TMI Blog1993 (12) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... en challenged on various grounds. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. (iv) Where prospecting mining or quarrying may necessitate 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 opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining to tracts of land over an area of 1312-62 Acres situate at village Judugoda in the district of Singhbhum (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 private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oo, District Ranchi, A copy of the said letter dated 29th Jan., '62 was also forwarded for information to the Chairman of erstwhile 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining leases for mineral Copper ore in the district of Singhbhum East and one mining lease for mineral Kynite in the West Singhbhum district, 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 Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts specified in the said mining lease. (i) C.W.J.C. No. 3320 of 1992 (R) M/s. Rattanlall Prakashchand. (j) C.W.J.C. No. 3201 of 1992 (R) Nirmal Kumar Pradeep Kumar. (k) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id proposal. However, the said objection was rejected. It appears that in Mining Misc. Case No. 25 of 1991-92 Respondent No. 3 directed the Divisional Forest Officer to take steps for finalising the proposal dated 4.10.78 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commissioner of Urban Land Tax and Ors. v. Buckingham and Carnatic Co. Ltd.: AIR (1970) SC 169. In this context he has taken us through the different provisions of the said Act in details. 3. 1.1.2. On the question of the taxable event under 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - The India Cement Ltd. etc. v. State of Tamil Nadu AIR (1990) SC 85. If the legislation purports to be under an entry in List II but appears to encroach upon a field assigned to List I, the principle of pith and substance has to be applied to ascertain under which 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 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 10, 14, 16, 17, 18 and 23. Taxation Entries -List II - 45, 46, 47, 48, and 49. Each of the above-mentioned General entries are connected with land but entry 18 deals directly with land. Each of the Taxation entries mentioned above are also connected with land but entry 49 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to the tax under Sub-section (1) of Section 3 . (c) Section 7 authorises the State Government to appoint appellate authority. (d) Section 11 authorises the State Government to invest any authority or any functionary with drastic powers. (e) Section 12 authorises the State Government to lay down procedures and impose fees, 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, then the answer will be: (i) Section 12 does not refer to making rules for the purpose of assessment. (ii) If it is contended that the generality of the power in the first limb of Section 12, i.e. carrying out all or any of the purposes of this Act, would be technically wide enough to include the power to make rules of assessment. Section 12 to that extent would suffer from the vice of excessive 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 can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act) the actions taken under the Ordinance and the Rules framed under the Ordinance can survive. Otherwise the Ordinance being a temporary statute and there being no saving clause of actions taken under the Ordinance or the Rules made thereunder, the orders made and actions taken under the Ordinance lapses on the expiry of this Ordinance. In this connection reference was made to a Full Bench judgment of the Calcutta High Court reported in Tarak Chandra Mukherjee 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 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. 3. 1.2.4. So far as Legislative competence of taxing statute is concerned he has submitted that in order to find out as to whether a State Act comes within one or more Entries in List. II or List III of the Seventh Schedule the first exercise will be to find out the 'Taxable event, identifying the charge and fixing the point a location of the charge and determine the character of the levy. On the question of Taxable event he submitted as follows: (a) Taxable event is the 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 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is found in the case of K.P. Mopil Nair v. State of Kerala 1961 SC P-552 where rate of Land Tax is ₹ 2 / - per acre. In some other laws Land tax is charged on the basis of fractional percentage of the value of the property as is generally found in the municipal ratings. 3. 1.2.5. It was next submitted that the said Act is vague, arbitrary and discriminatory and therefore violative of Articles 14, 19, 301 read with 304(b) of the Constitution. It was submitted that the provision of an Act must be definite, 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 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scattered in a sporadic manner whereas there are other Forests where afforestation is done on Scientific and systematic basis. In some forests trees are thickly grown and in some other trees are scattered. But in the Schedule to the Act rate of tax are uniform according to the method of excavation. The same rate of taxation is levied upon all persons whether voiding of land was done by felling cheap type of trees such as Fire Wood trees or even useless trees as with trees of higher value. In Section 3(2)(b) the tax shall be payable by every occupier 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 developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the tax proposed to be imposed by the statute. The absence of a proper machinery in a taxing statute was held to be ultra vires the Constitution by the Supreme Court in the case of K.T. Moopil Nair v. State of Kerala reported in AIR 1961 SC 552 at page 559 para 9, Jaswant Theatre v. State of Punjab reported in 168 ITR 38. In that view of the matter the court was pleased to strike down the notification as in valid. The Petitioner concludes with the observations made by the Supreme Court in the lease of 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 argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws: In the Seventh Schedule to the Constitution there can be found a broad distinction between the general power to make laws on a certain subject and the power to make a fiscal statute on that subject. The general power is given by indicating broadly the field or area of legislation. This does not include the power to make taxing laws. This clearly highlights the difference between tax on a subject matter, say land and a tax on a matter relatable to land. For example, the power to make laws in matter, say land and a tax on a matter relating to land under Entry 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 fis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Article 14 he has submitted as follows: On the assumption that the tax imposed by this Act is ostensibly supported by Entry 49, List II the question that arises is whether it is void under Article 14. As will appear hereafter, the provisions of this Act are so arbitrary and vague, uncertain and discriminatory that it is hit by Article 14. 3. 1.3.6. On the question of user of Forest Land: within the meaning of Section 3(2)(a) he has submitted as follows: (i) Under Section 3(2)(a) every user allowed by the State Government to use forest land for non-forest purpose 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of forest. Much of it may have become barren and abandoned or a part of it may be under water. But the impact of the tax will be as much on such barren land as on the land which still has forest. (ii) To tax the occupant and the user of land on which forest does not exist merely on the ground that it is within the territory notified as forest area in the past is highly arbitrary. On the question of annual or one time tax, he has submitted as follows: (i) The Act does not indicate one way or the other. But the rules require annual return in respect of forest land, voided in the past or being voided, and used 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides for the field of legislation of the State so far Land is concerned. Entry 23 of List II of the Seventh Schedule provides for the field of Legislation of the State so far mine and mineral development is concerned. Entry 49 of List II of the Seventh Schedule is in relation to Tax on Land. The aforesaid entries go to show that there is certainly a distinction between Land and Mine. All land cannot be mine. As such the State Legislature cannot in the guise of taxing Land tax a mine.. 3. 1.4.3. The impugned is applicable to all Forest Land of Bihar. That means that the pre-requisite of the applicability of the provisions of the Act must be that it is a Forest land. A 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) It follows from the above that the Act imposes a levy not on the activity of mining but on the restoration and reclamation of areas voided and left degraded, which is not the entitlement of the holder of the lease. The levy is not on the legitimate user of the holder of the lease. (f) A perusal of the Schedule referred to in Section 3 of the Act would indicate that the extent of levy under the Schedule has no nexus to the quantity of mineral mined. It is clear that the extent of levy is relatable to the degradation of the land used for non-forest purposes and that the ill-effects of the mining activity and the degradation cost thereby has no nexus to the quantity or value of the mineral which is mined. (g) 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Das AIR 1902 SC 21 at 2180 para 23 - Indian Aluminium Co. (b) The Court in the context of a challenge to the constitutionality of the enactment must keep in mind the principle that the presumption is always in favour of its constitutionality and unless the court on a reading of the provisions finds the Act wholly unworkable or without legislative competence or otherwise arbitrary the court will hesitate strike down a legislative enactment. In this connection, he relied on the following decisions: AIR 1053 SC 375 at 370 Gajapati Narayan Deo AIR 1056 SC 503 at 512 para 21 - B.N. Bhup AIR 1050 SC 860 para 5 at page 864 -Swarup Singh AIR 1050 SC 308 at 316 G.N. Rao AIR 1060 SC 554 para 8, 9, 12 at page 559, 560, 561 -- Hamdard Dawakhana AIR 1065 SC 1017 at 1025 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 Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, by no stretch of imagination can it be contended that the impugned legislation has any nexus to entry 23 of List II. (d) Entries are fields and not powers of legislation and the fields of each of Entries are to be liberally construed. In this connection reference was made to: AIR 1962 SC 1044 (Calcutta Gas Co.) and AIR (1990) SC 781 (M/s Goodyear Co.). The impugned legislation relates to land and not regulation of. mines and mineral development is demonstrated by reference to the terms of the legislation itself. A reading of the definitions under Section 2(b) meaning of biological reclamation , Section 2(d) meaning of excavation , Section 2(h) meaning of mechanical reclamation , Section, Section 2(m) user , Section 2(n) vegetative density , 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 voi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The same logic applies in respect of levy assessment and collection of tax in relation to denudation of forest land on account of any activities other than excavation. The taxable event in respect of items (d), (e) and (f) in the Schedule is related to the density per unit of land relatable to effective growth of tree and green canopy. It is, therefore, idle to contend that the taxable event is not stipulated under any of the provisions of the impugned legislation. The Court in ascertaining the taxable event must not only look at the relevant section but also the entire scheme of the Act: and in the event, the court is unable to find any taxable event which in law must be the basis of the levy, then alone must the court strike down the legislation. In the present case it 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuant to Bihar Ordinance 11 of 1992, set forth the procedure for the furnishing of returns by every user and occupier as defined in the Act. Consequently, the Rules read along with the provisions of the Act suggest that the impugned legislation does not suffer from excessive delegation. (iii) The power with the Government to amend the Schedule by rules as and when considered necessary cannot also be challenged on grounds of excessive delegation, since the Government is entitled to amend the rates of the levy from time to time. There are enough guidelines which can be discerned from the provisions of the Act and the rules that the amendment of such rates cannot possibly be challenged on grounds of excessive delegation of legislative power. (iv) So far as Section 3 and Sub-section (4) of Section 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3. 2.6. On the question of repugnancy of the Act and the concept of Occupied Field it was contended that the Forest Conservation Act, 1980 in Section 2 stipulates that no State Government or other authority shall, except with the prior approval of the Central Government, make any order directing that any forest land or any portion thereof may be used for any non-forest purpose. The issues involved in this case do not involve the resolution of any question in respect of use of any forest land for any non-forest purpose without the approval of the Central Government. It is relevant to note that the Act came into force with effect from October 25, 1980 and applies in respect of such forest lands which are directed to be used for any non-forest purpose for which the prior approval of the Central Government is necessary. 