Wanchoo, J. in his dissenting judgment in Hingir-Rampur case. However, it was pointed out that the observations of Wanchoo, J. were not fully examined in India Cement case. It was pointed out. that Wanchoo, J. held that the tax in the raise before him was not a tax on mineral rights because it was levied on the value of minerals extracted. It was further pointed out that if the observation of Wanchoo, J. was read as a who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the royalties paid in respect thereof. The mere fact, it is argued, that the annual value is measured with reference to the royalty, dead rent or pit's mouth value of the mineral does not mean that it ceases to have the character of a tax on land. In this context, Sri Iyer places strong reliance on the decision of a Constitution Bench of this Court in Ajay Mukherjee v. Local Board of Barpeta (1965) 3 SCR 47 : AIR 1965 SC 1561. There a local Board was authorised to grant.... a licence for the use of any land as a market and impose an annual tax thereon'. The Court held, examining the scheme and the language of the provision in question, that the tax imposed was a tax on land under Entry 49. The Court indicated the following approach to the issue before it: The first question which fails for consideration then fore is whether the impost in the present case is a tax on land within the meaning of Entry 49 of List II of the Seventh Schedule to the Constitution. It is well settled that the entries in the three legislative lists have to be interpreted in their widest amplitude and therefore, if a tax can reasonably be held to be a tax on land, it will come within Entry 49. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 23 of the judgment, the court has categorically stated that a tax on royalty cannot be said to be a tax directly on land as a unit (para 31) Referring to the argument of Sri Iyer regarding the scope and effect of India Cement case it was observed as follows: The answer to this contention appears to be that the plea of the Assessee need not go to the extent of saying that the levy is a colourable piece of legislation. It is sufficient to restrict oneself to the issue of a proper determination of the pi(sic) and substance of the legislation. There is no doubt an apparent anomaly in considering Section 7(1) and (2) as levying a tax on land but construing Section 7(3) as imposing a tax on royalties and this anomaly has been noticed in India cement (1990) 1 SCC 12 (vice para 42). But the question is, what is it that is really being taxed by the Legislature? So far as mineral-bearing lands are concerned is the impact of the tax on the land or on royalties? The change in the scheme of taxation under Section 7 in 1976; the importance and magnitude of the revenue by way of royalties received by the State; the charge of the cess as a percentage and, indeed, as multiples of the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M.M.R.D. Act, 1957 and the declaration contained in Section 2 thereof, it was pointed out that this question would arise if the levy is treated as a tax falling under Entry 50 of List II or alternatively, as a fee though it may not affect the State's competence if it can be attributed to Entry 9 of List II. (para 39) So far as Entry 50 is concerned, it was observed as follows: To take up Entry 50 first, a perusal of Entry 50 would show that the competency of the State Legislature with respect thereto is circumscribed by "any limitations imposed by Parliament by law relating to mineral development". The M.M.R.D. Act, 1957, is there can be no doubt about this - a law of Parliament relating to mineral development, Section 9 of the said Act empowers the Central Government to fix, after, enhance or reduce the rates of royalty payable in respect of minerals removed from the land or consumed by the lessee. Sub-sec. (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. India Cement (1990) 1 SCC 12 has held that this is a clear bar on the State Legislature taxin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in support of the levy of cess by the other States as well. (para 42) Regarding the respective scope and effects of Entry 52 and Entry 54 of List I it was observed as follows: Before dealing with the contentions of the counsel for the State in this behalf a reference may be made to a difference in wording between Entry 52 and Entry 54 of List I. The language of Entry 52 read with Entry 24 would suggest that, once it is declared by Parliament by law that the control of a particular industry by the Union is expedient in the public interest, the State legislatures completely lose all competence to legislate with respect to such an industry in any respect whatever, Indian Tobacco Co. Ltd. v. Union; 1985 Supp 1 SCR 145. But, even here, there are judicial decisions holding that such declaration does not divest the State Legislature of the competence to make laws the pith and substance of which fall within the entries in List II, (see for e.g. Kannan Dewan Hills Co. v. State of Kerala (1973) 1 SCR 856. : AIR 1973 SC 2361 and Ishwari Khetan Sugar Mills Ltd. v. State of U.P. (1980) 3 SCR 331 : AIR 1980 SC 1955 to which reference will also be made later, merely on the ground that it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 pursuant 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. While the legislation in Hingir-Rampur ( AIR 1961 SC 459) and Tulloch ( AIR 1964 SC 461) was found to fall within the pale of the prohibition, those in Chanan Mal ( AIR 1976 SC 1654), Ishwari Khetan, ( AIR 1980 SC 1955) and Western Coalfields, were general in nature and traceable to specific entries in the State List and did not encroach on the field of the Central enactment except by way of incidental impact. The Central Act, considered in Chanan Mal, seemed to envisage and indeed permit State legislation of the nature in question. (Para 50) Thereafter, after referring to the relevant provisions of M.M.R.D. Act Hingir-Rampur case, Tulloch case and Baijnath Kedia case it was held as follows: If one looks at the above provisions and bears in mind that, in assessing the field c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing roads and environment. Section 18(1) empowers the Central Government to take all such steps as may be necessary for the conservation and development of minerals in India and for protection of environment. These, in the very nature of things, cannot mean such amenities only in the mines but take in also the areas