TMI Blog2004 (1) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... and Minerals (Regulations and Development) Act, respectively. Having regard to the purport and object of the said Parliamentary Acts and the declarations contained in section 2 of the 1957 Act and the 1952 Act, the State must be held to be denuded of its power to levy any tax on coal or tea, particularly, having regard to the provisions of sections 9, 9A, 13, 18 and 25 of the 1957 Act and sections 10, 13, 15, 25 and 30 of the Tea Act. Field of taxation on minerals is also covered by section 25 of the 1957 Act. The field of taxation under the Tea Act is specifically covered by section 25 thereof. The State being owner of the minerals and grant of mineral right being controlled by the Parliamentary statute, the State is denuded of its power to impose any tax on mineral right in terms of entry 50 of List II of the Seventh Schedule to Constitution of India. Having regard to the underlying object of the 1953 Act and the 1957 Act, even if the doctrine of pith and substance is applied, it may not be possible to hold that the State Legislature has only incidentally encroached upon the legislative field occupied by Parliament. Levy of tax on coal bearing lands and mineral beari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the character thereof particularly keeping in view the purpose and object the Parliamentary Acts seek to achieve. In determining the legislative competence the taxing event also plays an important role. The Tea Act having been enacted in terms of entries 10 and 14 of List I as also article 253 of the Constitution, the State is completely denuded of its legislative power in relation thereto. The expression "tea" should be given a broad meaning and entry 52 of List I of the Seventh Schedule to the Constitution should be interpreted in relation to tea having regard to the purport and object it seeks to achieve. - C.A. 1532 OF 1993 - - - Dated:- 15-1-2004 - Judge(s) : V. N. KHARE., R. C. LAHOTI., B. N. AGARWAL., S. B. SINGH., DR. A. R. LAKSHMANAN JUDGMENT [The judgment of V.N. KHARE C.J.I. and R.C. LAHOTI, B.N. AGRAWAL and DR. AR. LAKSHMANAN JJ. was delivered by R.C. LAHOTI J. S.B. SINHA J. delivered a separate judgment] R.C. LAHOTI J.- This batch of matters, some appeals by special leave under article 136 of the Constitution and some writ petitions filed in this court, raise a few questions of constitutional significance centering around entries 52,54 and 97 in List ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed.- The road cess and the public works cess [shall be assessed- (a) in respect of lands on the annual value thereof, (b) in respect of all mines and quarries, on the annual despatches therefrom, and, (c) in respect of tramways, railways and other immovable property, on the annual net profit thereof, ascertained respectively as in this Act prescribed,] and the rates at which such cesses respectively shall be levied for each year shall be determined for such year in the manner in this Act prescribed: Provided that (1) the rates of such road cess and public works cess shall not exceed six paise and twenty-five paise respectively on each rupee of such annual value, (2) the rates of each of such road cess and public works cess shall not exceed- (i) fifty paise on each tonne of coal, minerals or sand of such annual despatches, and (ii) six paise on each rupee of such annual net profits, Explanation.- For the purposes of this proviso, one tonne of coke shall be counted as one and a quarter tonne of coa1. 2. THE WEST BENGAL PRIMARY EDUCATION ACT, 1973 "78. Education cess.-(1) All immovable properties on which road and public works cesses are asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of coal mines, at the rate of [thirty-five paise per centum] on each tonne of coal on the. . . despatches therefrom; (c) in respect of mines other than coal mines and quarries, [at the rate of fifty paise on each tonne of materials other than coal on the annual despatches therefrom]. Explanation.-For the purpose of clause (b) the expression 'value of coal' shall mean-. (i) in the case of despatches of coal as a result of sale thereof, the prices charged by the owner of a coal mine for such coal but excluding any sum separately charged as tax, cess, duty, fee or royalty for payment of such sum to Government or a local body, or any other sum as may be prescribed, or (ii) in the case of despatches, other than those referred to in item (i), the prices chargeable by the owner of a coal mine for such coal if they were dispatched as a result of sale thereof, but excluding any sum separately chargeable as tax, cess, duty, fee or royalty for payment of such sum to Government or a local body, or any other sum as may be prescribed: Provided that if more than one price is chargeable for the same variety of coal, the maximum price chargeable for that variety of coal shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liable for levy of cess in respect of any year immediately succeeding the said two consecutive years in accordance with clause (a): Provided further that where no despatch of minerals or materials is made during a period of more than two consecutive years from the mineral-bearing land or quarry as referred to in clause (c), such land or quarry shall be liable for levy of cess in respect of any year immediately succeeding the said two consecutive years in accordance with clause (a). Explanation.- For the purposes of this chapter, "coal-bearing land" shall have the same meaning as in clause (1a) of section 2 of the West Bengal Rural Employment and Production Act, 1976.' (2) in section 78A,- (a) for clause (a), the following clause shall be substituted: '(a) the education cess payable for a year under sub-section (1) of section 78 in respect of coal-bearing land referred to in clause (b) of subsection (2) of that section shall be paid by the owner of such coal-bearing land in such manner, at such intervals and by such dates as may be prescribed;' (b) for clause (b), the following clause shall be substituted: '(b) every owner of a coal-bearing land shall furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable for such year is found not to have been paid in the manner and by the date prescribed under clause (a), he shall pay a simple interest at the rate of two per centum for each English calendar month of default in payment under clause (a) from the first day of the month next following the prescribed date for such payment up to the month preceding the month of full payment of education cess under clause (a) or up to the month prior to the month of such assessment under clause (d), whichever is earlier, upon so much of the amount of education cess payable by him according to clause (a) as remains unpaid at the end of each such month of default: Provided that where the education cess payable under clause (a) is not paid in the manner prescribed under that clause by the owner of a coal-bearing land, the notified authority shall, while making the assessment under clause (d) in respect of a year, apportion on the basis of such assessment the education cess payable in accordance with clause (a);' (h) in clause (gc), for the words "coal mine", the words "coal-bearing land" shall be substituted; (i) in clause (ge), for the words "coal mine", the words "coal-bearing land" shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two years immediately preceding that financial year shall be determined accordingly; (1a) 'coal-bearing land' means holding or holdings of land having one or more seams of coal comprising the area of a coal mine; (1b) 'despatched', for a financial year, shall, in relation to a mineral-bearing land (other than coal-bearing land) or a quarry, mean one-half the quantity of minerals, or minerals, despatched during two years immediately preceding that financial year from such mineral-bearing land or quarry ; (1c) 'development value' means a sum equivalent to five times the annual value of land as assessed under the Cess Act, 1880 ;' (b) after clause (3), the following clause shall be added and shall be deemed always to have been added: '(4) "year" means a financial year as defined in clause (15) of section 3 of the Bengal General Clauses Act, 1899 ;' (2) in section 4, for sub-section (2), the following sub-section shall be substituted: '(2) The rural employment cess shall be levied annually- (a) in respect of land, except when a cess is leviable and payable under clause (b) or clause (c) or sub-section (2A), at the rate of six paise on each rupee of develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mencement of the West Bengal Taxation Laws (Amendment) Act, 1992 : Provided that interest under clause (ga) or clause (gb) in respect of any period ended on or before the 31st day of March, 1992, or interest under clause (gc) in respect of assessments for which notices of demand of rural employment cess under clause (d) are issued before the date of commencement of the West Bengal Taxation Laws (Amendment) Act, 1992, shall continue to be payable in accordance with the provisions of this Act as they stood before the coming into force of the said Act as if the said Act had not come into force ;" (k) in clause (gh), for the words "coal mine", the words "coal-bearing land" shall be substituted; (l) in clause (gi), for the words "coal mine", the words "coal-bearing land" shall be substituted; (m) in clause (gj), for the words "coal mine", the words "coal-bearing land" shall be substituted; By order of the Governor. R. Bhattacharyya, Secy. to the Govt. of West Bengal." It is the constitutional validity of the amendment in the two legislations, given effect to from April 1,1992, which was successfully impugned in the High Court and is sought to be restored in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyment and Production Act, 1976. Cesses were sought to be levied upon certain lands and buildings in the State for raising funds for the purpose of providing primary education throughout the State and to provide for employment in rural areas. Different rates in respect of lands, coal mines and other mines on annual basis were provided. Tea estates were carved out as a separate category and a separate rate was prescribed therefor as under. "Section 4. (2) The rural employment cess shall be levied annually- (a) in respect of lands, other than a tea estate, at the rate of six paise on each rupee of development value thereof; (aa) in respect of a tea estate at such rate, not exceeding rupees six on each kilogram of tea on the despatches from such tea estate of tea grown therein, as the State Government may, by notification in the Official Gazette, fix in this behalf: Provided that in calculating the despatches of tea for the purpose of levy of rural employment cess, such despatches for sale made at such tea auction centers as may be recognized by the State Government by notification in the Official Gazette shall be excluded: Provided further that the State Government, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (L) O. Kuntze and producing green tea leaves from such plant, and shall include land comprised in a factory or workshop for producing any variety of the product known commercially as 'tea' made from the leaves of such plant and for housing the persons employed in the tea estate and other lands for purposes ancillary to the growing of such plant and producing green tea leaves from such plant." Clause (a) in sub-section (3) was also substituted which had the effect of making the owner of the tea estate liable for the said cess. The other provisions require the owner of the tea estate to maintain a true and correct account of green tea leaves produced in the tea estate. Sub-section (4) was also substituted. The substituted sub-section (4) empowered the State Government to exempt from the cess such categories of tea estates producing green tea leaves not exceeding two lakh fifty thousand kilograms and located in such area as may be specified in such notification. Section 4B contains the validation clause. It says that any cess collected for the period prior to the said Amendment Act shall be deemed to have been validly levied by it and collected under the Amended Act. Any assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0; Goodricke [1995] 98 STC 32; [1995] Supp. 1 SCC 707 was rightly not followed in Mahanadi Coal Fields [1995] Supp 2 SCC 686, rather Mahanadi Coal Fields [1995] Supp 2 SCC 686 has whittled down the authority of Goodricke [1995] 98 STC 32; [1995] Supp 1 sec 707 and that being the position of law the impugned cess is ultra vires the power of the State Legislature and deserves to be pronounced so. In short, the same challenge as was laid and turned down in Goodricke [1995] 98 STC 32; [1995] Supp.1 SCC 707 is reiterated drawing support from the decisions of this court previous and subsequent to Goodricke [1995] 98 STC 32; [1995] Supp 1 sec 707 and seeks the overruling of Goodricke [1995] 98 STC 32; [1995] Supp 1 SCC 707. (C) Brick-Earth matters The Bengal Brickfield Owners' Association, being a representative body of the persons engaged in the activity of brick manufacturing and owning brickfields as also one of the brickfield owners, have joined in filing a writ petition before this court wherein the constitutional validity of the very same provisions as contained in the Cess Act, 1880, the West Bengal Primary Education Act, 1973 and the West Bengal Rural Employment and Production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, the cess sought to be levied by the impugned State legislation is in the nature of fee and not tax. The purpose of levying the fee, as stated in the Preamble to the relevant legislation, is rendering different services to the society and for public benefit. The cesses have been levied by the State Government for securing of welfare to the people by the State as is enshrined in Part IV of the Constitution of India by providing communication facilities, removal of illiteracy and rural employment to the poor living below the poverty line. The impugned legislations levying the cess, do not encroach upon the field covered by the Central legislation. The brick-kiln owners extract the brick-earth as an item of trade. From every 100 cft of brick-earth which weighs 5 metric tonnes, 1,382 bricks are manufactured. The dispatch of 1,382 bricks means the dispatch of 100 cft or 5 metric tonnes of brick-earth. A brickfield owner performs dual functions: firstly, he extracts a quantum of brick-earth from the quarry, and secondly, he despatches the same for manufacture of bricks in the same quarry-field. The brickfield owner is an extractor of brick-earth and also a manufacturer of bricks. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts' means rights conferred on a lessee under a mining lease granted or renewed for mining operations in relation to minerals (providing operation for raising, winning or extracting coal) as defined in the Mines and Minerals (Regulation and Development) Act, 1957 (Act No. 67 of 1957). 3. (1) The authority may, subject to sub-rules (2) and (3), impose a cess on mineral rights on such minerals and minor minerals and at such rates are specified below: Mineral/Minor Mineral Minimum rate Maximum rate (1) Cess on coal Rs.5.00 (per ton) Rs.10.00 (per ton) (2) Cess on stone, Rs.2.00 (per cubic Rs.5.00 (per cubic coarse sand/sand metre) metre) (2) The rates shall not be less than the minimum rates or more than the maximum rates specified in sub-rule (1) and shall be determined by the authority by a special resolution which shall be subject to confirmation by the State Government." In exercise of the power conferred by the Act and the Rules, the State Government proceeded to levy cess and take steps for recovery thereof by serving notices and issuing citations on the several stone crushers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers were also clubbed with the abovesaid matters for hearing. The impugned judgment of the High Court of Allahabad in Minor Mineral Matters has placed reliance on the decision of this court in Goodricke Group Ltd. v. State of West Bengal [1995] Supp 1 SCC 707; [1995] 98 STC 32. The correctness of the said decision was in issue in Civil Appeals Nos.1532 and 1533 of 1993 and batch matters and hence these appeals were also directed be placed before the Constitution Bench for hearing. This is how the four sets of matters have been listed before and heard by the Constitution Bench. Relevant entries and principles of interpretation Before we proceed to examine the merits of the submissions and counter submissions made on behalf of the parties, it will be useful to recapitulate and summarize a few principles relevant for interpreting entries classified and grouped into the three Lists of the Seventh Schedule to the Constitution. The law is legion on the point and the principles which are being briefly stated hereinafter are more than settled. These principles are referred to in the several decisions which we shall be referring to hereinafter. So far as the principles are conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make laws extends to any matter not enumerated in the Concurrent List or the State List. The power of making any law imposing a tax not mentioned in the Concurrent List or the State List vests in Parliament. This is what is called the residuary power vesting in Parliament. The principles have been succinctly summarized and restated by a Bench of three learned judges of this court on a review of the available decisions in Hoechst Pharmaceuticals Ltd. v. State of Bihar [1983] 4 SCC 45. They are (1) The various entries in the three Lists are not "powers" of legislation but "fields" of legislation. The Constitution effects a complete separation of the taxing power of the Union and of the States under article 246. There is no overlapping anywhere in the taxing power and the Constitution gives independent sources of taxation to the Union and the States. (2) In spite of the fields of legislation having been demarcated, the question of repugnancy between law made by Parliament and a law made by the State Legislature may arise only in cases when both the legislations occupy the same field with respect to one of the matters enumerated in the Concurrent List and a direct conflict is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal and superficial encroachments are to be disregarded. (6) The doctrine of occupied field applies only when there is a clash between the Union and the State Lists within an area common to both. There the doctrine of pith and substance is to be applied and if the impugned legislation substantially falls within the power expressly conferred upon the Legislature which enacted it, an incidental encroaching in the field assigned to another Legislature is to be ignored. While reading the three Lists, List I has priority over Lists III and II, and List III has priority over List II. However, still, the predominance of the Union List would not prevent the State Legislature from dealing with any matter within List II though it may incidentally affect any item in List I. Tax legislation The above stated are general principles. Legislations in the field of taxation and economic activities need special consideration and are to be viewed with larger flexibility in approach. Observations of the Constitution Bench in R.K. Garg v. Union of India [1981] 4 SCC 675; [1982] 133 ITR 239 are apposite, wherein this court has emphasized a greater latitude-like play in the joints-being allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively as the subject of a tax and the measure of a tax. It is true that the standard adopted as a measure of the levy may be indicative of the nature of the tax, but it does not necessarily determine it. The nature of the mechanism by which the tax is to be assessed is not decisive of the essential characteristic of the particular tax charged, though it may throw light on the general character of the tax. Here we may refer to certain illustrative cases of well settled authority-authority which has not been shaken so far and has rather withstood the test of times. Taxation: measure of levy not suggestive of nature of tax: illustrative cases. In Ralla Ram, AIR 1949 FC 81, the Federal Court held that a tax on buildings under section 3 of the Punjab Urban Immovable Property Tax Act, 1940, measured by a percentage of the annual value of such buildings, remained a tax on buildings even though the measure of annual value of a building was also adopted as a standard for determining income from property under the Income-tax Act. The same standard was adopted as a measure for the two levies, yet the levies remained separate imposts by virtue of their distinctive nature. The