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 impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f levy in the same terms varies in respect of non-mechanised open cast excavation and underground excavation/subsidence area. In the case of use of forest land for non-forest purposes the levy is per hectare of forest land used for non-forest purposes. Consequently, the levy is on a unit of land. This directly falls within the ratio of India Cement and Orissa Cement as referred to above. In this connection he has referred to (a) paragraphs 34 to 37 at pages 1699-1700 in Orissa Cement case and (b) paragraphs 23 and 29-34 at pages 93-94 and pages 95-96 in India Cement Case. The Court is always entitled to determine the true nature of levy. In the cases of Orissa Cement and India Cement the levy was a cess on royalty. Since royalty is a charge on the value of the minerals, cess on royalty was consequentially also a levy on the value of 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t II. The pith and substance of the impugned legislation which falls within Entry 49 of List II is unrelated to Entry 54 of List I. Entry 54 of List I not being an Entry relating to taxation, the power to levy a tax cannot be found in the said Entry. That is the only rational and reasonable way of interpreting Entries in the VIIth schedule, in order to give effect to each entry and not to deny legislative power to the State Legislatures under Entry 49 of List II. Such would be the result in the event the interpretation of the Petitioners that Entry 54 of List I alone would entitle the Union Parliament to levy tax on land which is ravaged by mining activity. Such an interpretation is per se contrary to all norms and accepted principles of interpretation of legislative Entries. 3. 3. Reply by Mr. S.C. Bose In respect of the submissions made by 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls per cubic meter from such mining lands by open cast mining excavation or deep mining activities by the persons holding such mining leases and carrying on mining activities in such land. Such extraction of mineral per cubic meters of the lands may be from surface to undergrounds or by underground mining. But in reality and substance it is a tax on mining actually for extraction of minerals and not a tax on land. (d) Taxes on land is normally understood to have been imposed upon a person owning or occupying the land. The rate of tax is determined either according to the area of land held by such person or at a percentage of the value of land. For ex ample: (i) In the case of Mopil Nair (reported in AIR 1961 SC 552) the land tax is levied @ 2.50 per acre. (ii) In the case of Assistant Commissioner, Madras v. Buckingham and Carnatic 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as early as in early part of this Century. In this connection reference was made to the case of Harinarayan Singh v. Sriram Chakrabarty reported in 37 Ind App 136 . 3. 3.6. A question was asked by this Hon'ble Court to Sri Kapil Sibal, learned Senior Advocate as to whether in view of the provisions of the Mines and Minerals (Regulation and Development) Act, 1957 and Section 13(1) of the said Act in particular, it would be open to the Central Government to impose a levy on persons responsible for extraction of minerals from minerals lands, taking such land as unit by open cast excavation by mechanised or non-mechanised process in the same manner as in the Bihar Act. It was submitted that the question raised by this Hon'ble Court as above must be answered in the affirmative particularly after the judgment of the Supreme Court in 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 positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 245: (1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. (2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation. Article 246: (1) Notwithstanding anything in Clauses (2) and (3) Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the 'Union List'). (2) Notwithstanding anything in Clause (3), Parliament, and, subject to clause' (1), the Legislature of any State also have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the '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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1992. (2) It extends to the whole of the forest land in the State of Bihar. (3) It shall come into force at once. 2. Definition.-- In this Act unless the context otherwise requires (a) appellate authority means an authority appointed under Sub-section (1) of Section 7 by the State Government. (b) biological reclamation means restoration of vegetal cover by such means as may be deemed suitable; (e) collector means the Collector of the District, and the Additional Collector and any other officer, specially empowered as Collector by the State Government under this Act; (d) excavation means making hollows either on surface or underground by whatsoever means; (e) forest land means any land notified as such under any Act and/or recorded as forest in revenue record; (f) forest use means use of forest land for the purpose of forestry, agriculture, horticulture, or any allied and ancillary 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 ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose. (c) An user/occupier engaged in excavational activities against serial numbers (a), (b) and (c) and also using forest land for non-forest purpose against serial numbers (d), (e) and (f) shall be liable for taxation at the rate as specified in the Schedule. (4) The State Government may frame rules to impose a lump-sum tax in addition to the tax under Sub-section (1). 4. Assessment of Tax.-- (1) The Collector shall levy, collect and realise the tax at the rate mentioned in the Schedule. (2) The Collector shall cause a demand notice served on the occupier/user of the forest land who shall, within 3D days of service of the notice, deposit the tax in the State Treasury under the appropriate Revenue Head. 5. Penalty for non-payment within the specified time.-- If any amount of tax payable is not paid within the period specified in the demand notice, the Collector may impose a penalty on the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and area of forest land used and/or being used for non-forest purposes. 5. Assessment of Tax. -- The Collector, after receiving the return under rule or after ascertainment, under Rule 4, shall satisfy himself with the particulars stated therein, and shall assess the tax and thereafter cause a demand notice to be served in Form II indicating the amount of tax payable by the user and/or occupier as the case may be. 6. Manner of Service of Demand Notice. --(1) The demand notice in Form II shall be served on the user/occupier either by registered post with acknowledgement or in person. (2) In case the notice is returned without being received by the user/occupier, the service of notice shall be effected by affixing it on the house where the user/occupier ordinarily resides in the presence of two witnesses. 7. Appeal.-- (1) An appeal from any order passed by the Collector under the ordinance shall lie to the Commissioner. (2) Every such appeal shall be presented within thirty 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be sent to the applicant an acknowledgment of its receipt within the prescribed time and in the prescribed form. (3) On receipt of an application under this section, the State Government may, having regard to the provisions of this Act and any rules made thereunder, grant or refuse to grant the licence or lease. 13. Power of Central Government to make rules in respect of minerals.-- (1) The Central Government may, by notification in the Official Gazette, make rules for regulating the grant of prospecting licences and mining lease in respect of minerals and for purposes connected therewith. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: (g) the terms on which, and the conditions subject to which, any other prospecting licence or mining lease may be granted or renewed; (i) the fixing and collection of fee for prospecting licences or mining leases, surface rent, security deposit, fines, other fees or charges and the time within which and the manner in which the dead rent or royally shall be payable; (j) the manner in which rights of third partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent, royalty, fees, dead rent, fines or other charges and the time within which and the manner in which these shall be payable; (h) the manner in which rights of third parties may be protected (whether by way of payment of compensation or otherwise) in cases where any such party is prejudicially affected by reason of any prospecting or mining operations; (i) the manner in which rehabilitation of flora and other vegetation such as trees, shrubs and the like destroyed by reason of any quarrying or mining operations shall be made in the same area or in any other area selected by the State Government (whether by way of reimbursement of the cost of rehabilitation or otherwise) by the person holding the quarrying or mining lease; (o) any other matter which is to be, or may be, prescribed. (3) The holder of a mining lease or any other mineral concession granted under any rule made under Sub-section (1) shall pay royally or dead rent whichever is more in respect of minor minerals removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee at the rate prescribed for the time being in the rules framed by the State Government in respect of min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in from doing certain things in the interest of conservation or systematic development of minerals or for the protection of environment by preventing or controlling pollution which may be caused by prospecting or mining operations; (m) the maintenance and submission of such plans, registers or records as may be specified by the Government; (n) the submission of records or reports by persons carrying on prospecting or mining operations regarding any research in mining or geology carried out by them; (o) the facilities to be afforded by persons carrying out prospecting or mining operations to persons authorised by the Central Government for the purpose of undertaking research or training in matters relating to mining or geology; (p) the procedure for and the manner of imposition of fines for the contravention of any of the rules framed under this section and the authority who may impose such fines; and (q) the authority to which, the period within which, the form and the manner in which applications for revision of any order passed by any authority under this Act and the rules made thereunder may be made, the fee to be paid and the documents which should acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so that their workings do not interfere with the working of ore/minerals. (3) Orientation of the workings and sequence of mining operations shall be such that different grades of ore/minerals can be obtained simultaneously for blending with a view to achieve optimum recovery of ore/minerals from the deposit. 16. Separate stacking of non-saleable minerals. -- (1) The overburden and waste material obtained during mining operations shall not be allowed to be mixed with non-saleable or subgrade minerals/ores. They shall be dumped and stacked separately on the ground earmarked for the purpose. (2) The ground selected for dumping of overburden, waste material, the subgrade or non-saleable ores/minerals shall be away from working pit. It shall be proved for absence or presence of underlying mineral deposits before it is brought into use for dumping. (3) Before starting mining operations, the ultimate size of the pit shall be determined and the dumping ground shall be so selected that the clumping is not carried out within the limits of the ultimate size of the pit except in cases where concurrent back- filling is proposed. 17. Underground mining operations. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) The dumps shall be properly secured to prevent escape of material there from in harmful quantities which may cause degradation of environment and to prevent causation of floods. (3) The site for dumps, tailings or slimes shall be selected as far as possible on impervious ground to ensure minimum leaching effects due to precipitations. (4) Wherever possible, the waste rock overburden, etc. shall be back- filled into the mine excavations with a view to restoring the land to its original use as far as possible. (5) Wherever back-filling of waste rock in the area excavated during mining operations is not feasible, the waste dumps shall be suitably terraced and stabilised through vegetation or otherwise. (6) The fines, rejects or tailings from mine, beneficiation or metallurgical plants shall be deposited and disposed in a specially prepared tailing disposal area such that they are not allowed to flow away and cause land degradation or damage to agricultural field, pollution of surface water bodies and grounds water or cause floods. 34. Reclamation and rehabilitation of land. -- Every holder of prospecting licence or mining lease shall undertake the phase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause least damage to the flora of the area held under prospecting licence or mining lease and the nearby areas. (2) Every holder of prospecting licence or a mining lease shall -- (a) take immediate measures for planting in the same area or any other area selected by the Controller General or the authorised officer not less than twice the number of trees destroyed by reason of any prospecting or mining operations. (b) look after them during the subsistence of the licence/lease after which these trees shall be handed over to the State Forest Department or any other authority as may be nominated by the Controller General or the authorised officer, and (c) restore, to the extent possible, other flora destroyed by prospecting or mining operations. 4. 6. Forest (Conservation) Act, 1980 2. Restriction on the dereservation of forests or use of forest land for non-forest purpose. -- Notwithstanding anything contained in any other law for the time being in force in a State, no State Government or other authority shall make, except with the prior approval of the Central Government, any order directing: (i) that any reserved forest (within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a including the density of vegetation; (iii) topography of the area indicating gradient, aspect altitude, etc., (iv) its vulnerability to erosion, whether it forms a part of a seriously eroded area or not; (v) whether it forms a part of a national park, wildlife sanctuary, nature reserve, biosphere reserve etc., if so details of the area involved; (vi) rare endangered species of flora and fauna found in the area; (vii) whether it is a habitat for migrating fauna or forms a breading ground a for them; and (viii) any other feature of the area relevant to the proposal. 5. If the project for which forest land is required involved displacement of people or requires raw material from any forest area the details of proposals for their rehabilitation and procurement or raw material respectively should be furnished. 6. Proposed steps to be taken to compensate for the loss of forest area, the vegetation and wildlife. 