leading to and all around the mines. The development of mineral areas is implicit in them Section 25 implicitly authorises the levy of rent, royalty, taxes and fees under the Act and the Rules. The scope of the powers thus conferred is very wide. Read as a whole, the purpose of the Union control envisaged by Entry 54 and the M.M.R.D. Act, 1957, is to provide for proper-development of mines and mineral areas and also to bring about a uniformity all over the country in regard to the minerals specified in Schedule I in the matter of royalties and, consequently prices. Sri Bobde, who appears for certain Central Government undertakings, points out that the prices of their exports are fixed and cannot be escalated with the enhancement of the royalties and that, in different States, their working would become impossible. There appears to be force in this submission. As pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a tax directly on land and a tax on income arising from land. India Cement case as summarised in Orissa Cement case (para 17). 4. Payment for the user of land is not a tax on land. India Cement case (para 34). 5. If in an instant case no tax can be levied or is leviable under the impugned Act if no mining activity is carried on, it is manifest that it is not related to land as a unit which is the only method of valuation of land under Entry 49 List II but it is relatable to minerals extracted. India Cement case (para 23) 6. The statutory provisions for measuring the liability on account of levy throws light on the general character of the tax. The standard on which the tax is levied was a relevant consideration for determining the nature of the tax although it could not be regarded as conclusive in the matter. The method of determining the rate of levy would be relevant in considering the character of levy. A Reference under the Government of India Act, (1936) 1 All E.R. 111, R.R. Engineering Co. v. Zilla Parishad (1980) 3 SCC 330, Hingir-Rampur Coal Co. Ltd. v. State of Orissa (1961) 2 SCR 537, Buxa Dooars Tea Co. Ltd. v. State of West Bengal (1989) 3 SCC 211; India Cement Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a-vis other Entries. (1) Exclusive power of the State Legislation has to be exercised subject to Clause (1) of Article 246 i.e., the exclusive power which the Parliament has in respect of the matters enumerated in List I. Assuming that there is conflict between an Entry in List I and Entry 49 of List II which is not capable of reconciliation, the power of Parliament to legislate in respect of the matter which is exclusively entrusted to it must supersede pro tanto the exercise of power of the Legislature. S.C. Nawn's case (para 7) approved in India Cement case (Paras 22 and 23) (2) Mere declaration of a law of Parliament that it is expedient for an industry or the regulation and development of mines and minerals to be under the control of the Union and Entry 52 or Entry 54 does not denude the State Legislature of their legislative powers with respect to the fields covered by 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 pursuant to such declaration as spelt out by the legislative enactment which makes the declaration. Orissa Cement case (par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1957. India Cement case as summarised in Orissa Cement case (para 17) (10) In view of MMRD Act, it is a clear bar on the State legislation taxing royalty so as, in effect, to amend the Schedule to the Central Act 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. India Cement Case; Orissa Cement Case. (11) Similar to MMRD Act, Parliament had assumed control of the tea industry by making a declaration in Section 2 of Tea Act. Accordingly, it is a covered field and the State Legislature has no legislative competency in respect of despatch of tea. Buxa Dooars Case (para 14). (12) Whether any rules had been framed under Section 18(1) or 18(2)(k) of MMRD Act is immaterial. Hingir-Rampur case; Tullock and Baijnath Kedia's cases, as approved in Orissa Cement Case (para 54) (13) The object of Section 9 of MMRD Act cannot be ignored. The terms of Section 13 of the Central Act empower the Union to frame rules in regard to matters concerning roads and environment Section 18(1) empowers the Central Government to take all such steps as may be necessary for the conservation and development of minerals in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'user' within the meaning of Section 3(2)(a) read with Section 2(m), 2(e), 2(i) and 2(f) of the Act. The other type of tax is on the 'occupier' within the meaning of Section 3(2)(b) read with Section 2(k), 2(d) and 2(o) of the Act. This is also clear from Sub-section (3) of Section 3 and the Schedule itself. Therefore, we have to examine the scope of these two different imposts separately. 6.3.3. Let us first examine the nature and scope of tax payable by the 'user' under Section 3(2)(b). This tax is payable by an 'user' who has been allowed by the State Government to use 'forest land' for 'non-forest purpose' 'Forest use' means 'use of forest land for the purpose of forestry, agriculture, horticulture or any allied and ancillary activities. This clearly specifies that such a tax is not directly on land. This is also made clear from Section 3(3)(b). It is not a tax levied on land as a unit. It has nothing to do with the annual value of the land. It is only a tax on a particular user of the land. It is a tax relating to particular activities carried on in relation to the land. This is also made clear from the Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uot;responsible" for such "excavation" and "void" and further if he had "indulged in any development activities including mining". Until and unless such activities, within the meaning of Section 2(o), had been carried out there is no "voiding". Further the liability of the "occupier" arises only if he is "responsible" for creating "void". Therefore, merely a person in possession of land is not liable. If he is also the person responsible for creating "void", then only he is liable. Therefore, it is the activity of such "occupier" which creates the liability. Moreover, it is not also the case of every 'occupier' who has created "void" who is made liable; but only those occupier creating void "by indulging in development activity including mining". Though this is not defined, it clearly shows that it is certain user of the land and certain activities relating to the land, including mining, which is