meas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rata above or below. In other words, the word "land" includes not only the surface of the earth but everything under or over it, and has in its legal significance an indefinite extent upward and downward. The four-Judges Bench upheld the validity of the law levying tax in respect of area occupied by underground lines by reference to entry 49 in List II, holding it to be a tax on land only. Ample authority is available for the concept that under entry 49 in List II the land remains a land without regard to the use to which it is being subjected. It is open for the Legislature to ignore the nature of the user and tax the land. At the same time it is also permissible to identify, for the purpose of classification, the land by reference to its user. While taxing the land it is open for the Legislature to consider the land which produces a particular growth or is useful for a particular utility and to classify it separately and tax the same. Different pieces of land identically situated otherwise, but being subjected to different uses, or having different potential, are capable of being classified separately without incurring the wrath of article 14 of the Constitution. The Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercisable without reference to the use to which the building is put, was held to be valid. In the opinion of the court, it was irrelevant that the building was occupied by a factory which could not conduct its activities without the machinery and furniture. Once it is held that the land or building is available to be taxed, it does not matter to what use the land is being subjected though the nature of the user may enable land of one particular user being classified separately from the land being subjected to another kind of user. The tax would remain a tax on land. It cannot be urged that what is being taxed is not the land but the nature of its user. So also it is permissible to adopt myriad forms and methods of valuation for the purpose of quantifying the tax. In Ralla Ram v. Province of East Punjab [1948] FCR 207, the Federal Court made it clear that every effort should be made as far as possible to reconcile the seeming conflict between the provisions of the Provincial legislation and the Federal legislation. Unless the court forms an opinion that the extent of the alleged invasion by a Provincial Legislature into the field of the Federal Legislature is so great as would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll then cease to be a measure or yardstick of the tax and will become the very subject-matter of the tax. Restraint in this behalf is a prudent prescription for the local authorities to follow. The Constitution Bench observed that it was only a matter of convenience that income was adopted as a yardstick or measure for assessing the tax and the evolvement of such mechanism was not conclusive on the nature of tax. We are inclined to make a reference to a few selected Full Bench decisions of different High Courts which have been cited with approval before this court in many of the decisions to which we are making reference during the course of this judgment. In Sir Byramjee Jeejeebhoy v. Province of Bombay, AIR 1940 Bom 65 [FB], the Provincial Government levied a tax at the rate of 5 per cent. of the annual letting value in the City of Bombay on buildings and lands. The buildings were classified by reference to their annual letting value, and exception from payment of tax was also carved out in favour of such buildings as remained vacant and unproductive of rent for the specified period. It was urged that the impugned tax purported or desired to tax the value. Placing reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal business turnover may be considered for purposes of taxation, though he may not have earned any taxable income. State of Punjab v. Union of India, AIR 1971 P H 155; [1971] 80 ITR 248 [FB] is a five-Judges Bench decision delivered by Chief Justice Harbans Singh. Conflict was noticed between List I, entry 86, and List II, entry 49. Dealing with the scope of entry 49 in List II, it was held that it empowers the State Legislatures to directly tax lands and buildings, and for determining the basis of the tax the State Legislature may take either the area, annual rental value, market value or the capital value of the land as a basis for calculating and quantifying the tax on land. Merely because tax was calculated on the basis of annual rental value, it will not turn it into a tax on income, and if it is based on capital value, it will not turn it into a tax on capital value. Yet another angle which the constitutional courts would advisedly do better to keep in view while dealing with a tax legislation, in the light of the purported conflict between the powers of the Union and the State to legislate, which was stated forcefully and which was logically based on an analytical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administrative convenience, but one of principle-the outcome of our own historical process and a recognition of the ground realities." Quoting from M.C. Setalvad, Tagore Law Lectures "Union and State relations under the Indian Constitution" (Eastern Law House, Calcutta, 1974), Jeevan Reddy J. observed: "It is enough to note that our Constitution has certainly a bias towards the Centre vis-a-vis the States. . . . It is equally necessary to emphasise that courts should be careful not to upset the delicately-crafted constitutional scheme by a process of interpretation." The conflict: a cautious evaluation of "India Cement" We will now refer to and deal with those cases which have led to the three learned judges of this court, placing the matter for consideration by a Constitution Bench. We would refer to the cases mentioned in the order of reference and also to those cases which were heavily relied upon on behalf of the respondents, disputing the validity of the impugned tax. Immediately, we take up India Cement. In India Cement Ltd. v. State of Tamil Nadu [1990] 1 SCC 12, what was impugned was a levy of cess on royalty and the question was, whether such cess on royalty is wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry 54 in List 1. A Division Bench decision of the Mysore High Court in Laxminarayana Mining Co. v. Taluk Development Board, AIR 1972 Mys 299 was cited with approval in India Cement [1990] 1 SCC 12. The Mysore High Court struck down as violative of the MMDR Act, 1957, a licence fee on mining manganese or iron ore, etc., imposed by a State legislation. A perusal of the judgment of the Mysore High Court shows that the impost was by way of licence fee on the mining of certain minerals. Regulation and development of mines and minerals was undertaken by the Central legislation and therefore the power of the State Legislature under entries 23 and 52 in List II got denuded in the field of regulation and development covered by the Central legislation. The Division Bench, vide paragraph 6, held "it is therefore clear that to the extent the Central Act makes provision regarding the regulation and development of minerals, the powers of the State Legislatures under entry 23 of List II stand curtailed". The State Government had sought to defend the licence fee on the ground that it was in the nature of a tax and not a licence fee. This plea has been specifically noted by the High Court an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use likely embarrassment and have adverse effect on subsequent judicial pronouncements which would follow India Cement Ltd.'s case [1990] 1 SCC 12, feeling bound and rightly, by the said judgment having the force of pronouncement by seven-Judges Bench. Paragraph 34 of the report reads as under: "In the aforesaid view of the matter, we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature because section 9 of the Central Act covers the field and the State Legislature is denuded of its competence under entry 23 of List II. In any event, we are of the opinion that cess on royalty cannot be sustained under entry 49 of List II as being a tax on land. Royalty on mineral rights is not a tax on land but a payment for the user of land." (underlining by us) In the first sentence the word "royalty" occurring in the expression-"royalty is a tax", is clearly an error. What the majority wished to say, and has in fact said, is- "cess on royalty is a tax". The correct words to be printed in the judgment should have been "cess on royalty" in place of "royalty" only. The words "cess on" appear to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct between them. 'Royalty' is a share of the product or profit (as of a mine, forest, etc.) reserved by the owner for permitting another to use his property." Stroud's Judicial Dictionary of Words and Phrases: "the word 'royalties' signifies, in mining leases, that part of the reddendum which is variable, and depends upon the quantity of minerals gotten or the agreed payment to a patentee on every article made according to the patent. Rights or privileges for which remuneration is payable in the form of a royalty." Words and Phrases, Legally Defined: "A royalty, in the sense in which the word is used in connection with mining leases, is a payment to the lessor proportionate to the amount of the demised mineral worked within a specified period." Wharton's Law Lexicon: "Royalty, payment to a patentee by agreement on every article made according to his patent; or to an author by a publisher on every copy of his book sold; or to the owner of minerals for the right of working the same on every ton or other weight raised." Mozley and Whiteley's Law Dictionary: "A pro rata payment to a grantor or lessor, on the working of the property leased, or otherwise on the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of view dead rent can be described as the minimum guaranteed amount of royalty payable to the lessor but calculated on the basis of the area leased, and not on the quantity of minerals extracted or removed. In H.R.S. Murthy v. Collector of Chittoor [1964] 6 SCR 666, too the Constitution Bench of this court had defined royalty to mean "the payment made for the materials or minerals won from the land". The judicial opinion as prevailing amongst the High Courts may be noticed. A Full Bench of the High Court of Orissa held in Laxmi Narayan Agarwalla v. State of Orissa, AIR 1983 Orissa 210, "Royalty is the payment made for the minerals extracted; it is not tax". In Surajdin Laxmanlal v. State of M.P., AIR 1960 MP 129, a Division Bench of the High Court of Madhya Pradesh referred to the Wharton's Law Lexicon and Mozley and Whiteley's Law Dictionary and said: "royalties are payments which the Government may demand for the appropriation of minerals, timber or other property belonging to the Government." The High Court opined that there are two important features of royalty: (i) the payment is in proportion to the quantity removed; and (ii) the basis of the payment is an agreement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never be said to be an imposition on the holder of a mining lease." We need not further multiply the authorities. Suffice it to say that until the pronouncement in India Cement [1990] 1 SCC 12, nobody doubted the correctness of "royalty" not being a tax. Such has been the position even subsequent to the pronouncement in India Cement [1990] 1 SCC 12. In Inderjeet Singh Sial v. Karam Chand Thapar [1995] 6 SCC 166, a Bench of two learned judges held that: "In its primary and natural sense 'royalty', in the legal world, is known as the equivalent or translation of jura regalia or jura regia. Royal rights and prerogatives of a sovereign are covered thereunder. In its secondary sense the word 'royalty' would signify, as in mining leases, that part of the reddendum, variable though, payable in cash or kind, for rights and privileges obtained. It is found in the clause of the deed by which the grantor reserves something to himself out of that which he grants. It may even be a clause reserving rent in a lease, whereby the lessor reserves something for himself out of that which he grants." In Ajit Singh v. Union of India [1995] Supp 4 SCC 224, another Bench of two learned jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s extracted. But then (vide para.12), the court felt bound by the view taken in India Cement [1990] 1 SCC 12, reiterated in Orissa Cement [1991] Supp 1 SCC 430, to hold that royalty is a tax. The point that there was apparently a "typographical error" in para.34 in India Cement [1990] 1 SCC 12 was specifically raised but was rejected. In Saurashtra Cement and Chemicals Industries, AIR 1979 Guj 180 too the court felt itself bound by the decision in Mahalaxmi Fabric Mills Ltd. [1995] Supp 1 SCC 642, backed by India Cement [1990] 1 SCC 12, and, therefore, held royalty to be tax. We have clearly pointed out the said error, as we are fully convinced in that regard and feel ourselves obliged constitutionally, legally and morally to do so, lest the said error should cause any further harm to the trend of jurisprudential thought centering around the meaning of "royalty". We hold that royalty is not tax. Royalty is paid to the owner of land who may be a private person and may not necessarily be the State. A private person owning the land is entitled to charge royalty but not tax. The lessor receives royalty as his income and for the lessee the royalty paid is an expenditure incurred. Roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 410, which is considered later, the above passage was quoted with approval by the Supreme Court as stating precisely the two elements involved in almost all tax cases, namely, the subject of a tax and the measure of a tax. It is necessary to examine the scheme underlying the Seventh Schedule of the Constitution. We are relieved of the need of embarking upon any maiden voyage in this direction in view of the availability of a Constitution Bench decision in M.P.V. Sundararamier and Co. v. State of Andhra Pradesh [1958] SCR 1422; [1958] 9 STC 298. Venkatarama Aiyar J. speaking for the Constitution Bench, traced the history of legislations preceding the Constitution, analysed the scheme underlying the division of legislative powers between the Centre and the States and then succinctly summed up the quintessence of the analysis. It was held, inter alia: 1. In List I, entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of entries shows that while the main subject of legislation figures in the first group, a tax in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges constituting the Bench in Synthetics and Chemicals Ltd. v. State of U.P.[1990] 1 SCC 109; [1991] 80 SIC 270 held that under the constitutional scheme of division of powers in the Seventh Schedule, there are separate entries pertaining to taxation and other laws. A tax cannot be levied under a general entry. The abovesaid principles continue to hold the field and have been followed in cases after cases. General power of "Regulation and Control" does not include power of taxation. One thing, which too is well settled by a series of decisions is that the power of "regulation and control" is separate and distinct from the power of taxation. How this principle has been applied in myriad situations may be illustratively noticed. The Constitution Bench in Hingir-Rampur Coal Co. Ltd. v. State of Orissa [1961] 2 SCR 537; AIR 1961 SC 459, was faced with a challenge to the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952. The petitioner-company was engaged in producing and selling coal excavated from its collieries at Rampur in the State of Orissa. The Act and the Rules framed and the notification issued thereunder levied the payment of cess on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriation in that behalf; it went into the special fund earmarked for carrying out the purpose of the Act and thus its existence established a correlation between the cess and the purpose for which it was levied, satisfying the element of quid pro quo in the scheme. The scheme of the Act showed that the cess was levied against the class of persons owning mines in the notified area and to enable the State Government to render specific services to the said class by developing the notified mineral area. Its application was regulated by a statute and was confined to its purposes. There was a definite correlation between the impost and the purpose of the Act which was to render services to the notified area. These features of the Act impressed upon the levy the character of a fee as distinct from a tax. The inter-relationship of entries 23 and 66 in List II qua entry 54 in List I was so stated by the Constitution Bench: "The effect of reading the two entries together is clear. The jurisdiction of the State Legislature under entry 23 is subject to the limitation imposed by the latter part of the said entry. If Parliament by its law has declared that regulation and development of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first schedule included coal as an article as to which the industry engaged in the manufacture or production was brought within the purview of the Act. Section 9 empowered the Central Government to levy cess for the purpose of the Act on all goods manufactured or produced in any scheduled industries including coal. The Constitution Bench held that the Central Act was passed to provide for the development and regulation of certain industries one of which undoubtedly is coal mining industry. The declaration made by section 2 of the Act covered the same field as is covered by the impugned State Act. Then the Constitution Bench held: ". . . but in dealing with this question it is important to bear in mind the doctrine of pith and substance. We have already noticed that in pith and substance the impugned Act is concerned with the development of the mining areas notified under it. The Central Act, on the other hand, deals more directly with the control of all industries including of course the industry of coal. Chapter II of this Act provides for the constitution of the Central Advisory Council and Development Councils, Chapter III deals with the regulation of scheduled industries, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice of repugnancy with the Central Act XXXII of 1947." [underlining by us] In spite of having held that the Central Act of 1951 was attracted to coal industries, their Lordships, by applying the doctrine of pith and substance, refused to annul the levy of cess under the impugned Orissa Act based on the following distinction: Central Act, 1951 State Legislation of 1952 Deals more directly with the control of all Is concerned with the development of the industries including the industry mining areas notified under it. of coal with a view to improvement and development of the service that they may render to the society and thus assist the solution of the larger problem of national economy. Though both were cesses, one levied by the Central Act and the other levied by the State Act, inasmuch as they had different fields to operate, entries 52 and 54 in List I were held not to have any adverse or denuding effect on the legislative competence of the State referable to entries 23 and 66 in List II. As a result, the writ petitions laying challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas and the latter was valid. The MMRD Act, 1957, which we are called upon to deal with, stands on a much better footing for the writ petitioners herein as it does not contain any provision similar to sections 6 and 10 of the Central Act No.53 of 1948 or section 9 of the Central Act No.65 of 1951. Challenge to the levy under the abovesaid Orissa Act 27 of 1952 did not come to an end with Hingir-Rampur Coal Co. [1961] 2 SCR 537. It was once again raised in the High Court with success and the State of Orissa came up in appeal which was heard and decided by a Constitution Bench in State of Orissa v. M.A. Tulloch and Co. Ltd. [1964] 4 SCR 461. The respondent writ petitioner was working a manganese mine in the State of Orissa under a lease granted under the provisions of the MMRD Act, 1948. The fee levied under the Orissa Act for the period of six quarters from September 30,1956, to March 31,1958, was under challenge. The MMRD Act, 1957, came into force w.e.f. June 1,1958. The recovery impugned, therefore, related to the period pre-MMRD Act, 1957, i.e., for the period during which the Industries (Development and Regulation) Act, 1951, was applicable. The recovery was sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be logical first to examine and analyse the State Act and determine its purpose, width and scope and the area of its operation and then consider to what "extent" the Central Act