7. Detailed opinion of the Chief Conservator of Forests/Head of the Forest Department concerned covering the following aspects, namely; (i) Out turn to timber, fuel wood and other forest-produce from the forest land involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of legislative powers between central and provincial legislatures it appears to be inevitable that controversy should arise; whether one or other legislature is not exceeding its own, and encroaching on the other Constitutional Legislative powers, and in such a controversy it is a principle, which their Lordships do not hesitate to apply in the present case, that it is not the name of the tax, but its real nature, 'its pith and substance', as it has sometimes been said which must determine into what category it falls. (para 38) We must therefore, look not to the form but to the substance of the levy. See the observations of the Federal Court in Ralla Ram v. Province of East Punjab, (Para 39). Therefore, the nomenclature given by the Haryana legislature is not decisive. One has to find out whether in pith and substance, a consignment tax is sought to be imposed, a tax on despatch in the course of inter-State trade or commerce. I have no hesitation in holding that it is a tax on despatch. Inter-state trade or commerce, it has been emphasised, is of great national importance and is vital to the federal structure of our country. As the imposition of consignment ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position, if it seeks to do anything but declare the law; but it may rightly reflect that a Constitution of a country is a living and organic thing, which of all instruments has the greatest claim to be construed ut res magis valeat quam pereat, is better that it should live than that it should perish. (Para 17) Certain rules have been evolved in this regard and it is well settled now that the various entries in the three lists are not power but fields of legislation. The power to legislate is given by Article 246 and other articles of the Constitution. See the observations of the Court in Calcutta Gas Co. v. State of West Bengal (1962) Supp. 3 SCR 1; AIR 1962 SC 1040 . The entries in the three list of the Seventh Schedule to the Constitution are legislative heads of fields of legislation. These demarcate the area over which appropriate Legislature can operate. It is well settled that widest amplitude should be given to the language of these entries, but some of these entries in different lists or in the same list may overlap and sometimes may also appear to be in direct conflict with each other. Then, it is the duty of the court to find out its true intent and Purpose and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution, and the Courts are not free to stretch or to pervert the language of an enactment in the interest of any legal or constitutional theory. Constitutional adjudication is not strengthened by such an attempt but it must seek to declare the law but it must not try to give meaning on the theory of what the law should be, but it must so look upon a Constitution that it is a living and organic thing and must adapt itself to the changing situations and pattern in which it has to be interpreted. It has also to be borne in mind that where division of powers and jurisdiction in a federal Constitution is the scheme, it is desirable to read the Constitution in harmonious way. It is also necessary that in deciding whether any particular enactment is within the purview of one legislature or the other, it is the pith and substance of the legislation in question that has to be looked into. It is well settled that the various entries in the three lists of the Indian Constitution are not powers but fields of legislation. The power to legislate is given by Article 246 and other Articles, of the Constitution. The three lists of the Seventh Schedule to the Constitution are legislative he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reinbefore, the relevant entries in the Seventh Schedule to the Constitution demarcate legislative fields and are closely linked and supplement one Anr. In this connection, reference may be made to Entry 84 of List I which deals with the duties of excise on tobacco and other goods manufactured or produced in India except, inter alia, alcoholic liquors for human consumption. Similarly, Entry 51 of List II is the counter-part of Entry 84 of List I so far as the State list is concerned. It authorises the State to impose duties of excise on alcoholic liquors for human consumption and opium etc. manufactured or produced in the State and the countervailing duties at the same or lower rates on similar goods produced or manufactured elsewhere in India. It is clear that all duties of excise save and except the items specifically excepted in Entry 84 of List I are generally within the taxing power of the Central Legislature. The State Legislature has power, though limited it is, in imposing duties of excise. That power is circumscribed under Entry 51 of List II of the Seventh Schedule to the Constitution. As we have noted hereinbefore, the correct principles of harmonious interpretation of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance of jurisdictions. A Constitutional Court, one must bear in mind, will not strengthen, but only derogate from its position if it seeks to do anything but declare the law; but it may rightly reflect that a Constitution is a living and organic thing, which of all instruments has the greatest claim to be construed broadly and liberally. See the observations of Gwyer, C.J. in Re Central Province and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1939. Mr. Justice Sulaiman in his judgment at p. 22 of the report observed that the power to tax the sale of goods is quite distinct from any right to impose taxes on use or consumption. It cannot be exercised at the earlier stage of production nor at the later stage of use of consumption, but only at the stage of sale (emphasis supplied). The essence of a tax on goods manufactured or produced is that the right to levy it accrues by virtue of their manufacture. On the other hand, a duty on the sale of goods cannot be levied merely because goods have ben manufactured or produced. Not can it be levied merely because the goods have been consumed or used or even destroyed. The right to levy the duty would not at all come into exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (3) have to be invoked only if there is a conflict as to the scope of two Entries in the two Lists and not otherwise. What has therefore first to be decided is whether there is any conflict between Entry 42 in List I and Entry 54 in List II. If there is not, the application of the non-obstante clause in Article 246(1) or of the words subject to in Article 246(3) does not arise. (para 56). There is Anr. rule of construction also well-settled that the Entries in two Legislative Lists must be construed if possible so as to avoid a conflict. In Province of Madras v. Bodhu Paidanna and Sons 1942 FCR 90: AIR 1942 FC 33 (3), the question was as to whether the first sales by a manufacturer of goods were liable to be taxed by the Province under Entry 48 in List II, or whether it was really a tax on excise which was within the exclusive competence of the Centre under Entry 45 in List I. It was held by the Federal Court that the correct approach to the question was to see whether it was possible to effect a reconciliation between the two Entries so as to avoid a conflict and overlapping, and that, in the view, though excise duty might in an extended sense cover the first sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution cannot be interpreted as throwing any light on the scope of Article 301 with reference to the question of taxation, as it merely reproduces Section 297(1)(b) of the Government of India Act, and as there was no provisions therein corresponding to Article 301, Section 297(1)(b) could not have implied what is now sought to be inferred from Article 304(a) (Para 58). 5. 2.5. In the case of Western India Theatres Ltd. v. Cantonment Board, Poona Cantonment reported in A.I.R. 1959 S.C. 582, the subject-matter before the Supreme Court was relevant power exercised by the authorities under the Cantonments Act, 1924. On the question of interpretation of the Entries in the legislative lists, the Supreme Court observed as follows: As pointed out by this Court in Navinchandra Mafatlal v. The Commissioner of Income Tax, Bombay City: 1955 SCR 829 : (S) A.I.R. 1955 (SC 58), following certain earlier decisions referred to therein, the entries in the legislative list should not be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Gallahghar 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 fact encroach upon the forbidden field. Nor are you to look only at the object of the legislator. An Act may have a perfectly 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. In other words, you may certainly consider the clauses of an Act to see whether they are passed in respect of the forbidden subject. In the case of Subrahmanyan Chettiar v. Muttuswami Goudan 1940 FCR 185 at p. 201 AIR 1941 FC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer, Mangalore v. D.H. Hazareth etc. reported in 1970 S.C. 999 , the question involved was whether the Parliament had any power to legislate with respect to tax as on gift of lands and buildings. Before considering the objection to the Gift Tax Act, Certain general principles were laid down as follows: To consider the objection to the Gift Tax Act which was sustained by the High Court a few general principles may be borne in mind. Under Article 245 Parliament makes laws for the whole or any part of the territory of India and the Legislatures of the States for the whole or part of their respective States. The subject-matters of laws are set out in three lists in the Seventh Schedule. List I (Usually referred to as the Union List) enumerates topics of legislation in respect to which Parliament has exclusive power to, make laws and List II (usually referred to as the State List) enumerates topics of legislation in respect to which the State Legislatures have exclusive power to make laws. List III (usually referred to as the Concurrent List) contains topics in respect to which both Parliament and Legislature of a State have power to make laws. Inconsistency between laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain principles regarding the taxing statutes which I shall indicate hereinbelow. 5. 3.1. In this context it may be pointed out that under the scheme of the Entries in the Lists, taxation is regarded as a distinctive matter and is separately set out (M.P. Sunderamier and Co. v. State of Andhra Pradesh AIR (1958) SC 468). 5. 3.2. In the case of Second Gift Tax Officer v. D.H. Hazareth AIR (1970) SC 999 it was observed as follows: The Constitution divides the topics of legislation into three broad categories: (a) entries enabling laws to be made, (b) entries enabling taxes to be imposed, and (c) entries enabling fees and stamp duties to be collected. It is not intended that every entry gives a right to levy a tax. The taxes are separately mentioned and in fact contain the whole of the power of taxation. Unless a tax is specifically mentioned it cannot be imposed except by Parliament in the exercise of its residuary powers already mentioned. Therefore, Entry 18 of the State List does not confer additional power of taxation. At the most fees can be levied in respect of the items mentioned in that entry, vide Entry 66 of the same list. Nor is it possible to read a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be brought to the Court. It was greatly emphasised that as a flat rate of taxation had been envisaged by the Act and as ultimately the tax at that rate would be realised from land found to be in possession of particular persons after a regular survey, the regular survey to be ultimately made would automatically determine the amount of tax to be paid and the adjustment of the taxes already paid could be made on that basis. On the legal aspect of the controversy raised on behalf of the Petitioners it was argued that the Act has its justification in Article 265 of the Constitution, which was not subject to the provisions of Part III of the Constitution and that, therefore, Articles 14, 19, 31 could not be pressed in aid of the Petitioners. It was also contended that even if the Act is, in effect, confiscatory, it cannot be questioned, being a taxing statute. Finally, it was urged that the question of the amount of income derived by the Petitioners from the property sought to be taxed is wholly irrelevant, because the Act was not a tax on income but it was a tax on the properly itself. (para 6) It was held that a taxing statute is not wholly immune from the attack on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the Legislature has classified persons of properties into different categories, which are subjected to different rates of taxation with reference to income or property, such a classification would not be open to the attack of inequality on the ground that the total burden resulting from such a classification is unequal. Similarly, different kinds of property may be subjected to different rates of taxation, but so long as there is a rational basis for the classification, Article 14 will not be in the way of such a classification resulting in unequal burdens on different classes of properties. But if the same class of property similarly situated is subjected to an incidence of taxation, which results in inequality, the law may be struck down as creating an inequality amongst holders of the same kind of property. It must therefore, be held that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause in Article 14, though the Courts are not concerned with the policy underlying a taxing statute or whether a particular tax could not have been imposed in a different way or in a way that the Court might think more just and equitable. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount the State ordinarily becomes the auction purchaser for the realisation of the outstanding taxes. It is clear, therefore, that apart from being discriminatory and imposing unreasonable restrictions on holding property, the Act is clearly confiscatory in character and effect. It is not even necessary to tear the veil, as was suggested in the course of the argument, to arrive at the conclusion that the Act has that unconstitutional effect. For these reasons, as also for the reasons for which the provisions of Sections 4 and 7 have been declared to be unconstitutional, in view of the provisions of Article 14 of the Constitution, all these operative Sections of the Act, namely 4, 5A and 7, must be held to offend Article 19(1)(f) of the Constitution also. (Para 10) 5. 