being taxed. "Mining" by itself, by the inclusive definition, is treated as an activity for which the tax is payable. This amounts to a tax on "mining&q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regarding Entry 49 List II in detail. I have considered this aspect of the matter from the "voided" point of view and the "use" point of view both separately. In this context I may point out that if his contention that the Act relates to the "consequent activity" and "using forest land for non- forest purpose", - which is also repeated in his "Written Argument" -- is accepted, then clearly it is not a tax directly on land as an unit or bearing any definite relationship to land within the meaning of Entry 49 List II. 6.3.6. For the aforesaid reason, I am of the opinion that the tax imposed under Section 3 read with the Schedule, whether payable by the "user" or the "occupier" under Section 3(2), is not a "tax" on land" within the meaning of Entry 49 List II. Accordingly, the State Legislature did not have the legislative competence to enact the said Act. Accordingly, the said Act and the Ordinance is unconstitutional and void. 6.4. M.M.R.D. Act. 6.4.1. I shall next consider the question of the competency of the State Legislature to enact the said Act in view of certain Central Acts and particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Article 246 and Entry 97 List I. 6.4.3. Reference may be made in this connection to the various decisions referred to above particularly Hingir-Rampur case, Tullock's case, Baijnath case, India Cement case, Orissa Cement case and Rajasthan case. 6.4.4. I am unable to accept the contention of Mr. Sibal that the concept of 'occupied field', so far as it relates to Entry 54 of List I is concerned, is relevant only when Entry 23 of List II is involved and that it cannot be applied when Entry 49 of List II is involved. As discussed above, it is now well settled that if the field is covered by any Central Act under Entry 54 List I, containing such declaration, then the power of State Legislature under Entry 49 is denuded and excluded to that extent. Whether the impugned legislation has any nexus to Entry 23 of List II or not, the question whether it is covered by a legislation under Entry 54 List I containing such declaration still remains. 6.4.5. Accordingly, in my opinion. in view of the MMRD Act also, the State Legislature had no legal competency to enact the State Act. For this reason also the Ordinance and the State Act must be held to be unconstitutional and voi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est plantations so that preservation of habitats for natural flora and fauna is ensured. (iv) Encouraging large scale industrial plantation to foster growth of forest industries. As pointed out in the aforesaid decisions the 1980 Act attracts mining in forest area. Whether it is reserved forest area or not and whether it is first grant or renewal of mining lease, the provisions of 1980 Act has to be complied with. I ought to point out in this context that Section 2 of 1980 Act was amended by Amending Act 69 of 1988 with effect from 15.3.1989. I have set out the relevant provisions of the 1980 Act, as amended hereinabove. In view of Section 2, the State cannot permit such acts as specified therein without prior approval of the Central Government. Once such order has been made by the State Government with the approval of the Central Government, the activity carried on is a perfectly legal activity, even if it amounts to use of any forest land for any non-forest purpose as defined in the 1980 Act. Further the Form in the Appendix under Rule 4 provides for steps to be taken to compensate for the loss of forest area, vegetation and wild life. It provides for 'restoration of vegeta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to sell them beyond the prices that are fixed by the controlling authorities. The power of granting or withholding licences or of fixing the prices of the goods would necessarily have to be vested in certain public officers or bodies and they would certainly have to be left with some amount of discretion in these matters. So far no exception can be taken; but the mischief arises when the power conferred on such officers is an arbitrary power unregulated by any rule or principle and it is left entirely to the discretion of particular persons to do anything they like without any check or control by any higher authority. A law or order, which confers arbitrary and uncontrolled power upon the executive in the matter of regulating trade or business in normally available commodities cannot but be held to be unreasonable. As has been held by this Court in 'Chintaman Rao v. State of Madhya Pradesh; A.I.R. 1951 SC 118 (A) the phrase "reasonable restriction" connotes that the limitation imposed upon a person in enjoyment of a right should not be arbitrary or of an excessive nature beyond what is required in the interest of public. Legislation, which arbitrarily or excessive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order and the only thing he has to do is to record reasons for the action he takes. Not only so, the power could be exercised by any person to whom the State Coal Controller may choose to delegate the same, and the choice can be made in favour of any and every person. It seems to us that Such provision cannot be held to be reasonable. No rules have been framed and no directions given on these matters to regulate or guide the discretion of the Licensing Officer. Practically the Order commits to the unrestrained will of a single individual the power to grant, withhold or cancel licenses in any way he chooses and there is nothing in the order which could ensure a proper execution of the power or operate as a check upon injustice that might" result from improper execution of the same. Mr. Umrigar contends that a sufficient safeguard has been provided against any abuse of power by reason of the fact that the licensing authority has got to record reasons for what he does. This safeguard, in our opinion, is hardly effective; for there is no higher authority prescribed in the Order who could examine the propriety of these reasons and revise or review the decision of the subordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmity is common to both the sections, and so what we will say about Section 4 will apply with equal force to Section 4A. It is clear that Section 4 contemplates preventive action being taken provided two conditions are