cuts into it or trenches on it. As to the MMRD Act, 1957, the Constitution Bench in M.A. Tulloch [1964] 15 STC 261; [1964] 4 SCR 461, AIR 1964 SC 1284 observed by reference to section 18 of the Act that the intention of Parliament was to cover the entire field and thus to leave no scope for the argument that until rules were framed there was no inconsistency and no supersession of the State Act. The following holding of the above Constitution Bench is again worth noting: ". . . that technically speaking the power to levy a fee is under the entries in the three lists treated as a subject-matter of an independent grant of legislative power, but whether it is an incidental power related to a legislative head or an independent legislative power it is beyond dispute that in order that a fee may validity be imposed the subject-matter or the main head of legislation in connection with which the fee is imposed is within legislative power. The material words of the entries are: 'Fees in respect of any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic interest by the Central Government is on: (i) the regulation of mines, (ii) the development of minerals, and (iii) to the extent hereinafter provided. The scope and extent of declaration cannot and could not have been enlarged by the court nor has it been done. The effect is that no State Legislature shall have power to enact any legislation touching: (i) the regulation of mines, (ii) the development of minerals, and (iii) to the extent provided by Act No.67 of 1957. The Preamble to the Central Act 67 of 1957 itself speaks-"An Act to provide for the development and regulation of mines and minerals under the control of the Union". Tax and fee is not a subject dealt with by Act No.67 of 1957. Let us demonstrate the same from the provisions of the Act and for that purpose the relevant part of section 13, subsection (1), and the relevant part of sub-section (2) of section 18, sub-section (3) of section 18 and section 25 are extracted and reproduced as under: "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 reconnaissance permits, prospecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the commencement of this Act which was put in issue before the Constitution Bench; the Constitution Bench was only adjudicating upon the issue whether a liability to pay cess incurred under the previous Act could be enforced under Act No.67 of 1957 or in other words if Act No.67 of 1957 had any castigating effect on the demand validly raised under the previous enactment. Secondly, the extent to which power to legislate by the States was excluded by the Central Act No.65 of 1951 was not a question dealt with in-depth as it was done in Hingir-Rampur Coal Co. [1961] 2 SCR 537. Thirdly, M.A. Tulloch AIR 1964 SC 1284, if not correctly read, creates a wrong impression that Act No.67 of 1957 provides for levy of tax and fee, which in fact it does not. Section 13(2)(i) cannot be read as empowering the Central Government to levy any tax or fee. The expression "other fees and charges" have to be interpreted ejusdem generis taking colour from other words and phrases employed in the same clause. The word" charges" cannot and does not include within its meaning any tax. The expression" other fees or charges" must be assigned such meaning as to include therein only such fees and charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thus assisting the solution of the larger problem of the national economy. In spite of the declaration made by section 2 of the Central Act of 1951 considered in the light of its several provisions it was found difficult to hold that the field covered by the Central Act was the same as the field covered by the impugned Orissa Act. None of the two Constitution Benches have held that power to regulate and develop with which the Central Act of 1951 was concerned would include the power to levy tax and fee, which power shall have to be traced to some other entry in List 1. List 1 contains a general entry, i.e., entry 96, for levy of fee in respect of matters in List I but so far as levy of tax is concerned there are separate and specific entries. Further in view of entry 50 of List II, Parliament can by any law relating to mineral development limit or place limitations on the power of the State Legislatures to impose taxes on mineral rights. Power to tax not a residuary power Article 265 mandates-no tax shall be levied or collected except by authority of law. The scheme of the Seventh Schedule reveals an exhaustive enumeration of legislative subjects, considerably enlarged o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating that power in that entry. We are unable to agree with those learned judges when they sought to place reliance on articles 245, 246 and 248 and entry 97 of List I for the purpose of locating the power of amendment in the residuary power conferred on the Union." Similar views were expressed by five other judges. According to Seervai, "the law laid down in Kesavananda's case [1973] 4 SCC 225 is that if a subject of legislation was prominently present to the minds of the framer of our Constitution, they would not have left it to be found by courts in the residuary power; a fortiori, if a subject of legislative power was not only present to the minds of the framers but was expressly denied to Parliament, it cannot be located in the residuary power of Parliament." Vide para.22.194 the eminent jurist poses a question: "Does article 248 add anything to the exclusive residuary power of Parliament under article 246(1) read with entry 97 List I to make laws in respect of 'any other matter' not mentioned in List II and List III including any tax not mentioned in those Lists?" and answers by saying-"The answer is 'No.' " As to the riddle arising in the context of mines and mineral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the principle in the following words: "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." The judicial opinion of binding authority flowing from several pronouncements of this court has settled these principles: (i) in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of Legislature's failure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enjoyment of his own rights and privileges by requiring the observance of rules of order, fairness and good neighbourhood, by all around him. This manifestation of the sovereign authority is usually spoken of as the police power. The power to tax must be distinguished from an exercise of the police power (State v. Tucker 56 US 516). The political power 'is a very different one from the taxing power, in its essential principles, though the taxing power, when properly exercised, may indirectly tend to reach the end sought by the other in some cases'." "The distinction between a demand of money under the police power and one made under the power to tax is not so much one of form as of substance." The distinction between a levy in exercise of police power to regulate and the one which would be in nature of tax is illustrated by Cooley by reference to a license. He says: "So-called license taxes are of two kinds. The one is a tax for the purpose of revenue. The other, which is, strictly speaking, not a tax at all but merely an exercise of the police power, is a fee imposed for the purpose of regulation." "Suppose a charge is imposed partly for revenue and partly for regulation. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken a power to levy tax or fee except when it is only regulatory. Power to tax or levy for augmenting revenue shall continue to be exercisable by the Legislature in whom it vests, i.e., the State Legislature in spite of regulation or control having been assumed by another Legislature, i.e., the Union. The State Legislation levying a tax in such manner or of such magnitude as can be demonstrated to be tampering or intermeddling with Centre's regulation and control of an industry can perhaps be the exception to the rule just stated. In Synthetics and Chemicals Ltd. v. State of U.P. [1990] 1 SCC 109; [1991] 80 STC 270 the question before the seven-Judges Bench was as to the power of a State to legislate on industrial alcohol as a subject. Entry 8 in List II and entry 33 in List III came up for consideration. Their Lordships noticed the provisions of the Industries (Development and Regulation) Act, 1951 (as amended in 1956), especially section 18G thereof, and held that the provisions evinced clear intention of the Union to occupy the whole field relating to industrial alcohol and therefore the State could not claim to regulate it. The power with regard to the control of alcoholic i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the imposition of taxes in List II. The Constitution-makers must have intended that under those items the States will be entitled to raise revenue for their own purposes. If the widest view is accepted, then there would be for all practical purposes, an end of State autonomy even within the fields allotted to them under the distribution of powers envisaged by our Constitution. An examination of the entries in the Lists of the Seventh Schedule to the Constitution would show that there are a large number of entries in the State List (List II) and the Concurrent List (List III) under which a State Legislature has power to make laws. Under some of these entries the State Legislature may impose different kinds of taxes and duties, such as property tax, sales tax, excise duty, etc., and legislation in respect of anyone of these items may have an indirect effect on trade and commerce. Even laws other than taxation laws, made under different entries in the lists referred to above, may indirectly or remotely affect trade and commerce. If it be held that every law made by the Legislature of a State which has repercussion on tariffs, licensing, marketing regulations, price-control, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as falling under entry 49 or in the alternative under entry 23 or entry 50 in List II. The attack was that the legislation being one on mineral lands and mineral rights and the Parliament having enacted the Mines and Minerals (Development and Regulation) Act, 1957, the field was entirely covered and the State Legislature was incompetent to levy the tax. Reliance was placed on India Cement [1990] 1 SCC, 12 ; Orissa Cement [1991] Supp 1 SCC 430 and Buxa Dooars Tea Co. Ltd. [1989] 3 SCC 211; [1989] 179 ITR 91 (SC). Only mineral bearing land and coal bearing land were the subject of the levy of tax. The three-judges Bench, speaking through K.S. Paripoornan J., concluded that the charging section of the impugned Act imposed a tax on the minerals also, and was not confined to a levy on land or surface characteristic of the land. All non-mineral bearing lands and non-coal bearing lands were left out of the levy. The levy was struck down as levying a tax not on land (related to surface characteristic of the land) but on minerals and mineral rights. Goodricke's case [1995] Supp 1 SCC 707; [1995] 98 STC 32 was cited before their Lordships and it was observed that in Goodricke's case [1995] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Baijnath Kedia v. State of Bihar [1969] 3 SCC 838, the writ-petitioners were holding mining leases for minor minerals. The State of Bihar amended the Bihar Minor Mineral Concession Rules, 1964, whereby with effect from January 27,1964, the rates of dead rent, royalty and surface rent were revised. Additional demands were raised. It was submitted that in view of the provisions contained in the MMRD Act, 1957 incorporating (vide, section 2 thereof) a declaration within the meaning of entry 54 in List I, it was not competent for the State Legislature to revise the rates as abovesaid. This court held that the whole of the legislative field relating to minor minerals was covered by the Central legislation by virtue of the declaration made by section 2 and the enactment of section 15 in the Act, thereby leaving no scope for the enactment of the second proviso to section 10 of the Bihar Land Reforms Act whereunder the powers to increase the royalty, dead rent and surface rent were sought to be exercised. There were pre-existing old leases which could have been modified only by a legislative enactment made by the Parliament on the lines of section 16 of Act No.67 of 1957. Any attempt to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the rent which a lessee or licensee actually pays for the land being the test, it is manifest that the land cess is nothing else except a land tax. (2) When a question arises as to the precise head of legislative power under which a taxing statute has been passed, the subject for enquiry is what in truth and substance is the nature of the tax. No doubt, in a sense but in a very remote sense, it has relationship to mining as also to the mineral won from the mine under a contract by which royalty is payable on the quantity of mineral extracted. But that, does not stamp it as a tax on either the extraction of the mineral or on the mineral right. It is unnecessary for the purpose of this case to examine the question as to what exactly is a tax on mineral rights seeing that such a tax is not leviable by Parliament but only by the State and the sole limitation on the State's power to levy the tax is that it must not interfere with a law made by Parliament as regards mineral development. Our attention was not invited to the provision of any such law enacted by Parliament. In the context of sections 78 and 79 and the scheme of those provisions it is clear that the land cess is in tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry 49 of List II, the writ petitioner laid challenge to the validity of levy on very many grounds. It was submitted, firstly, that to bring the levy within the field of entry 49 of List II it must be directly upon the land whereas the levy in question is really a tax on production of tea, a subject covered by entry 84 of List I; secondly, that a tax on land must be a constant figure whereas the impugned levy varies from year to year based as it is on the quantity of tea produced in a tea estate in a given year and where there is no production of tea leaves at all in a particular year, no cess would be payable by the tea estate in that year; thirdly, that the definition of "tea estate" further establishes the absence of any nexus between "cess" and the "land"; land covered by the factory and building and even fallow land, is included within the meaning of "tea estate" and if no tea leaves are produced and plucked, there would not be levy on the estate at all; and fourthly, that the levy is clearly invalid in view of the seven-Judges Bench decision of this court in India Cement [1990] 1 SCC 12 and the three-Judges Bench decision in Orissa Cement [1991] Supp 1 SCC 430. It was urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, they do require some capital and labour to make them yield or to produce income which yield or income can without difficulty be taken as measure for quantifying the tax which would undoubtedly be a levy on the land; (v) it is not an essence of a tax, nor a condition of its validity, that the tax must be constant and uniform for all the years or for a particular number of years. The tax on land or building can be levied and assessed by reference to previous year's income or yield. In short, it is open to the State Legislature to adopt such formula as it thinks appropriate for levying the tax and so long as the character of the tax remains the same as contemplated by the entry, it does not matter how the tax is calculated, measured or assessed; (vi) it is permissible to classify land by reference to its user as a separate unit for the purpose of levy of cess. Tea estate, as a separate category of land, is a valid classification; (vii) the fact that the Tea Act empowers the Central Government to levy a duty or cess upon tea or tea leaves for the purposes of that Act, can in no manner deprive the State Legislature of its power to tax the land comprised in a tea estate. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be found clearly enumerated in Lists I and II, there can be no overlapping. There may be overlapping in fact but there would be no overlapping in law. The subject matter of two taxes by reference to two Lists being different, simply because the methodology or mechanism adopted for assessment and quantification is similar, the two taxes cannot be said to be overlapping. This is the distinction between the subject of a tax and the measure of a tax. (3) The nature of tax levied is different from the measure of tax. While the subject of tax is clear and well defined, the amount of tax is capable of being measured in many ways for the purpose of quantification. Defining the subject of tax is a simple task; devising the measure of taxation is a far more complex exercise and, therefore, the Legislature has to be given much more flexibility in the latter field. The mechanism and method chosen by the Legislature for quantification of a tax is not decisive of the measure of the tax though it may constitute one relevant factor out of many for throwing light on determining the general character of the tax. (4) Entries 52,53 and 54 in List I are not heads of taxation. They are general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modes of determining the value of the land such as annual or capital value of the land or its productivity. The methodology adopted, having an indirect relationship with the land, would not alter the nature of the tax as being one on land. (8) The primary object and the essential purpose of legislation must be distinguished from its ultimate or incidental results or consequences, for determining the character of the levy. A levy essentially in the nature of a tax and within the power of the State Legislature cannot be annulled as unconstitutional merely because it may have an effect on the price of the commodity. A State legislation, which makes provisions for levying a cess, whether by way of tax to augment the revenue resources of the State or by way of fee to render services as quid pro quo but without any intention of regulating and controlling the subject of the levy, cannot be said to have encroached upon the field of "regulation and control" belonging to the Central Government by reason of the incidence of levy being permissible to be passed on to the buyer or consumer, and thereby affecting the price of the commodity or goods. Entry 23 in List II speaks of regulation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any, imposed by Parliament by law relating to mineral development and to that extent shall circumscribe the States' power to legislate. Power to tax mineral rights is with the States; the power to lay down limitations on the exercise of such power, in the interest of regulation, development or control, as the case may be, is with the Union. This is the result achieved by homogeneous reading of entry 50 in List II and entries 52 and 54 in List I. So long as a tax or fee on mineral rights remains in pith and substance a tax for augmenting the revenue resources of the State or a fee for rendering services by the State and it does not impinge upon regulation of mines and mineral development or upon control of industry by the Central Government, it is not unconstitutional. The result: individual cases (A) Coal Matters The amendments incorporated by the West Bengal Taxation Laws (Amendment) Act, 1992, w.e.f. April 1,1992, into the provisions of the West Bengal Primary Education Act, 1973, and the West Bengal Rural Employment and Production Act, 1976, classify the land into three categories: (i) coal-bearing land, (ii) mineral bearing land (other than coal-bearing land) or quar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 50 of List II. The West Bengal Taxation Laws (Amendment) Act, 1992, must be and is held to be intra vires the Constitution. We also hold that Mahanadi Coalfields [1995] Supp 2 SCC 686 was not correctly decided inasmuch as India Cement Ltd. [1990] 1 SCC 12 and Orissa Cement Ltd. [1991] Supp 1 SCC 430 were applied to the levy of a cess to which they did not apply. The learned judges, deciding Mahanadi Coalfields Ltd. [1995] Supp 2 SCC 686 were, with respect, not right in forming the opinion that the cess was levied on minerals and mineral rights and not on land and hence the conclusion reached therein that the State Legislature did not have the legislative competence and that the State legislation trenched upon a field already occupied by Mines and Minerals (Regulation and Development) Act 1957, a Central legislation is incorrect. State of Orissa v. Mahanadi Coalfields Ltd. [1995] Supp 2 SCC 686, is overruled. (B) Tea Matters Inasmuch as we have held