3.5. In the case of Asstt. Commissioner v. Buckingham and Carnatic AIR (1970) SC 169 it was held as follows: It is of course true that the power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual income on property was ₹ 6000 and the proposed market value for the lands alone comes to ₹ 10,40,000/ -. The urban land tax at 0.4 per cent of the market value is ₹ 4,160 and the income-tax at the rate applicable to the Petitioner was ₹ 1,234. The total tax burden in the aggregate under the three heads was ₹ 6,794, which exceeds the rental income. In W.P. No. 3686 of 1967 the municipal annual value was 4,0.95, the property tax was ₹ 1,098 and the urban land tax at 0.4 per cent was ₹ 1,523. The proportion of the two taxes together to yearly or annual municipal value worked out to ₹ 62.5 percent. It was, therefore, said that the taxes put together would practically exhaust the total income and the charging Section in the new Act was unreasonable. The answer to the contention is that the charge is on the market value of the urban land and not on the annual letting value on which the municipal property tax is based. The basis of the two taxes being different it is not permissible to club together the two taxes and complain of the cumulative burden. If the tax is on the market value of the urban land as it is in this case it does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o are subject to their jurisdiction. An excessive levy on circumstances will tend to blur the distinction between a tax on income and a tax on circumstances. Income will then cease to be a mere measure or yardstick of the tax. Restraint in this behalf will be a prudent prescription for the local authorities to follow, (para 22). 5. 3.7. In the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax and Ors. 60 STC 1 it was observed as follows: The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity. 5. 3.8. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group. In M.P. Sundararamier and Co. v. State of Andhra Pradesh 1958 SCR 1422 : AIR 1958 SC 468 this Court dealt with the scheme of the separation of taxation powers between the Union and the States by mutually exclusive lists. In List I, Entries 1 to 81 deal with general subjects, of legislation: Entries 82 to 92-A deal with taxes. In List II, Entries 1 to 44 deal with general subjects of legislation; Entries 45 to 63 deal with taxes. This mutual exclusiveness is also brought out by the fact that in List III, the Concurrent Legislative List, there is no entry relating to a tax, but it only contains an entry relating to levy of fees in respect of matters given in that list other than court fees. Thus, in our Constitution, a conflict of the taxing power of the Union and of the States cannot arise. That being so, it is difficult to comprehend the submission that there can be intrusion by a law made by Parliament under Entry 33 of List III into a forbidden field viz. the State's exclusive power to make a law with respect to the levy and impositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion. If the levy is regarded as one in respect of tea estates and the measure of the liability is defined in terms of the weight of tea despatched from the tea estate there must be a nexus between the two indicating a relationship between the levy on the tea estate and the criteria for determining the measure of liability. If there is no nexus at all it can conceivably be inferred that the levy is not that it purports to be. The statutory provisions for measuring the liability on account of the levy throws light on the general character of the tax as observed by the Privy Council in Re: A reference under the Govt. of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934, (1936) 2 ALLER 11 . In R.R. Engineering Co. v. Zila Parishad, Bareilly (1980) 3 SCR 1 : AIR 1980 SC 1088. This Court observed that 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. Again in The Hingir Rampur Coal Co. Ltd. v. State of Orissa (1961) 2 SCR 537 : AIR 1961 SC 459 this Court observed that the method of determining the rate of levy would be relevant in consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem from administrative experience and other factors of life and not artistic visualisation or neat logic and so the literal, though pedestrian, interpretation must prevail. (Para 7). 5. 3.12. In interpreting a section in a taxing statute, according to Lord Simonds, the question is not at what transaction the section is according to some alleged general purpose aimed, but what transaction its language according to its natural meaning fairly and squarely hits : St. Aubyn (LM) v. A.G. (1951) 2 All ER 473 (HL), p.485. 5. 3.13. It is, therefore, not the function of a court of law to give to words a strained and unnatural meaning to cover loopholes through which the evasive tax-payer may find escape or to tax transactions which, had the legislature thought of them, would have been converged by appropriate words.: IRC v. Wolfson (1949) 1 All ER 865 (HL) p.868. 5. 3.14. In the case of W.M. Cory and Sons Ltd. v. IRC (1965) 1 All ER 917 (HL), p. 921, Lord Reid said- The words of a taxing Act must never be stretched against a tax-payer. There is a very good reason for that rule. So long as one adheres to the natural meaning for the charging words the law is certain, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of legislative competency, particularly whether it was a tax on lands and buildings within the meaning of Entry 49 List II it was held as follows: The Parliament enacted the Wealth-tax Act in exercise of the power under List I of the Seventh Schedule Entry 86- Taxes on the capital value of assets, exclusive of agricultural lands, or individuals and companies . That was so assumed in the decision of this Court in Banarsi Dass v. Wealth-tax Officer, Special Circle, Meerut (1965) 5 ITR 224 : AIR 1965 SC 1387 and counsel for the Petitioner accepts that the subject of Wealth-tax Act falls within the terms of Entry 86, List I of the Seventh Schedule. He says, however, that since the expression net wealth includes non agricultural lands and buildings of an Assessee, and power to levy tax on lands and buildings is reserved to the State Legislatures by Entry 49, List II of the Seventh Schedule, the Parliament is incompetent to legislate for the levy of Wealth-tax on the capital value of assets which include non agricultural lands and buildings. The argument advanced by counsel for the Petitioner is wholly misconceived. The tax which is imposed by entry 86, List I of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the land or building or both as a unit and subjecting the value to a percentage of tax. In the case of Wealth-tax the charge is on the valuation of the total assets (inclusive of lands and buildings) less the value of debts and other obligations which the Assessee has to discharge. Merely because in determining the taxable quantum under taxing statutes made in exercise of power under Entries 86, List I and 49 list II, the basis of valuation of assets is adopted, trespass on the field of one legislative power over Anr. may not be assumed. (para 5) On the question of overlapping it was held as follows: Assuming that there is some overlapping between the two entries, it cannot on that account be said that the Parliament had no power to legislate in respect of levy of wealth tax in respect of the lands and buildings which may form part of the assets of the Assessee. As observed by Gwyer, C.J., in In re, Central Provinces and Berar Act No. XIX of 1938 (1939) FCR 18 at p.49: (AIR 1939 I at p. 11) . .. that a general power ought not to be so construed as to make a nullity of a particular power conferred by the same Act and operating in the same field when by reading th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 1964 Ori. 128, and also in Sri Krishna Rao v. Third Wealth tax Officer A.I.R. 1963 Mys. 111 . (para 8). It was further held that failure to make Rules for valuation of any asset as provided in Section 7 did not affect the vires of the said section. (para 10). 6. 1.2. In the case of Assistant Commissioner of Urban land Tax, Madras and other etc. v. Buekingham and Carnatic Co. Ltd. etc., reported in A.I.R. 1970 S.C. 169, the question of law which arose for determination was whether Madras Urban Land Tax Act, 1966 was constitutionally valid. Section 5 of the said Act provided that there shall be levied and collected from every year, a tax on each urban land from the owner of such urban land at the rate of 0.4 percent of the market value of such urban land. The first question to be considered was whether the State Legislature was competent to enact the Legislation under Entry 49 of List II. In this context the Supreme Court observed as follows: . .. It was argued on behalf of the Petitioners that the impugned Act fell under Schedule VII, List I, Entry 86 that is Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies on the valuation date. The tax is not imposed on the components of the assets of the Assessee. The tax under Entry 86 proceeds on the principle of aggregation and is imposed on totality of the value of all the assets. It is imposed on the total assets which the Assessee owns and in determining the net wealth not only the encumbrances specifically charged against any item of assets but the general liability of the Assessee to pay his debts and to discharge his lawful obligations have to be taken into account. In certain exceptional cases, where a person owes no debts and is under no enforceable obligation to discharge any 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 levied on the capital or annual value under Entry 49 of List II, contemplates a levy of tax on lands and buildings or both as units. It is 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wami Goudan at p. 20l : 1940 FCR 188 : AIR 1941 FC 47 at p. 51 Sir Maurice Gwyer, C.J. said: It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in Anr. list, and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid 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 v. Parsons, 1881 7 AC 96 : Russel v. The Queen, 1882 7 AC 829 ; Union Colliery Co. of British Columbia v. Bryden 1899 AC 580 ; All. Gen. for Canada v. All. Gen. for British Columbia, 1930 AC 111 ; Board of Trustees of Lethbridge Irrigation District v. Independent Order of Foresters, 1940 AC 513 . In my opinion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from is reserved for the States shows that taxes on lands and buildings read liberally must also cover taxes in respect of gifts of land particularly agricultural land and buildings. If the entry so read can be reasonably said to include the tax, then there can be no question of recourse to the residuary powers of Parliament. (Para 7) After consideration of various decisions it was observed as follows: The subject of Entry 49 of the State List in relation to imposition of Wealth Tax came up for consideration in Sudhir Chandra Nawn v. Wealth Tax officer, Calcutta 1968 69 ITR 897 : AIR 1969 SC 59 and the view of the High Court on the construction of this entry was affirmed. Although the judgment under appeal was not referred to expressly the result is that it must be taken to be impliedly overruled. In view of the decision of this Court it is not necessary to deal with the matter except briefly. (Para 9) The Constitution divides the topics of legislation into three broad categories: (a) entries enabling laws to be made, (b) entries enabling taxes to be imposed, and (c) entries enabling fee and stamp duties to be collected. It is not intended that every e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Jowai Autonomous Distt. v. Dwet Singh AIR (1086) SC 1930 the Respondents before the Supreme Court were forest contractors and they were parties in two forests within the jurisdiction of the Appellant District Council The forests were alleged to be belonging to some private person. The Secretary of the Executive Committee of the District Council issued notice levying royally, in exercise of his powers under the United Khasi and Jaintia Hills Autonomous District (Management and Control of Forests) Act, 1958, on red pine, while pine and log pine timber grown in the private forests situated within the jurisdiction of the District Council at the rates specified therein. The challenge of the Petitioners were upheld by the High Court against which the appeal was preferred to the Supreme Court. The question before the Supreme Court was, inter alia, whether the royalty levied by the impugned notification could be realised by the District Council in respect of trees in private forest. In this context, it was observed that in the true sense what is sought to be recovered under the Act was not royally since the forest did not belong to the District Council. It was held that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence, it was held that if it was a levy in respect of tea estates, it would be referable to Entry 49 in List II. But if it was in respect of despatches of tea, legislative authority must be found for it with reference to some other Entry. It was pointed out that the Court was not shown any entry in List II or in the List III of the Seventh Schedule which would be pertinent. In this connection it was pointed out that Parliament had made a declaration in Section 2 of the Tea Act, 1953 that it was expedient in the public interest that the Union should lake under its control the tea industries under the Tea Act. The Parliament had assumed control of the tea industry including the tea trade and control of the prices. Under Section 25 of the Act a cess on tea produced in India had also been imposed. Accordingly it was held that the impugned legislation was also void for want of legislative competence, as it pertained to a covered field. 6. 1.6. The question before the seven Judges Bench in the case of The. India Cement Ltd. etc. v. State of Tamil Nadu etc. A.I.R. 1990 S.C. 85, was whether the levy of cess on royalty was within the competence of the State Legislature. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increment to an existing tax, the same matters not (sic) for the validity of the cess must be judged of in the same was as the validity of the tax to which it is an increment. Negativing the contention in this regard Supreme Court held that cess in not on land, but on royalty which is included in the definition of 'land revenue'. None of the three lists of the 7th Schedule of the Constitution permits or authorises a State to impose tax on royally. Supreme Court pointed out that this levy was sought to be justified under Entry 45 of List II of the 7th Schedule. Upon consideration of what was meant by land revenue it was held rejecting the contention of the State that the expression royalty in Section 115 and 116 of the Act cannot mean land Revenue properly called or conventionally known, which is separate and distinct from royalty. Such impost was sought to be justified on behalf of the State under Entry 49 of List II as taxes on lands and buildings and in this context reference was made to the decision in Raja Jagannath Baksh Singh v. State of U.P. (1963) 1 SCR 220 : AIR (1962) SC 1563. Dealing with the same Supreme Court observed as follows: But in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at p. 1002 it was held that a tax on the gift of land is not a tax imposed directly on land but only on a particular user, namely, the transfer of land by way of gift. In Union of India v. G.S. Dhillon AIR 1972 SC 1061 (supra), this Court approved the principle laid down in S.C. Nawn's case as well as Nazareth's case (supra). In Bhagwan Dass Jain v. Union of India at p. 816 : (1981) 2 SCR 808: AIR 1981 SC 907 at p. 911 this Court made a distinction between the levy on income from house property which would be an income-tax and the levy on house property itself which would be referable to entry 49 list II. It is, therefore, not possible to accept Mr. Krishnamurthy Iyer's submission and that a cess on royalty cannot possible be said to be a tax or an impost of land. Mr. Nariman is right that royalty which is indirectly connected with land cannot be said to be a tax directly on land as a unit. In this connection, reference may be made to the differentiation made to the different types of taxes for instance, one being professional tax and entertainment tax. In the Western India Theatres Ltd. v. The Cantonment Board, Poona Cantonment at p. 69 : 1959 (2) Supp. SCR 63: AIR 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then it should be under one of the general entries under list II. The expression 'land' according to its legal significance has an infinite extent both upward and downwards, the surface of the soil and would include not only the face of the earth but everything under it or over it. See the observations in Anant Mills Co. Ltd. v. State of Gujarat (1975) 3 SCR 220 at p. 249 : AIR 1075 SC 1234 at p. 1249. The minerals which are under the earth can in certain circumstances fall under the expression 'land' but as tax on mineral rights is expressly covered by entry 50 of list II, if it is brought under the head taxes under entry 40 of list II, it would render entry 50 of list II redundant. Learned Attorney General is right in contending that entries should not be so construed as to make any one entry redundant. It was further argued that even in pith and substance the tax fell to entry 50 of list II, it would be controlled by a legislation under entry 54 of list I. (Para 25) On the other hand, learned Attorney General submitted that if it be held to be a fee, then the source of power of the State Legislature is under entry 66 read with entry 23 of list II. Here als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mining activities carried on by the persons holding mineral concessions. It followed that the levy of tax of mining by the Board as per the impugned notification was unauthorised and liable to be set aside. At p. 306 of the said report, it was held that royalty under Section 9 of the Mines and Minerals Act was really a tax. (Para 27) To the similar effects are the observations of the High Court of Patna in L. Mal v. The State of Bihar AIR 1965 Pat. 491 at p. 494. Mr. Krishnamurthy Iyer, however, referred to he decision of this Court in H.R.S. Murthy's case (AIR 1965 SC 177) (supra). There, under the terms of a mining lease the lessee worked the mines and won iron-ores in a tract of land in a village in Chittor district and bound himself to pay a dead rent if he used the leased land for the extraction of iron ore to pay a royalty on iron ore if it were used for extraction of iron and in addition to pay a surface rent in respect of the surface area occupied or used. In the said decision the legislative competence of Sections 78 and 79 of the Madras District Boards Act was upheld by which land cess was made payable on the basis of royalty. This Court proceeded on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st II, there is no limitation to the taxing power of the State. In view of the principles mentioned hereinbefore and the expressed provisions of Section 9(2) of the Mines and Minerals (Regulation and Development) Act, 1957, this submission cannot be accepted. This field is fully covered by the central legislation. (para 32). It was further observed: In any event, royalty is directly relatable only to the minerals extracted and on the principle that the general provision, is excluded by the special one, royalty would be relatable to entries 23 and 50 of List II, and not entry 40 of List II. But as the fee is covered by the central power under entry 23 or entry 50 of list II, the impugned legislation cannot be upheld. Our attention was drawn to a judgment of the High Court of Madhya Pradesh in Misc. Petn. No. 410/83-M/s Hiralal Rameshwar Prasad v. The State of Madhya Pradesh, which was delivered on 28th March, 1986 (reported in 1986 MPLJ 514) by a Division Bench of the High Court. J.S. Vermar Acting Chief Justice, as his Lordship then was, held that development cess by Section 9 of the Madhya Pradesh Karadhan Adhiniyam, 1982 is ultra vires. It is not necessary in the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperly so called or conventionally so known. (b) Entry 49 of List II: as it is not a tax on land. A tax on land can only be levied on land as a unit must be imposed directly on land and must bear a definite relationship to it. There is a clear distinction between a tax directly on land and a tax on income arising from land. The cess is not a tax directly on land as unit but only a tax on royalty which is indirectly connected with land. In the words, of Oza, J. it is a tax not only on land but on labour and capital as well. It could have been treated as a tax on land if it had been confined to 'surface rent' instead of 'royalty'. (c) Entry 50 of List II: as a tax on royalty as it is not a tax on mineral rights and so is outside the purview of Entry 50 Even otherwise, Entry 50 is subject to the provisions of List I and is, therefore, subject to the declaration contained in, and the purview of the MMRD Act, 1957. 2. Even if the cess is regarded as a fee, the State's competence to levy the same can, if at all, only be justified with reference to Entry 23 and Entry 50 of List II but this recourse is not available as the filed is already covered by C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court was bound by the same. It was further pointed out that this apart, there was Anr. hurdle, which was discussed in connection with the second question, in the way of the State's attempt to have recourse to Entry 50 List II which was also touched upon by India Cement case (paras 26 and 27). On the question as to whether cess could be described as a tax on land it was held as follows: Can, then the cess be described as a 'tax on land? The statute considered in India Cement (1991) 1 SCR 12, as Sri Iyer correctly points out, was differently worded. It purported to levy a cess on land revenue and 'royalty' was brought within the definition of that expression. It was, therefore, a case where the levy had no reference to land at all but only to Income from the land in the case of Government lands, got by way of land revenue or otherwise. Here the statute is different. The objective of the Cess Act, as set out earlier, is to levy a cess on all land. Indeed, originally the idea was to levy a uniform cess at 25% of the annual value of all land which was subsequently raised to 50%. It is argued that the tax here is, therefore, a tax on land and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows therefore that the use to which the land is put can be taken into account in imposing a tax on it within the meaning of Entry 49 of List II for the annual value of land which can certainly be taken into account in imposing a tax for the purpose of this entry would necessarily depend upon the use to which the land is put. It is in the light of this settled proposition that we have to examine the scheme of Section 62 of the Act which imposes a tax under challenge. (para 28) After referring to the decision in Buxa Dooars' case and other cases it was held as follows: There is force in the contention urged by Sri T.S.K. Iyer that there is a difference in principle between a tax on royalties derived from land and a tax on land measured by reference to the income derived therefrom. That a tax on buildings does not cease to be such merely because it is quantified on the basis of the income it fetches is nowhere better illustrated than by the form of the levy upheld in Ralla Ram 1948 FCR 207 : AIR 1949 FC 81 followed by Bhagwan Das Jain (1981) 2 SCR 808 : AIR 1981 SC 907 which illustrates the converse situation. Mukherjee (supra) also supports this line of reasoning. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of R.R. Engineering Company v. Zilla Parishad (1980) 3 S.C.R. 1 : AIR (1980) SC 1088 it was observed as follows: ... The manner in which the levy, initially introduced a uniform cess on all land was slowly converted qua mining land, into a levy computed at multiples of the royalty amounts paid by the lessees thereof seem to bear out the contention that it is being availed of as a tax on the royalties rather than one on the annual value of the land containing the minerals. In the words of Chandrachud, J. (as he then was) one can legitimately conclude that royalty has ceased to be a mere measure or yardstick of the tax and has become the very subject-matter thereof. (para 35) For the aforesaid reasons the contention of the State seeking to justify the levy under Entries 45, 49 and 50 of List II of the Seventh Schedule was repelled. (para 36). The Court further held that it was not necessary to decide whether royalty itself was a tax or not. In this respect it was observed as follows: We do not think that it is necessary for us to express an opinion either way on this controversy for it seems to us, it is immaterial for the purposes of the present case. If royalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as fee under Entry 66 of State list. In this context, it was observed as follows: . .. Section 10 as it stands now earmarks the purposes of utilisation of only fifty per cent of the proceeds of the cess and that too is limited to the cess collected in respect of lands other than lands held for carrying on mining operations . In other word, the levy cannot be correlated to any services rendered or to be rendered by the State to the class of persons from whom the levy is collected. Whether royalty is a tax or not, the cess is only a tax and cannot be properly described as a fee. (para 41) XX XX XX X This consideration apart, even assuming it is a fee, the State Legislature can impose a fee only in respect of any of the matters in the State List. The entry in the State List that is relied upon for this purpose is Entry 23. But Entry 23, it will be seen, is subject to the provisions of List I with respect to regulation and development of mines and minerals under the control of the Union. Under Entry 54 of List I, regulation of mines and minerals development is in the field of Parliamentary legislation to the extent to which such regulation and developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mines and mineral development. Emphasising this difference, learned Counsel for the State of Orissa submits that the intent, purpose and scope of the M.M.R.D. Act is totally different and does not cross the field covered by the impugned Act. It is a law to provide for the proper exploitation and development of minerals and regulates the persons to whom, the manner in which and procedure according to which licences for prospecting of leases for minerals should be granted. That enactment is concerned with the need for a proper exploitation of minerals from lands. The impugned Act, on the other hand, concentrates on the need for development of mineral areas as such and provides for the collection of cess to cater to these needs. The scope of the subject-matter of legislation under the two Acts are entirely different and the M.M.R.D. Act cannot be considered to exclude State legislation of the nature presently under consideration. (para 43) After taking into consideration the decisions in State of West Bengal v. Union of India (1964) 1 SCR 371 : AIR 1963 SC 124; Baijnath Kedia v. State of Bihar (1970) 2 SCR 100 : AIR 1970 SC 1436; State of Haryana v. Channa Mal (1976) 3 SCR 688; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt matters and aspects which can legitimately be brought within the scope of the said statute, the conclusion seems irresistible, particularly in view of Hingir-Rampur ( AIR 1961 SC 459) and Tulloch, that the State Act has trespassed into the field covered by the Central Act. The nature of the incursion made into the fields of the Central Act in the other cases were different. The present legislation, traceable to the legislative power under Entry 23 or Entry 50 of the State List which stands impaired by the Parliamentary declaration under Entry 54, can hardly be equated to the law for land acquisition or municipal administration which were considered in the cases cited and which are traceable to different specific entries in List II or List III. (para 52). Referring to the decision in Bharat Coking Coal v. State of Bihar 1990 2 Scale 256 : 1991 (1) PLJR SC 3 it was observed as follows: The question whether the State of Bihar had the authority to grant a lease for lifting coal slurry coming out of the Appellants' washeries and getting deposited on the river bed or other lands was answered in the negative. The Court, in coming to the conclusion held that no rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , come to the conclusion that the validity of the impugned Act cannot be upheld by reference to Entry 23 or Entry 50 of List II. (para 54) It was further held that the legislation in question did not come within Entry 18 List II for the same reasons that it was held that it does not come under Entry 49 List II. It was further held that if the levy in question cannot be described as Tax on land, it cannot be described as fee with regard to land either (para 55). In respect of Bihar Act also, it was held similarly. The contention under Article 277 was also rejected (paras 57 to 60). 6. 2. Case-laws summarised. From the aforesaid decisions, amongst Ors. the following aspects are clear. A-Re: Entry 49 List II generally. 1. For the purpose of determining whether it is a Legislation with respect to Entry 49, List It, the Court must ascertain the subject matter of the legislation in its pith and substance or its true nature or character. There is a difference between the object of the Act and its subject . The court must not look only at the object of the legislation. An Act may have a perfectly lawful object but may seek to achieve the object by inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1990) SC 85 (para 22). 