satisfied; first, that the presence, movements or acts of any person sought to be proceeded against should appear to the District Magistrate to be prejudicial to the interests of the general public, or that a reasonable suspicion should exist that such a person is committing or is likely to commit acts calculated to disturb public peace or tranquillity; and second that the person concerned must be a goonda. It would thus be clear that it is only where prejudicial acts can be attributed to a goonda that Section 4 can come into operation. In other words, the satisfaction of the first condition alone would not be enough; both the conditions must be satisfied before action can be taken against any person. That clearly means that the primary condition precedent for taking action under Section 4 is that the person against whom action is proposed to be taken is a goonda; and it is precisely in regard to this condition that the section suffers from a serious infirmity. (par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary assistance to the District Magistrate in deciding whether a particular citizen falls under the category of goonda or not; that is Anr. infirmity in the Act. As we have already pointed out Section 4A suffers from the same infirmities as Section 4. (para 9). Having regard to the two infirmities in Sections 4, 4A respectively we do not think it would be possible to accede to the argument of the learned Advocate-General that the operative portion of the Act can fall under Article 19(5) of the Constitution. The person against whom action can be taken under the Act is not entitled to know the source of the information received by the District Magistrate is based that action should be taken against him under Section 4 or Section 4A. In such a case it is absolutely essential that the Act must clearly indicate by a proper definition or otherwise when and under what circumstances a person can be called a goonda, and it must impose an obligation on the District Magistrate to apply his mind to the question as to whether the person against whom complaints are received is such a goonda or not. It has been urged before us that such an obligation is implicit in Sections 4 and 4A. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion that follows is that if there are two separate and different classes having different conditions of service and different incidents, the question of discrimination does not arise. On the other hand, if among the members of the same class, discriminatory treatment is meted out to one against the other, Article 14 is doubtless attracted. (Para 27) After referring to various decisions, the law in this regard was summarised as follows: Thus, from a detailed analysis and close examination of the cases of this Court starting from 1952 till today, the following propositions emerge- (1) In considering the fundamental right of equality of opportunity a technical pedantic or doctrinaire approach should not be made and the doctrine should not be invoked even if different scales of pay, service terms, leave, etc. are introduced in different and dissimilar posts. Thus, where the class or categories of service are essentially different in purport and spirit, Article 14 cannot be attracted. (2) Article 14 forbids hostile discrimination but not reasonable classification. Thus where persons belonging to a particular class in view of their special attributes qualities, mode of recruitm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 45 years) but the regulation seems to us to arm the Managing Director with uncanalised and unguided discretion to extend the age of AHs at his option which appears to us to suffer from the vice of excessive delegation of powers. It is true that a discretionary power may not necessarily be a discriminatory power but where a statute confers a power on an authority to decide matters of moment without laying down any guidelines or principles or norms the power has to be struck down as being violative of Article 14. (para 115) The doctrine of a provision suffering from the vice of excessive delegation of power has been explained and discussed in several decisions of this Court. In Anwar Ali Sarkar's case AIR 1952 SC 74 (supra) which may justly be regarded as the locus classicus on the subject. Fazal Ali, J. (as he then was) clearly observed as follows (at pp. 84, 85) but the second criticism cannot be so easily met, since an Act which gives uncontrolled authority to discriminate cannot but be hit by Article 14 and it will be no answer simply to say that the legislature having more or less the unlimited power to delegate has merely exercised that power. Secondly, the Act itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or equal protection. Any arbitrary division or ridge will render the equal protection clause moribund or lifeless. Apart from the absence of any reasonable or rational classification, we have in this case the additional feature of carte blanche being given to the State Government to send any offences or cases for trial by a Special Court. And Bose, J. held thus (at p. 104) It is the differentiation which matters, the singling out of cases or groups of cases, or even of offences, or classes of offences, of a kind fraught with the most serious consequences to the individuals concerned, for special, and what some would regard as peculiar treatment. The five Judges whose decisions we have extracted constituted the majority decision of the Bench. (para 114) In Han Chand Sarda v. Mizo District Council: (1967) SCR 1012 : AIR 1967 SC 829, it was highlighted that where a Regulation does not contain any principles or standard for the exercise of the executive power, it was a bad regulation as being violative of Article 14. In this connection, the Court observed as follows (at pp. 833 of AIR) A perusal of the Regulation shows that it nowhere provides any principle's or standard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the period up to ten years. In other words, the spirit of the Regulation is that an AH, if medically fit, is likely to continue up to the age of 45 by yearly extension given by the Managing Director. Unfortunately, however, the real intention of the makers of the Regulation has not been carried out because the Managing Director has been given an uncontrolled, unguided and absolute discretion to extend or not to extend the period of retirement in the case of AHs after 35 years. The words 'at the option' are wide enough to allow the Managing Director