Goodricke Group Ltd. v. State of West Bengal [1995] Supp 1 sec 707; [1995] 98 STC 32 to have been correctly decided, the impugned levy on tea estates as levied by the West Bengal Taxation Laws (Second Amendment) Act, 1989, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " and left behind. The average quantity of brick earth utilized in making bricks whether on the brick field itself or on a place nearby, does involve removal-and consequently dispatch-of the brick earth from the place where it was to the place where it is captively consumed in making bricks. The fact that the methodology for working out the royalty payable and the cess payable is the same, does not have any detrimental effect on the constitutional validity of the cess whether it be treated as one on the land-classified by reference to its production, i.e., the brick earth, or as one on mineral rights in brick earth. In either case it would be covered by entry 49 or 50 in List II. None of the pleas raised has any merit. (D) Minor Mineral Matters While narrating the facts, we have quoted in the earlier part of the judgment section 35 of the U.P. Special Area Development Authorities Act, 1986 ("SADA Act", for short) which is the charging section and the Rules framed under the Act. We refer to other relevant provisions of the Act in brief. Section 3 of the SADA Act authorizes the State Government to declare by notification an area to be a special development area upon its form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RD Act to be exercised only by the Central Government and hence the impugned levy of cess is repugnant to the Central legislation. To test the validity of the submission we have to examine the real nature of the levy and find out if such levy encroaches upon the field reserved for Central legislation. All the minerals form part of the land. Minerals are conceived by the mother earth by the process of nature and nurtured over innumerable number of years and delivered on their assuming value and utility for the earthlings. Generally and broadly speaking-and that would suffice for our purpose, a mine is an excavation in the earth which yields minerals. Mineral is something which grows in a mine and is capable of being won or extracted so as to be subjected to a better or precious use. Until extracted, the mineral forms part of the crust of the earth. A mineral right, according to Black's Law Dictionary (seventh edition) is the right to search for, develop, and remove materials from the land. It also means the right to receive a royalty based on the production of minerals which right is usually granted by a mineral lease. In both the senses, the right vests in the owner of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uffixing to it the expression "to the extent hereinafter provided". Section 15 of the Act has excepted and preserved the power of the State Governments to make rules in respect of minor minerals. The qualifying words used in entry 54 of List I and in section 2 of the MMRD Act contain an in-built indication that in spite of an inclination on the part of the courts to be liberal in assigning a wide meaning to the scope of the said provisions, boundaries of limitation are there and the expanse of these provisions cannot be so stretched as to strike at the State legislations which are adequately accommodated within the field of an entry in List II which too shall have to be meaningfully and liberally construed. The MMRD Act enables control over the regulation of mines and the development of minerals being exercised by the Central Government through legislation. The High Court has upheld the validity of the SADA Act by relating it to entry 5 in List II which is "local government". Any local government exercising the power of governance over a local area shall have to administer, manage and develop the area lying within its territory which cannot be done without raising funds. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ap, such overlapping does not detract from the distinctiveness of the aspects. In our opinion, there is no question of conflict solely on account of two aspects of the same transaction being utilized by two Legislatures for two levies both of which may be taxes or fees or one of which may be a tax and other a fee falling within two fields of legislation respectively available to the two. As we have pointed out earlier, a cess may be tax or fee. So far as the present case is concerned, this distinction does not need any further enquiry by reference to the facts of the case inasmuch as the impugned cess is constitutionally valid considered whether a tax or a fee. We do not propose to continue dealing therewith any more inasmuch as it would be an exercise in futility. We would only place on record briefly our reasons for upholding the validity of the impugned levy whether a tax or a fee. As a tax the impugned levy of cess is clearly covered by entry 5 of List II (as the High Court has held, and we add) read with entries 49,50 and 66 of List II. There is no challenge to the declaration of the area as a special development area and the constitution of Special Area Development Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of bringing the powers, duties and functions of the local authority within the purview of occupied field. The power to levy tax on lands and buildings within their jurisdiction by the local authority was upheld by this court. The following observations of the Constitution Bench in Hingir-Rampur Coal Co. [1961] 2 SCR 537; AIR 1961 SC 459 squarely apply to the SADA Act and the SADA Rules for upholding their constitutional validity: " . . . in pith and substance the impugned Act is concerned with the development of the mining areas notified under it. The Central Act, on the other hand, deals more directly with the control of all industries including of course the industry of coal. . . . The functions of the Development Councils constituted under this Act prescribed by section 6(4) bring out the real purpose and object of the Act. It is to increase the efficiency of productivity in the scheduled industry or group of scheduled industries, to improve or develop the service that such industry or group of industries renders or could render to the community, or to enable such industry or group of industries to render such service more economically. . . . the object of the (Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy on mineral rights with impact on the land and quantified by reference to the quantum of minerals produced. The distinction, though fine, yet exists and is perceptible. In our opinion Ram Dhani Singh v. Collector, Sonbhadra, AIR 2001 All 5 has been correctly decided. We uphold and affirm the same. End result C.A. Nos. 1532-33 of 1993 (Coal Matters) are allowed. The decision by the Calcutta High Court [Kesoram Industries Ltd. (Textile Division) v. Coal India Ltd., AIR 1993 Cal 78] is set aside. The writ petitions filed in the High Court of Calcutta shall stand dismissed. Leave granted in S.L.P.(C) Nos.3986 of 1993, 11596 and 17549 of 1994. C.A. Nos.298, 299 and 297 of 2004 (Ambuja Cement Ltd. v. State of West Bengal) and C.A. Nos.3518-3519, 5149-54 of 1992, C.A. No.2350 of 1993, C.A. No.7614 of 1994 (Coal Matters) are directed to be dismissed. W.P.(C) Nos.262 of 1997 (Tea Matters), W.P.(C) Nos.515, 641, 642 of 1997, W.P.(C) Nos.347, 360 of 2000, W.P.(C) Nos.50, 553 of 2000, W.P.(C) Nos.207, 288, 389 of 2001 and W.P.(C) No.81 of 2003 are directed to be dismissed. W.P.(C) No.247 of 1995 and W.P.(C) No.412 of 1995 (Brick Earth Matters) are directed to be dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be imperative in the economic and industrial development of the country. Despite the same, the price of coal produced in India is considered to be on the high side as a result whereof it is imported also form other countries despite its availability in abundance. With a view to reduce the price of coal, the Central Government has recently even reduced the rate of custom duty. Tea is also one of the important commodities having regard to its export potential. An agency of the Central Government even furnishes guarantees to the exporters of tea for export thereof to several countries. Tea has been the subject matter of international treaties. Necessity of regulation of price and quality of coal and tea having regard to competitive international market, by the Central Government cannot, therefore, be minimised. The constitutional significance involved in these matters is required to be considered on the aforementioned backdrop. Subject matter: The constitutionality of the Cess Act, 1880, the West Bengal Primary Education Act, 1973, the West Bengal Rural Employment and Production Act, 1976, as amended by the West Bengal Taxation Laws (Amendment) Act, 1992, whereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in purported exercise of his power under section 72 of the Cess Act, 1880, directed each brick earth quarrier to file returns in the prescribed form on the average of despatch of brick earth for the previous three years failing which it was threatened that a daily fine of Rs.50 would be imposed. The said demand was referable to section 6(1)(b) of the Bengal Cess Act, 1880. The contention of the respondent is that the cess has been levied for securing the welfare of the people of the State as enshrined in Part IV of the Constitution of India. It is, however, accepted that the cess is assessed on annual despatches. High Court judgments: Coal Matters: Before the Division Bench of the Calcutta High Court the sole question which was raised by the parties was as to whether the impugned statutes imposing cess are in pari materia with the statutes which have been held ultra vires by this court in India Cement [1990] 1 SCC 12 and Orissa Cement [1991] Supp 1 SCC 430. The High Court in its impugned judgment in extenso referred to the provisions of the Orissa Acts, the Madhya Pradesh Act, and the Bihar Acts and compared the same with the impugned Acts, noticing that therein also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stioning imposition of cess in terms of the Shakti Nagar Special Area Development Authority (Cess on Mineral Rights) Rules, 1997, was dismissed by the High Court of Allahabad on the ground that the said rules can be upheld in terms of entry 5 of List II of the Seventh Schedule to the Constitution of India. Submissions: The State of West Bengal has been represented by Mr. Dwivedi in the coal matter and Mr. Reddy in the tea matter. Their submissions would, therefore, be noticed separately. The writ petitioners and the respondents, however, have been represented by a number of counsel. Re: Coal matters: Drawing our attention to a comparative chart of the Cess Act, the West Bengal Primary Education Act, 1973, and the West Bengal Rural Employment and Production Act, 1976, as amended from time to time, Mr. Dwivedi would contend that as by reason of the amendments carried out therein in terms of the West Bengal Taxation Laws (Amendment) Act, 1992, remedial measures as regard the deficiencies pointed out by this court in India Cement [1990] 1 SCC 12 and Orissa Cement [1991] Supp 1 SCC 430 were taken by the State of West Bengal, the High Court committed a manifest error in decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not either on mineral rights or on land. (iii) Although mineral is extracted from land but therefor three things are required viz.,: (a) land from which the mineral could be extracted; (b) capital for providing machinery, instruments and other requirements; (c) labour. Such a tax is neither a tax on land (entry 49 of List II) nor a tax on mineral rights (entry 50 of List II) but a hybrid tax on mines plus capital plus labour. It, thus, could only be imposed by Parliament under entry 97 of List I. (iv) In any event, no tax on mineral right can be imposed as the entire field of legislation is occupied by Parliament in view of sections 9, 9A, 13, 18 and 25 of the Mines and Minerals (Regulation and Development) Act, 1957, and the declaration contained in section 2 therein. Once it is held that the field is covered by an Act of Parliament, the guidelines for determining the constitutionality of the State Acts not only should be considered with reference to the Parliamentary Act and the rules framed thereunder but also upon taking into account matters and aspects which can be legitimately brought within the purview of the legislative competence of the State. (v) As i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... potential productivity would be relevant factors; (iii) the subject of a tax is different from the measure thereof. It was pointed out that the municipal law relating to property tax would also be relatable to entry 49, List ii, and this court in relation thereto has held that actual value may be a relevant consideration. According to learned counsel green tea leaf is not a marketable commodity and in that view of the matter, it cannot be said that the there exists a competing entry for levy of excise duty thereupon in terms of the provisions of the Central Excises and Salt Act, 1944, and, thus, the State must be held to have the legislative competence to impose the impugned tax. Strong reliance, in this connection, has been placed on Union Carbide India Ltd. v. Union of India [1986] 2 SCC 547; [1987] 64 STC 444 (SC) and Ralla Ram's case, AIR 1949 FC 81. Learned counsel would submit that despite entry 52, List I, this court has held that thereby the other taxing powers of the State have not been taken away. Learned counsel appearing on behalf of the writ petitioners, on the other hand, submitted: (i) Parliament in its wisdom has taken over control of the entire tea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, no cess can be levied by the State Government purported to be in exercise of its power under entry 5 of the List II of the Constitution of India. Issue: The core issue with which this court is concerned is as to whether the legislative competence of the State to impose cess is traceable to entries 49 and 50 of List II vis-a-vis entries 52 and 54, read with entry 97, of List I of the Seventh Schedule to the Constitution of India. Overview of the statutes: The impugned Acts: Cess Act, 1880: Under section 4 (interpretation clause) of the Cess Act, 1880, "immovable property" and "land" have been defined as follows: (i) "immovable property" includes lands and all benefits to arise out of land and things attached to the earth, or permanently fastened to anything which is attached to the earth, but does not include crops of any kind, or houses, shops or other buildings; (ii) "land" means land which is cultivated, uncultivated covered with water and does not include houses or buildings. "Despatch" in the said Act has been defined as: " 'despatch' in relation to a coal mine, means the quantity of coke and coal despatched from the coal mine and that, in relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... West Bengal Rural Employment and Production Act, 1976; (c) in respect of a mineral bearing land (other than coal bearing land) or quarry, at the rate of one rupee on each tonne of minerals (other than coal) or materials despatched within the meaning of clause (1b) of section 2 of the West Bengal Rural Employment and Production Act, 1976, from such mineral bearing land or quarry: Provided that when in the coal bearing land referred to in clause (b) there is no production of coal for more than two consecutive years, such land shall be liable for levy of cess in respect of any year immediately succeeding the said two consecutive years in accordance with clause (a); Explanation.- For the purposes of this chapter, "coal bearing land" shall have the same meaning as in clause (la) of section 2 of the West Bengal Rural Employment and Production Act, 1976'." Similar provisions were inserted by reason of section 3 of the West Bengal Rural Employment and Production Act and as such are not being reproduced once over again. However, it may be noticed that by reason of the said amendment, cess has been imposed even on a mine when there has been no production of coal for more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a leaves produced (Effective from April 14, 1984 and validation clause also passed) Act II of 1992 Section 2(1) : Section 78(2) No change p. 37 at 38 replaced by a new section. New section 78(2)(b) : cess on coal bearing lands at 5 per cent. of the annual value of the land, as defined in section 2(1) of Act XIV of 1976 (on the basis of value of coal produced in the preceding two years). Act X of 1996 Section 5 : 5 per cent. raised to No change cent. p. 48 7 per cent. Act VIII of Section 2 : 7 per cent. reduced No change. p. 49 to 51 per cent. Act XIV of Section 4(2)(b):Not exceeding No separate section 1976 p. 3-4 Rs. 0.50 per tonne and annual Section 4(2)(a):Not exceeding despatches of coal Rs. 0.06 on development value of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a new section. New section 78(2)(b) : cess on coal bearing lands at 5 per cent. of the annual value of the land, as defined in section 2(1) of Act XIV of 1976 (on the basis of value of coal produced in the preceding two years). Act X of 1996 Section 5 : 5 per cent. raised to No change cent. p. 48 7 per cent. Act VIII of Section 2 : 7 per cent. reduced No change. p. 49 to 51 per cent. ------------------------------------------------------------------------------------------- Changes in unit and rate of cess under the West Bengal Rural Employment Production Act, 1976. ------------------------------------------------------------------------------------------- Statute Coal Tea ------------------------------------------------------------------------------------------- Act XIV of Section 4(2)(b):Not exceeding No separate section 1976 p. 3-4 Rs. 0.50 per tonne and annual Section 4(2)(a):Not exceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om April 1,1981 and validation clause also passed) Act II of 1992 p. 37 at 42-43 Section 3(2):Section 4(2) replaced No change by a new section. New section 4(2)(b) :Cess on coal bearing lands at 35 per cent. of the annual value of the land, as defined in section 2(1) of the Act (Inserted by section 3(1)(a) of this Act) annual value defined on the basis of value of coal produced in the preceding two years Act XVI of No change Section 6:Rs. 0.12 reduced 1996 p. 47 to Rs. 0.08 Act X of 1996 Section 6:35 per cent. raised to 38 No change p. 48 per cent Act VIII of Section 3 : 38 per cent. reduced No change. p. 49-50 to 20 per cent. ------------------------------------------------------------------------------------------- 1. West Bengal Rural Employment and Production Act, 1976. 2. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Development) Act, 1957 (Act No.67 of 1957). 3. (1) The authority may, subject to sub-rules (2) and (3) impose a cess on mineral rights on such minerals and minor minerals and at such rates as specified below: Mineral/Minor mineral Minimum rate Maximum rate (1) Cess on Coal Rs. 5.00 per ton Rs. 10.00 per ton (2) Cess on stone, coarse sind/sand Rs. 2.00 per cubic metre Rs. 5.00 per cubic metre (2) The rates shall not be less than the minimum rates or more than the maximum rates specified in sub-rule (1) and shall be determined by the Authority by a special resolution which shall be subject to confirmation by the State Government." M.M.R.D. Act 1957: Purport and object: While enacting the 1957 Act, it was stated: "Amending Act 15 of 1958.-In view of its importance as basic fuel and the position it occupies in the country's economy, coal has always been treated differently from other minerals. It is in recognition of this that no rules have been framed so far under section 7 of the Mines and Minerals (Regulation and Development) Act, 1948, in regard to modification of the terms and conditions of mining leases for coal granted before the commencement of that Act, tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be carried out only under a licence or lease to be granted in the manner prescribed by the rules made under sections 13 and 15 thereof, as the case may be. Section 9 of the said Act provides for royalty. Section 9A provides for dead rent. Section 13 confers power on the Central Government to make rules in respect of major minerals. Rules may provide for fixing and collection of rent, fees, charges, etc., for prospecting licenses or mining leases. Section 15 of the said Act provides for rule making power by the State in relation to the minor minerals; pursuant to or in furtherance whereof the State Government framed the Minor Mineral Concession Rules for regulating grant of quarry lease, mining lease and other mineral concessions in respect of minerals and purposes connected therewith. Section 15(1A)(g) reads thus: "1A. 