8. Tax on timber, which is brought from private forest, is, in pith and substance, a tax on forest produce grown on private forest land. It is not a tax on land. District Council v. Dwet Singh AIR (1986) SC 193 (para 18). 9. Tax on gift of land is not a tax imposed directly on land but only on a particular user, namely, the transfer of land by way of gift. Second Gift Tax Officer (para 11); India Cement (para 23); Union of India v. M.S. Dhillon AIR (1972) SC 1061. 10. A gift tax is not a tax on land and building as such which is a tax resting upon general ownership of land but it is a levy upon particular use of the land which is transmission of title by gift. The two are not the same thing and the incidence of tax is not the same. Since Entry 49 contemplates a tax directly levied by the general ownership of lands and buildings it cannot include gift tax as levied by the Parliament. Second Gift Tax Officer (para. 11). 11. In the case of a levy in respect of tea estate it would be referable to Entry 49 List II but if the legislation is in substance legislation in respect of despatch of tea it does not come under the said Entry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Act and the Rules made thereunder but should also take into account matters and aspects which can legitimately be brought within the scope of the said statute. On such assessment if it appears that the State Act has trespassed into the field covered by the Central Act, it would be unconstitutional Hingir-Rampur case; Tullock's case; Bharat Coking Coal v. State of Bihar (1990) 2 Scale 256 : 1991 (1) PLJR (SC) 3 ; Orissa Cement case (paras 51 to 54). (4) In view of Parliamentary legislation under Entry 54 List II and the declaration made under Section 2 of the M.M.R.D. Act and provisions of Section 9 of the Act, the power of the State Legislature is overridden to that extent. Hingir-Rampur Coal Co. Ltd. v. State of Orissa (1961) 2 SCR 537 : AIR (1961) SC 459; State of Orissa v. M.A. Tullock and Co. (1964) 4 SCR 461 : AIR (1964) SC 1284 Baijnath Kedia v. State of Bihar (1970) 2 SCR 100 (page 111) : AIR (1970) SC 1430, (at p. 1442) approved in India Cement case (para 26) (5) Entry 49 List II is more general in nature than Entry 86 List I which is more specific in nature and in the event of conflict between Entry 86 List I and Entry 49 List II Entry 86 prevails a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 MMRD 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 matters of royalties and consequently prices. The prices of their exports are fixed and cannot be escalated with the enhancement of the royallies and if different royalties were to be charged in different States, their working would become impossible. The Central Act bars an enhancement of the royalty directly or indirectly, except by the Union and in the manner specified by the 1957 Act. India Cement Case, (1990) 1 SCC 12; Orissa Cement case (para 54). 6. 3. Decision. 6. 3.1. Keeping the aforesaid in view it is to be ascertained whether it is a 'tax on land' within the meaning of En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of Schedule itself mentions that it is an assessment of tax on excavation and use of forest land for non-forest purpose . Under the Schedule when it is a case of liability of an user within the meaning of Section 3(2)(a), in that case Clauses (d), (e) and (f) of the Schedule applies. These clauses, apart from the heading, expressly mention that the tax is in respect of 'use' of forest land. It relates to certain activities relating to land. Column I of the Schedule expressly refers to 'use'. The rates specified in Col. 2 are not fixed on the land or on the basis of the area or value of the land, but it is on the basis of use in respect of the land and calculated on the basis of 'use' for a particular number of years. From the aforesaid it is clear that liability of tax imposed on the 'user' under Section 3(2)(a) is not directly on land as a unit; it does not bear any relation to it; but it is a tax on a particular use of land. It is in respect of certain activities carried on in respect of a land. The tax is by way of payment for the user of the land. If there is no such use, then there is no tax. 6. 3.4. So far as the other tax i.e. th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or activity relating to the land. Unless such activities, including mining activities, are carried out, no such tax is pay able by the occupier. It is the levy upon use of a land; levy on activities carried on a land. This is not tax on land. This will also be clear from the Schedule itself, which is to be treated as part of Section 3 read with Section 3(2)(b). The heading of the Schedule is, so far as Section 3(2)(b) is concerned, assessments of tax on excavation . It is made quite clear that the basis of tax or the rate of tax is not on the nature of the land or the value of the land, but in respect of certain use of the land, certain activities carried out in respect of the land. Under Column (1) in respect of mechanised open cast excavation , certain rates specified in corresponding column (2) is to to applied. If there has been non-mechanised open cast excavation , then a different rate is applied. If underground excavation has been carried out or subsidence has taken place, then it is under a third type of rate. From Col. 2, relating to rate, also it is clear that the rate is not on the land as such, but land which has been voided or subsided . The taxation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I shall deal with the same shortly. 6. 4.2. As I have pointed out, it is now well settled that Entry 49 List II is general in nature. In the case of any conflict between such a general entry in List II and any specific entry in List I, the specific entry shall prevail. In view of the declaration made by Section 2 of the M.M.R.D. Act, the Parliament has assumed control over the matter in respect of which the M.M.R.D. Act has been enacted. The legislative power of the State is eroded to the extent control is assumed by the Union pursuant to such Act. Reference may also be made in this connection to the M.M.R.D. Act and the Rules framed thereunder and, particularly Sections 9, 13 and 18 of the M.M.R.D. Act and Rules 15 to 17 and 31 to 41 thereof. The development of the mineral area is implicit in the MMRD Act and the Rule making power conferred therein. In any event it may be pointed out that the relevant consideration is not the actual provisions of M.M.R.D. Act and the Rules made thereunder but the Court must take into account matter and aspects which can legitimately be brought into the scope of the M.M.R.D. Act. Whether any specific Rule had been framed under any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the fact that such an argument was advanced before the Court, I shall shortly refer to the same without going into the details. In the case of Rural Litigation and Entitlement Kendra v. State of U.P. 1989 Supp (1) SCC 504 in connection with the 1980 Act it was pointed out as follows: Forest was initially in the State List covered by Entry 19. In 1976 under the 42nd Amendment the Entry was deleted and Entry 17-A in the Concurrent List was inserted. The change from the State List to the Concurrent List was brought about following the realisation of the Central Government that forests were of national importance and should be placed in the Concurrent List to enable the Central Government to deal with the matter. The same amendment of the Constitution brought in Article 48-A in Part IV is providing thus: The State shall endeavour to protect and improve the environment and to safeguard the forests and wild life of the country. Article 51-A in Part IV-A of the Constitution inserted by the same amendment provided a set of fundamental duties and Clause (g) runs thus: It shall be the duty of every citizen of India- XX XX XX (g) to protect and improve the natura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence of the Parliament only under Entry 97 List I. The other question is whether it can be said that the State Act is violative of Article 254 of the Constitution of India as it is repugnant to the Central Act being 1980 Act to this extent. Admittedly, there is no assent of the President to the State Act. 7. Article 14. 7. 1. I shall now take up the other broad contention raised to the effect that irrespective of the question of legislative competency of the said Act, the said Act is violative of the provisions of the Constitution and particularly Part III thereof. 7. 2. I shall first take up the question whether the present Act is violative of Article 14 of the Constitution. I shall consider this whether the State Act is vague or uncertain or whether it otherwise confers naked and arbitrary power without any guiding principles or it is otherwise discriminatory and accordingly unconstitutional and void: 7. 3. I shall first deal with certain decisions on this question. 7. 3.1. In the case of Messrs. Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh and Ors.: AIR (1954) SC 224, the constitutional validity of the U.P. Coal Control Order ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would proceed to examine the provisions of this Control Order, the validity of which has been impugned before us on behalf of the Petitioners (para 6). The provisions contained in Clause 3(1) of the Order that no person shall stock, sell, store for sale or otherwise utilise or dispose of coal except under a licence granted under this Order is quite unexceptional as a general provision; in fact, that is the primary object which The Control Order is intended to serve. There are two exceptions engrafted upon this general rule; the first is laid down in Sub-clause (2)(a) and to that no objection has been or can be taken. The second exception, which is on bodied in Sub-clause (2)(b) has been objected to by the learned Counsel appearing for the Petitioners. This exception provides that nothing in Clause 3(1) shall apply to any person or class of persons exempted from any provision of the above sub-clause by the State Coal Controller, to the extent of such exemption. It will be seen that the Control order nowhere indicates what the grounds for exemption are, nor have any rules been framed on this point. An unrestricted power has been given to the State Controller to make exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yick Wo v. Hopkins (1986) 118 U.S. 356 at p. 373 (B) that the action or non-action of the officers placed in such position may proceed from enmity or prejudice, from partisan zeal or animosity, from favouritism and other improper influences and motives which are easy of concealment and difficult to be defected and exposed, and consequently, the injustice capable of being wrought under cover of such unrestricted power becomes apparent to every man without the necessity of detailed investigation. In our opinion, the provision of Clause, 4(3) of the U.P. Coal Control Order must be held to be void as imposing an unreasonable restriction upon the freedom of trade and business guaranteed under Article 19(1)(g) of the Constitution and not coming within the protection afforded by Clause (6) of the Article. (para 8). Ultimately, it was held that Clause 4(3) of the Control Order as well as the cancellation of the Petitioners' licence should be held to be invalid and a writ in the nature of mandamus was issued accordingly. The petition was partly allowed. 7. 3.2. In the case of State of Madhya Pradesh and Anr. v. Baldeo Prasad, reported in A.I.R. (1961) SC 293 , the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to be heard after he is given a copy of the grounds on which the order is proposed to be made against him; but there is no doubt that all that the goonda is entitled to show is response to the notice is to challenge the correctness of the grounds alleged against him. The enquiry does not contemplate an investigation into the question as to whether a person is a goonda or not. The position, therefore, is that the District Magistrate can proceed against a person without being required to come to a formal decision as to whether the said person is a goonda or not and in any event no opportunity is intended to be given to the person to show that he is not a goonda. The failure of the section to make a provision in that behalf undoubtedly constitutes a serious infirmity in its scheme. (para 8) Incidentally it would also be relevant to point out that the definition of the work goonda affords no assistance in deciding which citizen can be put under that category. It is an inclusive definition and it does not indicate which tests have to be applied in deciding whether a person falls in the first part of the definition. Recourse to the dictionary meaning of the word would hardly b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute regards as conditions precedent to the exercise of the said authority. If the statute is silent in respect of one of such conditions precedent it undoubtedly constitutes a serious infirmity which would inevitably take it out of the provisions of Article 19(5). The result of this infirmity is that it has left to the unguided and unfettered discretion of the authority concerned to treat any citizen as a goonda. In other words, the restrictions which it allows to be imposed on the exercise of the fundamental right of a citizen guaranteed by Article 19(1)(d) and (e) must in the circumstances be held to be unreasonable. That is the view taken by the High Court and we see no reason to differ from it. (Para 10) 7. 3.3. In the case of K.A. Abbas v. Union of India. AIR (1971) S.C. 481 (Paras 46 to 48) it was observed that it cannot be said as an absolute principle that no law will be considered bad for sheer vagueness. It was observed that there is ample authority for the proposition that a law affecting fundamental rights may be so considered. Reference was made in this connection to the aforesaid State of M.P. decision. 7. 