to exercise his discretion in favour of one Ali and not in favour of the other which may result in discrimination. The Regulation does not provide any guidelines, rules or principles which may govern the exercise of the discretion by the Managing Director. Similarly, there is also no provision in the Regulation requiring the authorities to give reason for refusing to extend the period of retirement of AHs. The provision does not even give any night of appeal to higher authorities against "the order passed by the Managing Director. Under the provision, as it stands, the extension of the retirement of an AH is entirely at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir period of retirement being extended up to 45 years until a suitable amendment is made by the Management in the light of the observations made by us. (para 129) 7.3.5. In the case of B.B. Rajwanshi v. State of U.P. and Ors. reported in: A.I.R. 1988 S.C. 1089 before the Supreme Court the constitutional validity of Section 6(4) of U.P. Industrial Disputes Act, 1947 was questioned. Section 6 of the said Act provided as follows: 6. Awards and action to be taken thereon. -- (1) Where an industrial dispute has been referred to a Labour Court or Tribunal for adjudication, it shall hold its proceedings expeditiously and shall soon as it is practicable on the conclusion thereof, submit its award to the State Government. (2) The award of a Labour Court or Tribunal shall be in writing and shall be signed by its Presiding Officer. (2A) An award in an industrial dispute relating to the discharge or dismissal of a workman may direct the setting aside of the discharge or dismissal and reinstatement of the workman on such terms and conditions, if any, as the authority making the award may think fit, or granting such other relief to the workman, including the substitution of any lesser punis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oy gold or subject it to any other process, or sell, deliver, transfer or otherwise dispose of any gold; (iv) a licensed dealer may buy, acquire, accept or receive or sell, deliver transfer or dispose of gold. The Supreme Court upheld the contention on behalf of the Petitioner that the said Section 27(2)(d) must be struck down as it confers such wide and vague power on the Administrator that it is difficult to limit its scope. In this context the Supreme Court observed as follows: We now come to Section 27 of the Act which relates to licensing of dealers. It was stated on behalf of the Petitioners that the conditions imposed by Sub-section (6) of Section 27 for the grant or renewal of licences are uncertain, vague and unintelligible and consequently wide and unfettered power was conferred upon the statutory authorities in the matter of grant or renewal of licence. In our opinion, this contention is well founded and must be accepted as correct. Section 27(6)(a) states that in the matter of issue or renewal of licences the Administrator shall have regard to "the number of dealers existing in the region in which the applicant intends to carry on business as a dealer". But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, necessary for parliament to enact fresh legislation imposing appropriate conditions and restrictions for the grant and renewal of licences to dealers. In the alternative the Central Government may make appropriate rules for the same purpose in exercise of its rule-making power under Section 114 of the Act.... (para 18) 7.3.7. In the case of Hamdard Dawakhana and Ors. v. Union of India and Ors. A.I.R. 1960 SC 554, the power given to the authority under the provisions of Section 3 of the Drugs and Magic Remedies (Objectionable Advertisements) Act (Act 21 of 1954) as contained in Clause (d) provided as follows: S. 3. Subject to the provisions of this Act, no person shall take any part in the publication of any advertisement referring to any drug in terms which suggest or are calculated to lead to the use of that drug for.... (d) the diagnosis, cure, mitigation, treatment or prevention of any venereal disease or any other disease or condition which may be specified in rules made under this Act. Section 16(1) The Central Government may be notification in the official gazette make rules for carrying out the purposes of this Act. (2) In particular and without prejudice to the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d delegation. As a consequence the Schedule in the rules must be struck down. But that would not affect such conditions and disease which property fall within the four clauses of Section 3 excluding the portion of el. (d) which has been declared to be unconstitutional. In the view we have taken it is unnecessary to consider the applicability of (1909) 8 CLR 626. (para 34) We are of the opinion therefore that the words "or any other disease or condition which may be specified in the rules made under this Act" confer uncanalised and un-controlled power to the Executive and are therefore ultra vires. But their being taken out of Clause (d) of Section 3 does not affect the constitutionality of the rest of the clause or section as they are severable; 1957 SCR 930 : (S) AIR 1957 SC 628). (para 35) 7.3.8. In the case of Delhi Transport Corporation v. D.T.C. Mazdoor Congress 1991 Supp (1) SCC 600 at p. 716 and 718 (paras 230 and 237) it was observed as follows: There is need to minimise the scope of the arbitrary use of power in all walks of life. It is inadvisable to depend on the good sense of the individuals, however high placed they may be. It is all the more improper and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic importance' constituted sufficient guideline to the government. It was not, therefore, a case of no guideline but of the absence of details of the guideline. (para 237) 7.3.9. In the case of Naraindas Indurkhya v. The State of Madhya Pradesh and Ors. A.I.R. 1974 S.C. 1232, it was observed as follows That takes us to the challenge based on Article 14 of the Constitution. This Article ensures equality before law and strikes. at arbitrary and discriminatory State action. Where Slate Government exercises any power, statutory or otherwise, it must not discriminate unfairly between one person and Anr. Every State action must be guided by certain norms and standards which are in themselves not objectionable as being discriminatory in character. If power conferred by statute on any authority of the State is vagrant and unconfined and no standards or principles are laid down by the statute to guide and control the exercise of such power, the statute would be violative of the equality clause, because it would permit arbitrary and capricious exercise of power, which is the antithesis of equality before law. Such a case, would fall within the second proposition laid down by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to in this judgment. However, I need not deliberate on this matter any further having regard to the fact that, upon clarification sought for that effect, Mr. Sibal has frankly submitted before us that he does not support such contention made on behalf of the State in the said case. On the contrary, for obvious reasons, he has invited the Court to look into all the provisions of the Act, and not merely Section 3, the charging section, to ascertain the true scope and effect thereof. 