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 fixing and collection of rent, royalty, fees, dead rent, fines or other charges and the time within which and the manner in which these shall be payable;" Sections 17 and 17 A grant specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 25. "Owner" has been defined in section 3(k) in the following terms: " 'Owner'- (i) with reference to a tea estate or garden or a sub-division thereof the possession of which has been transferred by lease, mortgage or otherwise, means the transferee so long as his right to possession subsists; and (ii) with reference to a tea estate or a garden or a sub-division for which an agent is employed, means the agent if, and in so far as, he has been duly authorised by the owner in that behalf ;" We may further note the definition of "tea" as contained in section 3(n) thereof, which is in the following terms: " 'tea' means the plant Camellia Sinensis (L) O. Kuntze as well as all varieties of the product known commercially as tea made from the leaves of the plant Camellia Sinensis (L) O. Kuntze including green tea;" is in pari materia with the State Act. Chapter II of the Act provides for constitution of the Tea Board. Section 10 provides for the duties and functions of the Board which in no uncertain terms states that it shall be the duty of the Board to promote by such measures, as it thinks fit, the development under the control of the Central Government of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of the Amending Act 24 of 1986, the Statement of Objects and Reasons whereof reads thus: "Amending Act 24 of 1986.- Under section 25 of the Tea Act, 1953 (29 of 1953), the Central Government is empowered to levy and collect as a cess, a duty of excise on all tea produced in India at the rate of four paise per kilogram. The Central Government is, however, empowered to fix a higher rate of cess not exceeding 8.8 paise per kilogram. The present rate of cess of eight paise per kilogram was made effective from August, 1978. Although, this rate is almost at the maximum rate allowed under the Act, the amount of cess collected has become insufficient to meet the expenditure of the various developmental and other activities of the Tea Board. The gap between the proceeds from the cess and the actual expenditure of the Tea Board is likely to widen further in view of the higher level of expenditure envisaged in the Seventh Plan. The ceiling of 8.8 paise per kilogram, therefore, needs to be revised. It is, accordingly, proposed to amend section 25 of the Act for providing higher ceiling of levy of cess at a rate not exceeding fifty paise per kilogram as the Central Government may, fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to clause (b) of sub-section (3), any person sells the whole or a part of any quantity of tea or tea waste, there shall be paid to him as price therefor- (a) where the price can be fixed by agreement consistently with the order, if any, relating to the fixation of price issued under sub-section (1), the price so agreed upon; (b) where no such agreement can be reached, the price calculated with reference to any such order as is referred to in clause (a); (c) Where neither clause (a) nor clause (b) applies, the price calculated at the market rate prevailing in the locality at the date of sale. (5) Without prejudice to the generality of the powers conferred by sub-sections (1) and (3), any order made thereunder may provide- (a) for requiring persons engaged in the production, supply or distribution of, or trade and commerce in, tea or tea waste to maintain and produce for inspection of such books, accounts and records relating to their business and to furnish such information relating thereto as may be specified in the order; (b) for such other matters, including in particular the entering and search of premises, vehicles, vessels and aircraft, the seizure by a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Centre as regards distribution of legislative fields was felt to be a matter of necessity and that is precisely the reason why more important heads of legislation are in the Union List. Even the residuary power has been conferred upon Parliament. The amendments made in the Constitution whereby and whereunder a few entries in List II which were either omitted or transferred to other Lists also is a pointer to the said fact. In Florida Lime and Avocado Growers v. Charles Paul 373 US 132; 10 Law Ed 2d 248, it is stated: "We have, then, a case where the federal regulatory scheme is comprehensive, pervasive, and without a hiatus which the state regulations could fill. Both the subject matter and the statute call for uniformity. The conflict is substantial-at least six out of every 100 federally certified avocados are barred for failure to pass the California test-and it is located in a central portion of the federal scheme. The effect of the conflict is to disrupt and burden the flow of commerce and the sale of Florida avocados in distant markets, contrary to the congressional policy underlying the Act. The State may have a legitimate economic interest in the subject matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the Union Government or under the directions of the latter, for then, events like those in Assam (over the language problem) or in Punjab could not have taken place at all. But, by reason of such centralizing trends, federalism cannot be said to be dead in India. A radical change in the background has taken place since 1967. So long as the Union and all the States in India were under the rule of one-Party under the strong leadership of a towering personality such as Pandit Jawaharlal or Mrs. Gandhi, there could hardly arise any tussle between the Union and the States which could not be settled by the Party leadership at Delhi, and, thus, Indian federalism came to work almost as a unitary system. But in 1967, different parties came to power in a number of States, so that they would naturally refuse to act as dictated by the Party in power at Delhi. The frequent resort to the extraordinary power under article 356 to keep recalcitrant State politics under Union control, the abuse of Governor's powers in some cases, and the like, have accelerated the forces of separatism. In such a situation, which is prevailing till the time of this writing in 1986, the question of 'St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required to be construed having regard to the importance of the subject matter of Parliamentary legislation and the impact and practical effect of the inroad of the State laws entrenching upon the legislative field occupied by Parliament. It would, therefore, not be correct for the superior courts to advocate the theory that while interpreting the Constitution, courts should lean in favour of the State. Federal character of the Union of States in India does not support the said theory. Legislative field The principle required to be deduced as regard field of legislation, may not be much in dispute. The question, however, is that of its application. Before analysing the relevant provisions, we may have an overview of the constitutional scheme in this behalf. Articles 245 and 246 of the Constitution of India read with the Seventh Schedule and Legislative Lists contained therein prescribe the extent of legislative competence of Parliament and the State Legislatures. Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule. Similarly, the State Legislatures have exclusive power to make laws in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions which we have set out in article 246(1),(2) and (3), is clearly to carve out not only two exclusive legislative fields for the Union and the States and a further field in which both the general and the regional governments can operate, but also to provide by the language used in each of the three clauses of the article that the legislative power of the Union in List I is predominant. That power is exercisable 'notwithstanding anything in clauses (2) and (3)' of article 246. The concurrent Union power of legislation conferred by clause (2) of article 246 is exercisable 'notwithstanding anything in clause (3)' which deals with the exclusive legislative power of the State. But the State's concurrent legislative power is 'subject to clause (1)', which deals with the exclusive Union power of legislation. The State's legislative power in the field carved out for it by List II is again exercisable 'subject to clauses (1) and (2)', which deal with the Union power and the Concurrent power, the first vested exclusively in the Union and the second in both the Union and the States." The Constitution makers found the need for power sharing devices between the Central and the State h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State Legislature and once the same is done the power of the State is denuded. Notwithstanding the great care with which the various entries in the three lists have been framed, on some rare occasions it may be found that one or the other field is not covered by these entries. The makers of our Constitution have, in such a case, taken care by conferring power to legislate on such residuary subjects upon the Union Parliament including taxation by reason of article 248 of the Constitution. We may notice that in the Government of India Act, 1935, no provision of the nature of entry 97 in List I existed. In terms of section 104 thereof the Governor-General could empower either the Dominion Legislature or a Provincial Legislature to enact a law with respect to any matter not enumerated in any of the Lists in the Seventh Schedule to the Act, including a law imposing a tax not mentioned in any such List and the executive authority of the Dominion or of the Province, as the case may be, shall extend to the administration of any law so made, unless the Governor-General otherwise directs. In Constitution of India, however, such a residuary power has expressly been conferred on P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have legislative competence to pass the law by virtue of the residuary powers under article 248 read with entry 97 of the Union List and it would not be necessary to go into the question whether it falls under any entry in the Union List or the Concurrent List. What is, therefore, required to be examined is whether the subject-matter of the Central Act falls in any of the entries in the State List" Yet again in Synthetics and Chemicals Ltd. v. State of U.P., AIR 1990 SC 1927; [1991] 80 STC 270, it has been held: " . . . 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 a harmonious way." In State of A.P. v. K. Purushotham Reddy reported in [2003] JT 3 SC 15; AIR 2003 SC 1956, it was held: "The conflict in legislative competence of Parliament and the State Legislatures, having regard to article 246 of the Constitution of India, must be viewed in the light of the decisions of this court which in no uncertain terms state that each entry has to be interpreted in a broad manner. Both the Parliamentary legislation as also the State legislation must be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is referable, the court has evolved the doctrine of pith and substance. If, in pith and substance, the legislation falls within one entry or the other but some portion of the subject-matter of the legislation incidentally trenches upon and might enter a field under another List, then it must be held to be valid in its entirety, even though it might incidentally trench on matters which are beyond its competence." In Ishwari Khetan Sugar Mills P. Ltd. v. State of U.P., AIR 1980 SC 1955, it was held: "When validity of a legislation is challenged on the ground of want of legislative competence and it becomes necessary to ascertain to which entry in the three lists the legislation is referable, the court has evolved the theory of pith and substance. If in pith and substance a legislation falls within one entry or the other but some portion of the subject-matter of the legislation incidentally trenches upon and might enter a field under another list, the Act as a whole would be valid notwithstanding such incidental trenching." The question which, therefore, is required to be posed and answered is as to whether both the Acts can stand together or not. While determining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reaties and covenants and being a party to WTO and GATT, it is obligated to fulfil its trans-national obligations. If for the purpose of giving effect to the international treaties, it, in exercise of its power under article 253 of the Constitution of India, had taken over the legislative field occupied by List II of the Seventh Schedule to the Constitution, no exception thereto can be taken. While doing so, the Central Government shall give effect to the will of the makers of the Constitution and would not act contrary thereto or inconsistent therewith. The legislative fields of the Union and the State vary from country to country depending upon the requirement of the situation in which such provisions are made. Although a lot can be said on the subject, keeping in view the fact that our job is confined to interpretation of the legislative entries vis-a-vis the Parliamentary and legislative Acts, it may not be necessary to do so. But suffice however to point out that when such an approach is adopted, we would be more prone to committing errors. We must proceed on the basis that neither the Union nor the State is supreme under the Constitution, as both the Union and the State will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , trite that there is nothing in the Constitution to debar Parliament to legislate under entry 54 read with entry 97 of the List I of the Seventh Schedule to the Constitution. However, recourse to the residuary power must be taken as a last resort, i.e., only when all the entries in the three Lists are absolutely exhausted, that is to say, If the subject matter is beyond the comprehension of the entries contained in the aforementioned three Lists. It is trite that when two interpretations are possible resort to the residuary power may not be taken recourse to. But it is also trite that the entries have to be given a liberal construction irrespective of the fact that as to whether they are in List I or List II. There cannot be any doubt whatsoever that for the said purpose, the main object as also the scope and purport of the Central legislation vis-a-vis the State legislation must be kept in mind and, thus, there cannot by any question of examining the same with jaundiced eyes. With the greatest respect, in the Indian context, it is difficult to follow Morey v. Doud [1957] 354 US 457 wherein Frankfurter J. says, "The courts have only the power to destroy, not to reconstruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the interpretation of the legislative fields of the State List and Union List should be construed in deference to the extent of declaration made by the Parliament in terms of entry 52, List I, of the Constitution of India. It may also be true that ordinarily the declaration contained in section 2 of the Act in regard to this requirement as contemplated in entries 52 and 54 of List I of the Seventh Schedule to the Constitution of India would not affect the legislative competence of the State in relation to raw material. Although a liberal construction of a State entry is desirable at the same time the court should guard against extending the meaning of the word beyond a reasonable limit. In Kerala State Electricity Board v. Indian Aluminium Co. Ltd. [1976] 1 SCC 466; AIR 1976 SC 1031, it was held that the entire field of "electricity" as contemplated under entry 38 of List III is covered under the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948. For the purpose of finding out the true nature and character of the Act and the legislative entry whereunder it was enacted, the Statement of Objects and Reasons and the purport and object thereof may be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 105. The said decisions are premised upon the assumption that by virtue of the said declaration, the States are totally denuded of the power to levy any taxes on minerals. It is for this reason that the State enactments were declared incompetent in so far as they purported to levy taxes/cesses on minerals. The denudation of the State is not partial. It is total. They cannot levy any tax or cess on minerals so long as the declaration in section 2 stands. Once the denudation is total there is no occasion or necessity for any further declaration of denudation or, for that matter, for repeated declarations of denudation." We are not oblivious of the fact that the said decision has been overruled by a three-judge Bench in District Mining Officer v. Tata Iron and Steel Co. [2001] 7 SCC 358 on a different question as therein the court laid emphasis that Cess and Other Taxes on Minerals (Validation) Act, 1992, in so far as imposition and collection of cess on minerals extracted up to April 4,1991, on which date the Supreme Court delivered its judgment in Orissa Cement case [1991] Supp 1 SCC 430 was valid as thereby Parliament by legal fiction injected legislative competence unto the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible on "activity of land" as it does not come within the purview of any of the entries contained in List II. Different considerations may arise as regard interpretation of different entries keeping in view the Lists in which they belong. The court may have to look from a different angle in a case where it relates to interpretation of conflicting entries in List I vis-a-vis List II, and List II vis-a-vis List III. In a case where both the State Act and the Central Act have been enacted in terms of List III, the question of repugnancy as envisaged under article 254 would arise. In that type of cases, it is well-settled that in the absence of Presidential assent, the Parliamentary Act would prevail. The question, however, must be considered from a different angle where an entry in List II is subject to entry in List I. The court in such a situation would compare the provisions of the two Acts so as to find out as to whether the entire field has been occupied by the Parliamentary Act or not. The situation may, however, be different where there is no apparent conflict between an entry in List II and one in List I. As, having compared the provisions of the two Acts, if it is pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning, so as to exclude from its purview the subject of legislation coming within entry 27 or entry 14 of List II. Bearing in mind the constitutional scheme of supremacy of Parliament, the normal rule of interpretation of an entry in any of the lists in the Seventh Schedule of the Constitution, the object of taking over the control of the tobacco industry by Parliament, on making a declaration as required under entry 52 of List I and on examining the different provisions of the Tobacco Board Act, we see no justification for giving a restricted meaning to the expression 'industry' in entry 52 of List I, nor do we find any justification in the contention of counsel appearing for the States and also different Market Committees that the provisions contained in the Tobacco Board Act dealing with the growing of tobacco as well as making provision for sale and purchase of tobacco, must be held to be beyond the legislative competence of Parliament, as it does not come within the so-called narrow meaning of the expression 'industry' on the ground that otherwise it would denude the State Legislature of its power to make law dealing with markets under entry 28, dealing with agriculture under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess on production of tea. Production has a direct nexus with the activities of the Tea Board as enumerated under the Tea Act. Imposition or levy of cess on production of tea in terms of section 25 of the Act is over and above the power to impose excise duty under the Central Excises and Salt Act, 1944. Thus, to impose cess on production of tea is the field occupied by Parliament. We have no manner of doubt that section 25 has been enacted specifically for the purpose of controlling the price of "tea" both for the purpose of its consumption within and outside the country. The State, therefore, must be held to be denuded of its power to impose any tax on production of tea. It is furthermore well-settled that for the purpose of determining the extent of the field occupied by a Parliamentary legislation, it is not necessary to find out as to whether any rule has been framed in terms of the provisions of the Act or not. Parliament, in