3.4. In the case of Air India v. Nargesh Meerza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved so that in such cases Article 14 will be completely out of the way. (3) Article 14 certainly applies where equals are treated differently without any reasonable basis. (4) Where equals and unequals are treated differently, Article 14 would have no application. (5) Even if there be one class of service having several categories with different attributes and incidents, such a category becomes a separate class by itself and no difference or discrimination between such category and the general members of the other class would amount to discrimination or to denial of equality of opportunity. (6) In order to judge whether a separate category has been carved out of a class of service, the following circumstances have generally to be examined- (a) the nature, the mode and the manner of recruitment of particular category from the very start, (b) the classifications of the particular category, (c) the terms and conditions of service of the members of the category, (d) the nature and character of the posts and promotional avenues, (e) the special attributes that the particular category possess which are not to be found in other classes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act is 100 evident to be explained away. And Mahajan, J. agreeing with the same expressed his views thus (at p. 86): The present statute suggests no reasonable basis or classification, either in respect of offences or in respect of cases. It has laid down no yardstick or measure for the grouping either of persons or of cases or of offences by which measure these groups could be distinguished from those who are outside the purview of the Special Act. The Act has left this matter entirely to the unregulated discretion of the provincial Government. Mukherjee, J. observed thus (at p. 91): In the case before us the language of Section 5(1) is perfectly clear and free from any ambiguity. It vests an unrestricted discretion in the State Government to direct any cases or classes of cases to be tried by the Special Court in accordance with the procedure laid down in the Act.... I am definitely of opinion that the necessity, of a speedier trial is too vague, uncertain and elusive a criterion to form a rational basis for the discriminations made.... But the question is how is this necessity of speedier trial to be determined? Not by reference to the nature of the offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or standards laid down in the Regulation there are obviously no restraints or limits within which the power of the Executive Committee to refuse to grant or renew a licence is to be exercised... The power of refusal is thus left entirely unguided untrammelled. A provisions which leaves an unbridled power to an authority cannot in any sense be characterised as reasonable. Section 3 of the Regulation is one such provision and is therefore liable to be struck down as violative of Article 19(1)(g). (para 115) To the same effect is Anr. decision of this. Court in State of Mysore v. S.R. Jayaram: (1968) 1 SCR 349 : AIR 1968 SC 346, where the following observations were made (at pp. 348, 349 of AIR): The Rules are silent on the question as to how the Government is to find out the suitability of a candidate for a particular cadre.... It follows that under the latter part of Rule 9(2) it is open to the Government to say at its sweet will that a candidate is more suitable for a particular cadre and to deprive him of his opportunity to join the cadre for which he indicated his preference. We hold that the latter part of Rule 9(2) gives the Government an arbitrary power o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power on the Managing Director is clearly violative of Article 14, as the provision suffers from the vice of excessive delegation of powers. (para 117) For these reasons, therefore, we have no alternative but to strike down as invalid that part of Regulation 47 which gives option to the Managing Director to extend the service of an AH. The effect of striking down this provision would be that an AH, unless the provision is suitably amended to bring it in conformity with the provisions of Article 14 would continue to retire at the age of 45 years and the Managing Director would be bound to grant yearly extension as a matter of course, for a period of ten years if the AH is found to be medically fit. This will prevent the Managing Director from discriminating between one AH and Anr. (para 118) The first part of the Regulation has become redundant in view of the Notification dated 12.4.80, referred to above, but the latter part which gives the General Manager a blanket power to retain an AH till the age of 40 years, still remains. As, however, the bar of marriage is gone, the Rules of 1972 which empower the General Manager to retain an AH in service will have to be read a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case may require. (3) Subject to the provisions of Sub-section (4) every arbitration award and the award of a Labour Court or Tribunal, shall, within a period of thirty days from the date of its receipt by the State Government be published in such manner as the State Government thinks fit. (4) The State Government may before publication an award of a Labour Court or Tribunal under Sub-section (3), remit the awaited for reconsideration of the adjudicating authority, and that authority shall, after reconsideration, submit its award to the State Government, and the State Government shall publish the award in the manner provided in Sub-section (3). (5) Subject to the provisions of Section 6A, an award published under Sub-section (3) shall be final and shall not be called in question in any Court in any manner what soever. (6) A Labour Court Tribunal or Arbitrator may either of its own motion or on the application of any party to the dispute correct any clerical or arithmetical mistakes in the award, or errors arising therein from any accidental slip or omission; whenever any correction is made as aforesaid, a copy of the order shall be sent to the State Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word region is nowhere defined in the Act. Similarly Section 27(6)(b) requires the Administrator to have regard to the anticipated demand, as estimated by him, for ornaments in that region . The expression anticipated demand is a vague; expression which is not capable of objective assessment and is bound to lead, to a great deal of uncertainty. Similarly the expressions suitability of the applicant in Section 27(6)(c) and public interest in Section 27(6)(g) do not provide any objective standard or norm or guidance. For the these reasons it must be held that Clauses (a), (b), (e) and (g) of Section 27(6) impose unreasonable restrictions on the fundamental right of the Petitioner to carry on business and are constitutionally invalid. It was also contended that there was no reason why the conditions for renewal of licence should be as rigorous the conditions for initial grant to licence. The requirement of strict conditions for the renewal of licence renders the entire future of the business of the dealer uncertain and subjects it to the caprice and arbitrary will of the administrative authorities. There is justification for this argument and the requirement of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power, such rules may-- (a) specify any disease or condition to which the provisions of Section 3 shall apply; (b) prescribe the manner in which advertisement of articles or things referred to in Clause (c) of Sub-section (1) of Section 14 may be sent confidentially. was urged that Section 3(d) was delegated legislation and not conditional legislation and the power delegated therein is only to specify conditions and diseases in the rules. In this context it was observed as follows: The interdiction under the Act is applicable to conditions and diseases set out in the various clauses of Section 3 and to those that may under the last part, of Clause (d) be specified in the rules made under Section 16 The first Sub-section of Section 16 authorises the making of rules to carry out the purposes of the Act and Clause (a) of Sub-section (2) of that Section specifically authorises the specification of diseases or conditions to which the provisions of Section 3 shall apply. It is the first sub-section of Section 16 which confers_the general rule making power i.e., it delegates to the administrative authority the power to frame rules and regulations to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the more improper and undesirable to expose the precious rights like the rights of life, liberty and property to the vagaries of the individual whims and fancies. It is trite to say that individuals are not and do not become wise because they occupy high seats of power, and good sense, circumspection and fairness does not go with the posts, however high they may be. There is only a complacent presumption that those who occupy high posts have a high sense of responsibility. The presumption is neither legal nor rational. History does not support it and reality does not warrant it. In particular, in a society pledged to uphold the rule of law, it would be both unwise, and impolitic to leave any aspect of its life to be governed by discretion when it can conveniently and easily be covered by the rule of law. (para 230) The reliance placed on the decision in Ram Krishna Dalmia v. Justice S.R. Tendolkar to support the above theory is also according to me not correct. As has been pointed out there, the Commissions of Inquiry Act, 1952, the validity of which was challenged on the ground of unguided powers to institute inquiries, was not violative of Article 14 because the long title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e second proposition laid down by this Court in Jyoti Pershad v. Administrator for The Union Territory of Delhi at P. 137 (1992) 2 SCR 125 : AIR 1961 S.C. 1602. The enactment or the rule might not in terms enact a discriminatory rule of law but might enable an unequal or discriminatory treatment to be accorded to persons or things similarly situated. This would happen when the legislature vests a discretion in an authority, be it the Government or an administrative official action either as an executive officer or even in a quasi-judicial capacity by a legislation which does not lay down any policy or disclose any tangible or intelligible purpose thus clothing the authority with unguided and arbitrary powers enabling it to discriminate. (Para 21) 7. 4.1. I shall now consider the merits of the said contention and for this purpose I shall examine in details the true scope, effect and implications of the different provisions of the said Act, particularly having regard to the fact that this is a taxing statute. For this purpose, I shall examine all the relevant provisions of the said Act with particular reference to Section 3 stated to be the charging section - read with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been left out of the scope of the said Act, there is no explanation either by way of intrinsic or extrinsic evidence. No intelligible differentia appears from the Act or otherwise. Classification for legitimate purpose is permissible but not discrimination. There is nothing to show that there way any reasonable classification. (b) Section 2 -- Definition: (i) Section 2(a) - Appellate Authority within the meaning of Section 7(1) is to be appointed by the State. No qualification or the kind of persons to be appointed or their tenure or termination of tenure has been specified anywhere in the Act. The appeal is from the order of the Collector or any one appointed as Collector for the purpose of the Act. Any one can be appointed as Appellate authority. It may be an appeal from Caesar to Caesar's wife as pointed out by the Supreme Court in the case of Ram and Shyam Company v. State of Haryana AIR (1985) SC 1147 (at page 1151). (ii) Section 2(b) and (h): The tax being imposed for mechanical and biological reclamation Section 3(1) which expressions have been defined in Sections 2(b) and 2(h) respectively of the said Act. So far as the biological ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of this Act only. There is no restriction or minimum qualification or condition laid down for such appointment. The Concession officer does not mean any thing. It may include any person holding any post under the State Government. This is very important because under Section 4, it is the Collector who has been empowered to levy, collect and realise the tax at the rate mentioned in the Schedule. I have pointed out the complicated nature of the charging section read with the definition section and the Schedule. Accordingly, the Collector under the Act is a very important authority. This confers an arbitrary power to appoint any Government employee as Collector though all such matters are left for his decision. (iv) Section 2(e) - Forest land means any land notified as under any Act and/or recorded as forest in revenue record. How is such recording going to be ascertained or challenged for the purpose of this Act? (v) Section 2(n) -- Vegetative density is defined as certain percentage of a unit area or the forest land not receiving sunlight due to effective tree growth land not receiving sunlight due to effective tree growth or green canopy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not also been defined or otherwise provided for in the Act. (v) The name of the Act is stated in the Title and Section 3(1) as the Bihar Restoration and Improvement of Degraded Forest Land Tax Act . It is stated therein that this is a tax for mechanical and biological reclamation of forest land for rehabilitation so that the land is reclaimed as far as possible . What is meant by as far as possible . To what Extent? By whom? Whose satisfaction ? Is it subjective or objective? What is the guideline? Nothing is provided therein. (vi) The proviso to the Sub-section (1) confers power on the Government to amend the Schedule by rules as and when considered necessary . This confers a wide power. No guideline has been laid down as to when such power of amendment is to be exercised. The power to amend includes, under the general principles, which is well settled, the power to add, vary, omit or substitute the existing provision. This is important from Anr. aspect. The Schedule does not only specify the rate. It prescribes different rates for different types of voiding and different types of use . In view of such proviso, by exercise of the Rule making power the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , apart from any existing work of voiding or any future voiding. It does not merely state that it applies to all forest lands already voided before the date of the commencement of the Act but only those voided immediately before the date of commencement of the Act. What is meant by immediately ? It is not to be treated as a surplusage. It does not mean all past voiding but only 'immediate past voiding. But what is immediate has not been specified. Such voiding in the past might have been one day, one year, 10 years or 20 years back. On the other hand, the word immediately cannot mean any indefinite period. It only means a very short period. What is this short period? (d) Re: Section 3(4): This confers power on the State Government to frame Rules to impose a lump sum tax in addition to the tax under Sub-section (1). This power to impose an additional tax, over and above the tax referred to in Sub-section (1) which refers to the Schedule, confers a very wide power for which there is no guidance and no schedule. I have considered this aspect of the matter specifically in details elsewhere in this judgment. (c) Re: Section 4: It confers the power o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext Anr. aspect of the matter may be pointed out. The rules made under this Act are not required to be laid before the Legislature. If there had been any such provisions, then there would have been no question of abdication, as the delegate is kept under strict vigilance and control: D.S. Garewal v. State of Punjab AIR 1959 SC 512. M.K. papiah v. The Excise Commissioner (1975) 1 S.C.C. 492. (g) Schedule -- It is clear that Clause (a), (b) and (c) under. Col. I relates to liability of occupier under Section 3(2)(b) and Clauses (d), (e) and (f) refer to the liability of user under Section 3(2)(a) of the Act. Col. 1 relates to certain use and activities and Col. 2 specifies certain rates, depending on such use and/or such activity . I have considered this aspect of the matter in details in Anr. context. It may be pointed out, however, that though in respect of mechanical open cast excavation and underground excavation/subsidence area there is a maximum limit of impost specified in the Schedule, there is no such limit of impost specified in the Schedule, there is no such limit specified in respect of nonmechanical open-cast excavation though all of them come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso when unequals are treated equally. Here having regard to the purported object of such taxation, which does not specify how such object is to be achieved --unequals have been treated equally. Even the maximum limit does not depend on the nature of voiding. This is not a permissible classification. There is no intelligible differentia for the same. 7. 