7.4.3. From a detailed examination of the said Act, it appears as follows: (a) Section 1(2) -- It is made clear by this provision that this Act applies only to "Forest Land" in the State of Bihar and no other land in the State. No material has been placed before us or any argument advanced, why only the Forest lands have been singled out and not all lands have been brought within the scope of the Act when the object is "reclamation" and "rehabilitation" because of certain "user" and "voiding". Whether "voiding" is subject and/or object, why "voiding" of only forest lands have been included but voiding of non-forest lands have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated "as far as possible" Who is going to determine the same and how? Is it personal satisfaction or subjective because no guideline has been specified. Further, it mentions restoring such original contour "and/or" filling up the void. By such definition in 2(h) there may be restoring the "original contour" without any question of filling up the "void" being involved. There can be question of filling" up the "void" without the question of restoring the "original contour" being involved. There can be both the question of "contour" and "void". So far as the "filling up of void" is concerned, the question of "filling up" of the "void" is vague, because definition of "void" in Section 2(o) is very wide. In respect of all these aspects this is not only vague and uncertain but also inconsistent. This also confers naked and arbitrary power without any guiding policy. (iii) Section 2(c) -- "Collector" has been defined to include not only the Collector of the District or any Additional Collector or any one otherwise performing their duties, but also &quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look only at the object of the legislation. An Act may have a perfect lawful object e.g. to promote the health of the inhabitants, but may seek to achieve that object by invalid methods e.g. direct prohibition of any trade with a foreign country. An Act may also have nothing to do with the object. It is mentioned that the tax, called the "Bihar Restoration and Improvement of Degraded Forest Land Tax", shall be levied "for mechanical and biological reclamation of Forest land and for rehabilitation of the same". This is the "object" and not the "subject" of the Act. (ii) The tax is "called" a particular tax by name, but it is not stated that such tax shall be imposed on land. (iii) What is meant by "Degraded Forest" has not been defined in the Act. It cannot be treated as synonymous with "void" within the meaning of Section 2(o), as it is made clear from Sub-section (2) of Section 3 and the Schedule itself that the tax is not only for "voiding" but also for "user" without any "voiding". Such "voiding" as such is also not attracted but "voiding" by way of indulgin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecutive authority cannot be authorised to modify either existing or future law in any essential feature. Rajnarain v. Chairman P.A. Committee AIR (1954) S.C. 569. (b) Re: Section 3(2): (i) So far as Section 3(2)(a) is concerned it is payable by every user allowed by the State Government to use forest land for non-forest purpose. However, when such non-forest use has not been allowed by the State Government there is no liability of such user. This is a permissible classification with intelligible differentia but pure and simple discrimination. More over, it covers such user for any period in the past viz. whether 2 or 3 or 5 or 10 or 20 or 50 years back. (ii) So far as Section 3(2)(b) is concerned, it is said that such tax shall be payable by every occupier "responsible for creating void/voids by indulging in any developmental activities including mining". What is meant by "responsible"? How the responsibility is to be ascertained? Is it subjective or objective? What overt or other act would fix such responsibility. Further, under Section 2(h) "occupier" means "a person in possession of an area of excavated and voided land". How that respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Schedule. This aspect of the matter has been dealt with hereinabove. (f) Re: Section 12: Power to make Rules. So far as the rule making power is concerned, this is an unusual rule making power. Generally, in an Act, in Sub-section (1) of the section conferring rule-making power, such power is conferred to make rules to carry out the purpose and object of the Act and the Sub-section (2) thereof only refers to some specific matters which are only by way of illustration and not exhaustive. The conferment of power in the Act in favour of the executive to make rules,' is to carry out the object and purpose as laid down in the Act itself. It is ancillary and subsidiary to the main provisions which are provided in the Act itself. Essential and main provisions are specified in the Act and the Rules are framed merely to give effect to the same by way of providing the details. Legislature cannot delegate uncanalised and uncontrolled power to the Executive: Hamdard Dawakhana v. Union of India AIR (1960) SC 554 (para 35). An executive cannot be authorised to modify any law in any essential feature Rajnarain Singh v. Chairman P.A. Committee AIR (1954) SC 569. However, in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? Why different rates for different manner followed though the result is the same - which is "voiding". The object of the Act seems to be reclamation of forest land and rehabilitation so that the land is reclaimed as far as possible. Biological reclamation means restoration of vegetal cover and mechanical reclamation means restoring the original