enacting the Tea Act, has exercised its superior power in the matter in terms of article 253 of the Constitution of India. Such superior power in certain situations can also be exercised in terms of entry 33, List III, as also overriding powers of Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Once it is found that the object of the 1957 Act is to denude the State from enacting a statute and it will have a direct impact on regulation of mines and minerals development as also control of tea industry, the Central Acts would be construed liberally vis-a-vis the State Acts. The discussions on the subject must revolve round keeping the aforementioned factor in mind. The importance as regards fixation of price of coal and tea has a direct bearing with the regulation of mines and minerals development as also the tea industry. The Central Government has also reduced the customs duty on coal taking into the aforementioned consideration in view as would appear from a notification issued by the Central Government on January 8,2004, under the provisions of the Customs Act. The importance of fixation of value of coal will also be noticed from the Statement of Objects and Reasons of the 1957 Act as the State did not even intend to increase the rate of royalty, which would have an adverse effect on production of coal. The impact on the value of coal by reason of imposition of royalties and taxes had, therefore, all along been kept in mind by Parliament. If a restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principles for reconciling conflicting tax entries is to ascertain as to whether a person, thing or activity is the subject matter of tax and the amount of the tax to be levied. The question which has to be answered on the basis of the aforementioned principle is, is it a tax on land or tax on mineral. If having regard to the nature of tax and keeping in view the history of the legislation to the effect that the State of West Bengal has all along been trying to impose tax on minerals as opposed to tax on land, is taken into consideration, it will be noticed that endeavours have been made to continue to impose "cess" on mineral and mineral rights in the garb of "land tax". The decisions of this court as referred to hereinbefore including India Cement [1990] 1 SCC 12 must be judged from this angle and not in vaccum. It may be true that taxation is regarded as a distinct matter and has been separately set out in List I or List II of the Seventh Schedule to the Constitution of India but what should be borne in mind is that the same by itself is not determinative of the nature of the statute. There are statutes and statutes; one statute may cover a general entry as also a taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slatures in India but they are of a different character. They have nothing to do with legislative competence. If this is the true scope of residue powers of Parliament, then we are unable to see why we should not, when dealing with a Central Act, enquire whether it is legislation in respect of any matter in List II for this is the only field regarding which there is a prohibition against Parliament. If a Central Act does not enter or invade these prohibited fields there is no point in trying to decide as to under which entry or entries of List I or List III a Central Act would rightly fit in." Parliament can impose excise duty on coal in terms of entry 86 of List I. A regulatory fee which would also be in the nature of tax can also be imposed under entry 54 read with entry 97. There is no limitation on the power of Parliament to make an Act under several entries, one of which may be a tax entry. This court must also not forget that there exists a difference in interpretation between an entry relating to fee and an entry relating to tax. Once it is held that the matters in the State List, to the extent of declaration, stand subtracted from the scope and ambit of entry 23 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to entry 36 of List I of the 1935 Act. The said 1948 Act, inter alia, contains provisions for levy of taxes. The history of legislation as regards regulation of mines and development of mineral is a pointer to the fact that section 6(2) of the 1948 Act not only provided for prohibition of the mining, quarrying or digging or the excavating or collecting of minerals from any mine or in any area, but also provided for imposition of tax. Nobody says that by reason of rule-making power, a tax can be levied under section 13(2)(i) but what has been held by this court is that the field of imposition of tax, fee or any other sum has been conferred on Parliament under the Mines and Minerals (Regulation and Development) Act itself by necessary implication or otherwise as otherwise there would not have been any reason for Parliament to say that such tax, fee or any other sum due to the Government "under this Act" meaning thereby "1957 Act" or the rules framed thereunder would be recoverable. It may also be true that by reason of rule-making power as contained in sections 13(2) and 15(1A) Parliament has not delegated the power to impose tax upon the Central Government or the State Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,18 and 25 together harmoniously. It may be true that in section 25 Parliament has not explicitly stated as to what tax would be due to whom; but that would not mean the provision is vague. That would simply mean that whosoever would be entitled to the impost can take recourse thereto. Under the 1957 Act, it is the State Governments who are the beneficiaries but that is of not much consequence. M.A. Tulloch [1964] 4 SCR 461 must be read in the aforementioned context and so read the logical corollary would be that the field for levy of tax, fee or other charges must be held to have been covered under the 1957 Act. Entry 97, List I of the Seventh Schedule to the Constitution of India indisputably should be taken recourse to as a last resort but once it is held that Parliament has expressed its intention to cover the field of taxation also under the 1957 Act, the source of such power must be traced to the appropriate entries in List I including entry 97, if no other source is traceable. The matter may be considered from another angle. The States on their own showing are entitled to levy tax upon exercising the power which is said to be in terms of entries 49 and 50 of List II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s although "agriculture" comes within the legislative domain of the State Legislature. Such a finding was arrived at having regard to the fact that Parliament was aware that specific provision may not be found in the three Lists for the purpose of imposition of all types of taxes and in that situation entry 97 of List I could be taken recourse to. But the question as to why Parliament did not confer any power to tax the capital value of land as an asset either on the Central Government or the State Government does not fall for our consideration in this case. If an occasion arises, such a question has to be considered on its own merits, but the fact remains that so far as mines and minerals are concerned, levy of tax thereupon in any manner whatsoever is not within the power of the State. The State cannot assume such power indirectly by seeking to impose tax on land which it cannot do directly. So far as "tea" is concerned, power to impose excise duty on "tea" is expressly conferred on the Central Government in terms of section 25 of the Tea Act. The decision in Harbhajan Singh Dhillon [1971] 2 SCC 779; [1972] 83 ITR 58 was followed in Union of India v. Delhi High Court Bar Assn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to import beer into the State and, therefore, the same is within the competence of the State to impose import fee. I am of the view that the licensee besides the payment of duty, etc., is to comply with such conditions as the State Government may impose while formulating the excise policy for the concerned year. The State, in my view, is competent and entitled to impose excise duty or countervailing duty. Besides there is no bar on the State to charge any other fees on account of consideration for the privilege provided to the licensee to trade in liquor which privilege he did not otherwise have. Therefore, the licensee is liable to comply with the other conditions imposed by the State Government from time to time. As held in many cases referred to supra the levy in dispute under challenge is an import levy . . ." Imposition of tax by way of regulatory measures, therefore, is permissible while enacting a regulatory statute. Regulatory licence fee also has been held to be tax. The decision of a seven-judge Bench of this court in Synthetics and Chemicals Ltd. v. State of U.P.[1990] 1 SCC 109; [1991) 80 STC 270, is also an authority for the proposition that such regulatory m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 141 of the Constitution of India is the ratio of the judgment. The ratio decidendi of a judgment is the reason assigned in support of the conclusion. If the reasons contained in a judgment do not appeal to a subsequent Bench, the matter may be referred to a larger Bench but so long as the same is not done, the ratio can neither be watered down nor brushed aside. India Cement [1990] 1 SCC 12, Orissa Cement [1991] Supp 1 SCC 430 and other judgments of coordinate Benches are binding on us. The correctness or otherwise of the said judgments has not been questioned. It would, therefore, not be proper for this court to read something in the judgment which does not appear therefrom or to exclude from our consideration reasonings on the basis whereof the conclusions of the judgment had been reached. If imposition of a regulatory fee is permissible on mineral or tea then the power therefor must be held to be in the Central Government having regard to the 1957 Act and the 1953 Act. If the subject matter of tax is land, the power is with the State Government unless its power is denuded or otherwise limited. However, anything which entrenches upon the field of regulation of mines and minera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 of List II, however, should be read in such a manner so that the surface land must have a direct nexus with the sub-soil right which is an inchoate right. Indisputably, sub-soil right would include mineral right. Mining lease for winning of coal may be granted for a huge area but depending on the nature of mining activities to be carried on, necessarily the mining lessee would not require the entire surface thereof except where the mineral is being extracted by adopting the quarrying method. A mineral can be extracted from beneath a town, village, national highway, railway track, etc., in any manner, without disturbing the surface itself, subject of course upon carrying out the activities in such a scientific manner that proper and adequate support to the surface is provided. Mineral right may extend to more than one town or village. Thus, there can be separate owners for the surface and the underground. The right of the owner of the surface would necessarily cast a statutory or a contractual liability upon the mining lessee to provide the requisite support to the surface so as not to cause subsidence thereof. If a wide definition of coal bearing land is given so as to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the tax was upon land though the cess was quantified on the basis of produce of the tea estate. In the present case, however, we do not find that the tax is on land. In fact what is sought to be taxed is in the absence of land. " It was opined: "18. One of the facets of tax being levied on land is that the primary responsibility of the payment of tax is on the owner of the land. In the instant case the levy is not on the general ownership of the land but is on the person who uses it and who may or may not be the owner. The primary liability is on the use by the occupier and if the occupier and the owner are two different persons the liability would be that of the occupier alone and not of the owner." It was further held: "20. From the aforesaid discussion it is obvious that the present tax is one on the excavation and use of forest land and not on the forest land as such. Taxing of the undertaking of a non-forest activity in a forest land cannot be regarded as being covered by entry 49 of the State List because what is sought to be taxed is not land but the tax is on absence of land or forest by reason of the activity of excavation and/or mining or use of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution in their wisdom have classified the fields of the legislation and conferred power upon the State to impose tax on mineral rights but the same is subject to the limitation imposed by Parliament by law relating to regulation of mine and development of mineral. Further the Supreme Court clearly held that for the purpose of upholding the validity of a tax on land or building it must be referable as a tax on the land as a unit and not on the basis of the minerals extracted from it." Although entries in the Lists are designed to define the area of legislative competence of Union and State legislation, the matter has to be considered having regard to the decisions rendered by this court as also other High Courts. It has been held in Mahabir Prasad Jalan, AIR 1991 Patna 40, that the State is not denuded of its power of acquisition. Therein only for that purpose entry 14 and entry 18 of List II were held to have not taken away the legislative competence of the State. The legislative competence of the State in relation to agricultural land as also imposition of tax on land and buildings as contained in entry 49 of List II must be considered having regard to entry 52 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an incongruous result. Cess is imposed having regard to the valuation of coal bearing land but then in a situation of this nature the question would be as to what would be the unit of land for the purpose of computing the annual value of land; that is one acre of surface land or 100 acres of underground mining right. Furthermore, again the mode of valuation in respect of coal bearing land, namely, one acre of land having the mineral right with surface right intact and other 99 acres of land having mineral right only without any right to use the surface should be different. Yet again a situation may arise where the holder of a mining lease in relation to an underground mineral right has purchased or taken on lease the surface land for carrying out mining operations for having offices or place stock of coal or siding a railway or transport yard wherefrom coal is transported. The impugned statutes not having provided for computing the annual value of land in such different situations and, thus, the tax on land not being measurable as an independent unit of the land must be held to be not workable. No known method of valuation has been shown to us which provides that although with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been defined in section 2(24) as follows: '2(24). "land" includes benefits to arise out of land, things attached to the earth or permanently fastened to anything attached to the earth and rights created by law over any street';" Noticing that the expressions "land" and "buildings" had separately been defined and a distinction had been drawn by the Legislature, this court held that the State could not levy a property tax on machinery in the guise of levy of tax on lands and buildings. The tax under the impugned Acts has not been imposed on land as a unit but on coal. The tax, therefore, is not directly upon the land but upon a part of land, which is mineral and, thus, out of the legislative competence of the State. Applying the test laid down in several decisions of this court, we are of the opinion that the impugned cess is not a tax directly levied upon land as a unit by reason of the general ownership of the lands and buildings. Mineral bearing land vis-a-vis general rights over land: Land may consist of several rights. The surface of the land may be in the actual possession of an occupier who has no right or under-raiyat or a person having only a right to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by reason of section 25 of the Limitation Act, a person must exercise an easementary right without interruption for a period of 30 years in relation to air, way or watercourse or the use of any water or any other easement by enjoying it peaceably and openly as an easement and as of right. Then only such exercise of right to air, way, watercourse, use of water or other easement becomes absolute and indefeasible. A person who holds land for agricultural purpose may, therefore, subject to any reasonable restriction that may be made by the State, have the right to use water for irrigational purposes and for the said purpose he may also excavate a tank. But under no circumstances, can he be permitted to restrict flow of water to the neighbouring lands or discharge the effluents in such a manner so as to affect the right of his neighbour to use water for his own purposes. On the same analogy he does not have any right to contaminate the water to cause damage to the holders of the neighbouring agricultural fields. Large scale defoulment in the quality of water so as to make it unusable by others or as a result whereof the water is contaminated and becomes unpotable would be violative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the same surface unless it is so done on a unit. Only because etymologically the land may mean from the surface to the center of the earth, the holder of an agricultural right or non-agricultural right may not have any right over the subterranean right. Such subterranean right may be used only for the purpose of public interest granted to the holder of land under the relevant statute governing the field. The holder of a limited tenancy right, thus, cannot construct a dam or take out all water or mineral underneath. 1957 Act vis-a-vis entry 50 of List II The contour of the 1957 Act would clearly show that the Union had taken over the entire control of the mining industry. The 1957 Act is a comprehensive Act. It is a self-contained code. Grant of mineral rights, undoubtedly, would come within the purview of regulation of mines and mineral development in terms of the 1957 Act. The entire field of legislation is covered by the Parliamentary Act of 1957. When a mining lease is granted, consideration for parting with the mineral right would be a part of the terms and conditions thereof. The right to receive royalty is also a mineral right. State indisputably receives royalty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served: "Thus tax on mineral rights would be confined, for example, to taxes on leases of mineral rights and on premium or royalty for that. Taxes on such premium and royalty would be taxes on mineral rights while taxes on the minerals actually extracted would be duties of excise." The learned judge further observed: "There would be no difficulty where an owner himself works the mine to value the mineral rights on the same principles on which leases of mineral rights are made and then to tax the royalty which, for example, the owner might have got if instead of working the mine himself he had leased it out to somebody else. There can be no doubt therefore that taxes on mineral rights are taxes of this nature and not taxes on minerals actually produced." If the intention of the Constitution makers was to confer an absolute power upon the State Legislature to levy tax whether on mineral rights or minerals, the same could have been worded differently. There was absolutely no necessity to restrict the power to levy tax on mineral rights in the State and not to levy tax on minerals whether extracted or otherwise. Mineral rights, therefore, cannot be construed as a mineral al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f royalty on various grades of coal was in question. The arguments as regard lack of legislative competence was repelled referring to India Cement [1990] 1 SCC 12 in the following words: "11. In our considered opinion there is no substance in either of the twin contentions for challenging the vires of section 9(3). So far as competence to enact section 9 is concerned, the question is no longer res integra . . ." In India Cement [1990] 1 SCC 12, a seven-judge Bench of this court held that the 1957 Act and the declaration contained therein being a legislation controlled by entry 54 of List I the whole field is occupied and entry 50 of List II is totally excluded. In India Cement [1990] 1 SCC 12, thus, this court has held that no tax can be imposed by the State which would have a direct impact on the quantum of royalty. Further, in Laxminarayana Mining Co. v. Taluk Dev. Board, AIR 1972 Mys 299, which has been approved in India Cement [1990] 1 SCC 12, the Mysore High Court observed that a combined reading of entries 23 and 50 in List II and entry 54 in List I establishes that as long as Parliament does not make any law in exercise of its power under entry 54, the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning lease in terms of the provisions of the Mines and Minerals (Regulation and Development) Act and the rules framed thereunder for the remainder of the term. All coking coal mines and coal mines except a very few, thus, have become subject matter of statutory mining leases by reason of a legal fiction created under the 1972 and 1973 Acts. In that view of the matter too, entry 50 of List II of the Seventh Schedule to the Constitution of India may not have any application to such coking coal mines and coal mines, as they have been taken over and are being run by the Government companies in terms of the provisions of the Parliamentary Acts. The expression "any limitations" in entry 50 of List II should not be given a restricted meaning as contended by the appellant. In fact, the rule of interpretation that the language of the entries should be given widest scope, should equally apply to the interpretation of the said words. So read, the limitations on "taxes on mineral rights" could be in any form, including occupying the entire field of legislation under entry 50 of List II by a Parliamentary legislation and providing for levy of taxes. The MMRD Act, 1957, precisely achieves the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Slack 585.00 6.50 3.50 204.75 29.52 Rom 582.00 6.50 3.50 203.70 29.10 C 4,940, Steam 522.00 5.50 3.50 182.70 26.10 5,600 Kilo Calories/ Kg. Slack 515.00 5.50 3.50 180.25 25.75 Rom 512.00 5.50 3.50 179.20 25.60 -------------------------------------------------------------------------------------------- .........cont... -------------------------------------------------------------------------------------------- P.W. Road AMBH Cess TOT (A) (B) (C) Cess per MT per Mt. Stat.Levies Price CST/MT at 4 Price incl. (Excl.) Excl CST per cent on A CST (A+B) -------------------------------------------------------------------------------------------- 1.00 1.00 270.00 915.00 36.60 951.60 1.00 1.