4.4. For the aforesaid reason, in my opinion, the said Act confers a naked and arbitrary power which is also vague and uncertain. Accordingly, the Act is violative of Article 14 of the Constitution. 8. 1. I shall next take up separately the question of machinery for levy and imposition of tax. 8. 2. The question is whether a proper machinery has been provided for imposition of tax in the present case. It is well settled that it is mandatory not only to prescribe the Assessing Authority but to provide for machinery for adjudication of dispute regarding the amount of tax. Reference may be made in this connection to the following: 8. 3.1. In the case of K.T. Moopil Nair v. State of Kerarla AIR 1961 SC 552 it was observed as follows: ... Ordinarily, a taxing statute lays down a regular machinery for maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing statute provides no procedural machinery for assessment and levy of tax, the courts would be justified in striking down the impugned statute as unconstitutional. 8. 3.3. In the case of Union of India and Ors. v. The Tata Iron and Steel Company: AIR 1975 SC 769, it was observed as follows: The short question therefore, that arises for consideration is whether in the above background the High Court was right in interfering with the orders under Article 226 of the Constitution. It is not for the High Court no for this Court to come to a conclusion on facts as to whether the product can truly tome under the description of skelp. That undoubtedly would require some evidence be taken at the level of the taxing authority provided, however there is an identifiable, uniform and determinate test by which skelp can be property distinguished from strip. In the mass of documents filed before us and the extensive arguments addressed at the bar with regard to the definitions culled 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the basis of the same, it was held by the learned Single Judge that it is mandatory not only to prescribe the assessing authority but to provide for the machinery for adjudication of a dispute regarding the amount of tax which may arise between the Assessee and the Municipal Committee. 8. 3.5. In the case of Assistant Commissioner of Urban Land Tax and Ors. v. Buckingham and Carnatic Co. Ltd. reported in A.I.R. 1970 SC 169 while rejecting the contention that no machinery was provided for determining the market value and accordingly the impugned Act was ultra vires Article 14, the Supreme Court observed as follows: We proceed to consider the argument that no machinery is provided for determining the market value and the provisions of the new Act therefore, violate Article 14 of the Constitution. The argument was stressed by Mr. V.K.T. Chari that the guidance given under the 1963 Act has been dispensed with and the Assistant Commissioner is not hound to take into account, among other matters, the sale price of similar sites, the rent fetched for use and occupation of the land the principles generally adopted in valuing land under the Land Acquisition Act and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in the notice or to produce any evidence on which the owner may rely. After hearing such evidence as the owner may produce and considering such other evidence as may be required, the Assistant Commissioner may fix the market value. The proceeding before the Assistant Commissioner is judicial in character and his opinion regarding the market value is reached objectively on all the materials produced before him. Section 20 provides for an appeal by the Assessee objecting to the determination of the market value made by the Assistant Commissioner to a Tribunal within thirty days from the date of the receipt of the copy of the order. The Act requires that the Tribunal shall consist of one person only who shall be a judicial officer not below the rank of a Subordinate Judge. By Section 30, the Board of Revenue is empowered either on its own motion or on application made by the Assessee in this behalf, to call for and examine the records of any proceedings under the Act (not being a proceeding in respect of which an appeal lies to the Tribunal under Section 20), to satisfy itself as to the regularity of such proceeding or the correctness, legality or propriety of any decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter III of the Constitution, then it is a nullity from its inception. The prohibition imposed by Article 13(2) goes to the root of the matter and limits the State's power to make law; the law made in spite of the prohibition is a still-born law. Accordingly, if the Act is violative of the provisions of the Constitution, it cannot be saved by the Rules framed under the Act. 8. 4.3. There is Anr. aspect of the matter. Enforcement of the provisions of the Act is not postponed till the Rules are framed. The Act can be enforced without the Rules. Reference may be made in this connection to the decision of the Supreme Court in Sudhir Chandra Nawn v. Wealth Tax Officer AIR 1969 SC 59 (para 10). Moreover, a statutory rule cannot enlarge the meaning of the section; if a Rule goes beyond what the section contemplates, the rule must yield to the statutes -- Central Bank of India v. Their Workmen AIR 1960 SC 12 (para 20). 8. 5.1. Accordingly I shall consider the relevant provisions of the Act itself, without referring to the Rules, to ascertain whether proper machinery has been provided therein. In this connection I may point out that no fresh rules were framed under this A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no provision for hearing at all at the assessment stage though all such various aspects have to be determined. In this context reference may be made to provision for appeal as provided by Section 7 which provides for a hearing. However, such provisions for appeal, with hearing, cannot cure the defect of absence of such provision at the assessment stage. Reference may be made in this connection to Mysore State Road Transport Corporation v. Mirja Khasim Ali Beg AIR 1977 SC 747 at page 754 (paras 14 and 15) where it was pointed out that the initial defect in the original order cannot be cured by proceeding in appeal therefrom. As pointed out in Serajuddin and Co. v. State of Orissa AIR 1974 Cal 296 at page 300 (para 16): If the foundation of a structure is removed, the superstructure cannot stand and must collapse . Having regard to the constitution of the appellate authority under the Act, the cliche of appeal from Caesar to Caesar's wife should also be kept in mind. In this connection reference may be made to Ram and Shyam Company v. State of Haryana: AIR 1985 SC 1147 at p. 1151 (para 9). There is no provision for any survey. The tax is imposed on 'forest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t land having only bushes and grass but no tree within the meaning of Section 2(f) read with Clause (b) of Schedule or whether it is of certain 'vegetative density' within the meaning of Section 2(n). Over and above the same, whether it is receiving 'sunlight due to effective tree growth or green canopy' -- whatever may be the meaning of the same -- has to be ascertained. Further, the extent of the area has to be ascertained because the tax is to be paid according to the area. Total area has to be ascertained. There is no provision for survey. There is no machinery laid down to ascertain any of the same. 8. 5.3. So far as the liability of the 'occupier' within the meaning of Section 3(2)(b) read with Section 2(k) is concerned, the rates specified in Clauses (a), (b) and (c) of the Schedule would apply. There is no procedure or machinery laid down so as to ascertain the various aspects involved. I shall give some instances: (i) Whether it is a 'voided' land within the meaning of Section 2(o) has to be ascertained. This involves ascertainment of various aspects. Whether it is a 'left over' forest land. Whether it is a land fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd imposition of the tax payable. 8. 8. The next question is whether it can be saved by the Rules even if the Rules can be taken into consideration for this purpose. I have set out the relevant portion of the Rules hereinbefore. Even if the said Rules can be referred to for this purpose, these Rules do not improve the situation. The Rules merely provide for filing of Returns in Form I showing the area of forest land voided and/or being voided and the one of forest land used and/or being used for non-forest purpose (Rule 3), the effect of failure to file return (Rule 4), assessment of tax (Rule 5), manner of serving notice (Rule 6) and filing of appeal (Rule 7) and nothing else. It does not provide for anything else. It does not provide for any machinery, as referred to hereinbefore, which is required before such tax may be assessed or payable or recoverable. The Rules and the Return proceeds on same assumption. As a matter of fact Rule 5 empowers the Collector to assess the tax after satisfying himself with the particulars stated in the return filed under Rule 3 or after ascertainment of the area under Rule 4 when the return is not filed. This satisfaction also is subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the constitutional validity of Sub-section (4) of Section 3 of the said Act which purports to confer power on the State Government to impose a lump sum tax by way of framing Rules, in addition to the tax imposed under Sub-section (1). Having regard to my conclusion regarding the validity of the main tax, it is not strictly necessary to go into the question of validity of this power of imposition of additional tax. This cannot exist unless the main imposition exists. However, in my opinion, even if the main taxation be held to be valid and competent, this power to impose additional tax by framing rules, cannot in any event be supported. 9. 2. This is the most peculiar and unusual taxing provision I have ever come across. This violates all the canons of permissible taxation. It not only violates all the principles relating to taxation, but also all other provisions of the Constitution particularly Part III thereof. Firstly, power has been conferred to impose such tax by rules to be framed by the State Government. Taxation is not by legislature but by executive fiat under delegated legislation. Secondly, this is a lump-sum tax in addition to the tax under Sub-section (1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In view of my finding as above particularly my finding that no machinery has been laid down for such levy and impost, to that extent such taxation, in my opinion, amounts to unreasonable restriction violative of the fundamental right to carry on trade and business guaranteed by Article 19(1)(g) and not protected by Article 19(6) at least from procedural point of view. 10. 2. There is Anr. aspect of the matter to be considered in this context. This is not really a taxation but expropriation . Where it appears that the taxing statute is confiscatory, the courts would be justified in striking down the impugned statute as unconstitutional (Rai Ramkrishna v. State of Bihar AIR 1963 SC 1667). If the land is excavated by mechanised open cast process, the taxation may go upto 55 lakhs per hectare. One hectare is about 3 bighas or 60 kathas. Accordingly, it conies to about ₹ 90,000/ - per katha. If it is non-mechanised open-cast excavation, rate per katha is fixed but there is no upper limit. If it is underground excavation or subsidence it is 45 lakhs per hectare. So far as the liability of the user under Section 3(2)(a) is concerned, where (d) of schedule applies it is 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Act. (2) The Act and the Ordinance are also unconstitutional and void for the following reasons: (a) The material provisions of the said Act and the Ordinance are vague and uncertain and confers naked and arbitrary power. (b) No adequate machinery has been provided in the said Act for the purpose of levy, imposition and assessment of the tax introduced. (c) Section 3(4) of the Act permitting imposition of Additional tax is in any event unconstitutional and void. (3) The Act and the Ordinance are violative of Articles 19(1)(g) and not saved by Article 19(6) of the Constitution of India. (4) The Act and the Ordinance are violative of Article 301 read with Article 304(b) of the Constitution. 13. Accordingly, it is declared that the Bihar Restoration and Improvement of Degraded Forest Land Taxation Act, 1992 , and the earlier Ordinance to that effect, is unconstitutional and void. It is further declared that all action taken under the said Act, Ordinance and the Rules framed thereunder, are unconstitutional and void. There will be a writ of mandamus directing the Respondents and their Officers not to give effect to the said Act or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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