contour. However, vegetal cover and original contour may not be the same. However, in the Schedule the rate is on the basis of activity carried on for creating void in (a), (b) and (c) but this is without any relation to or having any connection with the nature of excavation or subsidence. The extent of void is not the criteria. The tax does not depend on the nature of excavation. The rate is on the area basis and not on the basis of vegetal cover or original contour. So far as non-forest use is concerned, it is based on density irrespective of the nature of the use though reclamation depends on the nature of the use. The measure of density is not based on measure of vegetal cover which requires to be restored or original contour which requires to be restored. In spite of such purported object, the extent of vegetal cover affected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax proposed to be levied, and finally as to the right to challenge the regularity of assessment made, by recourse to proceedings in a higher Civil Court. The Act merely declares the competence of the Government to make a provisional assessment, and by virtue of Section 3 of the Madras Revenue Recovery Act, 1864, the land-holders may be liable to pay the tax. The. Act being silent as to the machinery and procedure to be followed in making the assessment leaves it to the Executive to evolve the requisite machinery and procedure. The whole thing, from beginning to end, is treated as of a purely administrative character, completely ignoring the legal position that the assessment of a tax on person or property is at least of a quasi-judicial character. Again, the Act does not impose an obligation on the Government to undertake survey proceedings within any prescribed or ascertainable period, with the result that a land-holder may be subjected to repealed annual provisional assessments on more or less conjectural basis and liable to pay the tax thus assessed. Though the Act was passed about five years ago, we were informed at the Bar that survey proceedings had not even commenced. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the popular meaning or meaning ascribed to the term in commercial parlance. In absence of any clear criterion to determine what is skelp and not strip, no useful purpose would be served by even remanding the matter to the Excise authorities for a decision after taking necessary evidence. It is only when a taxing law provides for a clear and unequivocal test for determination as to whether a particular product would fall under strip or skelp it may be possible for the authorities to address itself to the evidence submitted by the parties in order to come to a decision on the basis of the test. This is, however, not possible in this case in view of the fact that there is no identifiable standard. The best way is to define the product for the purpose of excise duty in appropriate terms demarcating clearly the distinction between the two terms. (para 9) 8.3.4. In the case of Jaswant Theatre v. State of Punjab 1987 (168) I.T.R. 38, a Single Judge of Punjab and Haryana High Court made a reference to a Division Bench decision of the same High Court, which followed the decision of the Supreme Court in C.I.T. v. Ajax Products Ltd. (1965) 55 I.T.R. 741 wherein the Supreme Court ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner, or the Tribunal, as the case may be, such urban land would have fetched or fetch, if sold in the open market on the date of the commencement of this Act." It was said on behalf of the Petitioners that the opinion which the Assistant Commissioner has to form is purely subjective and may be arbitrary. We do not. think that this contention is correct. Having regard to the language and context of Section 6 of the new Act we consider that the opinion which the Assistant Commissioner has to form under that section is not subjective but should be reached objectively upon, the relevant evidence after following the requisite formalities laid down in Sections 7 to 11 of the new Act. Instead of the Assistant Commissioner classifying the urban land and determining the market value in a zone, the present Act requires a return to be submitted by the owner mentioning the amount which, in the opinion of the owner, is the market value of the urban, land. On receipt of the return, if the Assistant Commissioner is satisfied that the particulars mentioned are correct and complete, he may determine the market value as given by the owner of the land. If he is not satisfied with the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e record at any time within three years from the date of any order passed by him or it. Section 33 confers power on the Assistant Commissioner to take evidence, to require discovery and production of documents and to receive evidence on affidavit. Thus, the Act envisages a detailed procedure regarding submission of returns, the making of an assessment after hearing (objection and a right to appeal to higher authorities. We are hence unable to accept the contention of the Petitioners that the provisions of Section 6 of the new Act are violative of Article 14 of the Constitution. (para 9) 8.4.1. The first question is, if there is no proper machinery laid down or guideline for the same is laid down in the Act itself, then whether by framing Rules, the position can be improved. In my opinion, it cannot. Otherwise it would amount to leaving it to the executive to evolve the procedure and machinery which cannot be permitted as pointed out in Moopil Nair's case. The Rules are to be framed by the executive merely for the purpose of carrying out the object of the Act. The principle and scope of delegated legislation is well settled. Essential legislative functions cannot be delegated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auses (a), (b), (c), (d), (e) and (f) of the Schedule only specifies different rates for assessment of the tax. Accordingly, it is clear that no machinery is provided in Sub-section (1) of Section 3 itself. Section 3(2) merely specifies by whom such tax is payable. No machinery is provided therein. Section 4(1) only provides that the Collector shall levy, collect and realise the tax at the rate mentioned in the Schedule; How it is to be levied has not been provided. Sub-section (2) of Section 4 only provides that the Collector shall cause a demand notice to be served on the occupier/user of the forest land who shall within 30 days of service of the notice, deposit the tax