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 512.00 75.00 3.50 590.50 23.62 614.12 -------------------------------------------------------------------------------------------- The difference in the ultimate price of coal in the State of West Bengal and other States would, thus, be around 25 per cent. of the base price. The submission of Mr. Dwivedi to the effect that the cess imposed is not excessive, therefore, does not appear to be correct. From the aforementioned chart, it is evident that no substantial difference can be culled out so far as the price of coal on despatch vis-a-vis at the pit head is concerned, inasmuch by reason of the amendments made in the impugned Acts only the amount of royalty and other taxes were be deducted, which would only be a sum of Rs.10 whereas in lieu thereof sums of Rs.225.75, Rs.32.25, Re.1 and further sum of Re.1 would be levied on the base value of coal by way of rural employment cess, education cess, road cess and other cesses amounting to Rs.270 per M.T. Parliament, on the other hand, having regard to the decision in India Cement [1990] 1 SCC 12, thought it expedient to increase the rate of royalty from Rs.6.50 to Rs.120 per M.T. The effect of imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a right of extracting mineral is conferred, even if, the mineral comes out of the mine, say while washing coal in a coal washery or manufacturing coke in a coke plant ("coal washery" and "coke washing plant" are mines under several Parliamentary Acts as also orders and rules governing the field) the State would have no right to deal with the same. "Mining lease" as defined in section 3(c) of the Act means "a lease granted for the purpose of undertaking mining operations, and includes a sub-lease granted for such purpose." "Mining operations" as defined in section 3(d), mean" any operations undertaken for the purpose of winning any mineral". Section 5(1) imposes restriction on the grant of mining leases by a State Government. The essence of mining operation is that it must be an activity connected with mineral whether under the surface or on the earth. Once the right of winning mineral is conferred in terms of the 1957 Act, the State would be denuded of any power to impose any tax in respect thereof in any form and at any place, even if the mineral is found outside the mineral bearing lands. Under the three impugned Acts, as would be discussed in detail hereinafter taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atch. We have therefore to construe document exhibit D5 on its own terms and not barely on the label or description given to the stipulated payments. Conceivably this arrangement could well have been given a shape by using another word. The word 'royalty' was perhaps more handy for the authors to be employed for an arrangement like this, so as to ensure periodic payments. In no event could the parties be put to blame for using the word 'royalty' as if arrogating to themselves the royal or sovereign right of the State and then make redundant the rights and obligations created by the deed." In Quarry Owners' Association v. State of Bihar [2000] 8 SCC 655, the royalty is the tax while agreeing thereto, it was observed: "In considering this submission we have to keep in mind, tax on this royalty is distinct from other forms of taxes. This is not like a tax on income, wealth, sale or production of goods (excise), etc. This royalty includes the price for the consideration of parting with the right and privilege of the owner, namely, the State Government who owns the mineral. In other words, the royalty/dead rent, which a lessee or licensee pays, includes the price of the minerals w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise of its residuary power." Taking any view of the matter, it cannot be said that impugned "cess" under the State Acts is referable to entry 50 of List II. In Quarry Owners' Association v. State of Bihar [2000] 8 SCC 655, imposition of royalty on mines and minerals by the State of Bihar in exercise of its power conferred upon it under section 15 of the 1957 Act was in question. While considering as to whether the State has exceeded its delegated power in levying excess royalty, interpreting the expression "regulation of mines and minerals development" occurring in entry 54, List I and entry 23, List II of the Seventh Schedule to the Constitution of India, it was observed: " . . . The word 'regulation' may have a different meaning in a different context but considering it in relation to the economic and social activities including the development and excavation of mines, ecological and environmental factors including States' contribution in developing, manning and controlling such activities, including parting with its wealth, viz., the minerals, the fixation of the rate of royalties would also be included within its meaning . . ." Referring to the decision of this cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest in relation thereto. Regulation of transfer of such mineral right is also therefore governed by Parliamentary legislation. The State thus cannot impose a tax on its own right. Indisputably, requisite declaration in terms of entry 54 has been made in section 2 of the 1957 Act. Any legislation by the State after such declaration entrenching upon the field disclosed in the declaration must necessarily be held unconstitutional because that field is abstracted from the- legislative competence of the State Legislature. The word "control" has been defined in Black's Law Dictionary in the following terms: "Control-power or authority to manage, direct, superintend, restrict, regulate, govern, administer, oversee." In Bank of New South Wales v. Commonwealth (76 CLR 1), Dixon J., observed that the word "control" is "an unfortunate word of such wide and ambiguous import that it has been taken to mean something weaker than 'restraint', something equivalent to 'regulation'." Having regard to the purport and object of the 1957 Act, the said expression must be held to be of wide import. Entry 50 of the Seventh Schedule to the Constitution of India provides for tax on mine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same as that of royalty. The value of the coal or, for that matter, of green tea has a direct nexus with the weight thereof. Thus, there may not be any significant distinction in principle between the levy in India Cement's case [1990] 1 SCC 42 and levy in the present one. The rate of royalty, etc., under the 1957 Act is fixed by the statute and not by agreement between the parties. Rate of royalty may be revised subject to the limitation contained in sub-section (3) to section 9 of the 1957 Act in respect whereof the lessees have no say in the matter. Even the principles of natural justice are not required to be complied with. The lessee even cannot surrender the leasehold. The amount of "royalty" received by the State is expended as general revenue. In D.K. Trivedi and Sons v. State of Gujarat [1986] Supp SCC 20, it is stated: "39. In a mining lease the consideration usually moving from the lessee to the lessor is the rent for the area leased (often called surface rent), dead rent and royalty. Since the mining lease confers upon the lessee the right not merely to enjoy the property as under an ordinary lease but also to extract minerals from the land and to appropriate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r building their own houses. By way of example, we may notice sub-section (2) of section 21 of the Chota Nagpur Tenancy Act, 1908, which reads thus: "(2) Notwithstanding anything contained in any entries in the record of rights or any local custom or usage to the contrary, the following shall not be deemed to impair the value of the land materially or to render it unfit for purposes of the tenancy, namely:- (a) the manufacture of bricks and tiles for the domestic or agricultural purposes of the raiyat and his family; (b) the excavation of tanks or the digging of wells or the construction of bandhs and ahars intended to provide a supply of water for drinking, domestic, agricultural or piscicultural purposes of the raiyat and his family; and (c) the erection of buildings for the domestic or agricultural purposes or for the purposes of trade or cottage industries of the raiyat and his family." The State of West Bengal has issued notices for submission of return on despatches of brick earth for the previous three years. The very fact that royalty on minor mineral is required to be paid on despatches, any imposition of tax at the point of despatch must be held to be ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulation in terms of the 1957 Act, the State is denuded of its power to impose any tax thereupon or a product therefrom. Minor mineral matters: Section 3 of the U.P. Act in no uncertain terms provides for imposition of cess on mineral rights. Such a cess has been imposed subject to limitations imposed by Parliament by law relating to mineral development. It is not in dispute that in terms of the provisions of the Zamindary Abolition Act, the mineral right has vested in the State. Mineral right, therefore, cannot be the subject matter of taxation as the State cannot impose a tax on itself. Once the 1957 Act has been made, the power of the State to grant lease is on the terms and conditions which were provided under the statute; the State, over and above the amount by way of royalty, surface rent, dead rent, fees, etc., cannot realise any other sum. Such an impost would directly come in the way of mineral development. Rule 3 of the Special Area Development Authority (Cess on Mineral Rights) Rules, 1997, clearly states that whereas cess on coal would be Rs.5 to 10 per ton, cess on stone, coarse sand, etc., would be Rs.2 to 5 per cubit metre. The imposition of cess on miner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The power to impose tax upon the said authority by delegation of power or otherwise on mineral rights or mines and minerals cannot be bestowed by the State. The power to tax on mineral right cannot be delegated by the State to any other authority. The said power per se does not fall within the purview of entry 5. The statutory authorities, having regard to the provisions contained in entry 5, may be delegated with the power to impose tax on land and buildings, etc., which would have a direct nexus for which such authority has been constituted but not on "mineral right" which is vested in the State. Nobody questions or has any reason to question the validity of the constitution of the authority but what is being questioned is its power to impose tax on mineral rights or mines and minerals. Apart from what has been said hereinabove, even the State is denuded of its power to impose any tax on mineral rights or mines and minerals having regard to the provisions of the 1957 Act. If it is held otherwise, the same would render India Cement [1990] 1 SCC 12, Central Coalfields Ltd. AIR 1991 Patna 27 and a large number of decisions following the same wholly nugatory. No material has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 1 SCC 125 cannot be said to be good law in view of the subsequent decisions of the larger Bench of this court in India Cement [1990] 1 SCC 12. The validity of a provision imposing tax on a mineral cannot be upheld in terms of entry 5, List II of the Seventh Schedule to the Constitution of India at the instance of a statutory authority. No material having been brought on record that any services invoking the principles of quid pro quo are rendered to the owners of the mine, the impost cannot also be upheld on the ground that the same is a fee within the meaning of entry 66, List II of the Seventh Schedule to the Constitution. It may be noticed that a Division Bench of this court in Jindal Stripe Ltd. v. State of Haryana [2003] 8 SCC 60; [2003] 1 RC 728 referred the question of concept of compensatory tax which had been evolved as an exception to the provisions of article 301 of the Constitution doubting the propositions of law enunciated in Bhagatram Rajeev Kumar v. CST [1995] Supp 1 SCC 673; [1995] 96 STC 654 and State of Bihar v. Bihar Chamber of Commerce [1996] 9 SCC 136; [1996] 103 SIC 1. The levy of cess in terms of the SADA Act cannot be justified as a fee keeping i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution of India, the State's power to make any law dealing with tea including levy of any tax on any types of tea which would include green tea leaves would completely be denuded, as a tax either in terms of entry 14,18 or 49 would affect the said commodity. In Maganbhai Ishwarbhai Patel v. Union of India, AIR 1969 SC 783, this court held: "The effect of article 253 is that if a treaty, agreement or convention with a foreign State deals with a subject within the competence of the State Legislature, the Parliament alone has, notwithstanding article 246(3), the power to make laws to implement the treaty, agreement or convention or any decision made at any international conference, association or other body. In terms, the article deals with legislative power; thereby power is conferred upon the Parliament which it may not otherwise possess." In State of Bihar v. Bihar Chamber of Commerce [1996] 9 SCC 136; [1996] 103 STC 1, this court held: " . . . The impugned Act is also not relatable to any of the articles 249 to 253 which are in the nature of exceptions to the normal rule that Parliament can make no law with respect to the entries in List II. If so, it follows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in the Cess Act, 1880. It is also doubtful as to whether the Cess Act, 1880, and consequently the impugned levies would be applicable throughout the State as the levy would be attracted at the places where "road and public work cess" is payable. The definition of land, immovable property as contained in the Cess Act, 1880, play an important role in so far as in terms of section 78 of the West Bengal Primary Education Act and section 4 of the West Bengal Rural Employment and Production Act, 1976, cess would be levied on all immovable properties on which road and public work cesses are assessed. Section 5 of the Cess Act, 1880, provides that all immovable properties to be liable to road cess and public works cess. The immovable property which is, therefore, not liable to a road cess and public works cess, a fortiorari, cannot be subjected to education cess or rural employment cess. In Buxa Dooars [1989] 3 SCC 211; [1989] 179 ITR 91, primary education cess and rural employment cess levied on tea had been held to be ultra vires article 301 of the Constitution of India. The said decision applies on all fours in the present case. In Buxa Dooars [1989] 3 SCC 211; [1989] 179 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notification dated October 30,1986, issued thereunder. Once it is conceded that green tea leaves would come within the purview of definition of "tea", it is inconceivable as to how the impost of excise duty on tea in terms of subsection (2) of section 25 of the Act will have no bearing on the subject. By reason of sub-section (2) of section 25, additional excise duty is levied. Excise duty in terms of the Central Excise Act, it is trite, cannot only be levied on finished products but also the products at intermediary stages. Unfortunately, in Goodricke's case [1995] Supp 1 SCC 707; [1995] 98 STC 32, the learned judges did not consider the matter from this angle. Goodricke [1995] Supp 1 SCC 707; [1995] 98 STC 32 also runs counter to India Cement [1990] 1 SCC 12 as also Kannadasan [1996] 5 SCC 670 the effect of the expression "immovable property" in the Cess Act, 1880, was also not brought to its notice and had the same been done, there would not have been a conclusion that a tea estate would be treated as an unit as therefrom the standing crops and structures were required to be excluded. Goodricke Group of case does not, therefore, lay down good law and should be overruled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of enacted domestic law occupying the field when there is no inconsistency between them. It is now an accepted rule of judicial construction that regard must be had to international conventions and norms for construing domestic law when there is no inconsistency between them and there is a void in the domestic law. The High Court of Australia in Minister for Immigration and Ethnic Affairs v. Teoh [128 Aus LR 353] has recognised the concept of legitimate expectation of its observance in the absence of a contrary legislative provision, even in the absence of a Bill of Rights in the Constitution of Australia." In Salomon v. Commissioner of Customs and Excise [1966] 3 All ER 871 (CA), it was held that when the statute is in compliance with international conventions then it must be interpreted in conformity therewith. Measure of tax: It is no longer in dispute that for the purpose of determining the nature of tax, the measure with reference to which a tax is calculated is a relevant factor although not conclusive. In Byramjee Jeejeebhoy (Sir) v. Province of Bombay reported in ILR [1940] Bom 58; AIR 1940 Bom 65 [FB] it is stated: "In determining the nature of the tax, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of despatches of different kinds of tea. In the present case also cess has no nexus with the tea estate which comprises not only the lands on which the green tea are grown but also the factory or the workshop where the green tea leaves are manufactured into black tea, the houses of the employees where the employees reside, other construction and also on lands which are ancillary to the tea estate. In Sudhir Chandra Nawn v. WTO [1968] 69 ITR 897; [1969] 1 SCR 108 this court was considering the validity of the Wealth-tax Act of 1957 on the ground that it fell within entry 49 of List II. It was held that entry 49 of List II contemplated a levy on land as a unit and the levy must be directly imposed on land and must bear a definite relationship thereto. As the Wealth-tax Act fell under entry 86 of List I, it was held to be a valid piece of legislation. The said decision has been referred to with approval in India Cement [1990] 1 SCC 12. This court also referred to the case of Second Gift-tax Officer v. D.H. Nazareth [1970] 76 ITR 713; [1971] 1 SCR 195. In that case this court held that the tax on gift of land is not a tax imposed directly on land as a unit but only on a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty shall be subjected, observed: "In my opinion, the construction of the section is entirely wrong. Grammatically I think it wrong. I think that the words 'charged with income tax under Schedule D' mean' charged under Schedule D with income tax,' and the words 'such tax' mean the tax which is called in the Act 'income tax'. It is said that the tax imposed on property within Schedule A is not strictly an income tax, because it is levied on the annual value of property and not on the profits received by the owner. That, no doubt, is so, and if one were writing a treatise on taxation it would be proper to refer to this distinction. But the question is, what do the words 'income tax' mean in the language of the Legislature, and in this Act?" The learned Law Lord Davey observed: "Again, it is said (if I understand Mr. Danckwerts rightly) that the expression 'profits and gains' has a technical, or almost technical, meaning as descriptive only of the taxable subjects comprised in Schedule D. No doubt from the nature of the case the word 'gains' is more frequently, though not exclusively, used in Schedule D. But, unluckily for the argument, the word 'profits' is the word selected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question occurs, how is such tax to be laid, uniformly or apportionately? The rule of uniformity will apply, because it is an indirect tax, and direct taxes only are to be apportioned. What are direct taxes within the meaning of the constitution? The constitution declares that a capitation tax is a direct tax; and, both in theory and practice, a tax on land is deemed to be a direct tax. In this way, the terms direct taxes, and capitation and other direct tax are satisfied. It is not necessary to determine, whether a tax on the product of land be a direct or indirect tax." Tax on land must be direct tax, but a tax on mineral severed from land would not be a direct tax. The question has to be considered having regard to the legislative competence as well as the nature of the product. Normally, a tax which is measured in terms of the profit arising out lands being in nature of a tax on income would be a direct tax. A tax, however, which is levied on the product would be an indirect tax. Excise duty is considered to be an indirect tax. When a legislation having regard to the entries in List I provides for imposition of excise duty or additional duty, the same must necessarily be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36 of 1992 is in substance on minerals and mineral rights, which has nothing to do with surface characteristic of the land. In this view of the matter, the levy of tax, on mineral-bearing lands and coal-bearing lands, under section 3 read with section 2(a)(1) and section 2(d) of the Act is beyond the competence of the State Legislature and is ultra vires." The State of West Bengal had carried out amendments in the impugned Acts after the India Cement [1990] 1 SCC 12 by inserting coal bearing lands instead and in place of coal mines but the definitions of mines within the meaning of several Parliamentary Acts including Mines Act, 1952, and the coal bearing lands are in pari materia. Even the definition of despatch under the impugned Acts and the Parliamentary Acts make no significant difference. We may notice that even in relation to mines and minerals, a cess at 0.50 paise per tonne is levied on minerals or materials despatched from the land. These provisions go to show that the materials which are produced on the land, as for example bricks, which can be said to be a material and which has no bearing with the minerals extracted therefrom became the subject-matter of tax. The im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the tea estate, as contended, the levy of cess can never be uniform and will have no nexus with the land as the land used for factory, workshop and the houses for persons employed in the tea estate have no contribution to the production of tea leaves which have nexus only with the land where tea plants are grown and which produce green tea leaves. Apart from this, in a tea estate, there are fallow land, nursery and other areas apart from the factory, workshop, house where cultivation of tea bushes or plant are not possible. By use of the so-called measure of production of tea leaves, such lands would remain outside the levy of cess. A distinction exists between capital value as a measure of tax and capital value as assets. The validity of levy can be upheld where taxes on buildings are levied having regard to a percentage of capital value provided the same is not unreasonable or confiscatory in nature. Municipalities which ordinarily provide for compensatory tax may also be delegated with the power of levying tax or on building the measure whereof may be on the annual value of the building. However, what is converted into income can reasonably be regarded as income. Save and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure of tax is related to the produce of only one portion of the land purported to be defined as the unit of taxation. (c) Additionally, the land comprised in a factory or workshop for producing commercial tea has no nexus whatsoever with the growing of tea plants because by definition, green tea leaves for the purpose of the levy means unprocessed green leaves of the tea plant. The factory and workshop land therefore has no connection whatsoever with the production of green tea leaves. Similarly, the levy on the land used for housing estates and those used for ancillary purposes also have no rational connection with the production of green tea leaves. (d) In any event the productivity or yield value of all the areas of a tea estate other than that portion which is currently being used for cultivation of the tea plants has been totally ignored for the purpose of fixing the alleged measure of tax. Whether the measure of tax provided in the Act bears a rational nexus with the levy itself, has been considered in the case of Buxa Dooars Tea Co. Ltd. [1989] 3 SCC 211; [1989] 179 ITR 91 (SC). In paragraphs 10 and 11 of the said judgment the following propositions have been elucidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the expression wherever it occurs in the Act. 'For the purposes of the Act' surely means for the purposes of all and not only some of the provisions of the Act. If the intention was to limit the applicability of the definition of the expression 'public servant' as contended, the language used would not have been 'for the purposes of the Act' but something like 'for the purposes of the Act in so far as they relate to the offences under sections 161 to 165A of the Indian Penal Code'." See also Ashok Leyland v. State of Tamil Nadu (C.A. Nos. 976-979 of 2001 disposed of on January 7,2004] [2004] 2 RC 249). In Central Coalfields Ltd., AIR 1991 Patna 27, it was held: "45. In this case, it is clear that so far as imposition of cess on mines and minerals is concerned, the same has not been levied taking the land as a unit or the annual value thereof, but on the basis of royalty payable on the minerals raised therefrom or on the price of the value of coal raised from the mines which have no direct bearing with the imposition of cess on land as a unit." It was further noticed therein: "47. In CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294,299 (SC); AIR 1981 SC 972, the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy in the Cess Act is that although it appears to be tax on land, in effect, and substance, it is a tax on minerals extracted therefrom," In Krishi Utpadan Mandi Samiti [2003] 19 Scale 432, it was held: "... It is trite that fiscal statute must not only be construed literally, but also strictly, It is further well known that if in terms of the provisions of a penal statute a person becomes liable to follow the provisions thereof it should be clear and unambiguous so as to let him know his legal obligations and liabilities thereunder. The matter may be considered from another angle, 'Expressio unius (persone vel rei) est exclusio alterius', is a well known maxim which means the express intention of one person or thing is the exclusion of another. The said maxim is applicable in the instant case. Having regard to the fact that in the event it is held that buying of seeds which is a commodity governed by a Parliamentary Act would attract payment of market fee in terms of the said Act, a conflict would arise. In ordinary parlance at particular stages in which seeds are grown from breeder seeds may take the form of wheat but the said production which is bought by the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annual value of a land or building is determined by applying one or the other approved or known method of valuation, but the same cannot have any application for determination of the total value of the mineral bearing land. The valuation of mineral bearing land would be dependent upon so many factors which would include the geographical condition, quality and quantity of the mineral which can be removed, the capital required to be invested and various other factors. Once the mineral is removed from the mineral bearing land, the surface may not either remain in existence and, thus, the value of the land would gradually come down. The value of a land with minerals and without minerals would be different. As and when mineral is taken out of the land, the value is diminished. The method of imposing tax with reference to the materials produced from the land, thus, cannot be a criterion for determining the value of the land and, thus, the said method of valuation should not made applicable for the purpose of determining the annual value of land or building. This aspect of the matter has again not been considered in Goodricke Group [1995] Supp 1 SCC 707; [1995] 98 SIC 32. In Goodricke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1961] 3 SCR 77 in its proper perspective where a flat rate of tax imposed on lands was held ultra vires article 14 of the Constitution of India. In Moopil Nair [1961] 3 SCR 77; AIR 1961 SC 552, this court held: " . . . Ordinarily, a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxation. Under the Act in question we shall take a hypothetical case of a number of persons owning and possessing the same area of land. One makes nothing out of the land, because it is arid desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one, in due course of husbandry, is making the land yield just enough to pay for the incidental expenses and labour charges besides land tax or revenue. The fourth is making large profits, because the land is very fertile and capable of yielding good crops. Under the Act, it is manifest that the fourth category, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined by the Central Government or the Coal Controller under the Colliery Control Order, 1945, which was continued under Essential Commodities Act, 1955, and thus being covered by entry 33, List III of the Seventh Schedule to the Constitution of India, no tax on coal can be imposed which will have a direct nexus on the value thereof. The impugned Acts must be construed having regard to the other statutes operating in the field. A statute will not be valid unless the defects pointed out are removed. Such removal of the defects must be done keeping in view the principle of "legislative competence". Even Parliament could not validate an Act which was enacted without proper legislative competence. As the measure of tax levied led to the declaration of the law invalid being in truth and substance to be beyond the competence of the State Legislature by reason of the impugned Acts, the levy cannot be said to have been revalidated. They were required to be re-enacted but such re-enactment must also be in tune with any or other entries made in List II of the Constitution of India. The definition of mineral is wide. As coal washing plants or coke-oven plants are collieries or coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classes of properties like factories, textile mills, etc., vis-a-vis other properties. The questions which have been raised herein were not raised in that case. The core question which was posed therein was as to whether having regard to the affidavit filed on behalf of the respondent-Corporation the classification could be upheld on the basis that total expenses to be incurred for conservancy service is required to be found out first whereafter, different rates of conservancy tax fixed for a particular class of property must be related to the cost involved in supply of conservancy service to that class. The court held that a broad and general estimate of the cost of conservancy services and the tax receipts after taking into account the relevant factors would satisfy the requirement of law. If a broad meaning of land for the purpose of imposition of conservancy tax is required to be given, the same would include mineral which would, empower the State to levy tax on mineral. Such a finding would lead to an absurd result and make entry 54 of List I otiose. Therein the fact situation was absolutely different in so far as the definition of land contained in clause (30) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al which is clearly beyond the power of the State Legislature. On the same analogy levy of house tax is permissible having regard to the nature and object thereof wherefor there can be a valid classification. The annual valuation of the house on the basis of income must be considered for the purpose of quantifying the tax. But the said principle would not apply in the case of tax on production of minerals. We, having regard to the decisions of this court in Buxa Dooars [1989] 3 SCC 211; [1989] 179 ITR 91 and India Cement [1990] 1 SCC 12 which are directly on the point, do not think that the approach to the questions involved in the instant case should be different. In imposing tax, having regard to political or economic consideration, it may be permissible to allow some concession to the small owners or income arising from the land may be taken into consideration but as would be noticed from the decisions the validity of such taxes have been upheld in relation to the land or the structures standing thereupon or a tax on circumstances and properties. We may notice that in District Board of Farrukhabad v. Prag Dutt, AIR 1948 All 382 a distinction was made between a tax on circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price by the Central Government would not be possible if it is held that a different rate of cess can be levied, by different States which will have a direct impact on the sale price thereof. In State of Rajasthan v. Vatan Medical and General Store [2001] 4 SCC 642, this court upheld the power of the State to make a law with respect to manufacture of intoxicating liquor, which power evidently exists in the State under entries 8,1,6 and 51, List II, of the Seventh Schedule to Constitution of India read with article 47 thereof. Having recorded that finding, it was observed that once the act came within the four corners of the State entries, no Central Law made further in terms of List I or List III can be held to be valid. The said decision has no application in instant case. In Ralla Ram v. Province of East Punjab [1948] FCR 207, annual value of the buildings and lands was to be ascertained by estimating the gross annual rent at which such land or building with its appurtenances and any furniture that may be left for use or enjoyment with such building might reasonably be expected to let from year to year. In that case, therefore, gross annual rent so fixed or expected reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta, AIR 1965 SC 1561, imposition of tax on land used as a market was upheld on the ground that the use to which the land is put can be taken into account. In the instant case, the use of land is extraction of coal or production of tea. Having regard to the Parliamentary Acts, any tax on the activities of land is forbidden. In the case of Ajay Kumar Mukherjee, AIR 1965 SC 1561, the State even could impose tax in terms of entry 26 of List II as was observed in I.T.C. Ltd. [2002] 9 SCC 232. In Goodricke Group [1995] Supp 1 SCC 707; [1995] 98 STC 32, Jeevan Reddy J. in no uncertain terms held that overlapping of two fields may be permissible but the conflict has to be determined having regard to the fact whether it is slight as well as the basis as to whether such overlapping is on fact or is on law. Despite slight overlapping which is permissible, distinctiveness of the nature of levy under the State Act vis-a-vis the Parliamentary Act must exist. However, once an overlapping takes place in law, the State legislation, in view of the declaration made in the Parliamentary legislations, would be unsustainable. Reasoning adopted in Goodricke Group [1995] Supp 1 SCC 707; [1995] 98 SIC 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of lands held for carrying on mining operations in relation to any mineral, on such per centum of the annual value of the said lands, as specified against that mineral in Schedule II ;" In Orissa Cement [1991] Supp 1 SCC 430, therefore, annual value was to be determined not only on the basis of royalty but also on the basis of the dead rent. Even then, section 5(2) of the said Act was declared ultra vires. Only because cess is levied on annual rental value, the same by itself would not be determinative of the character of the levy. Royalty levied on the mineral under section 9 of the 1957 Act must be held to have a direct relation with the income derived from the mineral bearing land. Royalty is measured in terms of the amount of coal extracted. The value of the coal will, thus, have a direct nexus on the royalty being the lessor's share on the demised land. Thus, any tax imposed on extracted minerals would be prohibited as the same will have an adverse effect/impact on the mineral development. For levying any tax on land in terms of entry 49 of List II, it must have a direct bearing on the land as a unit. " Any attempt on the part of the State to impose tax on min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that despite insertion of the proviso appended to section 11A of the Industrial Disputes Act the right of the employer to adduce evidence justifying his action for the first time in such a case is not taken away by the proviso to section 11A. It was held that legal position as existing prior thereto and changes thereby shall continue stating: "Another aspect to be borne in mind will be that there has been a long chain of decisions of this court, referred to exhaustively earlier, laying down various principles in relation to adjudication of disputes by industrial courts arising out of orders of discharge or dismissal. Therefore, it will have to be found from the words of the section whether it has altered the entire law, as laid down by the decisions, and, if so, whether there is a clear expression of that intention in the language of the section." A Bench of this court in Dharam Dutt v. Union of India [2003] 10 Scale 141 observed: "65. Welfare Association A.R.P. Maharashtra v. Ranjit P. Gohil [2003] JT 2 SC 335, is a decision to which both of us are parties. Therein we have held that it is permissible for the Legislature, subject to its legislative competence otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and sections 10, 13, 15, 25 and 30 of the Tea Act. Field of taxation on minerals is also covered by section 25 of the 1957 Act. The field of taxation under the Tea Act is specifically covered by section 25 thereof. (v) The State being owner of the minerals and grant of mineral right being controlled by the Parliamentary statute, the State is denuded of its power to impose any tax on mineral right in terms of entry 50 of List II of the Seventh Schedule to Constitution of India. (vi) Having regard to the underlying object of the 1953 Act and the 1957 Act, even if the doctrine of pith and substance is applied, it may not be possible to hold that the State Legislature has only incidentally encroached upon the legislative field occupied by Parliament. (vii) Levy of tax on coal bearing lands and mineral bearing lands where mining operations are being carried out through the process of incline or digging pits is illegal, inasmuch as the underground mining right would be larger in area than the surface right and, thus, it is not possible to uphold the validity of such statute with reference to the extent of the surface right as mineral is being extracted from a larger underground a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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