in the State Treasury. Section 8 provides for recovery of money due as an arrear of land revenue. The question of demand notice and recovery of money arise only after assessment proceedings are completed. These are the only provisions regarding imposition of the tax in the Act. These cannot be described as "machinery". In effect no. "machinery" at all has been provided for in the Act. How such tax is to be assessed, nothing has been specified in the Act, particularly having regard to various co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questioning the existing revenue record or further recording. No provision for any enquiry or hearing has been made in this regard. It is clear from Section 3 read with the schedule that the rate specified in (d), (e) and (f) of the Schedule relates to tax payable by 'user' under Section 3(2)(a) and that the rate specified in (a), (b) and (c) of the Schedule relates to 'occupier' under Section 3(2)(b) but the ascertainment of the particular rate to be applicable involve various factors. There is no provision for survey or any enquiry to ascertain the nature or area of the land "voided" or "used". 8.5.2. So far as the liability of the 'user' for using the land for 'non- forest purpose' is concerned, it involves various questions. 'Forest purpose' has not been defined but 'forest use' has been defined. In this context it may also be pointed out that "non-forest use" within the meaning of this Act is not the same as "non-forest use" within the meaning of Forest (Conservation) Act, 1980. However, proceeding on the basis that 'use' and 'purpose' under this State Act means the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponsible' for creating such 'void'. It has also to be ascertained whether he had 'indulged' in any 'development activities including mining'. (iii) Further, for the purpose of fixing rates as prescribed in the Schedule, various factors have to be ascertained. Whether it is or was a case of 'excavation'; if 'excavation' whether it was a case of "open cast excavation" or "underground excavation" or whether it is a case of "subsidence area". Then again it has to be ascertained whether it is a case of "mechanised" open cast excavation or a case of "non-mechanised" open cast excavation. The rate of tax also depends on "M3" of land involved. How to measure the same. No machinery is provided to ascertain the same. 8.6. Accordingly, in my opinion, no proper "machinery" or "methodology has been provided in the Act without which imposition of a tax is not permissible. Provision for taxation must be made in clear terms with proper machinery set out. Otherwise if cannot be treated as a levy or collection by authority of law within the meaning of Article 265. Power to tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is purpose, in my opinion, still there is absence of proper "machinery" for imposition and levy of the tax. 8.9. The fact that there is no machinery provided in the Act would be borne out by the following amongst Ors. Annexure 3 to the petition of the India Aluminium Co., (C.W.J.C. 1790 of 1992 (R) is memo No. 603/DC dated 18th May, 1992 whereby a sum of ₹ 227.70 lac was imposed on the Company by way of tax under this Act. They were required to deposit this amount within a period of 30 days of the receipt of the notice failing which they were informed that recovery proceedings would be started against them under the Public Demand Recovery Act. The said notice mentions that the Company has been granted mining lease in Serengdag area which includes 61.65 hectares of forest land out of which 5.06 hectares have been used by Indian Aluminium Company for mining purposes. How this has been ascertained it has not been mentioned. It has also been mentioned therein that a report from the Divisional Forest Officer, Ranchi Forest Division has been received to the effect that the Company had used 5.06 hectares of forest area having density of 0.5. Only on the basis of such a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not indicated. The most peculiar aspect of the matter is that under Section 4, the Collector has been conferred with the power to levy, collect and realise tax at the rate mentioned in the Schedule. However, the Schedule relates only to sub-Sections (1), (2) and (3) of Section 3 but not to Sub-section (4). Accordingly there is no provision as to how, by whom, to what extent and how such lump-sum additional tax shall be levied or collected or realised. How is it to be imposed? There is not even any pretence of any machinery set up for such imposition or levy or collection. 9.3. The other peculiar feature being that both the object or subject of the tax being silent, it is beyond the legislative competency of the State Legislature. The State has no general or residuary power regarding taxation. Only certain specific entries confer such power. It is a fraud upon the legislative power to tax. 9.4. In my opinion, it is not permissible taxation within the meaning of Article 265. This confers naked and arbitrary power on the executive. It is violative of Article 14. It is violation of Article 19(1)(g) and not protected by Article 19(6) of the Constitution. This is violative of Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the question of Article 301 read with Article 304(b) separately in details. Taxation laws are not outside the purview of Part XIII of the Constitution. The imposition in this cannot be termed as regulatory or compensatory measure. Having regard to the nature of the State Act it directly and immediately interferes with the flow of inter-State trade and commerce within the meaning of Article 301. Further, it is so excessive and prohibitive that it becomes an impediment in the free flow of trade and commerce. It is confiscatory, in nature. No facility is provided by this Act. Concept of reasonableness of restriction under Article 304(b) being the same as under Article 19(6), this is also violative of Article 304(b). Reference may be made in this connection to Atiabai Tea Co. v. State of Assam AIR 1961 SC 232, State of Madras v. Nataraja Mudalier AIR 1969 SC 147, India Cement v. State of A.P.: AIR 1988 SC 567, State of Tamilnadu and Ors. v. M/s. Sangeetha Trading Co and Ors.: (1993) 1 SCC 236 and other decisions. 12. Without any intention to summarise the conclusions arrived at as aforesaid, I shall specify some of the salient features of the same; (1) Such Ordinance could not ..... 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